Dion Giuseppi Sergi by next friend Aileen Solowiej v Sergi - [2012] WASC 18

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: DION GIUSEPPI SERGI By Next Friend AILEEN SOLOWIEJ -v- SERGI [2012] WASC 18

CORAM: EM HEENAN J

HEARD: 10 MARCH & 22 NOVEMBER 2011

DELIVERED : 20 JANUARY 2012

FILE NO/S: CIV 2876 of 2010

BETWEEN: DION GIUSEPPI SERGI By Next Friend AILEEN SOLOWIEJ
First named Plaintiff
RYAN PETER SERGI By Next Friend KAREN DEIGHTON-SMITH
Second named Plaintiff
AND
BIAGIO MICHAEL SERGI
First Defendant
MARIA TROVATO
First named Second Defendant
ANTONIO SERGI
Second named Second Defendant
GIUSEPPINA RITA WALLER
Third named Second Defendant

Catchwords:

Infants or persons under disability - Application for approval of proposed compromise - No contentious proceedings on foot - Threatened proceedings under Inheritance Act or to contest validity of will under which infant plaintiffs are contingent beneficiaries - Relevant considerations - Control of costs by court - Capping costs

Legislation:

Inheritance (Family and Dependants Provision) Act 1972 (WA)
Rules of the Supreme Court, O 70 r 11

Result:

Proposed settlement approved
Further submissions required for means of implementation of compromise

Category: A

Representation:

Counsel:

First named Plaintiff     :        Mr B W Ashdown
Second named Plaintiff               :        Mr B W Ashdown
First Defendant               :        Ms M E Speering
First named Second Defendant     :        Mr D L Jones
Second named Second Defendant   :        Mr D L Jones
Third named Second Defendant     :        Mr D L Jones

Solicitors:

First named Plaintiff     :        Ian Watson Lawyer
Second named Plaintiff               :        Ian Watson Lawyer
First Defendant               :        Young & Young
First named Second Defendant     :        Brickhills
Second named Second Defendant   :        Brickhills
Third named Second Defendant     :        Brickhills

Case(s) referred to in judgment(s):

Baychek v Baychek [2010] NSWSC 987
Bondelmonte v Blanckensee [1989] WAR 305
Cadwallender v The Public Trustee [2003] WASC 72
Chapman v Chapman [1954] AC 429
Congregational Union of New South Wales & Burchmore v Thistlethwayte (1952) 87 CLR 375
Donnellan v The Public Trustee [No 2] [2010] WASC 214
Elliott v Diener (1978) 21 ACTR 21
Ireland v Retallack (No 2) [2001] NSWSC 1096
Karvelas (Infant) v Chikirow (1976) 11 ACTR 22
Kowal v Natalia Roxana Langlands as Executor of the Estate of Wlodymyr Kowal [2008] WASC 27
Nudd v Mannix [2009] NSWCA 327
Queen Street Hotels Pty Ltd v Byrne [1980] CLC 40‑611
Re Horton (Dec) [1976] 1 NZLR 251
Re Lord Hylton's Settlement, Barclays Bank Ltd v Jolliffe [1954] 1 WLR 1055
Re McGregor (Dec) [1961] NZLR 1077
Re Powell‑Cotton's Resettlement; Henniker‑Major v Powell‑Cotton [1956] 1 WLR 23
Sherborne Estate (No 2) [2005] NSWSC 1003; (2005) 65 NSWLR 268
Singer v Berghouse (No 2) (1994) 181 CLR 201
Sosa v Carter [1978] WAR 123
Vigolo v Bostin (2005) 221 CLR 191

