Allen v Coffman & Ors: Estate of Prager - [2008] NSWSC 1067

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CITATION: Allen & Ors v Coffman & Ors - Estate of Prager [2008] NSWSC 1067

HEARING DATE(S): 30.09.08

JUDGMENT DATE :
10 October 2008

JUDGMENT OF: Debelle AJ

DECISION: Par 23

CATCHWORDS: CONTRACT - CONSTRUCTION - compromise of contentious probate proceedings - meaning of clause relating to distribution of proceeds of realisation of estate

CATEGORY: Principal judgment

CASES CITED: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Estate of Szylowicz (1978) 19 SASR 263
Prenn v Simmonds [1971] 1 WLR 1381

PARTIES: Louise Anne Allen – first plaintiff/first cross-defendant
Edda Ingeborg Lehmann – second plaintiff/second cross-defendant
The Children’s Hospital at Westmead – third plaintiff/third cross-defendant
The Salvation Army (New South Wales) Property Trust – fourth plaintiff/fourth cross-defendant
William John Coffman – first defendant/first cross-claimant
Ian Cole Miller – second defendant/second cross-claimant
Elizabeth Coffman- third defendant/third cross-claimant

FILE NUMBER(S): SC 2052/08

COUNSEL: Mr M S Willmott SC – plaintiffs/cross defendants]
Ms J A Needham SC/ Ms R Kako – defendants/cross-claimants

SOLICITORS: Champion Legal – plaintiffs/cross defendants
Hunt & Hunt – defendants/cross-claimants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Debelle AJ

10 October 2008

2052/08 Allen & Ors v Coffman & Ors

JUDGMENT

1 His Honour: In these proceedings, the plaintiffs applied for a declaration as to the true construction of an agreement made between the parties on 17 October 2006 and embodied in an order made in this Court on 30 October 2006. After hearing argument, I announced my decision adding that I would later publish reasons for it. These are the reasons for that decision.

A testatrix makes five wills

2 Margarete Anneleise Prager (the deceased) died on 4 March 2005. The deceased made five wills in the period 8 June 1995 to 11 March 1996, a period of a little over nine months. Some of the wills had different executors and the testamentary dispositions differed. Some persons were beneficiaries in one will but not in others. The wills were made on 8 June 1995, 14 August 1995, 29 February 1996, 1 March 1996 and 11 March 1996. The last three wills were made in less than a fortnight. The fourth and fifth wills are in the same terms but the witnesses are different.

3 At the date of her death, the deceased was the owner of a property at Castle Hill known as “Lynton Lee”. I shall refer to it as “Lynton Lee”. She had cash and other personal estate with a total value exceeding $6,000,000.

Contentious probate proceedings

4 John Michael Burford (Mr Burford), the executor named in the last will made on 11 March 1996, applied for a grant of probate of that will. Ms Edda Lehmann, one of the executors of the will dated 29 February 1996, responded by filing a caveat. Ms Lehmann was also a beneficiary under the will dated 29 February 1995 as well as under each of the other wills. Mr Burford’s application for the grant of probate became contentious. Proceedings were issued and pleadings exchanged. The essential issue in the probate proceedings was whether the deceased had testamentary capacity at the time of executing each of the five wills.

A compromise of the proceedings

5 Before the matter was tried, the parties agreed to a mediation. It was held on 17 October 2006. The mediation was attended by all parties to the probate proceedings and a large number of beneficiaries. The persons at the mediation included the parties to these current proceedings. The persons at the mediation reached a compromise which was embodied in a written agreement called “terms of settlement”. Short minutes of order were prepared and on 30 October 2006 Campbell J made orders in accordance with those minutes. The minutes of order were in these terms:

1. Probate, in solemn form, of the Will made and published by the deceased on 11 March 1996 be granted to the Plaintiff.

2. The matter be remitted to the Registrar to complete the grant.

3. Subject to order 4, each party will pay his or her own costs of the proceedings.

4. The Court notes the agreement of the parties that the Plaintiff:

(a) will cause the assets of the estate to be realised;

(b) will cause to be opened a bank account in the name of the Plaintiff and Ian Colwell Miller into which the proceeds of sales of assets and/or any cash in the estate will be placed;

(c) will pay all costs and expenses of realising the assets;

(d) will pay debts, funeral, testamentary and administration expenses;

(e) of the amount then remaining will;

(i) pay 25% to the executor named in the will of the deceased made and published by her on 29 February 1996;

(ii) pay 37.5% to the executor named in the will of the deceased made and published by her on 14 August 1995;

(iii) will hold the balance of 37.5% as executor of the will made and published by the deceased on 11 March 1996.

