Barns v Barns

[2002] HCATrans 154

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  Nos A39 of 2001 and A54 of 2002

B e t w e e n -

KATHRYN FAY BARNS

Applicant

and

MALCOLM PHILLIP BARNS

First Respondent

ALICE ELIZABETH BARNS

Second Respondent

MICHELLE LOUISE FISHER and RHIANNA KATE FISHER by their next friend PETER CHARLES SYMES

Third Respondents

Applications for special leave to appeal

GAUDRON J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 3 MAY 2002, AT 9.30 AM

Copyright in the High Court of Australia

________________

MR S.W. TILMOUTH, QC:   If the Court pleases, I appear once again with my learned friend, MR D.M. HAINES, QC, for the applicant.  (instructed by Boltons Lawyers)

MR D.G.W. HOWARD:   If the Court pleases, I appear as before for the second respondent.  (instructed by Corsers)

GAUDRON J:   Yes, that is in both matters?

MR TILMOUTH:   Yes, it is, if the Court pleases, and, as I understand it, your Honours, the non-appearance for the other parties is on the same footing as on the last occasion as well.

GAUDRON J:   Yes.  There is a further certificate from the Senior Registrar who certifies that she has been informed by Grope Hamilton Budini, solicitor for the first respondent, Malcolm Barns, in his capacity as executor of the estate, that in that capacity he will submit to any order of the Court save as to costs.  She has been informed further by von Doussas, solicitor for the first respondent, Malcolm Barns, in his personal capacity, that in that capacity he will rely on the oral and written submissions of the second respondent.  She further certifies that she has been informed by Rudall & Rudall, solicitor for the third respondents, that they will submit to any order of the Court save as to costs.  Yes.

MR TILMOUTH:   If the Court pleases.

GAUDRON J:   The order was made by Justice Nyland, I take it?

MR TILMOUTH:   Yes it was, your Honour, and that is now comprised in a fresh appeal book in No 54 of 2002 – your Honour should have a small appeal book in that matter – and the requisite order appears at page 12 of that book and your Honours will see at page 13 that her Honour Justice Nyland dismissed the claim for the plaintiff,

and special leave from that order is sought by this new application and we seek to have it heard with the original application No A39 of 2001.  The submission now is, if the Court pleases, the primary vehicle for special leave, if granted, ought to be the latter action, because that avoids any question of a section 73 final order problem.  Otherwise the issues are the same, if the Court pleases.

GAUDRON J:   Yes, thank you, Mr Tilmouth.  We would be assisted now by hearing from the active respondent.

MR TILMOUTH:   May it please the Court.

GAUDRON J:   Thank you.  Yes, Mr Howard.

MR HOWARD:   Thank you, your Honours.  Firstly, I accept my friend’s last submission that if leave is granted then the matter ought to proceed in the way in which he has just outlined.

GAUDRON J:   But if it were granted, there would be no difficulty about both matters going forward.

MR HOWARD:   That is so, yes.

GAUDRON J:   Yes.

MR HOWARD:   Your Honours, my submissions will be addressing the three special leave points fairly concisely.  There is, of course, the substantial outline, which has already been filed and which, as I understood it, your Honours had read in some detail before we were last before you a fortnight ago.

The first point which is claimed to be a special leave point relates to this question of whether or not the kind of agreement which has been made in this case and which does, indeed, have the effect of meaning that there is no estate for the Court to deal with ‑ ‑ ‑

GAUDRON J:   Well, that is a very large question, is it not, and an interesting and important question?

MR HOWARD:   That is the second point, with respect.  If I can proceed for the moment on the assumption that that point is accepted, just for the purpose of this argument.  In that situation, if your Honour pleases, the position, in my submission, is one where the Privy Council has made a very clear decision when it chose to overrule the decision in Dillon and in Schaefer, in my submission, there was extended and careful argument and considerable analysis of the cases which had gone before and it came down, essentially, to this issue of the public policy. 

The question, therefore, is whether there is some form of public policy which would prohibit agreements of the sort which is postulated here, which have the effect – and I emphasise the effect – not the intent or the purpose, but the effect of depriving the court of exercising its jurisdiction simply because there is no asset there. 

There is a real and substantial question, in my submission, as to whether that form of public policy can be discerned from the Act in question or, indeed, any other similar Act, except perhaps for New South Wales, because, in my submission, what fell from the Privy Council in Schaefer, and in particular through Lord Cross at page 592F paraphrased is that it is a question of social policy upon which different people may have different views and he, speaking for the majority, said that it was a question for the legislature and, with the utmost respect, that is my submission. 

