Get to know your testator! – Calvert v Badenach [2015] TASFC 8

In or about March 2009, Mr Badenach, a partner of the law firm Murdoch Clarke, took instructions to prepare a will from Mr Doddridge (the testator) who was terminally ill. The testator's instructions were to pass his entire estate to the appellant, Mr Calvert (the beneficiary). The beneficiary is the son of the testator's long-term partner, with whom the testator established a relationship in 1975, after he separated from his wife in 1973.

The assets of the estate were valued at about $640,000 of which $530,000 comprised of the testator's interests in two properties he owned with the beneficiary as tenants in common in equal shares. Mr Badenach and the firm had acted for the testator and the beneficiary on the purchase and registration of the two properties in their names as tenants in common.

The firm had previously prepared two wills for the testator in May and October 1984 respectively with each drawn largely to give effect to the same instructions as those in 2009, except that the May 1984 will included a bequest of $10,000 to the testator's long-estranged daughter. His daughter was not mentioned in the October 1984 will or the 2009 will. Both wills made in 1984 were still held by the firm in March 2009.

After the testator's death on 1 September 2009, the testator's daughter succeeded in a family provision claim under the Testators Family Maintenance Act 1912 (Tas) (TFM Act). She was awarded the sum of $200,000 along with interest and costs totalling about $175,000 which was paid out of the estate. This reduced substantially the net value of the estate which the beneficiary had expected to receive.
The beneficiary commenced an action against Mr Badenach and the firm alleging that:

• They owed a duty of care to him to ensure that the testator's instructions were given effect. That is, a duty to ensure that the beneficiary in fact received the whole of the estate which existed when the will was drawn

• They acted negligently and breached their duty of care by failing to advise the testator of the possibility of a family provision claim by the daughter and of the options available to the testator to arrange his affairs so as to avoid any claim being brought upon his death which would undermine his testamentary wishes

• As a result of the breach, the beneficiary suffered loss.

At first instance, the beneficiary's action failed.² Blow CJ found that Mr Badenach and the 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 of loss could have been established on the facts. The beneficiary appealed that decision.

The Full Court allowed the appeal unanimously.

Scope of solicitor's duty of care

The Full Court found that the trial judge confined the ambit of the duty of Mr Badenach and the firm to the testator too narrowly. In determining the scope and content of the duty of care owed by solicitors to their client, Tennent J emphasised that some regard should be paid to the nature of the client and the dynamics between the client and the solicitor. The following key factors were determinative of the scope of duty the solicitor owed to the testator:

• Mr Badenech was a very experienced legal practitioner

• The testator was an elderly and terminally ill man who had been his client for a number of years. The firm had also acted for the testator in various transactions

• There was no suggestion that the testator had any particular knowledge about the potential for TFM Act claims

• The testator's instructions, consistently for 25 years, were that he wished to leave the entirety of his estate to someone unrelated to him by blood

• While there was no evidence that Mr Badenach knew of the daughter's existence, it was also obviously foreseeable that at some stage during his lifetime, the testator might have fathered one or more children, that a child of his could have made a claim under the TFM Act, and that such a claim might succeed. Mr Badenach could also have discovered the daughter's existence by looking at those earlier wills made in 1984 which were still held by the firm as at March 2009 when the last will was made

• The testator's estate as at 2009 when his last will was made included interests in two properties. It was reasonable to infer that the testator's intention was that the beneficiary has the entirety of his interest in those properties and his estate generally, not that estate less any amount paid to a successful TFM Act claimant

• As Mr Badanech knew that the testator and beneficiary held the two properties as tenants in common, Mr Badanech should have been aware that there was a foreseeable risk that the beneficiary's entitlements might be diminished by a successful TFM Act claim, unless a joint tenancy was created or a gift was made before his death.

In light of those circumstances, the Full Court found that the duty of care owed by Mr Badenach and the firm to the testator extended, not only to enquire whether he had any children or family for whom no provision had been made, but also to advise him why that enquiry was being made, the potential for a TFM Act claim. The Full Court held that such advice should extend to the impact a TFM Act claim could have on his expressed wishes and possible steps he could consider to avoid that impact so as to better fulfil the testator's intentions. However that duty did not need to extend to ensuring any such advice was accepted and acted upon.

The Full Court also held that Mr Badanech and the firm owed the same co-extensive duty of care in tort to the beneficiary as there was nothing to suggest that the interests of the testator and the beneficiary in this case were not effectively the same. The Full Court found that Mr Badenach breached his duty by making no enquiries and giving no relevant advice causing the beneficiary to suffer loss.

Issue of loss

The Full Court held that the loss suffered by the beneficiary, as a result of the solicitor's negligence, was the loss of chance that the testator might have taken steps to protect the estate including the two properties from the reach of any successful TFM Act claim. The beneficiary's loss of opportunity occurred when the testator was not given the chance to consider what steps, if any, he would take in anticipation of a claim under the TFM Act. As such, the beneficiary was entitled to have his damages assessed on the basis of a loss of chance of a better outcome under the will.

The beneficiary was able to prove that on the balance of probabilities, his chance of a better outcome under the will actually existed. He did that by proving that there were means by which the properties could have been protected from any claim under the TFM Act, and by proving that the testator should have been, but was not made aware of, the existence of such means. The Full Court was satisfied that there was more than a negligible chance that the testator would have taken action to circumvent a possible claim under the TFM Act, in consideration of the consistency of the testator's instructions over 25 years to give the entirety of his estate to the beneficiary. It followed that there was more than a negligible chance that the beneficiary would have avoided the detriment had Mr Badenach and the firm not been negligent.

Although the loss of opportunity issue was not pleaded at trial as a claim for damages, the Full Court held that it did not prevent damages from being assessed on that basis. This was because, despite the pleadings, Mr Badenach and the firm were on notice that the beneficiary's claim was a loss as a result of negligent advice, that correctly understood, the case could never have been anything other than a loss of chance case, and the issue of loss of chance or opportunity was not wholly ignored at trial, with the beneficiary's counsel referring to the concept of "loss of opportunity" in her opening and closing address. The Full Court remitted the matter to a single judge other than the trial judge for the assessment of damages

This case emphasises the broad scope of duty of care owed by a lawyer to a testator and to beneficiaries when drafting a will. The scope of the duty will depend on the particular circumstances of the case and the lawyer's actual or implied knowledge about the circumstances of the testator. What constitutes proper advice is wide ranging. It is incumbent on the lawyer to make the necessary enquiries of the testator as required by the circumstances.

In the course of taking instructions to prepare a will, a lawyer should be aware of the type of enquiries he or she should be making, especially with regard to the nature of the client and possibility of blended families. The lawyer needs to be aware of and advise upon the possible options the client has to fulfil his or her testamentary wishes in order to ensure that the client's choice is a fully informed one. This is particularly so in relation to real property and superannuation.