Boyd v Peeters

[2024] NSWSC 1035

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Boyd v Peeters [2024] NSWSC 1035

Hearing dates:

22 July 2024

Date of orders:

20 August 2024

Decision date:

20 August 2024

Jurisdiction:

Equity

Before:

Meek J

Decision:

Declaration made as to construction of the Will sought in the defendant’s cross-claim.

Catchwords:

SUCCESSION — Construction — Conditional gifts — Whether condition involved forfeiture in the case of non-fulfilment or was merely a personal obligation — Whether condition precedent or subsequent — Testatrix bequeathed real property to the defendant (her daughter and substitute executrix of her estate) “provided that” within two years from the date of her death she pays to the plaintiff (the testatrix’s son) an amount equivalent to one-third of the market value of that property at the date of her death (“the consideration”) — If the defendant failed or decided not to pay the consideration within the time specified, the property would form part of the remaining balance of the estate (i.e. residue) — As the time period specified had not yet expired and the defendant was ready, willing and able, and had attempted to, pay the consideration amount, the consequences of non-fulfilment of the condition were in a sense moot — Nonetheless, considered that the condition was a condition subsequent

SUCCESSION — Executors and administrators — Rights, powers and duties — Whether the defendant executrix was permitted to borrow funds “in her personal capacity”, secured with a registered mortgage over the property, in order to pay the consideration amount to the plaintiff — Will contained clauses empowering executrix and trustee to, inter alia, “use” or “otherwise deal with any real or personal property… on whatever terms as the trustee thinks fit” and “borrow, raise moneys from and to secure by mortgage… the payment… of any money to any persons” — Held that the powers set out in the Will, in context, were powers to facilitate the purposes specified or envisaged by the Will and to facilitate the execution of the trusts created by the Will and the disposition of property — Held that mortgaging the property in order to facilitate a beneficiary (in this case the defendant herself) raising sufficient funds to satisfy the condition of a gift, being to pay the consideration to the plaintiff, was for a purpose envisaged by the Will

SUCCESSION — Executors and administrators — Discussion of executrix acting in her capacity as executrix and in her personal capacity — Meaning of executrix acting in her personal capacity

EQUITY — Fiduciary duties — Breach — Whether defendant executrix breached her fiduciary duties by obtaining loan in her “personal capacity” secured by mortgage over the property — Whether such conduct demonstrated that the defendant favoured her own interest and failed to act in the best interests of the beneficiaries in the estate — Held that, where it had been accepted by the plaintiff that the defendant would have been permitted to obtain the loan in her capacity as executrix, there was no conflict between interest and duty

SUCCESSION — Executors and administrators — Removal of executors

WORDS AND PHRASES — “otherwise deal with”

Cases Cited:

AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63

AMP Capital Investors Ltd v Parsons Brinckerhoff Australia Pty Ltd; Retail Employees Superannuation Pty Ltd v AMP Capital Investors Ltd [2013] NSWSC 1633

Huntley Management Ltd v Timbercorp Securities Ltd (2010) 187 FCR 151; [2010] FCA 576

In re Cumings; Nicholls v Public Trustee (South Australia) (1945) 72 CLR 86; [1945] HCA 32

In re Porter; Logan v Northern Bank Ltd [1975] NI 157

Infigo II Pty Ltd v Linmas Holdings Pty Ltd [2023] NSWSC 755

Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2019] AC 271

Kauter v Kauter [2003] NSWSC 741

Mordecai v Mordecai (1988) 12 NSWLR 58

Nathan v Leonard [2003] 1 WLR 827

NSW Trustee and Guardian v Matthews [2024] NSWSC 595

Parkin v Thorold (1852) 16 Beav 59; 51 ER 698

Princess Ann of Hesse v Field (1963) 80 WN (NSW) 66

Re Gardiner (deceased); Gardiner v Gardiner [1971] 2 NSWLR 494

Re Lester; Lester v Lester [1942] Ch 324

TheBombayTramwayCompanyLtd v TheMunicipal Corporationof theCityofBombay [1904] UKPC 29

Valverde v Inch [2018] NSWSC 366; (2019) 19 BPR 39421

Wentworth v New South Wales Bar Association (1992) 176 CLR 239; [1992] HCA 24

Wyatt v Perpetual Trustee Co Ltd (1917) 23 CLR 14; [1917] HCA 16

Texts Cited:

Dal Pont, G E, Interpretation of Testamentary Documents (2019, LexisNexis Butterworths)

Dal Pont, G E, Law of Executors and Administrators (2022, LexisNexis)

Dal Pont, G E, Law of Succession (3rd ed, 2021, LexisNexis)

Haines QC, David M, Construction of Wills in Australia (2007, LexisNexis Butterworths)

Oxford English Dictionary, online ed

Category:

Principal judgment

Parties:

Matthew Lee Boyd (Plaintiff / Cross-Defendant)
Samantha Grace Peeters (First Defendant / Cross-Claimant)
Kevin Louis Emanuel (Second Defendant)

Representation:

Counsel:
E K Glover (Plaintiff / Cross-Defendant)
D C Price (First Defendant / Cross-Claimant)

Solicitors:
Keating Avery Solicitors Pty Ltd (Plaintiff / Cross-Defendant)
Shaddicks Lawyers (First Defendant / Cross-Claimant)

File Number(s):

2023/352092

JUDGMENT

Introduction

1. HIS HONOUR: These proceedings involve a contest between siblings arising out of a dispute regarding a gift of property under the Will dated 24 April 2019 (Will) of the late Elaine Fay Boyd (deceased), who died on 30 October 2022. In particular, the contest pertains to whether certain steps were permissibly taken by the first defendant (as executrix) to facilitate a payment by her (as beneficiary) to give effect to the gift.

2. The plaintiff and the first defendant are respectively the son and daughter of the deceased. They are her only two children. The deceased’s husband, Herman, predeceased her in November 2020.

3. The second defendant, Mr Emanuel, is an independent solicitor who has consented to act as an independent administrator. He has filed a submitting appearance.

4. The proceedings were commenced by a statement of claim filed on 6 November 2023. The first defendant filed a cross-claim on 14 June 2024, in which the plaintiff is named as the sole cross-defendant.

5. In light of the fact that the first defendant/cross-claimant is the only active defendant in the proceedings, I will (for convenience and unless otherwise indicated) refer to her as the defendant. I will similarly for convenience refer to the plaintiff/cross-defendant simply as the plaintiff.

6. Probate of the Will in common form was granted to the defendant (the substitute executrix) on 20 February 2023.

Real issues

7. In essence, the plaintiff alleges that the defendant (as executrix) impermissibly used the main asset of the deceased’s estate, a property at Tennyson (the Tennyson property), as security to borrow funds in her personal capacity to pay the plaintiff monies referable to the terms of cl 8.1 of the Will. The plaintiff claims that she did so in breach of alleged fiduciary duties, namely, that the defendant has failed: (a) to act impartially (and has favoured her own interests); (b) to act in the best interests of the beneficiaries; and (c) to administer the estate in accordance with the terms of the Will.