(f) No claim for commission will be made by the Plaintiff but he will be entitled to charge the estate of the deceased for work done by him in administering the estate in accordance with Clause 5 of the Will and any amounts charged will be an administration expense.

(g) In the event that he is able to do so, the executor will make an interim distribution as soon as he is reasonably able, as set out above in paragraph 4(e).

(h) The Plaintiff will appoint Ian Colwell Miller of Hunt & Hunt Solicitors, to act as the solicitor for the Estate on the sale of the deceased's property situated at 96 Tuckwell Road, Castle Hill which property is to be sold at a price to be agreed between Ian Colwell Miller and the Plaintiff, and failing agreement by an independent valuer appointed by the President of the Law Society of New South Wales or his or her nominee.

(i) The plaintiff will appoint Alexander John Wakefield of Holman Webb Solicitors to act as the solicitor for the Estate in relation to its administration.

(j) Each of the Executors referred to in paragraph 4(e) above will hold the amount paid to him, or her, on trust for the beneficiaries named in the said will of which he or she is named as executor and shall distribute that amount after payment of that executor's legal costs in the proportion calculated by reference to that percentage of that beneficiaries entitlement under the said will.

(k) In relation to the plaintiff as Executor, he will be entitled to receive, in addition to the amount referred to in (j) above, an amount equal to the balance of the pecuniary legacy which totals $250,000 and the costs of administering the estate prior to the date of this agreement assessed and agreed at $20,000, such amounts to be paid to him out of the share of the charities named in the will dated 11 March 1996.

6 The issue as to the meaning of par 4(j) stems from the terms of the will of the deceased made on 14 August 1995. By that will, the deceased appointed Mr W J Coffman and Mr I C Miller executors. After making a bequest of “Lynton Lee” to Mr Coffman and his wife absolutely, she gave the residue of her estate to her executors on trust to sell and convert it into cash and, after payment of all death, funeral and testamentary expenses, to divide it into ten equal shares and to pay such shares as follows:

(a) two undivided shares to Louise Allen,

(b) one undivided share to Edda Lehmann,

(c) one undivided share to the Children’s Hospital of New South Wales at Westmead,

(d) one undivided share to the Salvation Army, and

(e) five undivided shares to Mr and Mrs Coffman as joint tenants or the survivor of them absolutely.

7 The will made on 14 August 1995 is the only will that contains a bequest of “Lynton Lee”. In all of her other wills save the will made on 29 February 1996 the deceased gave legacies to named persons (the legacies in each will totalling approximately $1,000,000) and then divided the rest of her estate among three named beneficiaries each of which was a charity. In the case of the will made on 29 February 1996, the deceased gave legacies totalling $1,000,000 to named persons and divided the residue between four persons of whom Ms Lehmman was one, the other three being charities.

8 Mr Burford has got in and realised all of the assets of the estate of the deceased. He has made three interim distributions. So far as they effect the beneficiaries under the will made on 11 August 1995 those distributions have been paid as follows:

20% to the First Plaintiff $274,000.00

10% to the Second Plaintiff $137,400.00

10% to the Third Plaintiff $137,400.00

10% to the Fourth Plaintiff $137,400.00

20% to the First Plaintiff $185,000.00

10% to the Second Plaintiff $92,500.00

10% to the Third Plaintiff $92,500.00

10% to the Fourth Plaintiff $92,500.00

50% to the First and Third Defendants $462,500.00

9 On 30 August 2007, following the sale of “Lynton Lee”, Mr Burford paid a third distribution of $3,750,000 to Messrs Coffman and Miller. I will refer to it as “the third distribution”. Messrs Coffman and Miller have refused to distribute that sum in the same way as the first two distributions. In these proceedings the plaintiffs are the four beneficiaries named in the disposition of the residue of the estate other than Mrs and Mrs Coffman, that is to say, Louise Allen, Edda Lehmann, the Children’s Hospital at Westmead and the Salvation Army. The defendants are Mr Miller and Mr and Mrs Coffman. The plaintiffs contend that Messrs Coffman and Miller as executors of the will made on 14 August 1995 should distribute the amount of $3,750,000 in the same way as the first two distributions, that is to say, in the same proportions as is provided in that will for the division of the residue of the estate of the deceased. For their part, the defendants contend by cross-claim that the whole of the amount of $3,750,000 should be paid to Mr and Mrs Coffman.

Relevant principles

10 The meaning of a written instrument is to be determined by assigning to the words used their plain and ordinary meaning. At the same time, evidence of the surrounding circumstances is admissible as an aid to the construction of a contract: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 348 per Mason J. Although evidence of prior negotiations and of the parties’ intentions and a fortiori the intentions of one of the parties ought not to be received, evidence restricted to the factual background known to the parties at or before the date of the contract, including evidence of the “genesis” and objectively of the “aim” of the transaction, is admissible: Codelfa at 348 applying the reasons of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381 at 1383-1385. In this case, the relevant surrounding circumstances are the assets comprising the estate of the deceased, the five wills, the probate proceedings, and the fact that the parties compromised the probate proceedings.

11 The parties to the agreement (which parties include all of the parties to these proceedings) must have been aware that the agreement was a compromise of the competing claims of each in respect of each of the five wills. When they agreed to the compromise, the parties agreed to forego their respective entitlements under each of the wills and agreed, instead, to distribute the estate of the deceased according to the terms of the compromise. By assenting to the compromise, the parties effectively made a new will for the deceased. The power to compromise is important and the court will uphold it. In this respect see Mortimer, Probate Law & Practice, 2nd ed (1927) at p 610, referred to with approval in Estate of Szylowicz (1978) 19 SASR 263 at 269.

12 The terms of the agreement embodying the compromise expressly directed Mr Burford first to get in and realise all of the assets of the estate. Those assets included “Lynton Lee”. Once the assets had been realised, Mr Burford was obliged to pay all costs and all debts and then out of the amount remaining to pay the prescribed portion to the three designated recipients, each being an executor or executors of one of the three wills named in the agreement in the following shares:

(a) 25 per cent to the executor of the will made on 29 February 1996;

(b) 37.5 per cent to the executor of the will made on 14 August 1995; and

(c) 37.5 per cent to the executor of the will made on 11 March 1996.

13 The assets of the estate realised about $18,167,071. Of that amount, $12,054,571 represented the proceeds of sale of “Lynton Lee” and $6,112,500 represented cash and realisation of personal property. The agreement authorised Mr Burford to make interim distributions and he has done so. He was not obliged to do so. Had Mr Burford made but one distribution after all assets had been got in and realised and after all debts and other liabilities of the estate had been paid, he would simply have made a distribution in three parts according to the directions in par 4(e). For the purposes of illustration, I round off the cash value of the estate to $18,000,000. Thus, out of the amount of $18,000,000 Mr Burford would have paid:

(a) $4,500,000 to the executor of the will made on 29 February 1996

(b) $6,750,000 to the executor of the will made on 14 August 1995

It will have been immediately noticed that, in order to comply with his obligations under the agreement as to the amount to be paid to each executor pursuant to par 4(e), Mr Burford must use the proceeds of the sale of “Lynton Lee”. It is not possible for “Lynton Lee” or the proceeds of the sale of “Lynton Lee” to be given to Mr and Mrs Coffman if Mr Burford is lawfully to discharge his obligations and make the distributions as provided in par 4(e). Put another way, it is not possible for Mr Burford to permit the proceeds of sale of “Lynton Lee” to be paid to Mr and Mrs Coffman and at the same time comply with his obligations under the agreement.

