Browne, Darryl; Pollard, Ruth --- "Where from and where to with the forfeiture rule" [2018] PrecedentAULA 55; (2018) 148 Precedent 14

---

WHERE FROM AND WHERE TO WITH THE FORFEITURE RULE^[1]

By Darryl Browne and Ruth Pollard

The forfeiture rule is like Churchill’s description of Russia: ‘a riddle wrapped in a mystery inside an enigma’. It’s a rule of public policy designed around the aphorism ‘that no system of jurisprudence could with reason include amongst the rights which it enforces rights directly resulting to a person asserting them from the crime of that person’.^[2] The forfeiture rule has been limited to an inheritance resulting from a wrongful death. But its reach is uncertain. A Supreme Court decision from 2017 extended the principle to deprive an indirect inheritance, and this extension raises fresh issues.

This article contends that the rule is a principle of law which lacks cohesion and needs reform. After considering the position overseas, and particularly in the United States, and the application of the rule to elder abuse, the authors contemplate the prospect of reform broadening the rule in Australia to penalise that social ill.

LACK OF PRECISION – WHAT CONDUCT?

While described as ‘strict and unbending’,^[3] the full reach of the principle of public policy depriving a person of an inheritance due to a crime causing death, known in some places as the forfeiture rule and elsewhere as the slayer rule, cannot be mapped with precision.^[4] So much is apparent from the conclusion of the Supreme Court of Victoria’s Court of Appeal^[5] that the decision by the Supreme Court of NSW’s Court of Appeal^[6] concerning this rule was ‘plainly wrong’.^[7]

At some point criminal culpability for another’s death produces the loss of inheritance, under will or intestacy, of the killer from the deceased’s estate. Where it applies, the forfeiture rule extends the loss of ‘inheritance’ to property that does not belong to the deceased at death, such as rights of survivorship by reason of a joint tenancy,^[8] proceeds of life insurance payable by reason of the deceased’s death^[9] and a death benefit payable by a superannuation fund.^[10] But the precise point of intersection of criminality and loss of inheritance is uncertain. It clearly applies to murder,^[11] although there does not need to be a conviction; there may be an acquittal^[12] but not if the ground for the acquittal is mental illness.^[13] Particular difficulty exists with motor manslaughter,^[14] suicide pacts^[15] and defensive homicide in the context of domestic violence.^[16] Infanticide may be another area of difficulty.^[17]

Adding further to the uncertain ambit of the rule, legislation has modified the common law, by restricting or extending it where justice so demands.^[18]

LACK OF PRECISION – WHAT CONSEQUENCE?

There is also the problem of determining the distribution in the absence of the offender inheriting. This has led the Victorian Law Reform Commission to observe:

‘The application of the forfeiture rule can also have unfair consequences for third parties as it can affect their potential rights to take a forfeited benefit. Those affected may include alternative beneficiaries named in a will, other beneficiaries of the deceased person’s estate, the innocent descendants of the unlawful killer, and any person who co-owns property with the unlawful killer and the deceased person as joint tenants.’^[19]

There is yet to appear a consistent basis for explaining the reason a person benefits where the offender’s interest is forfeited. Generally, when inheriting a gift through a will or upon intestacy, the offender is treated as dying before the deceased (although that is not always the approach^[20]). When passed over as an executor the offender is treated as surviving the deceased but lacking legal capacity. With a joint tenancy, the offender is treated as surviving the deceased and being legally capable to hold the property as constructive trustee for the deceased’s estate.^[21]

Where the death causes an acceleration in the offender’s entitlement to property, such as where the remainderman kills the life tenant, the offender is treated as surviving and retaining the right to inherit although it is postponed for the period of the deceased’s life expectancy.^[22] This employs the ultimate legal fiction, namely that the deceased is still alive, but reverses the general approach as the offender survives the deceased. Under this approach the offender would inherit an absolute gift if actuarial tables suggested that the offender would outlive the deceased. An example is a child who kills a parent, such as Gonzales v Clarides [2003] NSWCA 227; (2003) NSWLR 211. The inheritance would not be lost, only postponed.

The prospects of this incoherence led to these comments in 1920:

‘The whole doctrine seems to me to be in a very unsatisfactory condition; it is an extraordinary instance of judge-made law invoking the doctrine of public policy in order to prevent what is felt in a particular case to be an outrage; but I cannot distinguish, consistently with these judgments, one case from the other.’^[23]

Almost 75 years later it was said in the same court:

‘The difficulty was that the new rule was devised by judges to solve the necessities of particular cases. It developed without a great deal of consideration, either of its scope, or of its exceptions, or of its fundamental underlying rationale.’^[24]

The ambit of the legal principle is all-embracing, because (unusually) it is a common law principle which has the effect of overriding legislation – the intestacy provisions; contractual entitlements – insurance policies and interests in superannuation funds; property rights – rights of survivorship and life estates; and testamentary acts – wills. This makes the incoherence and uncertainty of the law more startling. And to this cocktail can now be added the seldom considered incidence of indirect inheritance.