8. In addition, the plaintiff contends that the defendant did not inform him that she intended to use an asset of the estate as security for any loan, and that she has failed to account to the estate, repay the loan and discharge the security (a mortgage).

9. The plaintiff claims that the consequence of the alleged breaches is that the defendant is not fit to administer the estate, the grant of probate should be revoked and letters of administration with the Will annexed should be granted to Mr Emanuel as an independent administrator.

10. I will set out below the specific relief sought in the statement of claim. However, almost all of the detailed relief claimed is directed towards and aimed to facilitate the revocation of the grant of probate, as well as to preclude the defendant from holding herself out as entitled to act as the legal personal representative of the deceased. Whilst the plaintiff claims that breaches of fiduciary duty by the defendant have occurred, there is no specific claim for relief that the defendant is liable to account to the estate for any loss, or for equitable compensation.

11. The relief sought is as follows:

1. Order that the grant of probate to the defendant made on 20 February 2023 in respect of the estate of the deceased be revoked.

2. Order that letters of administration, with the Will of the deceased dated 24 April 2019 annexed, be granted to Mr Emanuel or, further or alternatively, to such other person or persons as the Court deems appropriate.

3. Order that the matter be remitted to the Senior Deputy Registrar in Probate to complete the grant.

4. Order that any requirement for an administration bond be dispensed with.

5. Order that the defendant deliver up, or cause to be delivered up, the original grant of probate to the Probate Registry, marked to the attention of the Senior Deputy Registrar in Probate, within 7 days of the service of a copy of these orders and notations upon her.

6. Order that, in the event that the original revoked grant is not produced to the Court by the defendant, in accordance with these orders and notations, the Senior Deputy Registrar in Probate proceed to completion of the grant of letters of administration with the Will annexed to Mr Emanuel, or to such other person or persons as the Court deems appropriate, notwithstanding non-compliance with the order (5) above.

7. Order that the defendant is under a continuing obligation to deliver up the revoked grant to the Court.

8. Order, subject to further order, that the defendant, by herself, her servants, and agents, be restrained from:

1. using, or dealing with, the grant of probate made on 20 February 2023, other than by delivery up of the grant to the Court;

2. acting, or purporting to act, as a legal personal representative of the deceased; and

3. holding herself out as entitled to act as a legal personal representative of the deceased.

9. Order that the defendant personally pay the plaintiff’s and Mr Emanuel’s costs of these proceedings and the administration of the estate, calculated on an indemnity basis, out of the defendant’s share of the estate and/or residuary estate.

10. Such further and other orders as the Court thinks fit.

12. On the cross-claim, the defendant seeks a declaration as to the proper construction of the Will. Specifically, the substantive relief claimed is as follows:

A declaration that, on the proper construction of the will of the late Elaine Fay Boyd (the “Deceased”) made on 24 April 2019, the defendant was permitted to mortgage the real property located at and known as [XX] Murrays Road, Tennyson in the State of New South Wales (having certificate of title folio identifier [X]/[XXXXX X]) (the “Property”) for the purpose of raising funds to pay the plaintiff one-third of the market value of the Property as at the date of death of the Deceased in accordance with clause 8.1 of the Deceased’s will.

13. On 6 December 2023, the defendant filed a defence to the statement of claim. On 27 June 2024, the plaintiff filed a defence to the cross-claim.

Estate

14. According to the inventory of property attached to the grant of probate, as at the date of her death, the deceased owned the Tennyson property, valued at $1.75 million, and had funds in three bank accounts with the National Australia Bank (NAB) totalling $231,900. It will be noted below that the value of the Tennyson property stated in the inventory of property is $25,000 more than the value given in the valuation report obtained by the defendant on 30 November 2022.

Appearances and evidence

15. On the hearing, Ms Glover of counsel appeared for the plaintiff and Mr Price of counsel appeared for the defendant. Mr Emanuel appeared briefly but sought to be excused in circumstances where he had filed the submitting appearance. However, he indicated that he may wish to be heard on the question of costs. Subject to that qualification, neither Ms Glover nor Mr Price had any difficulty with Mr Emanuel being excused, which I permitted.

16. Both Ms Glover and Mr Price provided written outlines of submissions prior to the hearing, which I will cite as the POS and DOS respectively.

17. The issues to be determined are gleaned from the submissions of the respective counsel. The principal issues are as follows:

1. What is the proper construction of cl 8.1 of the Will?

2. On the proper construction of the Will, was the defendant’s use of the Tennyson property as security to borrow the funds permitted?

3. Should the grant of probate to the defendant be revoked and letters of administration with the Will annexed be granted to Mr Emanuel?

18. On the hearing, the plaintiff relied upon the affidavits of:

1. Mr Emanuel, sworn on 9 November 2023, giving an undertaking to administer the estate in accordance with the terms of the Will if appointed as administrator;

2. Maddison Sharni Creamer, both sworn on 10 November 2023, the first of which witnessed the consent by the plaintiff to letters of administration being granted to Mr Emanuel and dispensing with the administration bond, and the second of which was in chief; and

3. the plaintiff, affirmed on 3 May 2024, in reply to the defendant’s affidavit.

19. The defendant relied upon the affidavits of:

1. herself, sworn on 15 April 2024, in chief; and

2. Donald John Shaddick, sworn on 10 July 2024, annexing a valuation of the Tennyson property and correspondence with the plaintiff’s solicitors.

20. Much of the affidavit material was admitted without objection, although there were a few objections upon which I ruled.

21. Counsel also tendered a number of documents, including certain documents produced upon the call by Ms Glover of a notice to produce issued by the plaintiff to the defendant dated 19 July 2024.

Family relationships

22. The following details of the family relationships, which neither counsel disputed, emerge from the evidence and inferences from it. Neither counsel suggested that precision was essential in respect of the following dates and ages.

23. The deceased was born in or about 1952 (derived from the uncontested fact that the deceased was 68 years old at the time of Herman’s death). Herman was aged 79 at the date of his death and accordingly was born in or about 1941. He was married twice. The first marriage was to Jill Sackwell in or about 1967 in Texas, USA. There is one child of that marriage, a daughter, Bonny, who was born in or about 1968. At some stage a few years after, the marriage ended seemingly by divorce.

24. In or about 1972, Herman married the deceased. The plaintiff was born in or about 1974 and is currently approximately 49 to 50 years old. The defendant was born approximately 13 years after the plaintiff, namely in or about 1987, and is currently approximately 36 to 37 years old. The defendant is married to Christopher Peeters.

The Tennyson property

25. The Tennyson property was purchased by the deceased and Herman in 1996. The couple lived at the property until their respective deaths in 2020 and 2022. At the time of its purchase, the defendant was approximately 9 years old and the plaintiff was approximately 22 years old.