EM HEENAN J: By an originating summons filed 22 November 2010 the two plaintiffs, each an infant suing by his next friend, are seeking the approval of the court pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 70 r 11(1) to a settlement and compromise of claims arising from foreshadowed disputes over the rights of distribution in the estate of their late grandfather, Salvatore Giuseppe Sergi, who died on 2 November 2008.
The late Salvatore Giuseppe Sergi died leaving a will dated 3 June 2005 under which he left, subject to conditions, the whole of his estate to his two grandsons, the plaintiffs, on condition that they survive him and attain the age of 25 years.
That will appointed the first defendant, Biagio Michael Sergi (known in the family as 'Michael'), as sole executor and trustee. It conferred upon the trustee powers to apply the whole or to pay part of the expectant share of either grandson for or towards his maintenance, education, advancement or support and for or towards any other purpose deemed in the trustee's absolute discretion to be of advantage to such grandson
The first infant plaintiff, Dion Giuseppi Sergi, was born on 15 March 1994 and the second, Ryan Peter Sergi, was born on 13 January 2003. Accordingly, at the date of their grandfather's death, they were aged, respectively, 14 and 5 years. It follows that, even now, it will be quite some time before they attain the age of 25 years and, thereby, attain an unconditional right to receive their shares in their grandfather's then remaining trust estate.
There is no provision in the will for the disposal of the estate in the event that neither grandson attains the age of 25 years. Should both die before attaining the age of 25 years, the condition of the testamentary gift would fail and there is no provision in the will for the distribution of the balance of the estate in that eventuality ‑ so producing a partial intestacy. In that eventuality, the persons entitled in distribution to the undistributed estate of the deceased would be those entitled under s 14 of the Administration Act 1903 (WA). As the late Mr Sergi died as a widower, the persons entitled to distribution in the event of such a partial intestacy would be his children, the four defendants, Maria Trovato, born 5 March 1949, Antonio Sergi (known as 'Tony'), born 1 January 1953, Biagio Michael Sergi, born 2 March 1961, and Giuseppina Rita Waller (known as 'Josephine'), born 23 September 1963.
This potential for such a partial intestacy and the consequent entitlement to distribution of the remaining trust estate by the four children of the deceased means that neither plaintiff is entitled to demand his expectant share of his grandfather's estate before attaining the age of 25 years as, for example, upon coming of age at 18 years - see Queen Street Hotels Pty Ltd v Byrne [1980] CLC 40‑611; Congregational Union of New South Wales & Burchmore v Thistlethwayte (1952) 87 CLR 375, 438 ‑ 440 (Dixon CJ, MacTiernan, Williams & Fullagar JJ), 447 (Kitto J contra); Cadwallender v The Public Trustee [2003] WASC 72, [33] ‑ [34], [47]. Consequently, the interests of the two infant plaintiffs under their grandfather's will are each contingent upon one child attaining the age of 25 years. If one attained that age but not the other, then the survivor would be entitled to the whole of the estate, but if neither attained that age, the estate would be distributed to those entitled upon an intestacy as already described.
The value of the late Salvatore Giuseppe Sergi's estate at the date of his death was estimated at $472,086, comprising of land and building at Charles Street, Bunbury and, for the most part, moneys on deposit in banks or similar institutions.
It is evident that following the death of Mr Sergi there were dissatisfactions within the family about the rights of distribution as signified in his will. Some of the second defendants questioned the validity of that will, asserting that because of his age and medical condition the deceased may not have been of full testamentary capacity at the time the will was made. These protagonists foreshadowed the possibility of challenging the validity of the will on those grounds and propounding instead an earlier will under which the deceased left his entire estate to his four children, the second defendants, and the elder of the two plaintiffs ‑ the younger not having been born at the date of that will. As an alternative, the second defendants also foreshadowed an intention to make a claim against the deceased's estate under the Inheritance (Family and Dependants Provision) Act 1972 (WA) (the Inheritance Act) seeking provision for themselves on the grounds that the testator had failed to make any or any adequate provision for them by his will in circumstances in which he should have done so.
However, no proceedings of either of the kinds foreshadowed nor of any other kind were commenced by the defendants or others. Rather, an agreement was reached that, subject to the approval of the court, 45% of the net value of the deceased's estate should be distributed immediately to the three second defendants and that the remaining 55% should be held upon the trusts of the will for the two grandchildren, the plaintiffs, but still subject to the same conditions rendering their respective interests contingent and subject to the same possibility that if neither attained the age of 25 years, there would be a partial intestacy resulting in distribution equally among the deceased's adult children.
Upon reaching agreement upon the terms of the proposed compromise, notwithstanding that it is conditional upon the approval of this court, the objecting second defendants allowed their caveat against a grant of probate of the last will of the deceased to lapse and Probate of that will was thereupon granted in common form to Biagio Michael Sergi, the first defendant, on 14 September 2010. Upon that grant being made the prospects of any of the second defendants successfully challenging the validity of that will on grounds of want of testamentary capacity receded very significantly. As long as that grant of probate stands, that will has been proved and takes effect. The only prospect of any earlier will being propounded would arise if any party applied for a rescission of that grant of probate and sought to propound an earlier will. In the light of the circumstances and the consensual lapse of the caveat to allow the probate to be granted, it would seem that the prospects of any such successful action to rescind the grant of probate and propound an earlier will are very slight although, perhaps, not entirely impossible.
This still leaves, however, the possibility that one or more of the second defendants might institute proceedings claiming provision out of the estate of their late father under the Inheritance Act. At the date of the commencement of these proceedings the six-month time for the commencement of any such claim has not expired - Inheritance Act s 7(2) ‑ but it has since expired. Again, the prospects for any of the defendants to obtain an extension of time to apply for relief under the Inheritance Act, and in all the circumstances, might be regarded as questionable, but again there can be no certainty that such an application for an extension of time would fail.
It is in these circumstances that approval is sought for the proposed compromise which would reduce the contingent entitlement of the infant plaintiffs to an equal share between them in the distribution of the whole of their grandfather's estate to a 55% interest, similarly defeasible, with the remainder of the 45% interest in the estate going immediately to their aunts, Maria Trovato and Giuseppina Rita Waller, and to their uncle, Antonio Sergi, in equal shares as tenants in common.
When the originating summons first came on for hearing on 10 March 2011 there was no evidence about the financial circumstances of any of the second defendants, nor of the basis upon which it might be contended that, having regard to their relationship with their late father, the will which he made which has since been the subject of a grant of probate, meant that any of them was likely to succeed in an application for provision out of his estate brought under s 6 of the Inheritance Act. Accordingly, there was then no basis upon which the court could determine whether or not it might be in the interests of the infant plaintiffs to have this proposed compromise approved resulting, as it would, in a substantial reduction of their contingent interest in distribution under their grandfather's estate. Nor was there any evidence to show why such a proposed compromise, which retained the contingent, and therefore defeasible, interests of the infant plaintiffs in distribution of their grandfather's estate, should remain. Put another way, the compromise proposed would result only in a substantial deterioration with no countervailing improvement of any kind, in the nature of the interests provided for the infant plaintiffs under their grandfather's will. That situation appeared to be a factor which bore negatively on the question of whether or not the proposed compromise was, in all the circumstances, in the interests of the infant plaintiffs. I therefore adjourned the hearing of the originating summons, and directed that affidavits should be filed or other evidence produced dealing with the financial circumstances of the various members of the family and the strength of the respective claims, if any, which the three second defendants and the two plaintiffs had upon the estate of the deceased.
The proceedings then came on for hearing again in November 2011 when affidavits had been filed by each of the second defendants giving some information about their financial circumstances. It is necessary, therefore, to examine all the evidence as it now stands.