EXTENSION TO INDIRECT INHERITANCES

In December 2008, Ah Bee Mack was killed by one of her two sons, Brent. Brent was convicted of the murder of his mother. Ah Bee did not leave a will. The court ordered that by reason of Brent having murdered his mother, he forfeited his entitlement to take in intestacy from her estate. Her other son, Adrian, inherited the whole of her estate. That estate remained undistributed when, in July 2014, Adrian died intestate. The administrator of Adrian's estate sought court directions as to the distribution of that part of Adrian’s estate which was made up of Ah Bee Mack's estate. Two persons were entitled to the latter estate, Brent and a half-brother, Gary.

The distribution depended on whether Brent, by the murder of his mother, forfeited any right to any identifiable part of Ah Bee Mack's estate even after the identifiable estate had passed to Adrian’s estate. The court considered that, intuitively, it would be a logical extension of the forfeiture rule to hold that a convicted murderer could not benefit indirectly as a consequence of his crime. The court found no Anglo-Australian case on point, but three American decisions were identified.

In the first US decision,^[25] two grandsons intentionally and unjustifiably caused their grandmother's death. Their mother died after the grandmother was murdered. An Illinois appellate court held that the grandsons could not indirectly inherit the grandmother's estate through their mother. In the second decision,^[26] the deceased died intestate survived only by eight nieces and nephews. One nephew had murdered his father, the deceased’s brother, and then stood to inherit by reason of the deceased’s brother’s death. The New York court held that the nephew's convictions disqualified him as an intestate distributee.

In the third US decision Matter of Edwards,^[27] the deceased’s daughter’s husband caused the death of his mother-in-law in circumstances which led to his conviction for manslaughter. Less than 14 months after the mother’s death, her daughter died intestate leaving her husband as her sole beneficiary. The court denied the husband an inheritance of his wife’s estate but admitted that:

‘a consistent application of the approach adopted herein could prove to be problematic were there a greater temporal proximity between the wrongful act and the wrongdoer's succession to the funds received by the original heir(s) of the victim. The court is well aware that the tracing of such funds may well prove to be impossible in certain cases due to their conversion, expenditure, depletion, or any other number of reasons.’

LIMITING THE INDIRECT FORFEITURE

Picking up on the point about an elapse of time, in Public Trustee (WA) v Mack [2017] WASC 325 the Supreme Court of Western Australia observed that there may be some doubt whether the principle would hold good where there was a long period of time between the commission of the offence and the passing of an asset to the wrongdoer. In Mack there was no significant modification to Adrian’s estate, by the flux of time or otherwise, which made identification of the asset held by Adrian consequent upon the death of Ah Bee Mack difficult. Unlike Matter of Edwards, Ah Bee’s estate had not vested in Adrian. Accordingly, the court made directions that on distribution of Adrian’s estate the administrator not pay Brent any part of the estate which derived from the estate of Ah Bee Mack.

The potential problem with delayed and remote indirect benefits was alluded to by the US Court of Appeals for the Seventh Circuit in circumstances where Kevin Spann was murdered at the instigation of his wife. She was sentenced to life imprisonment plus five years. His death triggered the payment of two life insurance policies. After excluding the murdering wife as beneficiary, the contingent beneficiaries were the wife’s sister for one policy and her son for the other. Their benefit was challenged by Kevin’s daughter. The court imagined the following ‘subtler cases of indirect benefit’:

‘Suppose that ...the murderess's son...promised that he would use the life insurance proceeds to pay for his mother's lawyer or to buy her books or other goods that the prison would allow her to receive. Or suppose that [the son] needed an expensive operation that Kevin could not or would not pay for and [his wife] killed Kevin so that the proceeds of his life insurance could be used to pay for the operation; or that [the wife] had been given a short prison sentence and [the son] had promised to support her in style out of the life insurance proceeds when she was released.’^[28]

The court did not resolve these hypotheticals. It concluded that it was ‘exceedingly unlikely that [the wife] will ever benefit significantly from the proceeds of her husband's life insurance policies in the hands of her son and her sister’. They weren’t deprived of the benefit because of the remote prospect of the offender benefitting. But remoteness as well as temporal proximity looms as a restraint on how far the decision of the Western Australian Supreme Court in Mack extends the forfeiture rule. These issues present additional uncertainty in identifying the reach of the forfeiture rule.

