Monday, 28 March 2022
Sofitel Darling Harbour, Sydney
Her Excellency the Honourable Margaret Beazley AC QC, Governor of New South Wales

Bujari gamarruwa

Diyn Babana Gamarada Gadigal Ngura

In the language of the Gadigal people, the Traditional Owners of the land on which we meet today, I would like to pay my respects to their Elders, past, present and emerging.

It is an honour to have been asked to open the 2022 Society for Trusts and Estates Practitioners (‘STEP’) Australia Conference.  The significance of STEP, with its mission to ‘help families plan their assets across generations,’[1] – cannot be understated.

Careful, and of necessity, forward planning for one of only two of life’s certainties, death and taxes, can be as complex as life itself – to say nothing of the complexity of the Australian taxation system.  I have intentionally used the facultative ‘can be complex’ because estate planning for most people involves what should be an essential but simple step of making a will and most people’s financial circumstances are not all that complex.  However, Perpetual’s annual client survey reveals that more than half of Australian adults have not done so, let alone have they discussed their succession plans with their family.[2]    

In thinking about that statistic and contemplating what I might usefully say in opening this very important and informative conference, I toyed with the idea of proposing that making a will be compulsory, as we have so successfully done in this country with compulsory voting.  However, almost simultaneously with that thought my legal brain kicked in because, as we know, the law has long done its job in that regard with laws governing intestacy, with which you are so familiar, and indeed has done for centuries.

Although a necessary default setting, intestacy laws do not easily accommodate complex financial arrangements including trusts or necessarily resolve family conflicts as was apparent in the recent New South Wales decision Turch v Tripolone,[3] where an estranged son, having received one third of the estate on intestacy, failed at the threshold of not having established he had been left without adequate support.  Costs were reserved for further submissions, costs being a matter to which I will return.  

Before doing so, I should mention that whilst I am confident that 100% of practitioners would affirm the proposition that regardless of the size of an estate, every adult should be encouraged to exercise their testamentary will-making power, STEP recently found itself in the bizarre position of potentially advocating the opposite.  In a 2021 media release responding to Treasury’s call for submissions in respect of changes to foreign investment regulations affecting Australian-based real estate passing to ‘foreign persons’, STEP pointed not only to the unfairness of the regulations but also warned that as the regulations do not apply to property passing on intestacy, there would be cases where an estates professional ‘could be obligated to advise a client to embrace intestacy’.[4]    

Let me return to Costs.  Costs in a modest estate of $1.1 million, as was the case in Turch, can raise difficult questions for estate practitioners which go beyond a lawyer’s ethical obligations and which raise questions as to the advice that lawyers should be giving in advising on prospects of success. 

In Salmon v Osmond,[5] a unanimous decision of the New South Wales Court of Appeal, which I understand rattled estate practitioners, the Court determined that, what I will describe as the ‘convention’ that costs are borne by the estate, did not apply and that the unsuccessful applicants should bear the costs, with the principal applicant bearing 90% of those costs.  

As the author of the principal judgment, I, as were the other judges, was aware of the financial impact our order would have on the applicants, just as we were conscious of the impact an order that the estate bear the costs would have on the successful beneficiaries.  As we pointed out, the costs considerations in estate cases can be different from other forms of litigation and that the key consideration was the overall justice of the case.  However, as we pointed out, the overall justice of the case was not remote from the rule that costs follow the event. 

In the recent and again unanimous decision of the Court of Appeal in Bassett v Bassett,[6] the Court observed that ‘claims on the bounty of a deceased parent by adult siblings can be ruinous in a host of ways, with potentially adverse financial, relational and health consequences’.[7]  The Court also pointed to the ‘disproportionate costs in family provision cases’ and re-iterated ‘the importance of parties in such cases not proceeding on the assumption that their costs will necessarily be indemnified out of the estate’.[8]

The outcomes in both these cases involving expensive legal costs point to the ameliorating role that mediation has to play, a mandatory and highly successful process in New South Wales estates litigation.  But even there, often it is the pressure of the court door still open behind the mediation process which secures the settlement but does not resolve or mollify the underlying family dispute. 

In a recent STEP Australia Newsletter, Zinta Harris, a Brisbane-based wills and estates lawyer wrote about Collaborative Practice, a multi-disciplinary process where parties contract not to litigate.   The process involves the collaboration of the parties, lawyers, a neutral financial expert and a communications coach, moving the ADR process outside ‘adversarial bargaining’, which can still pass for mediation.  This is not a ‘one day fits all’ model but can involve a number of shorter meetings over a longer period, giving parties the opportunity to digest information and think through consequences.   

That is an unusual example of what I will term ‘contracting in’.  Justice Ward, President of the Court of Appeal, is going to tackle the thorny topic of ‘Contracting out of Fiduciary Duties’, which is not so unusual, at least in the US.  Where it sits in the Australian legal landscape is for her Honour to reveal. 

The specialised work of STEP practitioners and the remit of this conference are not confined to the vagaries of estate litigation or alternate dispute resolution or indeed contracting in or out.   As trust practitioners, albeit with emphasis on estate planning, you require a detailed knowledge of Australian tax law, or at least having the discernment to know that tax advice was also required.  This is an area in which the Australian Tax Office also has a significant interest. 

In a report commissioned by the ATO in 2019, RMIT predicted that by 2022 over 1 million trusts would exist in Australia, the most common type being discretionary trusts.[9]  One matter to which attention was drawn was the absence in Australia of a central registry of trusts and trust assets, unlike the position in some overseas jurisdictions including the UK, New Zealand, South Africa and India.  This lacuna has made it difficult for Australia to implement the recommendations of the OECD’s Financial Action Task Force, to which it has committed, as there is no ready system to identify the beneficial ownership of trusts.  Professor John Glover’s exposition of this area later this morning thus has particular currency. 

The purpose of an Opening Address is not, of course, to itemise each and every conference topic, let alone comment upon them.  However, a review of STEP Australia’s 2022 Conference does provide an insight into the central role STEP plays in ensuring that practitioners remain informed as to matters of the present and trends of the future.  It also reveals at a touch the depth, breadth, complexity and importance of this area of the law and the expertise of its practitioners, to say nothing of the generosity of the presenters in sharing their knowledge.  

Go well, the next 2 days are a well of concentrated information of importance to you as practitioners of this area of the law.  The better-informed practitioners are, the better are the results for the client and therefore for the administration of justice in its broadest sense.