The evidence

Biagio Michael Sergi (Michael), the first defendant and executor of his father's estate is the father of both plaintiffs who are half‑brothers. Dion Giuseppi Sergi, the first plaintiff, is the son of the first defendant and Aileen Solowiej, his mother and next friend. That marriage was later dissolved and the first defendant remarried. The second plaintiff, Ryan Peter Sergi is the child of the second marriage between the first defendant and Karen Deighton-Smith the mother and next friend of Ryan Peter Sergi.
The first defendant Biagio Michael Sergi, having sought and obtained a grant of probate of his father's will is, of course, obliged to administer the estate in accordance with that will subject to any order which the court might make modifying its terms or effect. Having taken the grant of probate Biagio Michael Sergi is precluded from challenging the validity of the will but he could, of course, make or participate in an application under the Inheritance Act for provision for himself out of his father's estate. However, by his affidavit of 21 December 2010 he has decided not to make any claim under the Inheritance Act but he consents to the implementation of the terms of the proposed compromise which is now before the court.
Both Ms Solowiej as next friend of the first plaintiff and Ms Deighton‑Smith as next friend of the second plaintiff also desire to implement the terms of that compromise each believing that it would be beneficial to the plaintiffs to do so.
The opinion of the two next friends and of Biagio Michael Sergi that it would be in the interest of the plaintiffs to implement the terms of the proposed compromise rely upon the opinion of independent counsel. The details of that opinion will be examined later.
The late Salvatore Giuseppe Sergi had been born in Italy on 14 April 1922. He married his wife Maria in Italy on 2 August 1947. He migrated to Western Australia some time in the mid‑1950s. His wife and two eldest children, Maria and Antonio, followed about two years later. Biagio and Giuseppina were each born in Australia. The family settled in the south‑west originally on a farm at Burekup and then in about 1958 the family moved to Bunbury. Mr Sergi there worked for the Main Roads Department and lived at the family home in Charles Street, Bunbury. By all accounts the family upbringing was frugal and all the children had to join in, in various ways, working in and around the household and helping their father. The late Mr Sergi was engaged in a variety of activities and the children were encouraged or required to participate in part‑time employment and contribute their earnings to the family income pool. By all accounts this upbringing was hard but it is evident that it was a close and loving family and while Mr Sergi was, in some respects, a traditionalist, authoritarian and demanding all his children held him in high esteem and affection. Mrs Madelina Sergi died on 23 January 1996 and Mr Sergi continued to live in the family home. He never remarried. As it he became older he became increasingly demanding of his children insisting that they help him in various ways, run errands, do odd jobs, supply him with requisites and because he frequently complained that he was unable to afford various items, he accepted gifts and financial assistance from them.
All of the children of the deceased are married. As already noted the first defendant Biagio Michael Sergi has married twice and is presently living with his second wife and his two children in Queensland. The eldest of the children Maria Trovato was married on 1 August 1970 and lives with her husband at Bunbury. They have three children: Anthony, born in November 1971; Mark, born in November 1973; and Rebecca, born 3 July 1978. Those three children themselves are all married and have been living independently of their parents for some years. All received a tertiary education. The two boys are accountants and work full‑time and their daughter is an architect working part‑time and caring for her young child. In her affidavit of 10 June 2011 Mrs Trovato gives a detailed account of the family upbringing, the continuing good relationship between herself, her children and her father and details of quite a strict upbringing and demands made upon her by her father over the years before his death.
The second child of the deceased, Antonio Sergi was born in January 1953 in Italy and came to Western Australia as a baby with his mother and eldest sister when they followed their husband and father to Australia some years after his departure from Italy. Antonio was married in February 1981 and lives with his wife at Dalyellup. He and his wife have no children. Over recent years he has worked as a furniture salesman in Bunbury but has had some financial difficulties when working as a franchisee of the Harvey Norman store in Armadale resulting in him accumulating substantial debt. He also incurred further debt after making some unsuccessful land investments in Bunbury and is presently indebted significantly to the Australian Taxation Office and is unable to pay and is at risk of becoming insolvent. Antonio too describes growing up at the family home in Bunbury in circumstances where he was required frequently to work for his father in quite arduous tasks. He qualified as a carpenter and did a variety of other work. It seems that the late Mr Sergi disapproved of Antonio's marriage and was disparaging towards his son's wife in various ways over the ensuing years.
Antonio and his wife moved to Europe for a year after they married, staying in Italy and also working in Germany. After their return to Perth they ran a lunch bar for some time before going back to Europe for a period of about five years. During his time in Europe Antonio remitted money to Australia some of which was available for his father's use. Over recent years he regularly visited his father and Antonio's wife would cook for him and attend to his needs. This was very dutiful especially having regard to the late Mr Sergi's occasional disparagement of her. In his affidavit of 7 June 2011 Antonio describes a series of instances in which he helped his father or provided financial assistance for him in various ways but such was his father's attitude and demeanour that he seldom gave credit to Antonio for these forms of assistance.
Mrs Giuseppina Waller ('Josephine') was born in September 1963 in Western Australia and married in September 1992. She lives with her husband and two children at Treendale. Their two daughters Emma and Courtney‑Rose were born in June 1998 and November 1999 and are still at primary school at Leschenault. She too sets out an account of growing up with her parents in Bunbury and of the strict supervision which her father always maintained. She describes how she regularly paid for various work done at her father's home after her mother died and how she frequently paid her father's bills when he complained about them to her. She and her husband assisted the late Mr Sergi in various ways in and around the house doing gardening, bringing firewood, performing errands and taking him to medical appointments. Regularly her father attended at her home for meals. Over the years before his death Josephine visited her father at least once a week and telephoned him every day. Her children were on very close terms with their grandfather and the family relationship was always close.