CODIFYING THE LAW

Ideally, codifying legislation would give certainty and consistency to the law. It could prescribe the degree of criminality required to attract the rule. Legislation could state the consequence of the exclusion of the forfeited beneficiary on distribution of the estate or benefit. An Act could prescribe the extent to which remoteness or temporal proximity could be relied on to defend the forfeiture of an indirect inheritance. And, having done this, the legislation should go further and extend forfeiture to the reprehensible and disgraceful behaviour of a beneficiary perpetrated on an elderly victim.

EXTENSION TO ELDER ABUSE

Elder abuse is a burgeoning problem across Australia, as well as in many other nations. The perpetrators of abuse target aged persons, as well as others who are at risk due to other vulnerabilities, such as cognitive impairment or disabilities. Abuse may take the form of physical threats and assaults, sexual assault, psychological or emotional abuse, as well as exploiting and misappropriating assets (financial abuse).

In Australia and elsewhere there are increasing efforts to prevent elder abuse. In the US, in addition to the usual forfeiture provisions, which the Americans refer to as ‘slayer’ laws, eight states have expanded the forfeiture rule to disqualify persons from inheriting if they have been involved in physical abuse or financial exploitation of the deceased.^[29] A rationale for expanding the ‘slayer laws’ is to reduce elder abuse, recognising that it is often those who are beneficiaries in wills or those who inherit on intestacy – close family members – who commit the abuse.

‘By recognizing elder abuse as a matter of probate law, the goal is to disincentivize elder abuse by those who stand to gain from the death of an elderly individual.’^[30]

The US statutes provide not only for forfeiture of estate assets but also what is referred to as ‘non-probate assets’ or ‘will substitute assets’.

While the common law concept of ‘forfeiture’ is not used in civil law systems, a similar result is achieved through their succession laws linking repugnant behaviour or ‘unworthiness’ to disinheritance. This linkage is found in civil law systems across East Asia, Latin America, Africa and Europe.^[31]

An example of the application of the US slayer law in the context of elder abuse is In re Estate of Haviland, 301 P.3d 32 (Wash. 2013). Haviland and his first wife created an estate plan to benefit their four children, grandchildren and some charities to which they had been donors. Three years after his first wife's death, Haviland, at 85 years, met 35-year-old Mary Burden. Haviland married Mary and modified his estate plan to include his new wife.

During his second marriage, he changed his will several times, leaving larger shares of his property to Mary and her children from a former relationship. His last will was executed in 2006. His wife accompanied him to his estate attorney, where she gave handwritten changes to the attorney, which provided mainly for herself, excluded his children and grandchildren and substantially reduced the share going to charity. He signed the will after a short meeting and answered only yes and no to questions posed to him.

When Haviland died of advanced dementia in 2007, his children challenged the validity of the 2006 will. The court found that Mary had spent millions of dollars of Haviland's funds over the time of their marriage and at the time of his death, the total value of the estate was negative. The trial court ruled ‘that the will was the product of undue influence by [Mary]’. The 2006 will was ruled invalid and Mary was removed as personal representative. The court appointed a personal representative who then filed an application for determination that Mary was an abuser under the abuser provisions of the slayer law. The Washington Supreme Court found that Mary was disqualified from benefitting from Havilland’s estate on the basis that she was found to be an abuser who had financially exploited a vulnerable adult pursuant to the expanded ‘slayer’ law applying to cases of elder abuse.

A PROPOSAL FOR AUSTRALIA

A case that illustrates critical problems associated with the misuse of an enduring power of attorney is Cohen v Cohen [2016] NSWSC 336. In 2012, when in her late 80s, Aviva Cohen moved from her unit to an aged care facility. She became a high care resident. Her only son, Shalom, was her sole beneficiary by her will. She had appointed him her attorney. In 2013, as her attorney, Shalom signed a transfer of his mother’s unit to himself for consideration of $1.00. It was assessed for stamp duty to have a value of $200,000. At the time, the amount of fees owed to the aged care facility was about $8,130. Shalom justified his actions on the basis that he was the sole beneficiary of his mother’s estate and she lacked mental capacity. He declined to re-transfer the property to his mother even when it was pointed out that Centrelink ‘deemed’ his mother to have gifted the unit to him, her aged care costs exceeded her pension, the nursing home fee arrears continued to accumulate, and she had no funds to provide for comforts or other necessary expenses for her welfare.