Of course, as your Honours are aware from the papers before you, that suggestion was taken up in New South Wales, which made substantial amendments to its Act so as to cover for a certain period of time certain transactions which otherwise would have resulted in there being no estate over which the court could effectively exercise jurisdiction.  I suppose it is inherent in the amendments to the New South Wales legislation that, in that State at least, it was accepted that – could your Honour just pardon me while this fire announcement proceeds.

GUMMOW J:   I think you have the all clear now, hopefully.

GAUDRON J:   Yes.  Yes, do you have the all clear now, Mr Howard?

MR HOWARD:   I am just being slightly distracted by the continuing announcement.

GAUDRON J:   Well, please wait, yes.

MR HOWARD:   I would appreciate that.  Thank you, your Honour.  I am sorry for that.

GAUDRON J:   I do not think you need apologise.

MR HOWARD:   Now, if I can endeavour to pick up where I was.  I was saying, I think, that the New South Wales legislature had made those changes, presumably accepting that what had been held by the majority in Schaefer was a correct statement of law, which, of course, may or may not be correct.  It is perhaps of some small additional comfort to me that Lord Simon himself at page 594B commented that:

The legislatures of the various jurisdictions concerned may wish to consider this situation.

Of course, I have to accept that he made that statement bearing in mind that he was aware of the decision of the majority.  It is my submission that there are very significant and complex issues which can arise when a situation of public policy is brought in, not simply to prohibit the kind of agreements which have been held in the past to be invalid – and those agreements basically fell into two categories:  one, agreements to specifically oust the jurisdiction of the court by saying an application will not be made; and, two, provisions which effectively are of the nature where, if there is a challenge, then the entitlements under a will are foregone.

Those situations, in my submission, are really quite different from the kind of policy which may have the effect of striking down other agreements which have been made and, of course, this agreement, the deed which founded these mutual wills, was a tripartite agreement, so that the first respondent, as well as my client, has a significant interest in the outcome, both contractually and, in my submission, under the principles of equity, which brings me to the second point.

Now, I think it is well accepted, your Honours, that the concept of mutual wills is very old and well recognised and, indeed, Justice Lander spoke of that and the ‑ ‑ ‑

GAUDRON J:   But the real question is, what is the nature of the trust which takes effect on death of the first person, because it is not a trust which precludes the devisee or beneficiary from disposing of the assets in the ordinary course, is it?

MR HOWARD:   It is not, and I have not submitted that it was.

GAUDRON J:   Well, but that must impact upon the question whether there was anything in the estate that could be touched.

MR HOWARD:   Well, yes, your Honour, I accept that on the death of the deceased there was property which passed by will to the second respondent.

GAUDRON J:   And fell into the estate.

MR HOWARD:   Yes, it fell into the – I think I have to concede ‑ ‑ ‑

GAUDRON J:   Had to fall into the estate or it could not pass to anyone, is that not right?

MR HOWARD:   Quite, and I accept also – and, indeed, I submitted before Judge Burley at first instance – that during her lifetime Mrs Barns was entitled to deal with it as she wished.

GAUDRON J:   No, but at this stage we look at the position of – there has been a grant of probate, has there?

MR HOWARD:   Yes, your Honour.

GAUDRON J:   And the property is in the hands of the executor?

MR HOWARD:   Yes.

GAUDRON J:   Nothing has yet passed pursuant to the terms of the will to the beneficiaries, is that not ‑ ‑ ‑

MR HOWARD:   There has been no distribution, if that is what your Honour is inquiring about.

GAUDRON J:   Yes.

MR HOWARD:   There has been no distribution.

GAUDRON J:   Now, the executor would be bound to pay debts in the ordinary course?

MR HOWARD:   Absolutely.

GAUDRON J:   What is to stop his paying – and this seems to me to be the nub of this case – pursuant to orders taking effect as legacies?

MR HOWARD:   What we maintain, your Honour, is that there is an overriding equitable interest which inures to the benefit of the first respondent, Malcolm Barnes.

GAUDRON J:   In the hands of the executor.  You have to say in the hands of the executor, have you not?

MR HOWARD:   Yes, in the hands of the executor, that there is a similar equitable interest just as there would be if there had been a contract signed for the sale of a piece of land, the purchaser would be entitled to say, “You can’t deal with that piece of property.  I am entitled in equity to it.”