The first defendant, Biagio Michael Sergi ('Michael'), was born in Bunbury in March 1961 and received financial support from his parents throughout his higher education when he was in Perth from 1982 to 1984 and then in Sydney from 1985 to 1987. He married Aileen Solowiej, the next friend of the first plaintiff, but they separated in 1998 and were divorced in 1999. He is now living with Karen Deighton-Smith the mother and next friend of the second plaintiff whom he later married. They are living in Varsity Lakes in Queensland and Michael is an associate professor at Bond University. Dion is in year 11 at Palm Beach Currumben State High School in Queensland and intends to go on to university. Ryan is in year 3 at St Andrews Lutheran College Queensland and his father hopes that he too will attend university. Of all his generation of the family Michael is the only one with a tertiary education and also is the one with the most substantial income and means. He always maintained regular contact with his father and would visit Bunbury regularly every alternate year or more frequently and kept in touch with him via telephone. He too assisted his father in various ways financially.
More comprehensive details of the financial position of each of the defendants is set out in the affidavits which have most recently been filed but it is unnecessary and undesirable to disclose those particulars any more fully. It is enough to say that Antonio and his wife are obviously experiencing significant financial difficulties due to Antonio's business and investment losses and have modest but limited earning capacities. Mrs Maria Trovato and her husband are more secure and each have average earning capacities but, of course, have significant financial responsibilities. Mrs Giuseppina Rita Waller and her husband have a young family to provide for and, while they have reasonable earning capacity they also have significant financial responsibilities and obligations.
It is clear that each of the defendants in his or her own way respected and cared for their late father and assisted him in a variety of ways by providing services, financial contributions, regular attention and oversight. Each is careful to be restrained in their description of their father's activities and attitudes out of respect for him but it is evident that he could be demanding and insistent and harboured some rather old fashioned ideas particularly towards women in general and towards his daughters in particular. It is also evident that Mrs Maria Trovato, Mr Antonio Sergi and Mrs Giuseppina Rita Waller have to varying but significant degrees felt hurt and disappointed that their father made no provision for them or their families in his will especially in view of the good relationship and many acts of assistance, service and financial contribution which they made to him over a long period.
There is no evidence before the court bearing upon the deceased's medical condition or general state of comprehension in the years before his death or, in particular, at the date of the will of 3 June 2005. The cause of death is recorded in his death certificate is ischemic heart disease as determined at Bunbury on 4 December 2008 by the then coroner. The affidavit evidence filed in support of the application for the grant of probate discloses that the deceased was found dead one morning at his home after his daughter Mrs Giuseppina Rita Waller had called at about 8.50 am to pick him up to take him as usual to church that Sunday. He was found lying on his bed evidently after his morning shower. He had been speaking to Mrs Waller by telephone the evening before and had given no sign of illness or distress.
The only basis for any allegation that the deceased lacked the requisite testamentary capacity at the time the 2005 will was made is a suggested incongruity in singling out the plaintiffs as the only two of the deceased's seven grandchildren and four children for testamentary benefit. The will is in orthodox form, prepared by solicitors and duly executed and witnessed. One possible explanation for the alleged incongruity in the testator's disposition of his estate which was advanced in the course of submissions, but not otherwise supported by anything other than potential inferences from the evidence, is that the two plaintiffs are the only male descendents bearing the Sergi family name and for that reason may have been chosen by the deceased for benefit to preserve and continue the family name.