In an echo of the legal wrong committed by Mary Burden in Havilland, the court in Cohen concluded that by transferring the unit to himself, a transaction ‘which had the effect of depriving the [mother] of her only substantial asset, the [son] acted in breach of his fiduciary obligations to the [mother]’.^[32] The transaction was also invalidated as unconscionable. The unit was ordered to be re-transferred to her.

A possible solution to some cases of abusive conduct is the statutory will. Each Australian jurisdiction allows the Supreme Court to authorise a statutory will for a person (minor or adult) who permanently lacks testamentary capacity.^[33] The courts have demonstrated a willingness to deprive the unworthy of inheriting when there is an opportunity to authorise a person’s statutory will.

So, in State Trustees Ltd v Hayden [2002] VSC 98; (2002) 4 VR 229, the court re-wrote a will removing a person who had engaged in ‘reprehensible and disgraceful’^[34] behaviour, namely, elder financial abuse. The court’s abhorrence of reprehensible behaviour is most obvious where the court authorises a will starting with a blank canvas.^[35]

In Fenwick, Re; Application of JR Fenwick & Re Charles [2009] NSWSC 530; [2009] 76 NSWLR 22, the court made a statutory will for ‘Charles’, a pseudonym given to an eleven-year-old severely incapacitated child who suffered irreversible brain injury at the age of four months. His injuries were consistent with ‘Shaken Baby Syndrome’. He received a victim’s compensation award of $50,000. He was placed under the care of the Minister for Community Services. The Minister sought a statutory will for Charles to avoid his estate passing on intestacy to his parents. The surrounding circumstances undeniably raised a suspicion that the parents had caused Charles’s injuries. The court authorised a will in favour of Charles’s only other family member, his elder sister. The will contained a gift over provision in favour of two charities committed to caring for children with Charles’s disabilities.

As the law currently stands, an abuser’s inheritance depends on happenstance. If Charles had died before the court authorised a statutory will for him, his parents would have inherited the victim’s compensation paid to Charles by reason of their conduct.^[36]

CONCLUSION

A national conversation about undeserving beneficiaries could explore the extension of the forfeiture rule, as well as statutory wills, as a remedy in cases of financial abuse where the children who committed abuse will inherit their parent’s estate. There is a need to amend, or in some jurisdictions to enact, forfeiture rule statutes. There is a golden opportunity to make a logical extension of the legislation to ensure that reprehensible and disgraceful behaviour of a beneficiary perpetrated on an elderly victim results in the forfeiture of the beneficiary’s benefit on the victim’s death. It then wouldn’t be a matter of happenstance. Legislation could also allow for the forfeiture to be countered. An example is where the victim has testamentary capacity and intentionally makes provision for the abuser in a will made after the abuse has occurred. No doubt forgiveness could be shown in other ways. But care will be needed to ensure that there is not more uncertainty and incoherence in this area of the law.

Darryl Browne is an Accredited Specialist in Wills and Estates and TEP. He is the principal of BROWNE.Linkenbagh Legal Service, Leura NSW. PHONE [phone] EMAIL [e-mail]. Ruth Pollard is Director of Legal and Professional Services, NSW Trustee and Guardian.

---

^[1] This article is based in part on D Browne, ‘Though shalt not kill and inherit’, STEP Journal, July 2018, 62-3. Also, some of the matters discussed are elucidated in a forthcoming essay R Pollard and P Johnson, ‘The application of the Forfeiture Rule to cases of financial abuse’.

^[2] Helton v Allen [1940] HCA 20; (1940) 63 CLR 691, 709.

^[3] Gonzales v Claridades [2003] NSWCA 227, [46].

^[4] Estate of Paul Novasadek [2016] NSWSC 554, [16]: ‘its exact ambit has never been clear’.

^[5] Edwards v State Trustees Limited [2016] VSCA 28.

^[6] Troja v Troja (1994) 33 NSWLR 268.

^[7] Edwards v State Trustees Limited [2016] VSCA 28, [66].

^[8] Rasmanis v Jurewitsch (1970) 70 SR (NSW) 407; Re Stone [1989] 1 Qd R 351.

^[9] The Amicable Society for a Perpetual Life Assurance Office v Bolland (‘Fauntleroy’s case’) [1830] EngR 6; (1830) 4 Bligh NS 194; 5 ER 70; Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147.

^[10] In the Estate of the Late Fiona Ellen Fitter & The Forfeiture Act 1995; Public Trustee of New South Wales v Fitter [2005] NSWSC 1188; 97/111 [1997] SCTA 111.