GAUDRON J:   Of course, the executor cannot deal with it other than in accordance with the will and the laws which regulate the priorities under a will, can he?

MR HOWARD:   I accept that.

GAUDRON J:   Why would any trust attach until such times as a distribution is made to the other person who made the joint wills?

MR HOWARD:   Because, in my submission, the trust exists even before that.  Once the agreement has been made for the mutual wills to be made ‑ ‑ ‑

GAUDRON J:   No, I do not think that is right, is it?  Let us assume, for the moment, that before death the deceased had revoked the will and this came to the attention of the survivor, she would have an action in damages, perhaps, but not in breach of trust.  The trust comes about, does it not, because having taken the benefit of the will the survivor would be acting unconscionably by going back on his or her agreement?

MR HOWARD:   I am not certain that I accept that position, with respect.

GAUDRON J:   Well, that is the question that arises, is it not?  That is really where the hard issue is in this case.

MR HOWARD:   Yes, your Honour, that is the hard issue.  I have, of course, relied upon what his Honour Justice Dixon said in Birmingham v Renfrew (1936) 57 CLR 667 and, in particular, at page 689 where he described the purpose of an arrangement for corresponding wills and it seemed to me, with respect, that the “floating obligation” to which his Honour there refers, while it might be “suspended . . . during the lifetime of the survivor” was able to “descend . . . and crystallize into a trust” at the end of that time, but it was floating over the top, like an umbrella, I suppose.

GAUDRON J:   I wonder what that means.

MR HOWARD:   I hear what your Honour says.  In my submission, it means that the survivor, as distinct from the ultimate beneficiary, has the entitlement under the will.  It means that she can deal with the assets as she wishes during her lifetime but there is an overriding obligation to pass them on to the intended ultimate beneficiary.  Indeed, if she were not to do so, he would have, at least in this case, firstly, his action under the breach of the

deed and, secondly, in my submission, an action for breach of trust, which, of course, only would sound in damages.  So essentially, your Honours, that is the submission that I put in regard to that point.

The third point that was raised was the issue of whether Dillon or Schaefer should be followed.  I do not know whether that point is concerning your Honours or whether it is ‑ ‑ ‑

GAUDRON J:   It does sort of suggest, does it not, that there is an interesting question, and an important question, raised by these applications?

MR HOWARD:   I would submit, your Honour, that having regard to the whole of the decision in Schaefer, the fact that Dillon was examined with extraordinary care, there was very substantial argument and there was a reluctance to overrule ‑ ‑ ‑

GAUDRON J:   Please continue, yes.  You are not out of time yet.

MR HOWARD:   No, I think I have three minutes.  Because of the reluctance to overrule, which was apparent from the decision of the majority, it was plain that there was the most careful examination of the principles of Dillon.  I would submit, therefore that at that time ‑ ‑ ‑

GUMMOW J:   I think there is this problem, really, these notions of public policy and illegality, when one is looking at it in the context of a particular statute, have been looked at more closely since then in this Court in Nelson v Nelson and Fitzgerald v Leonhardt, I think, and that may require some rethinking of the conceptual bases of Schaefer v Schuhmann, I suspect.

MR HOWARD:   Your Honour, if that is the view that your Honours take, I think I am probably ‑ ‑ ‑

GUMMOW J:   You may ultimately succeed, but there do seem to be some special leave questions.

MR HOWARD:   Yes, at this point it may be more appropriate for me to withdraw gracefully.

GAUDRON J:   Yes, thank you, Mr Howard.  Mr Tilmouth, we do not need to hear you in reply.  There will be a grant of special leave – no, do not go away ‑ ‑ ‑

MR TILMOUTH:   I am here, your Honour.

GAUDRON J:   Yes, life is not so easy.  There will be a grant of special leave in both matters.  However, it would seem sensible that this matter be heard in Adelaide at the sittings in August.

MR TILMOUTH:   That would certainly suit our convenience, your Honour.

GAUDRON J:   I take it Mr Howard does not dissent from that – you can answer for him.

MR TILMOUTH:   He just indicated to me Adelaide would be convenient for him as well.

GAUDRON J:   Now, that may need some co‑operation in ensuring that the notice of appeal is filed quickly and in ensuring that the appeal books are available in advance of August.  So can I assume you will attend to that without directions?

MR TILMOUTH:   We will, may it please the Court.

GAUDRON J:   Very well, thank you, Mr Tilmouth.  The Court will adjourn briefly to reconstitute.

AT 9.54 AM THE MATTERS WERE CONCLUDED