26. The property comprises 10,000 m². There are two dwellings on the property, consisting of a primary dwelling and a secondary dwelling.

27. The primary dwelling is a freestanding brick veneer and tile roof residential dwelling, constructed around 1980 and approximately 187 m² in size. The accommodation includes three bedrooms, three bathrooms, kitchen/dining, lounge and rumpus room.

28. The secondary dwelling is approximately 60 m² in size, comprising two bedrooms and an open plan kitchen/living area.

29. The defendant has lived on the Tennyson property since her parents had purchased it in 1996. On her marriage to Christopher Peeters in 2014, the couple took up residence in the secondary dwelling.

30. The plaintiff also resided on the Tennyson property with his wife from 1997 to 2001 and again from early 2005 to November 2006 (then with his wife and three children). They had moved out only once they had purchased a home in Victoria.

Background

Alleged conversation

31. In or about April 2019 (i.e. relatively contemporaneous with the execution of the deceased’s Will), the defendant contends that she had a conversation with her parents at the kitchen table as follows:

3. In about April 2019, when Dad was suffering from cancer, I had a conversation with my parents at the kitchen table in their house at Tennyson in words to the following effect:

Mum: “We want to have a discussion with you to put your mind at rest as well as ours. Since Dad has found out that he’s unwell, we wanted to make sure that anything Dad wants sorted is done now.

We have been to see Don to finalise our wishes if anything happens suddenly to Dad or both of us. I am concerned about the property and wanted my wishes to be formalised.”

…

5. The conversation continued in words to the effect of:

Mum: “I want you to be protected. This is what Dad and I have spoken to Don about. What we have discussed with Don and put in our Wills is what we would like to happen.

We’ve left the property to you with a proviso that you are to pay to your brother one third of the property value at the date of our death. It is important that you see Don immediately when we die.”

Me: “I don’t know how I would raise the money to pay Matthew.”

Mum: “Do you think you would be able to get a home loan on the property because the bank will need security to approve the loan?”

Me: “I think I’ll be able to do that.”

Mum: “We’ve given you two year’s time to decide whether you want to have the property and to raise the funds. If you decide during that time that you don’t want the property, then it will form part of the estate.”

Me: “I’m worried about what Matthew might feel about that.”

Dad: “It shouldn’t be a problem. Matthew doesn’t have any interest in the property given that he lives in Victoria and he’s well established down there.”

32. The defendant was not cross-examined on the conversation. I accept her evidence that the conversation took place in the form to which she has deposed.

33. The reference to Don is a reference to the parents’ solicitor, Mr Shaddick, who is also the solicitor for the defendant.

Property valuation

34. Within the month after the deceased’s death, the defendant had arranged to obtain a valuation report of the Tennyson property from John O’Brien, a registered residential property valuer.

35. On 30 November 2022, Mr O’Brien inspected the property and provided a valuation report as at that date. He valued the property at $1.725 million.

36. The reason for the valuation being as at that date is not evident. It is not a valuation as at the date of the deceased’s death. Whilst I raised this issue with counsel on the hearing, neither party suggested that the anomaly in the date should be regarded as a matter of significance in the determination of the proceedings.

37. Accordingly, without demur from counsel, I have proceeded on the basis that Mr O’Brien’s valuation should be regarded as being a valuation of the Tennyson property which the parties are content to represent its market value as at the date of the deceased’s death. Indeed, the correspondence between the parties’ respective solicitors (which I will note below) gives no suggestion that the parties have proceeded on any other basis.

Correspondence and events leading up to the proceedings

38. Keating Avery Solicitors has acted for the plaintiff and a number of representatives of that firm, including Ms Creamer (a solicitor), Arlinda Wentworth (a law clerk) and Cherie Wighton (a legal assistant), have been the authors of correspondence on behalf of the plaintiff. Shaddicks Lawyers has acted for the defendant, with Theresa Parry (a legal executive), Andrew Gill (a solicitor) and Mr Shaddick engaging in correspondence on behalf of the defendant.

38. On 19 January 2023, Ms Parry sent an email to the plaintiff attaching a copy of Mr O’Brien’s valuation report. In the email, Ms Parry made reference to what she described as the defendant’s “option to purchase the property” and calculated $575,000 as being the sum to be paid to the plaintiff. She noted that the defendant “is currently making enquiries to obtain a loan to pay [the plaintiff] out”.

39. On 2 February 2023, the plaintiff responded to Ms Parry, noting that he had spoken with the defendant the prior night, and requested a copy of the probate application, including a list of assets and liabilities.

40. As noted above, probate was granted on 20 February 2023.

41. On 2 March 2023, Ms Creamer sent a letter to Shaddicks in which she noted that Keating Avery acted on behalf of the plaintiff in his capacity as a beneficiary and requested a number of matters, including updates on the application for probate and all of the estate assets. Relevantly, noting cl 8.1 of the Will, Ms Creamer requested confirmation that the defendant intends to “buy out” the plaintiff’s “one third share of the Tennyson property” and provision of details as to the arrangements and timeframe for that to occur.

42. On 8 March 2023, Mr Shaddick responded to Keating Avery. While he took issue with some of the contentions in its letter, he nonetheless confirmed that the defendant did intend to pay one-third of the value of the Tennyson property to the plaintiff as soon as possible and that she had applied for finance to enable her to do so. His letter indicated that the defendant anticipated having an approval in about one week and that his firm would let Keating Avery know when finance had been approved, and advise the timeframe for payment.

43. Between 28 April 2023 and 6 November 2023 (when the proceedings were commenced), there was extensive correspondence between Keating Avery and Shaddicks in relation to, amongst other things, enquiries by Keating Avery as to the capacity in which the defendant was seeking to borrow funds to facilitate giving effect to the provisions of cl 8.1 of the Will. It is not necessary to recite in detail all of that correspondence. I set out below the salient parts of the correspondence which includes reference to certain events regarding dealings with the Tennyson property.

44. On 28 April 2023, Keating Avery wrote to Shaddicks seeking, inter alia, details of the borrowing structure proposed by the defendant in order to make payment of what was described as the “consideration amount” to the plaintiff.

45. On 2 May 2023, Mr Shaddick caused a transmission application to be lodged on behalf of the defendant with the NSW Land Registry Services, which recorded that the defendant applied for transmission of the Tennyson property to her in her capacity as executrix.

46. On 10 May 2023, Ms Parry sent an email to Ms Wentworth in which she noted that she had sighted the defendant’s loan approval for $575,000. She further indicated that the defendant had signed her mortgage documents and anticipated that the NAB may be “ready to proceed [I infer finalise the loan and make funds available to the defendant] in the next week or two”.