14 Against that background, I turn to examine the terms of par 4(j). Paragraph 4(j) is intended to reflect what was par 5 of the terms of settlement which was in these terms:

Each of the executors referred to in paragraph 4(e) above will hold the amount paid to him, or her, on trust for the beneficiaries named in the said will of which he or she is named as executor and shall distribute the proportion thereof calculated by reference to the percentage received and referred to in paragraph 4(e) above to each of the beneficiaries named therein to which he or she is entitled after payment of that executor’s legal costs.”

15 The important words in par 4(j) (and also in par 5) are the direction to the executors to distribute the amount received “after payment of that executor’s legal costs in the proportion calculated by reference to that percentage of that beneficiaries entitlement under the said will”. The expression “that beneficiaries” is an obvious error. If that clause is to make any sense, it must read “those beneficiaries”. The intent is that each beneficiary will receive the proportion to which he or she is entitled under the will. If any doubt remains, reference to clause 5 of the terms of settlement makes the position entirely clear. Paragraph 4(j) does not refer to any bequest under the will but only to the proportion that that beneficiary is to receive in the will. In respect of the will made on 14 August 1995, the reference to “the proportion”, therefore, does not apply to any specific bequest in the will. It can only apply to the directions in the will as to the proportions into which the residue is to be divided. The fact that on the third distribution the executors of the will made on 14 August 1995 received only a portion, namely 37.5 per cent, of the proceeds of the sale of “Lynton Lee” serves to reinforce that conclusion. It is not possible to give effect to the bequest of “Lynton Lee” to Mr and Mrs Coffman. To do so would not only reduce the amount payable to the beneficiaries under the will of 14 August 1995 but would also reduce the amount payable to the beneficiaries under the wills dated 29 February 1995 and 11 March 1996. For all of these reasons, in the case of the will made on 14 August 1995 the expression “the proportion calculated by reference to that percentage of that beneficiaries entitlement under the said will” is a reference to the proportions into which the will directs that the residue shall be divided. To take any other course is to go behind the terms of the compromise.

16 There are other considerations that point to the same conclusion. While each consideration might not be wholly persuasive, when viewed as a whole, they are consistent with the conclusion that the reference to proportion in par 4(j) in the case of the will made on 14 August 1995 means the proportions into which the residue of the estate is to be divided.

17 The first of those considerations is that the will that was admitted to probate was the will made on 11 March 1996, not the will made on 14 August 1995. Mr Burford as executor of the will made on 11 March 1996 was required by the agreement to get in and realise all of the assets of the estate of the deceased and then to distribute the proceeds, after payment of debts and other obligations, as directed by the agreement, not as provided by the will made on 14 August 1995. As noted earlier, the effect of the compromise was to make a new will for the deceased. The will made on 14 August 1995 was thereby revoked except for the purpose of identifying the proportions named in the bequest of the residue.

18 A second consideration is that the bequest of “Lynton Lee” under the will made on 14 August 1995 created an interest in that property in favour of Mr and Mrs Coffman. The only provision in that will that divides the estate into proportions is the bequest of residue which divides the residue into ten equal parts of which Mr and Mrs Coffman are to take one half. To accede to the defendant’s submissions is to allow Mr and Mrs Coffman to take their interest under the will as well as their proportion of residue. That is clearly contrary to the intent of the compromise.

19 Thirdly, it is apparent that, where the parties intended that a particular beneficiary should receive the whole of the legacy or a bequest made in any of the wills, they made express provision for it. Under the will made on 11 March 1996, Mr Burford was to receive a legacy of $250,000. The terms of par 4(k) of the agreement make express provision to ensure that he will in fact receive $250,000. The absence of a like provision in relation to the bequest of “Lynton Lee” to Mr and Mrs Coffman serves to reinforce the conclusion in par 15 above.