Counsels' opinion

In the opinion prepared by independent counsel as required by RSC O 70 r 10, counsel addresses the two potential challenges which had been forecast against the last will of the deceased, referring to the foreshadowed challenge against the validity of the will as the 'probate action' and the foreshadowed claim under the Inheritance Act as the 'Inheritance Act action'. As already noted no proceedings of either kind have actually ever been commenced.
In considering the effect of a successful probate action counsel observed that in that event:
(a)Ryan would receive no direct provision from his grandfather's estate (as opposed to half the estate under the last will);
(b)Dion would receive one‑fifth of the estate (as opposed to half the estate under the last will);
(c)Biagio (Michael) would receive one‑fifth of the estate (which could be applied to Ryan if he chose); and
(d)Maria, Antonio and Giuseppina would each receive one‑fifth of the estate (as opposed to no provision under the last will).
In that case, the fortunes of each of Dion and Ryan would alter from a 50% interest in the estate down to a 20% interest (by assuming that Michael would give his interest to Ryan) whereas under the proposed settlement each would receive a 27.5% interest in his grandfather's estate. It is necessary to repeat that under the last will neither of the two plaintiffs is guaranteed receiving an interest because of the condition that the gift will not vest until one or both attains the age of 25 years.
As for the merits or potential significance of the threatened probate action counsel has undertaken an examination of the applicable principles and authorities and has expressed the view that there is no medical evidence of any condition or affliction which would throw doubt over the testamentary capacity of the deceased such as senility, dementia or Alzheimer's disease and that the will itself is not overly complex and that on its face its provisions are rational. The deceased had in fact left a hand written letter expressing his intention to dispose of his estate in the same fashion as the last will which provides evidence that the will itself was not a sudden or ill‑considered impulse.
Counsel addressed the suggestion that the deceased may have implemented a preference to dispose of his estate to male grandchildren on the basis that they were the only male issue with the Sergi name. Counsel observed that while such a view may no longer be in accord with general conceptions, practice and obligation in Australia today it is not a proposition of itself sufficient to establish that the deceased did not have a rational ability to evaluate and discriminate between the respective strengths of the claims of such persons who might be expected to have a claim on his testamentary bounty.
The ultimate conclusion of counsel in relation to the foreshadowed probate action was that there was no evidence which had been disclosed to displace the presumption that the last will of the deceased was valid and made with adequate testamentary capacity. The position to be adopted by this court in considering whether or not to approve such a compromise does not, as a subsequent examination of the authorities yet to be undertaken will establish, require agreement with the conclusions or advice of independent counsel. Nevertheless, in respect of this conclusion and on the basis of the evidence put before the court by the parties I can only say that I agree that the prospects of a successful challenge to the validity of the last will of the deceased, since admitted to probate, seem very remote.
Counsel then passes to an examination of the principles and applicable authorities dealing with claims under the Inheritance Act reviewing the major authorities including an explanation of the two‑stage test: Bondelmonte v Blanckensee [1989] WAR 305; Singer v Berghouse (No 2) (1994) 181 CLR 201; Vigolo v Bostin (2005) 221 CLR 191 and other authorities. In addressing issues relevant to an Inheritance Act claim, counsel observed that when balancing or considering the position of grandchildren in connection with an inheritance claim, the need if any, of a grandchild must be measured to a large extent by the ability of their parents to provide for them: Re McGregor (Dec) [1961] NZLR 1077; and Re Horton (Dec) [1976] 1 NZLR 251, 255. This led counsel to observe that to the extent that it was necessary to look at the position of Biagio Michael Sergi (as the father of Dion and Ryan) the evidence indicated that he is able to provide for both Dion and Ryan.
With respect to the potential significance of a claim under the Inheritance Act counsel observed:
98.Given the modest amount of the estate and the desire of the deceased to benefit Dion and Ryan I do not consider that the court is likely to afford each of Maria, Tony and Josephine an equal share in the estate with Dion and Ryan (ie in effect 20% each).
99.Also I do not consider it a likely outcome that the court would make an order that the estate be divided into two equal portions, one to be divided equally between Dion and Ryan and the other to be divided equally between Maria, Tony and Josephine. However in my opinion this may be an outcome which would be open to the court at trial upon the evidence. As such it would in my opinion represent the bottom end of a range of possible outcomes considering the matter from the viewpoint of Dion and Ryan.
100.In my opinion the potential quantum of any provision which may be awarded by the court (on the assumption that the evidence as ultimately found does not remove such claims entirely) is that somewhere between 20% and 45% (of what would then be a much depleted estate) may be ordered to be divided between Maria, Tony and Josephine with the balance remaining as provided in the last will for the benefit of Dion and Ryan.
101.It is a potentially open outcome that the court would not award any provision to the three potential claimants (Maria, Tony and Josephine) pursuant to the Inheritance (Family and Dependants Provision) Act 1972.
101.However the bringing of such a claim would still likely incur substantial costs for the estate (and with the potential for all parties costs to be awarded out of the estate) and thereby still deplete the net benefit which would remain for the beneficiaries of the estate, namely Dion and Ryan.
...
103.As to the general approach and considering matters of the kind presented by this dispute it is worth bearing in mind the following statements in Szlasko v Travini [2004] NSWSC 610:
'These days, executors in a small estate would be expected not to look under every bushel for evidence, but to put forward before the Court the essential material and to seek to compromise, if at all possible, in a way that would save both the plaintiff and the other beneficiaries' costs.
Finally counsel expressed his opinion that there was a serious issue and doubt as to whether any of Maria, Antonio and Giuseppina could establish that they are in need of support or that their omission from the last will of the deceased resulted in a position that the deceased had not made 'adequate provision from [the deceased's] estate for the proper maintenance, support, education or advancement in life, as required by s 6(1) of the Inheritance Act'. Accordingly counsel concluded that the potential claims of Maria, Antonio and Giuseppina were not strong but that nevertheless it is impossible to rule out the possibility that some such provision might be made. Counsel stressed that the two largest factors for consideration were, in his view, the modest size of the estate and the very significant impact that the legal costs of all parties involved in such a dispute might have upon it. On that basis counsel expressed the view that while the proposed settlement was considered to be at the lower end of an acceptable range of outcomes it was nevertheless in the interests of Dion and Ryan to accept it, subject to the approval of the court, and to have it implemented.