47. On 17 May 2023, Ms Wentworth emailed Ms Parry seeking, inter alia, details of the capacity in which the defendant was applying for the loan. Later that morning, Ms Parry responded by email in which she indicated that she had already advised the amount of the loan applied for and observed that she was “not sure what more you need to know”. Ms Wentworth again pressed the question as to whether the defendant was borrowing “in her capacity as executor or in her personal right”. Ms Parry replied by email, noting that the defendant was borrowing in her “personal right”.

48. On 19 May 2023, Ms Parry sent an email to Ms Wentworth attaching a draft deed of release between the plaintiff and the defendant as executrix. There is no need to dwell particularly upon the proposed deed as no party contends that it has any relevance to the issues to be determined.

49. Also on 19 May 2023 (a Friday), the NAB paid the sum of $574,834.76 into the defendant’s personal bank account ending 6525 and caused a mortgage to be registered on the title of the Tennyson property. Whilst I will say more about this below, it suffices to note that Shaddicks, by a letter to Keating Avery dated 22 August 2023, contended that in so doing the NAB ignored (or was oblivious to) the fact that the defendant held the Tennyson property in her capacity as executrix.

50. On 22 May 2023 (the following Monday), the defendant withdrew $575,035 from her personal account. Of that sum, $35 was used to purchase a bank cheque: T 17.

51. It is evident that the defendant provided the bank cheque to her solicitors to be banked to their trust account.

52. On 23 May 2023, Shaddicks’ trust account records the receipt of $575,000: T 17.

53. On 31 May 2023, Ms Parry sent an email to Ms Wentworth asking whether she had been able to obtain instructions in relation to the proposed deed and noting that “we have funds ready to go and would like to finalise the matter”.

54. On 19 and 23 June 2023, Ms Creamer sent emails to Ms Parry noting that they were awaiting final instructions regarding the proposed deed and seeking confirmation of a new proposed settlement date (I infer for the mortgage) and whether a PEXA workspace had been created.

55. On 30 June 2023, Ms Parry sent an email to Ms Creamer indicating that no changes to the proposed deed would be agreed to.

56. Also on 30 June 2023, Keating Avery caused a title search to be made of the Tennyson property and discovered that transmission of the title to the defendant as executrix had occurred on or about 19 May 2023.

57. On 4 August 2023, Mr Shaddick informed Keating Avery that the defendant “is ready, willing and able to pay the sum of $575,000 being the amount determined in accordance with the provisions of the Will” to the plaintiff.

58. On 22 August 2023, Mr Shaddick stated in his letter to Keating Avery, inter alia, that Shaddicks held the $575,000 in its trust account and, except for the distribution of the estate, the defendant had completed her executorial duties.

59. On 8 September 2023, Ms Creamer responded by letter to Shaddicks asserting, inter alia, that the defendant had advanced her position at the expense of the plaintiff and was in clear breach of her fiduciary duties. Keating Avery demanded that the defendant account to the estate, repay the loan in full and discharge the mortgage, noting that failure to do so would leave the plaintiff with “no alternative” other than to make an application to the Court to revoke the grant of probate and seek the appointment of an independent administrator.

60. On 27 September 2023, Ms Creamer by email requested that Shaddicks confirm that it held instructions to accept service of court documents. Mr Shaddick confirmed as much the following day.

61. On 13 October 2023, Ms Creamer wrote to Mr Shaddick confirming that she held instructions to commence proceedings, which she foreshadowed would occur on or about 31 October 2023. She requested that the defendant refrain from distributing the estate until the proceedings had been finalised.

62. On 26 October 2023, Mr Shaddick sent a letter to Keating Avery enclosing: two trust cheques in favour of the plaintiff, the first for the sum of $108,835.98 and the second for the sum of $575,000 “representing a 1/3rd value of the property pursuant to the Will”; and a copy of a distribution statement. The letter asserted that “this now completes the administration of the estate”.

63. According to Ms Creamer, that letter was not received by Keating Avery until 30 October 2023.

64. On 27 October 2023, the defendant, or rather Shaddicks on her behalf, caused to be registered a transfer of the Tennyson property to herself personally.

Will

66. The structure of the deceased’s Will is divided into two parts:

1. Part A, consisting of general provisions (cll 1 to 9); and

2. Part B, detailing the executor’s instructions and discretionary powers (cll 10 to 13).

67. In summary, the provisions of the respective parts are as follows:

1. Part A:

1. a revocation clause (cl 1);

2. a definitions clause (cl 2);

3. a clause appointing, in the events which occurred, the defendant as executrix (cl 3);

4. a clause appointing the executrix as trustee of each trust under the Will (cl 4);

5. a provision for the executrix to hold the estate on trust (cl 5);

6. a gift of personal chattels (cl 6);

7. a clause dealing with the balance of the deceased’s estate (which, having regard to Herman predeceasing the deceased, was operative such that the remaining clauses of the Will would take effect) (cl 7);

8. a clause dealing with the distribution of the balance of the estate (cl 8); and

9. a clause indicating the deceased’s wish that her body be cremated (cl 9);

2. Part B:

1. a clause expressing the deceased’s wish that her executrix deal with any death benefits in accordance with any last valid nomination that the deceased may have made (cl 10);

2. a clause in relation to prospective beneficiary testamentary trusts (cl 11);

3. a clause setting out other specific powers of the executrix and trustee (cl 12); and

4. a clause dealing with the payment of taxes or duties (cl 13).

68. On the hearing, counsel focused in particular on cll 5, 8 and 12. I will set out the relevant parts of those clauses in full below.

69. Clause 5 of the Will is in the following terms:

5. Executor to hold on Trust.

5.1. My Executor shall hold the whole of my estate on trust and, subject to the powers set out in this Will, after the:

(a) selling, calling in or converting into money any part of my estate; and

(b) payment of all or any debts and testamentary expenses associated with my death or the administration of my estate;

shall deal with the balance of my estate as provided hereafter.

70. Clause 8 of the Will contains four separate clauses. It is only necessary to set out in detail cll 8.1, 8.2 and 8.3, which are as follows:

8. Division and Distribution of Balance of Estate

8.1. If at the date of my death I am the owner of the property situate and known as [XX] Murrays Road, Tennyson (“the Property”) I give to my daughter SAMANTHA GRACE PEETERS all my right title and interest in the Property provided that within two (2) years from the date of my death she pays to my son MATTHEW LEE BOYD an amount equivalent to one third of the market value of that property at the date of my death, such value to be determined by a qualified real estate valuer appointed by my Executor (“the Consideration”). In the event that my son MATTHEW LEE BOYD predeceases me or fails to survive me for the said two (2) year period then the amount which would otherwise have been payable to him under this sub-clause of my Will shall be payable to his legal personal representative. If SAMANTHA GRACE PEETERS fails or decides not to pay the Consideration within the time specified in this sub-clause, then the Property shall form part of the remaining balance of my estate.

8.2. My Executor shall divide the balance of my estate not already dealt with under the preceding clauses of this Will (“the remaining balance”) into one or more equal parts, sections or portions, and shall hold on trust in accordance with this Will, and dispose of such parts, sections or portions as outlined in this clause.

