When will a solicitor owe a duty of care to intended beneficiaries? – Badenach v Calvert [2016] HCA 18

Curwoods Lawyers previously published a Case Note on the decision of the Full Court of the Supreme Court of Tasmania (Full Court) in Calvert v Badenach [2015] TASFC 8, which sets out the full background of the matter. Our Case Note can be found here.

This matter was initially heard in the Supreme Court of Tasmania (Supreme Court) before Blow CJ, and later heard by the Full Court on appeal.

First instance decision (Supreme Court)

At first instance, the beneficiary’s action failed.³ Blow CJ found that the solicitor and his firm owed a duty of care to the testator to enquire as to the existence of any family members who could make a claim under the TFM Act, with a view to the testator’s reasons for making no provision for them possibly being included in the will. Blow CJ said that if the solicitor had made such enquiries, as he should have done, then the testator would have disclosed the existence of his daughter and the solicitor would have advised as to the risk of successful proceedings under the TFM Act. His Honour did not make a finding as to whether the solicitor owed a duty to the beneficiary as pleaded. His Honour concluded that it was unnecessary to make such a finding because no causation could have been established on the facts. The beneficiary appealed that decision.

Full Court decision

The Full Court allowed the beneficiary's appeal. In their Honours' view, the solicitor's duty to the testator extended not only to a duty to enquire whether the testator had any children, and to advise of the potential for a claim under the TFM Act and the impact such a claim might have upon his estate, but also to a duty to advise of the possible steps he could consider taking in order to avoid that impact occurring even if the testator did not make any enquiry about those steps. The Full Court reasoned that the duty owed by the solicitor to the beneficiary as intended beneficiary could not be less than that owed to the testator under the terms of his retainer or in tort. As such, the duty the solicitor owed to the testator was co-extensive with that owed to the beneficiary.

The Full Court also held that the loss suffered by the beneficiary, as a result of the solicitor’s negligence, was the loss of the prospect that the testator may have taken steps to protect the beneficiary's position. By grant of special leave, the solicitor appealed to the High Court of Australia (High Court).

The High Court unanimously allowed the appeal and overturned the Full Court's decision.

Duty of care issue

The High Court held that the solicitor's duty to the beneficiary, as recognised by the Full Court, did not arise because the interests of the testator in this case were not coincident with the interests of the beneficiary and as such, the solicitor could not owe any duty to the beneficiary that was co-extensive with the solicitor's duty to the client.

French CJ, Kiefel and Keane JJ delivered a joint judgment. Gageler and Gordon JJ each delivered separate judgments. In arriving at their conclusion, their Honours first defined the scope of the solicitor's duty of care to the testator-client. Their Honours held that in the circumstances of the case, the solicitor owed a duty to the testator to:

• Enquire about the testator's family upon observing that no provision had been made for any family member in the instructions to prepare a will. This enquiry would have led to the information on the existence of the long-estranged daughter

• Advise the testator that it was possible that a TFM claim might be brought by the daughter against the testator's estate under the TFM Act

• Inform the testator that, absent further enquiries, the solicitor could not provide advice as to whether the daughter would qualify under the TFM Act for provision out of the client's estate

• Advise the testator that it could not be known whether the daughter would in fact make a claim

• Identify the options available to the testator to deal with a possible TFM claim by the daughter. This duty arose from the solicitor's original retainer with the testator. It was a duty to ensure that the testator gave consideration to the claims that might be made upon his estate before giving final instructions as to his testamentary dispositions.

Their Honours held that the scope of the solicitor's duty of care to the testator could not have extended to providing voluntary advice about how to defeat any possible TFM claim against the testator's estate by, for example, inter vivos transactions with property interests as alleged by the beneficiary. This was because the testator's initial instructions were limited to the drafting and execution of his will to solely benefit the beneficiary and the testator did not provide any instructions to the solicitor that the testator wished to take any lawful step to defeat any claim which was made by the daughter. In any case, neither the solicitor nor the testator could have known with any certainty whether the daughter would make a TFM claim, whether the claim would be successful and, if so, the extent of the provision that might be made for the daughter from the testator's estate.

Having determined the solicitor's scope of duty owed to the testator, the High Court held that the solicitor breached his duty of care owed to the testator because the solicitor had not considered that the testator's instructions made no provision for any family member and did not make any enquiry about the testator's family.

The question that arose then was whether the solicitor also owed a duty to the beneficiary and, if so, whether that duty was similarly breached.

In answering this question, all five members of the High Court considered and distinguished the present case from its previous decision in Hill v Van Erp, which held that the duty of care owed by a solicitor to a testator-client in tort may extend to an intended beneficiary under a will only in limited circumstances where the interests of the testator and intended beneficiary were the same, consistent or coincident and where final testamentary instructions had been given to the solicitor. In Hill v Van Erp the interests of the testator and the intended beneficiary were aligned because the testator's testamentary wishes were formalised in a properly drawn will and both their interests were that the will as drawn was properly executed. Their Honours held that in this case, at the time of the alleged breach of duty owed to the testator, the will had not been drawn and the beneficiary's interests were not the same as, consistent with or coincident with the testator's. This was because it could not be said with any certainty what the testator would have done had the solicitors made enquiries about the testator's family, and whether the testator may have made a different decision about the beneficiary's testamentary gift that would have been detrimental to the beneficiary's interest. It followed that with this divergence in interest, the solicitor did not owe the beneficiary a duty of care.

The High Court was at pains to emphasise that Hill v Van Erp is not authority for the proposition that a solicitor instructed to prepare a will always owes a duty of care to an intended beneficiary. It was emphasised that the limited duty owed by a solicitor to an intended beneficiary, as recognised in Hill v Van Erp, was a duty to give effect to a testamentary intention.

Causation and loss issue

Having decided that the solicitor did not owe a duty of care to the beneficiary, it was unnecessary for the High Court to decide on the issue of causation and loss. Their Honours nevertheless commented in obiter that even if it was accepted that the solicitor came under a duty to advise the client in the terms alleged, the beneficiary had not established factual causation as required under s 13(1)(a) of the Civil Liability Act 2002 (Tas). This was because it could not be concluded, on the balance of probabilities, what course of action the testator could then have taken. The beneficiary did not provide any evidence of what would have been done by the testator if the solicitor had observed that the testator's instructions made no provision for any family member and then made an enquiry of the testator's family. As such, the beneficiary did not establish that the solicitor's alleged negligence (assuming a duty existed) caused his loss and the issues of the sufficiency or value of the opportunity purportedly lost did not arise for consideration.

This case clarified the scope of duty of care owed by a lawyer to a testator and more importantly, to beneficiaries when drafting a will. While the High Court disagreed with the Full Court's broadening of the scope of duty of care owed by a lawyer to a testator and to beneficiaries, the scope of the duty owed by a lawyer to a testator will still depend on the circumstances of the case, in particular, the precise instructions received, and the lawyer's actual or implied knowledge about the circumstances of the testator. It is incumbent on the lawyer to make the necessary enquiries of the testator as required by the circumstances.

Importantly, a lawyer instructed to prepare a will will not always be found to owe a duty of care to an intended beneficiary. It is critical that the interests of the testator and beneficiary are aligned at the time of the alleged breach of duty for any duty of care to be owed to an intended beneficiary. This clarification by the High Court is likely to reduce lawyers' exposure to liability in negligence in relation to aggrieved beneficiaries under a will.