Factors for consideration

The position to be adopted by the court in considering whether or not to approve a proposed compromise when exercising its jurisdiction under RSC O 70 has frequently been examined and described. A recent occasion in which this was done is the decision of Le Miere J in Kowal v Natalia Roxana Langlands as Executor of the Estate of Wlodymyr Kowal [2008] WASC 27 where his Honour said [10]:
What the court is called upon to do is to satisfy itself that all the facts relevant to the third defendant's claim have been brought together and considered by his legal advisers and that the settlement is supported by the opinion of independent counsel. The court must itself consider the opinion given and the reasons for it. If having done that it appears that all aspects of the case have received proper consideration the court should be slow to disagree with the opinion particularly upon such a matter as an Inheritance Act application. The court should be aware of the risks of litigation in an area in which reasonable people can reasonably reach different conclusions and hence slow to force the person under disability to take a risk which the court is unable to underwrite. It should, too, satisfy itself that the opinion of counsel has been considered and understood by the guardian and next friend of the person under disability and it should give proper weight to the fact that the next friend wishes to accept the settlement: see Sosa v Carter [1978] WAR 123.
More recently in Donnellan v The Public Trustee [No 2] [2010] WASC 214 Kenneth Martin J had occasion to examine the role of a court when approving the compromise of a claim by a disabled person under RSC O 70 r 10. His Honour described the position of the 'protective role' of the court as being [66]:
That protective role of the court is explained in various cases including by the Full Court of Western Australia in Sosa v Carter [1978] WAR 123 at 124 (Burt CJ, Wallace and Brinsden JJ agreeing); Fowler v Gray [1982] Qd R 334 (a decision of Master Lee QC as he then was); C v FAI General Insurance Co Ltd (Unreported, QSC, 16 June 1998) (Lee J), and the observations of EM Heenan J in Cadwallender v The Public Trustee [2003] WASC 72 [28], referring in turn to observations of McLure J (as her Honour then was) in T'Hart v Director General of the Department of Community Development [2002] WASC 245.
Various reasons have been given over the years for this protective jurisdiction of the court and how it should be exercised. The prominence of particular considerations will vary according to the circumstances of the individual case and the nature of the claim or proposed claim for which approval of a proposed compromise is sought. The reasons given include:
(a)the need to protect minors and disabled persons from any lack of skill or experience of their legal advisors which might lead to a settlement of the money claim for far less than it is worth;
(b)to provide means by which a defendant may obtain a valid discharge from an inference or a disabled person's claim;
(c)to ensure that the solicitors acting for an infant or a disabled person are paid their proper costs and no more; and
(d)to make sure that money recovered by or on behalf of the infant or disabled person is properly looked after and wisely applied: see Supreme Court Practice (The White Book) 1991 at par 80/10 ‑ 11/1.
So it is observed that the basic question of concern to the court in considering whether to approve a compromise involving a person under a disability is whether or not the compromise will be for the benefit of the person under the disability: Halsbury's Laws of Australia, vol 20 [325] ‑ [6827] and that the wishes of the next friend or guardian ad litem will be taken into account but are not decisive: Karvelas (Infant) v Chikirow (1976) 11 ACTR 22, 22 (Blackburn CJ). Blackburn CJ observed in Elliott v Diener (1978) 21 ACTR 21, that the relevant question is:
whether the prospect of getting a greater sum by rejecting the present offer is good enough to outweigh, significantly, the risk of not getting any more (22).
It is necessary that there be evidence to establish that the person under a disability and his or her next friend or guardian ad litem have carefully considered the proposed settlement and that the next friend or guardian is satisfied that the settlement is beneficial: Sosa v Carter [1978] WAR 123.
The most frequent occasion in which the court is called upon to exercise this jurisdiction is one in which there is a money claim for damages by a disabled person or infant, often and most commonly, a claim for damages for personal injuries sustained in a motor vehicle accident or other circumstances giving rise to potential tortious liability by the defendant. In that situation the issues are relatively clear being concerned with the quantum of the amount of the claim and the prosects of successful recovery with or without apportionment for contributory negligence. However the jurisdiction extends to all claims including claims for property and, as here, the rights of distribution under a will or to the effect upon any such rights of claims under the Inheritance Act. These and claims for variations of interests under deeds of settlement or trust can give rise to different considerations. So it has been held that the jurisdiction to sanction a compromise does not extend to cover cases in which there have been no real dispute as to rights but where it is sought, by way of a bargain between the beneficiaries under a trust, to rearrange their beneficial interests and to bind children to the bargain by order of the court: Chapman v Chapman [1954] AC 429; and Re Powell‑Cotton's Resettlement; Henniker‑Major v Powell‑Cotton [1956] 1 WLR 23 ‑ see generally Halsbury's Laws of England (4th ed, 2008 reissue) vol 5(4) [1423]. Nevertheless, whether there is a real dispute as to rights the power to approve is not excluded by the fact that the compromise involves the rearrangement of beneficial interests: Halsbury's (op cit); and Re Lord Hylton's Settlement, Barclays Bank Ltd v Jolliffe [1954] 1 WLR 1055.
In this present case the foreshadowed claims which are the subject of the compromise proposed for approval are, of course, not simple money claims or claims for unliquidated damages. Of their very nature they do involve the potential rearrangement of rights to property under the trusts established by the will of the deceased. In doing so, they have the potential to detract from the rights and distribution under the will, as proved, enjoyed by the plaintiffs if undisturbed and the rights of other adult members of the Sergi family who have foreshadowed an intention to attempt to propound an earlier will under which they are named beneficiaries or, alternatively to make claims under the Inheritance Act. As independent counsel has advised in the opinion before the court the prospects of success for the potential claimants do not appear to be high but they cannot be entirely dismissed. Also, and significantly, the potential for lengthy and expensive litigation which might arise if the compromise is not implemented would certainly be adverse to the infant plaintiffs. This would be so even if they were ultimately successful because it seems inevitable that, even if the claimants were ordered to pay the costs of unsuccessful proceedings, there would be other costs and expenses which the plaintiffs would have to bear or which would be charged against the estate.