My Children to be Beneficiaries

8.3. Each of my children MATTHEW LEE BOYD and SAMANTHA GRACE PEETERS who survive me by thirty (30) days shall be the beneficiaries of the trust for one such equal part.

71. Clause 12.1 of the Will sets out various powers in subcll (a) to (u). On the hearing, the particular powers to which reference was made are the powers in subcll (a), (e), (f), (q) and (r). Those subclauses are as follows:

12. Other Specific Powers of Executor and Trustee

12.1. My Executor and the trustee of any trusts established by the terms of my Will shall have the following powers to:

(a) make loans to beneficiaries (having regard to the taxation and other implications) that are:

i. secured or unsecured;

ii. subject to interest or interest free; and

iii. on whatever terms they consider appropriate;

…

(e) to hold, use, surrender, let, lease, take and grant options or rights in, or otherwise deal with any real or personal property and including, but not limited to, shares, units, debentures or securities of any company or trust on whatever terms as the trustee thinks fit;

(f) sell, lease, exchange or otherwise dispose of assets in my estate on such terms as they consider expedient as if they were the absolute beneficial owner;

…

(q) borrow, raise moneys from and to secure by mortgage, bill of sale, lien or charge (by way of fixed, floating, legal or equitable charge) the payment, repayment or advances of any money to any persons;

(r) delegate in writing the exercise of any powers or discretion and to execute any powers of attorney or other instruments necessary to effect the delegation;

…

Will construction principles

72. In NSW Trustee and Guardian v Matthews [2024] NSWSC 595, I set out at [46]-[58] some of the principles relevant to the construction of a Will as follows:

46. In Reeves v Reeves [2024] NSWSC 134 and “Will Construction” (Paper), NSW Bar Association Succession and Elder Law Committee, 22 March 2023, I addressed some of the principles of Will construction. I note the following.

47. There is only one true construction of any legal instrument, including a Will: Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [154] per Edelman J; Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 78-79 per Isaacs J; [1925] HCA 18.

48. There is discussion in estate law texts regarding the correct approach to construction. It has been suggested that there are two types of approaches. The first approach requires looking for the ordinary meaning of the word or passage, and is described as the literal (otherwise referred to as the “grammatical” or “objective”) approach, while the second requires looking for the meaning intended by the Willmaker, described as the intentional (otherwise referred to as the “inferential” or “purposive”) approach: e.g. Roger Kerridge (assisted by A H R Brierley), Parry and Kerridge: The Law of Succession (12th ed, 2009, Sweet & Maxwell) (Parry and Kerridge) at 240; David M Haines QC, Construction of Wills in Australia (2007, LexisNexis Butterworths) (Haines) at 35; G E Dal Pont, Interpretation of Testamentary Documents (2019, LexisNexis Butterworths) (Dal Pont) at 1.

49. The literal approach is premised on the notion that there is a “correct” and “proper” sense of a word in a Will, and is said to have the advantage that whenever a word appears in a Will, it means the same thing: Parry and Kerridge at 241.

50. However, the intentional approach has prevailed in Australia: Haines at 30, 35; Dal Pont at 1.

51. Thus, the object of construction of a Will is to give effect to what can be ascertained, having regard to admissible extrinsic evidence, the Willmaker intended by the words he or she used: e.g. De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351 at [50] per White JA (Gleeson JA agreeing), citing Fell v Fell (1922) 31 CLR 268; [1922] HCA 55 (Fell v Fell)at 273-274 per Isaacs J; Perrin v Morgan [1943] AC 399 at 406 per Viscount Simon LC, 416 per Lord Thankerton.

52. Whilst attempting to encapsulate in a shorthand form two approaches to construction, the above-mentioned labels may be misleading as to what may be taken into account in the task of construing Wills.

53. To be clear, whilst the literal (“grammatical”/“objective”) approach has been rejected in Australia, it would be wrong to conclude that grammatical considerations play no part in the proper approach to the construction of Wills. Conversely, the intentional approach does not seek to subjectively, as distinct from objectively, ascertain what the Willmaker intended from the words appearing in their context and against the backdrop of admissible extrinsic evidence: Dal Pont at 1.

54. This much is made clear by Issacs J in Fell v Fell at 273-274 (in particular, by the first and second of the ten “incontestable” principles). Put another way, the Court discerns the Willmaker’s intended meaning from the Willmaker’s expressed intentions; the Court does not seek to discern what the Willmaker subjectively intended or meant to say or do when making the Will, but what the Willmaker actually said by the words in the Will: Middleton v Schofield [2022] NSWSC 1454 at [17] per Robb J.

55. Specifically, grammatical considerations, sentence structure and common English usage are all matters to which the Court may properly have regard in determining the Willmaker’s expressed intentions.

56. Moreover, the exercise of reading the Will as a whole instrument may, in appropriate cases, reveal a scheme which the deceased had conceived for dealing with the estate, which in turn assists in discerning intention: Fell v Fell at 273-274 (the second principle); Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234 (Fairbairn) at [19] per Campbell JA (Macfarlan and Young JJA agreeing), citing Powell J in Coorey v George (Supreme Court (NSW), Powell J, 27 February 1986, unrep) at 14, which passage was approved by Bryson J in Perpetual Trustee Co Ltd v Wright (1987) 9 NSWLR 18 at 33.

57. Where the terms of the Will are perfectly clear, searching for the scheme may be of little use, but where the language is obscure or the effects of a literal reading and the reasoning impliedly underlying it are startlingly unlikely, the scheme of dispositions may be very important in construing the Will: Muir v Winn [2009] NSWSC 857 at [24] per Bryson AJ.

58. All of the counsel who appeared and made submissions properly accepted that questions of construction are essentially fact specific. In this sense, no case can truly provide any precedent for construction of a Will that subsequently comes before the Court for consideration: see Gibb-Maitland v Perpetual Executors Trustee & Agency Co (WA) Ltd (1947) 74 CLR 579 at 586 per Rich J; [1947] HCA 35.

73. On the hearing there was debate about the construction of testamentary instruments addressing gifts that are subject to a payment being made to another beneficiary.

74. There is comment, analysis, principles and guides (guides) in texts dealing with the construction of testamentary instruments relevant to this issue: e.g. David M Haines QC, Construction of Wills in Australia (2007, LexisNexis Butterworths) (Haines) at 268.

75. I will set out below some of those guides. However, it is important to understand what guides are and the role which they play in the construction of testamentary instruments.

76. Guides to construction are not random rules without any rational basis. Rather, they are truths, propositions or chains of reasoning that over time have been identified by courts (or commentators) because they have served to identify the legal effect of different potential meanings given to the words used by Willmakers. Guides can also provide an independent means of testing the likely intention of the Willmaker in cases where a number of competing plausible interpretations present themselves.

77. In doing so, guides often reflect probabilities as to the likely intentions of Willmakers based upon common experience of how humans think and act in life.