20 In the course of his argument, Mr Willmott SC for the plaintiffs suggested that there was an analogy with the principles relating to ademption. He did not press the analogy and, I think, for good reason. The principles of ademption operate in circumstances where events occur before the death of the testator. All relevant events in this case occurred subsequent to the death of the deceased. If an analogy exists, it lies in the fact that the parties agreed to compromise the probate proceedings in a way that required “Lynton Lee” to be sold and the proceeds distributed among all of the beneficiaries of the three wills named in the compromise with the consequence that the bequest to Mr and Mrs Coffman of “Lynton Lee” necessarily fails.

21 Ms Needham SC, who appeared for the defendants, submitted that the proportions into which the amount paid to the executors was to be divided was to be determined by an enquiry as to how much of the proceeds coming into the hands of Mr Burford represented the proceeds of the sale of “Lynton Lee”. As the third distribution was made after the sale of “Lynton Lee”, she contended, a simple tracing exercise led to the conclusion that Mr and Mrs Coffman are entitled to the whole of the third distribution. The argument cannot succeed. It plainly fails to have any regard to the terms of the compromise that required “Lynton Lee” to be sold and the proceeds distributed among the beneficiaries of the three wills named in the agreement. To assert that Mr and Mrs Coffman can trace their entitlement to the proceeds of sale of “Lynton Lee” is to go behind the compromise and to seek to restore the will of 11 August 1995 which was not admitted to probate. The argument also fails to have any regard to the fact that 62.5 per cent of the proceeds of the sale of “Lynton Lee” are distributed to the beneficiaries named in the wills made on 29 February 1996 and 11 March 1996.

22 Everything in the compromise points to the conclusion that Mr and Mrs Coffman were not to receive “Lynton Lee” or the proceeds of the sale of “Lynton Lee”. First, there is nothing in the agreement that preserves the bequest of “Lynton Lee” to Mr and Mrs Coffman. Although one of the wills provided for a bequest of “Lynton Lee”, the parties compromised the probate proceedings without making any express provision in relation to “Lynton Lee” or in relation to that bequest except that in par 4(h) they agreed who should act as solicitor on the sale, a purely administrative arrangement. The compromise embodied in the agreement was a resolution of the competing claims of each of the parties in respect of each of the five wills. It effectively created a new will. When effect is given to the compromise, the proceeds of sale of “Lynton Lee” like other assets are to be divided in the proportions specified in the gift of residue.

23 For all of these reasons, I made the following orders:

(3) That the first defendant, second defendant, third defendant pay the plaintiffs’ costs of and incidental to these proceedings.

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Citations

Allen v Coffman & Ors: Estate of Prager [2008] NSWSC 1067

Cases Citing This Decision

0

Cases Cited

2

Statutory Material Cited

0

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24

Wheatley v Edgar [2003] WASC 118

CITATION:	Allen & Ors v Coffman & Ors - Estate of Prager [2008] NSWSC 1067
HEARING DATE(S):	30.09.08
JUDGMENT DATE :	10 October 2008
JUDGMENT OF:	Debelle AJ
DECISION:	Par 23
CATCHWORDS:	CONTRACT - CONSTRUCTION - compromise of contentious probate proceedings - meaning of clause relating to distribution of proceeds of realisation of estate
CATEGORY:	Principal judgment
CASES CITED:	Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Estate of Szylowicz (1978) 19 SASR 263 Prenn v Simmonds [1971] 1 WLR 1381
PARTIES:	Louise Anne Allen – first plaintiff/first cross-defendant Edda Ingeborg Lehmann – second plaintiff/second cross-defendant The Children’s Hospital at Westmead – third plaintiff/third cross-defendant The Salvation Army (New South Wales) Property Trust – fourth plaintiff/fourth cross-defendant William John Coffman – first defendant/first cross-claimant Ian Cole Miller – second defendant/second cross-claimant Elizabeth Coffman- third defendant/third cross-claimant
FILE NUMBER(S):	SC 2052/08
COUNSEL:	Mr M S Willmott SC – plaintiffs/cross defendants] Ms J A Needham SC/ Ms R Kako – defendants/cross-claimants
SOLICITORS:	Champion Legal – plaintiffs/cross defendants Hunt & Hunt – defendants/cross-claimants