Then, in litigation of this kind there is the importance of family comity and tranquillity. Even if the compromise were not approved and the plaintiffs entitlement under the last will remained unaffected it is likely that such a consequence would have some impact on future relations between members of a close knit family with all the feelings of resentment and recrimination which so often follow litigation. This would be likely to follow whether further proceedings were brought and if so whether or not they were successful. That those potential consequences may not have any direct financial impact on the infant plaintiffs is not, at least in my view, a reason for dismissing them from consideration. In litigation of this kind the significance of family harmony and the preservation of future good relations have value and importance in themselves.
Here I consider it to be a significant consideration that the mothers of each of the infant plaintiffs, who are respectively their next friends, have considered the affidavit evidence, counsel's opinion and the desire to have the proposed compromise accepted. This is even more significant in the case of the first plaintiff where the next friend Ms Aileen Solowiej is the divorced wife of the first defendant and no longer within the immediate Sergi family sphere. Her view must, therefore, be regarded as one of real independence and detachment and to be the result of a wide appreciation of the interests of her son. Although Ms Karen Deighton-Smith, the next friend of the second plaintiff is now the wife of the first defendant and living with him in Queensland, her position is somewhat comparable because she is living at a distance remote from the other members of the Sergi family and sees them only occasionally. Both mothers have, in all the circumstances, formed the view that the proposed settlement is in the interests of their respective sons and in the circumstances of this case this is deserving of particular significance.
As for the terms of the proposed settlement it is proposed that 55% of the estate of the deceased should devolve upon the plaintiffs subject to the conditional gift that they attain the age of 25 years with power to advance capital or income, as contrasted with an immediate payment of 45% of the net value of the estate to the second defendants. I note that this solution is described by independent counsel as being at the 'lower end of an acceptable range of outcomes' and it is very difficult to bring any uncontroversial quantitative analysis to such an assessment. The basis relied upon by counsel seems to be that if any Inheritance Act claim were successful it is unlikely that 50% or more of the estate would be ordered to be redirected towards the three second defendants as claimants. One could agree generally with that approach but it does not bring to account the large depreciating impact upon the value of the estate of the likely costs of proceedings which could leave the infant beneficiaries in an even worse position than the implementation of this proposed compromise even if smaller awards were made in favour of the claimants. It seems that a very powerful consideration in the present case is the desirability of avoiding the expense of further litigation which could only be destructive of the plaintiffs' interests.
These are obviously considerations which have been weighed by the plaintiffs' next friends and by counsel and it is also significant that the proposal is supported by the first defendant, the father of the young plaintiffs. This is not a case which can be measured with precision or even with confidence. I am satisfied that the plaintiffs' next friends have their best interests at heart and that their views should be accorded respect.
In the circumstances I am satisfied that the implementation of the proposed compromise should be regarded as being in the interests of the plaintiffs and that the court should grant its approval.