78. Often the assistance of such guides is limited and may be exhausted by simply identifying the plausible alternative constructions and performing some testing of those constructions to incline the judge’s mind in any given case toward or against a particular outcome. Thus, ultimately such guides merely serve to assist judges in the process of determining the proper construction of a Will, as distinct from directing or compelling a particular construction outcome.

79. Haines refers to a number of decisions involving gifts that were subject to a payment being made to another, including Re Lester; Lester v Lester [1942] Ch 324 (Re Lester), which Mr Price cited. In that case, the testator bequeathed shares in two companies to one of his sons, “subject to” the payment by him of an annuity to another son, in the first instance, and a number of other successive annuities thereafter. Simonds J considered that the parties had rightly conceded that the Will imposed a personal obligation on the legatee to make the payment and, contrary to what had been submitted, there was no ground for saying that in addition a charge on the subject matter of the legacy had been created: Re Lester at 326-328.

73. In Re Gardiner (deceased); Gardiner v Gardiner [1971] 2 NSWLR 494 (Re Gardiner), the deceased gave the whole of his estate to one of his sons “subject to” him paying the sum of £1,000 to another son within two years from the deceased’s death. The first son did not make the payment within the time specified, and the second son sought a determination as to whether the gift to the first son had failed such that, in the absence of a gift over, the estate devolved as on an intestacy.

74. A number of questions were posed for determination. The first question, as identified by Helsham J, was whether the provisions of the Will imposed a condition or some other legal characterisation such as a trust, charge or personal obligation.

75. His Honour made reference to a number of cases, including Re Lester. On the facts of Re Gardiner, Helsham J determined that the intention was that the gift was subject to a condition such that it would fail if the money was not paid within the prescribed time. However, it is clear that his Honour found the construction vexing and he noted that, whilst the facts of the case were very simple, they seemed to him to raise extraordinarily difficult questions of law: Re Gardiner at 495C. I think the same may be said for this case.

76. The law distinguishes between conditions which are precedent or subsequent. Generally speaking, in the case of a condition precedent, the condition is construed as requiring performance before the beneficiary takes any interest in the property the subject of the gift. Conversely, a condition subsequent is construed as operating only in defeasance of an interest given to a beneficiary: In re Cumings; Nicholls v Public Trustee (South Australia) (1945) 72 CLR 86 at 91 per Latham CJ; [1945] HCA 32. Nonetheless, in either case, it is necessary to look at the precise words of the provision creating the condition and to ascertain the intention of the testatrix from the words she has used, having regard to admissible extrinsic evidence. As a guide, Haines suggests that where a condition is capable of being performed immediately it is a condition precedent, but if time is required or expected it will be subsequent: Haines at 271.

77. There is also a disinclination of courts to construe a gift as being subject to forfeiture if a different meaning can be fairly given to the words used: e.g. G E Dal Pont, Interpretation of Testamentary Documents (2019, LexisNexis Butterworths) (Dal Pont) at 312. Indeed, in Kauter v Kauter [2003] NSWSC 741, whilst referring to Helsham J’s decision in Re Gardiner, Young CJ in Eq (as his Honour then was) observed at [54] that there are cases going the other way. His Honour noted that equity tends to construe conditions as not involving a forfeiture but as capable of being “policed by specific performance, injunction, or equitable compensation”, citing R P Meagher and W M Gummow, Jacobs’ Law of Trusts in Australia (6th ed, 1997, Butterworths) at [232].

78. Further, where there is doubt as to the date or time of vesting, courts tend to lean towards a construction that a gift vests at the earliest date which is possible in accordance with the words of the Will. Isaacs J expressed the presumption in the following terms in Wyatt v Perpetual Trustee Co Ltd (1917) 23 CLR 14 at 19; [1917] HCA 16 (Wyatt):

In this will there are no technical expressions, and there is no canon of construction to be applied except the fundamental rule that a man’s testamentary intentions must be judged of by the words he uses, having regard to the subject matter. His untechnical words must receive their ordinary natural meaning, unless he himself has in some way indicated a special meaning. Apart from that, there is only one legal principle to bear in mind, and that is that in case of doubt the Court leans to an early indefeasible vesting, where not inconsistent with the natural meaning of words. That is not an arbitrary principle: it is only applying what the Court assumes is natural in the mind of a testator—to have as much certainty about his dispositions as is consistent with his expressed wishes.

86. Both Haines (at 53) and Dal Pont (at 61) expressly refer to that presumption, in each case making reference to the decision of Isaacs J in Wyatt.

Issue 1 – What is the proper construction of cl 8.1?

Submissions

87. Ms Glover submitted that there was no real dispute between the parties as to the meaning of a word or clause of the Will, the effect of the Will or a provision of it: POS [55]. In relation to cl 8.1, Ms Glover submitted as follows (POS [58]-[60], footnotes omitted):

58. An examination of the Will discloses a scheme as to the outcome intended by the deceased as to the distribution of her estate. The Property was not an absolute gift to the First Defendant. Clause 8.1 of the Will sets out the scheme, namely the First Defendant would hold the Property in her capacity as executor of the estate and was afforded a 2-year period in which to pay the Plaintiff a one third value of the Property as determined by a market valuer. If for whatever reason the First Defendant did not elect to make payment to the Plaintiff, the Property would fall into residue. To adopt an alternate meaning would be to render the last three lines of clause 8.1 a nullity. It must be asked “what work” the last three lines of clause 8.1 does within the relevant provision.

59. There is no power in clause 12 of the Will that engages on the facts. The specific powers set out in clause 12 of the Will are powers of the Executor and Trustee, not powers given to the First Defendant in her personal capacity.

60. The Plaintiff submits that on a true construction of the Will, the First Defendant was not permitted to use the estate Property, as security to borrow funds in her personal capacity to pay the Plaintiff one third of the market value of the Property as at the date of death of the deceased.

88. For his part, Mr Price’s submissions in relation to the construction of cl 8.1 were as follows (DOS [11]-[15]):

11. The clear intent of the testatrix in clause 8.1 was that:

(a) the plaintiff was to receive one-third of the market value of the Tennyson property within 2 years of the death of the testatrix; and

(b) the first defendant was to receive the Tennyson property.

12. It was only if the first defendant “fails” or “decides not to pay the Consideration” to the plaintiff that the property falls to residue.

13. It is clear that the first defendant had not decided “not to pay”. It is also clear that the first defendant had not “failed” to pay.

14. The plaintiff’s argument is premised on the first defendant having obtained a benefit. The first defendant’s acts did not result in her obtaining a benefit. She has received what was directly and expressly contemplated by clause 8.1 of the will.

15. Accordingly, there was no breach by the first defendant of her fiduciary duties.

89. In elaborating on her written submissions, Ms Glover submitted that there was nothing within the language used in cl 8 which raises any ambiguity or is meaningless in some way, and there is nothing within cl 8 or the Will itself upon which it could be implied that the defendant, in her personal capacity as beneficiary, was entitled to mortgage the Tennyson property for a personal loan, whether that loan be for the purposes of the “consideration payment” in cl 8.1 or for any other purpose.