^[11] Gonzales v Clarides [2003] NSWCA 227; (2003) NSWLR 211.

^[12] Helton v Allen [1940] HCA 20; (1940) 63 CLR 691.

^[13] Kemperle v The Public Trustee (Unreported, Supreme Court of New South Wales, Powell J, 20 November 1985).

^[14] Tinline v White Cross Insurance Association Limited [1921] 3 KB 327; James v British General Insurance Company Limited [1927] 2 KB 311; Hardy v Motor Insurers’ Bureau [1964] 2 QB 745; Beresford v Royal Insurance Company Limited [1938] AC 586.

^[15] Dunbar v Plant [1998] Ch 412; The Public Trustee of Queensland v The Public Trustee of Queensland [2014] QSC 47.

^[16] In re Giles [1972] 1 Ch 544; In re K [1985] 1 Ch 85; Public Trustee v Evans (1985) 2 NSWLR 188; Re Keitley [1992] VicRp 38; [1992] 1 VR 583; Troja v Troja (1994) 33 NSWLR 268; Edwards v State Trustees Limited [2016] VSCA 28, [4].

^[17] Victorian Law Reform Commission, The forfeiture rule report, 3.64-3.73.

^[18] Forfeiture Act 1995 (NSW), ss5, 8 and 11; Forfeiture Act 1991 (ACT).

^[19] Victorian Law Reform Commission, The forfeiture rule report, x.

^[20] Re DWS (deceased) [2001] Ch 568.

^[21] Rasmanis v Jurewitsch (1970) 70 SR (NSW) 407.

^[22] Batey v Potts [2004] NSWSC 606; (2004) 61 NSWLR 274.

^[23] Re Tucker [1920] NSWStRp 100; (1920) 21 SR (NSW) 175, 181.

^[24] Troja v Troja (1994) 33 NSWLR 268, 278.

^[25] In Re Estate of Vallerius 259 Ill.App.3d 350 (1994).

^[26] In Re Estate of Macaro 182 Misc.2d 625 (1999).

^[27] Matter of Edwards 2012 NY Slip Op 22102.

^[28] Prudential Insurance Company of America and Boston Mutuallife Insurance Company v Chrustal Athmer, [1999] USCA7 273; 178 F 3d 473.

^[29] The states are California, Arizona, Illinois, Kentucky, Maryland, Michigan, Oregon, and Washington.

^[30] J Piel, ‘Expanding Slayer statutes to elder abuse’, The Journal of the American Academy of Psychiatry and the Law, Vol. 43, No. 3, 2015, 369.

^[31] See L B Schwartz, ‘The inheritance law of the People’s Republic of China’, Harv. Int'l L J, Vol. 28, 1987, 433; A M Han, ‘Inheritance law of the People’s Republic of China’, Int'l Legal Prac, Vol. 13, 1988, 66; F H Foster, ‘Towards a behaviour based model of inheritance?: The Chinese experiment’, UC Davis L Rev, Vol. 32, 1998-1999, 78; A Vacquer, ‘Freedom of testation, compulsory share and disinheritance based on lack of family relationships’ (2010) available at <https://www.researchgate.net/publication/228143184>. European examples include Catalan (E Arroyo i Amayuelas and M Anderson, ‘Between tradition and modernisation: A general overview of the Catalan Succession Law Reform’ in M Anderson and E Arroyo i Amayuelas (eds) The Law of Succession: Testamentary Freedom: European Perspectives (Europa Law Publishing, 2011) 55), Malta, Spain, Poland (G Wolak, ‘Disinheritance on the ground of an offence against a testator’s next of kin (Article 1008(2) of the Civil Code)’, Review of Comparative Law, Vol. XXIV, 2016, 52-54), and Hungary.

^[32] [2016] NSWSC 336, [66].

^[33] Relevant statutes include: Wills Act 1992 (Tas), s27; Wills Act 1936 (SA), s73; Wills Act 1997 (Vic), s26; Wills Act 2000 (NT), s21; Succession Act 1981 (Qld), s24; Succession Act 2006 (NSW), s22; Wills Act 1970 (WA), s42.

^[34] [2002] VSC 98; (2002) 4 VR 229, [46].

^[35] This is a person who has never had testamentary capacity. They have been commonly called ‘nil capacity’ cases in Australia since Re Fenwick [2009] NSWSC 530 but were called ‘tabula rasa’ in Re C, (A Patient) [1991] 3 All ER 866, 870.

^[36] An example of similar conduct which produced a statutory will for the abused child is Secretary, Department of Human Services v Nancarrow [2004] VSC 450 (unreported, Cummins J, 1 November 2004).