Capping of costs

That the potential impact which legal costs may have on a small estate in influencing beneficiaries or claimants under the Inheritance Act to yield in negotiations, not because of the plausible merits of a claim, but, rather, because proceedings may so significantly deplete the estate that, even if unsuccessful, it seems economically preferable to yield to an unmeritorious claim is a very undesirable feature of claims associated with the Inheritance Act. All practitioners and Judges will have had experience in which claims, seemingly unmeritorious, are pursued and concessions in settlement negotiations demanded because of the in terrorem effect which the risk of costs in the proceedings can produce ‑ especially in small or modest estates.
Where there is reason to apprehend that considerations of this kind may be influencing the pursuit or maintenance of proceedings, the court is not powerless to prevent such injustices. Under the existing rules (RSC O 66 r 1) the costs of all proceedings are at the discretion of the court and by O 1 r 4B(1) the court has the power to manage and supervise actions, causes and matters to ensure that the costs of the procedure to the parties are proportionate to the value, importance and complexity of the subject matter in dispute and proportionate to the financial position of each party. There is a Practice Note issued by the court to this effect ‑ see Consolidated Practice Directions 9.2.2 par 15. These provisions would justify an application to the court being made whether at the commencement or in the course of Inheritance Act proceedings or at their end, that the court should fix or limit the costs of any matter in a manner that is proportionate to the value and importance of the subject matter in dispute and the financial position of each party. It would only be a small step in the employment of those powers for the court to make an order or orders capping the costs of a party or parties in Inheritance Act proceedings having regard to the value of the estate and the nature of the claims being advanced. Applications of this kind and orders fixing or capping costs made under these powers should be able to prevent a situation arising in which unmeritorious concessions are made or claims recognised merely because of the impact which an unregulated costs order or orders might have on the parties or on the estate under consideration.
In other jurisdictions, notably New South Wales, there are established statutory powers and regulations allowing the court to make orders capping costs in Family Provision Act claims and in other forms of litigation ‑ see Supreme Court of New South Wales Practice Note SC Eq 7 (Family Provision) 15 May 2009 par 24 and s 1 of the Civil Procedure Act 2005 (NSW). Those provisions have led to the development of a significant jurisprudence in New South Wales about the power of the court to make orders capping costs in various proceedings, including Family Provision proceedings, and how, when and to what extent, such orders should be made. Examples of these powers being exercised and discussed include Baychek v Baychek [2010] NSWSC 987 [10] ‑ [20], Nudd v Mannix [2009] NSWCA 327 and Ireland v Retallack (No 2) [2001] NSWSC 1096. As observed by Ball J in Baychek v Baychek [22]:
A second feature of Family Provisions Act matters is that the amount claimed or that the plaintiff can reasonably be expected to recover may be quite small, either because the estate is small or because the claim itself does not justify the award of a more substantial amount. In those cases, it is reasonable to expect that the costs will be proportionate to the amount claimed and the nature of the issues in the case. As Palmer J pointed out in Sherborne Estate (No 2) [2005] NSWSC 1003; (2005) 65 NSWLR 268 [30] (referring to Lord Wolfe's comments in Lownds v Home Office [2002] EWCA Civ 365; [2002] 1 WLR 2450), '[p]roportionality of costs to the value of the result is central to the just and efficient conduct of civil proceedings'. As I have pointed out, that principle is reflected in the CPA s 60. It is also reflected in the structure of our court system and in rules that apply in particular areas of the law ‑ such as UCPR r 42‑30, which provides that an applicant can claim under the Property (Relationships) Act 1984 is not normally entitled to recover costs in this court if the amount that the applicant recovers is less than the jurisdictional limit of the Local Court. In the case of Family Provisions Act matters, the principles that the costs should be proportionate to the amount claimed is also reflected in Practice Note SC Eq 7 par 24'.
There are many analogies between the observations of Ball J in Baychek v Baychek and the statutory provisions and rules in this jurisdiction which render these observations applicable and germane to similar proceedings in this court. It is to be hoped that a greater recognition of the powers of the court to regulate costs in these and other forms of litigation will become appreciated by the legal profession and the public so that real effect is given to the concept of 'proportionality' which has now been a feature of civil practice in this jurisdiction for quite some years. If for any reason existing provisions in the rules or legislation prove in practice to be inadequate to secure the results and the protection for litigants which are obviously intended, then I have no doubt that the law reform authorities and the parliament could be expected to respond favourably and quickly to any need to enlarge or amend the court's powers in these respects.

Means of approval

The originating summons seeks an order that the will of the deceased should be varied by substituting for cl 2 thereof, as it presently exists, provisions to the effect that the estate of the late Salvatore Giuseppe Sergi should be held on trust to be divided and distributed as follows:
(a)as to 55% of the estate for such of Dion Giuseppi Sergi and Ryan Peter Sergi as shall survive the late Salvatore Giuseppe Sergi and attain the age of 25 years absolutely and if both then in equal shares; and
(b)as to 45% of the estate of the deceased for Maria Trovato, Antonio Sergi and Giuseppina Rita Waller in equal shares as tenants in common.
The originating summons also seeks orders for the costs of all the parties to be paid out of the estate and that a certified copy of the order of the court to be placed upon the grant of probate.
These are orders of a character which could be expected to be made if the second defendants had actually initiated proceedings under the Inheritance Act and had succeeded in those claims: see s 16 and s 20 of the Inheritance Act. The potential practical difficulty which has not been addressed in any submissions, however, is that no such proceedings have been commenced by any of the second defendants, and the time for commencing such proceedings has now expired. If proceedings were to be commenced leave to do so would need to be sought and obtained and the principal proceedings then being pursued, compromise of the claims would be sought and, presumably, approved on the terms proposed. A question arises as to whether or not the court has the power to make such orders on the present originating summons where the jurisdiction of the court under the Inheritance Act has not been expressly invoked. If not it may be necessary for such proceedings to be commenced which, I acknowledge, would be undesirable because of additional expense of fees, costs and delay.
An alternative procedure which may, or may not, be attractive would be for the parties to enter into a conditional deed of family arrangement which would make provision for the variation of the rights and entitlements under the will to give effect to the substance of the compromise and which would be made conditional upon the approval of the court. Upon production of such a deed to the court for scrutiny approval of the compromise contained in the deed could be ordered and the parties left to implement the entitlements to distribution of the estate under the will as varied by the deed without further proceedings. There may, however, be unacceptable stamp duty liabilities arising from this course but as this factor has not been addressed by the parties I will not at this point pursue it.
I consider that I should at this stage publish these reasons which, in short, would lead to a decision that the court should, by some acceptable means approve the compromise of the rights of inheritance of the plaintiffs and others under the will of the late Mr Sergi and await further submissions from counsel as to the practical means by which the terms of the compromise should best be implemented.