90. Ms Glover contended (as the plaintiff’s solicitors had in a letter to the defendant’s solicitors on 15 August 2023) that the condition is a condition precedent: T 22.9-.10. She submitted (T 19.29-.34) that cl 8:

… is not an absolute [gift] to the defendant, but there is a condition that must be satisfied, and it’s implicit in 8.1 that the defendant would hold the property in her capacity as executor, and if the gift were perfected and the consideration paid within that two year period, only then would the right title and interest in the property pass to her in her capacity as beneficiary.

91. Mr Price rejected the contention that the requirement for the consideration to be paid was a condition precedent to the transfer of the Tennyson property: T 29.46-.48.

92. Whether or not the condition to which the gift to the defendant in cl 8.1 was subject was a condition precedent (as she contended), Ms Glover contended that, if the condition was not satisfied within the requisite two year period, forfeiture of the gift would result and the Tennyson property would fall into residue. For his part, Mr Price appeared to initially accept that position, but later contended that the condition merely imposed a personal obligation on the defendant similar to that in Re Lester: T 30.

Significance of the proper construction

93. A number of questions arise in relation to the construction of cl 8.1. They include (a) whether the gift is subject to a condition precedent or subsequent, which is relevant to when (if at all) the gift vests in the defendant, and (b) what is the consequence of the defendant failing to comply with the payment of the consideration.

94. Whilst these are important questions, neither of them is of itself completely definitive of the parties’ claims, for two reasons.

95. First, the time period for the payment of the consideration has not yet elapsed. Secondly, Ms Glover acknowledged that the characterisation of the terms of the gift in cl 8 as being a condition precedent or otherwise would not, of itself, determine the outcome of the proceedings, as there was the second issue which arose as to whether the defendant was permitted “as beneficiary” to use the estate property as security for a loan: T 25.28-.33.

Structure of cl 8.1

96. Clause 8.1 deals completely with the disposition of the Tennyson property. It contains three sentences which address how that is to occur.

97. The first sentence provides for a gift of the property on a proviso, to which I will return.

98. The second sentence addresses an event which has not occurred. Neither counsel contended that this sentence was relevantly engaged on the facts of the case.

99. In its terms, the third sentence addresses what is to occur in relation to the property if the defendant fails or decides not to pay the consideration within the time specified in the first sentence.

Consequences of non-payment – forfeiture or otherwise?

100. I accept that the condition in cl 8.1 involves forfeiture of the gift to the defendant for non-fulfilment. The fact that the third sentence expressly provides for the Tennyson property to fall into residue if the defendant fails to make the payment to the plaintiff within the time specified makes this condition distinguishable from that in Re Lester. The deceased’s provision for a gift over should the defendant not fulfil the condition is probative of her intention to create a condition going to forfeiture: Dal Pont at [11.8], citing Nathan v Leonard [2003] 1 WLR 827 at 830-838 per John Martin QC (sitting as a deputy High Court judge).

Time of vesting – is the consideration payment a condition precedent or subsequent?

101. On this question, the surrounding circumstances are important. The defendant had been living on the Tennyson property for approximately 23 years (and was continuing to live at the property) at the time of the making of the Will, meanwhile the plaintiff had not lived on the property for a period of approximately 12.5 years and was living independently in Victoria (although I accept he had at times lived on the Tennyson property previously).

102. The conversation deposed to by the defendant between her and her parents (and in particular the deceased) took place, I infer, shortly after the time at which the Will was made.

103. In the conversation, the defendant raised with her parents, and in particular the deceased, the fact that she did not then know how she would raise the money to pay the plaintiff the one-third value of the Tennyson property. In her response to the defendant, the deceased envisaged the possibility that the defendant may be able to get a home loan on the property, recognising that the bank would need security to approve any loan.

104. Accepting as I do that the conversation took place slightly after the deceased had made her Will, it seems likely that the conversation confirmed to the deceased the probability, or at least the possibility, that the defendant, upon the deceased’s eventual death, would need to borrow funds in order to make the consideration payment.

105. Having regard to that evidence providing context, I incline against a construction that the condition in cl 8.1 was intended to be a condition precedent; rather, I lean to a construction that it was intended to be a condition subsequent such that the defendant’s interest would vest in possession prior to the condition being fulfilled. It has been said that where a specific time is mentioned for the performance of the condition but not for the vesting of the interest, the condition will in general be subsequent: In re Porter; Logan v Northern Bank Ltd [1975] NI 157 (Re Porter) at 160 per Lowry LCJ. Moreover, if it is reasonable to suppose that the interest must vest in possession before the donee can be expected to comply with the condition, it will be subsequent: Dal Pont at [11.15], citing Re Porter at 160. Any remaining lack of clarity as to the deceased’s intention would incline the Court towards construing the gift as subject to a condition subsequent, giving effect to the rationale for a presumption in favour of early vesting: Dal Pont at [11.14]; Re Porter at 160.

106. Significantly, as I have noted, the consequences of non-fulfilment of the condition are largely moot at this stage because the time period for the performance of the condition in cl 8.1 has not yet expired and the defendant has made it clear through her legal representatives that she is ready, willing and able, and indeed has already attempted, to pay the consideration amount to the plaintiff.

Issue 2 – Was the defendant’s use of the property as security to borrow funds permitted?

Submissions

107. Ms Glover submitted that it was important to establish the capacity in which the defendant had borrowed the funds from the NAB in order to pay the consideration. She noted that the defendant admits in her defence that she borrowed the funds from the NAB in her personal capacity.

108. Ms Glover submitted that it was impermissible for the defendant as executrix to use the Tennyson property as security in that manner, as there was no relevant power in cl 12 of the Will (or otherwise) which permitted the defendant to act as she did in her personal capacity: POS [59]. According to Ms Glover, it is undisputed that as at 19 May 2023: (a) the defendant in her capacity as executrix was recorded as the registered proprietor of the Tennyson property; (b) the defendant in a personal capacity borrowed funds from the NAB, using the property as collateral security; and (c) the NAB registered a mortgage on the title of the Tennyson property, paying the loan monies to the defendant personally: POS [30]. She further acknowledged or accepted in argument that, had the defendant gone to the NAB and asked to borrow the $575,000 in her capacity as executrix, after which the NAB paid the monies into an estate bank account, that would have been permissible under the Will: T 26.22-.45.

109. Ms Glover submitted that cl 12.1, and in particular cl 12.1(q), did not permit the defendant as executrix to allow herself as beneficiary to use estate assets to secure a personal loan. She submitted that, if the deceased had wished to give such a power to the defendant, she could have specifically done so and framed cl 8.1 in terms that permitted her to borrow funds in her personal capacity. However, she submitted that the deceased had not done so and that, by cl 12.1 of the Will, she had specifically limited any borrowing power to the defendant in her capacity as trustee or executrix of the estate: T 20.30-.36. In the context of the list of powers in cl 12.1, that submission calls to mind the guide to construction “expressio unis est exlusio alterius” (the express mention of one is to the exclusion of the other). I pause to note that it has often been said that the expressio unis maxim is one that should be applied with caution: e.g. Wentworth v New South Wales Bar Association (1992) 176 CLR 239 at 250 per Deane, Dawson, Toohey and Gaudron JJ; [1992] HCA 24. Even so, it would be rare for a Willmaker to give a beneficiary (as distinct from an executrix or trustee) a power to deal with property under a Will. Ordinarily, there is no relevant need to do so.

110. Meanwhile, Mr Price submitted that the argument that an absence of power can be inferred from the fact that there is no express mention of it in a document (citing the decision of the Privy Council in The Bombay Tramway Company Ltd v The Municipal Corporation of the City of Bombay [1904] UKPC 29, in the contractual context) had been discredited. It is not obvious to me that the Board’s decision gives effect to that proposition.

111. In respect of cl 12.1(e), Ms Glover accepted that the words “otherwise deal with any property” constitute an extremely broad statement, but submitted that it would not extend to allowing the defendant in her capacity as beneficiary to borrow monies from a bank in that capacity, and then for the estate property to be mortgaged for that purpose: T 34.40-.44.

112. According to Ms Glover, borrowing the monies in her personal capacity with the Tennyson property as security meant that the defendant has acted in breach of her fiduciary duties, “has favoured her own interest and failed to act in the best interests of the beneficiaries in the estate”: POS [61]; see also T 25.

113. For his part, Mr Price submitted that the plaintiff’s argument represents a triumph of form over substance, relying upon Parkin v Thorold (1852) 16 Beav 59 at 66-67; 51 ER 698 at 701 per Lord Romilly MR and AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 197 per Deane J; [1986] HCA 63.

114. Specifically, he submitted that the Will conferred a power on the defendant as executrix to borrow and use estate property as security, and that equity will not intervene to invalidate her borrowing in a personal capacity, there being no material difference to the outcome if the defendant had borrowed the money in her capacity as executrix: DOS [21].

115. Mr Price further submitted that, pursuant to cl 12.1(e), the defendant had powers as executrix to “use” or “otherwise deal with any real or personal property… on whatever terms [she] thinks fit” and that, accordingly, it was open to her to have the Tennyson property mortgaged as she did: DOS [22].

Determination

116. While the defendant’s solicitors had indicated in correspondence, and the defendant admitted in her defence, that she had borrowed the monies in her personal capacity from the NAB in order to pay the plaintiff, overall there was a lack of precision in both parties’ cases as to exactly what that meant.

117. Regrettably, the loan agreement between the defendant and the NAB was not in evidence. Nonetheless, at the time that the mortgage was registered in May 2023, the defendant held the fee simple estate in the Tennyson property as executrix. As the mortgage document lodged by the NAB shows, it was the fee simple estate which was being mortgaged.

118. The capacity in which a party contracts, is given rights or assumes or becomes subject to obligations or liabilities under a contract, must be determined objectively in the same manner as the contract itself is construed: Infigo II Pty Ltd v Linmas Holdings Pty Ltd [2023] NSWSC 755 (Infigo) at [51]; Huntley Management Ltd v Timbercorp Securities Ltd (2010) 187 FCR 151; [2010] FCA 576 (Timbercorp) at [53] per Rares J. Whilst a party to a contract can seek to identify the capacity in which the party contracts, a party cannot deem their relationship or the capacity in which the party contracts to be something that it is not: Infigo at [53]; Timbercorp at [57]. In this case, that task is obviously inhibited by the fact that the loan agreement was not in evidence.

116. One must bear in mind that the legal personality of a trustee is unitary; although a trustee has duties specific to her status as such, when it comes to the consequences of contractual arrangements between a trustee and third parties the law does not generally distinguish between her personal and her fiduciary capacity: Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2019] AC 271 (Privy Council) (Investec) at [59(iii)] per Lord Hodge (Lord Sumption and Lord Carnwath agreeing). It follows that the trustee assumes those liabilities personally and without limit, however such liabilities may be limited by contract: Investec at [59(iii)-(iv)]. The principle is not relevantly different in the case of an executrix in respect of liabilities incurred after the deceased’s death: see e.g. G E Dal Pont, Law of Executors and Administrators (2022, LexisNexis) at [15.21]-[15.25].

117. The question of whether a person or entity acts as trustee or in some other capacity is relevant to the internal question, as between trustee and beneficiary, as to whether the trustee has a right of recoupment from the trust fund for any liability it may incur. That is not an issue in which third parties usually have any legitimate involvement: AMP Capital Investors Ltd v Parsons Brinckerhoff Australia Pty Ltd; Retail Employees Superannuation Pty Ltd v AMP Capital Investors Ltd [2013] NSWSC 1633 at [16] per Pembroke J. Further, as Lindsay J observed in Valverde v Inch [2018] NSWSC 366; (2019) 19 BPR 39421 at [103]-[104]:

103. Because the Real Property Act (Torrens) system of registered title is not a system of registration of title but a system of title by registration (Breskvar v Wall (1971) 126 CLR 376 at 385-386), where a person, in the character of an executor, secures registration on the title to land under the Act, unless there is an entry on the title that the land is held in a fiduciary capacity (such as may be authorised by section 12(1)(f) of the Act as an exception to the principle, embodied in section 82 of the Act, that trusts are not recorded in the Register), for the purposes of any dealing with the land the executor, as registered proprietor, is deemed to be absolute proprietor of the land: Real Property Act, sections 42 and 96.

104. Nevertheless, as section 96 of the Real Property Act confirms, the Act is consistent with a beneficiary’s entitlement to enforce equitable rights against a registered proprietor who acquired registration (and, accordingly, via sections 41 and 42 of the Real Property Act, legal title) as an executor and who – whether in the character of an executor or in the character of a trustee – continues to hold that title.

121. What the defendant meant by “in her personal capacity”, in the circumstances which unfolded, appears to be limited to the fact that she would (and has been) paying interest on the borrowed funds without recoupment of those interest expenses from the estate: see Mr Price’s submission at T 28.41-.42.

122. Once this is made clear, and in light of Ms Glover’s acknowledgement that it would have been permissible under the Will for the defendant to have gone to the NAB and asked to borrow the $575,000 in her capacity “as executrix” (which would prima facie result in her being able to recoup interest expenses out of the estate), it is difficult to understand how the defendant has purportedly “favoured her own interest”. Indeed, that (proper) acknowledgement undermines the argument that the defendant placed her own interests in conflict with her duty as executrix, as it is premised upon her duty permitting her to do precisely what she had in fact done.

123. In any case, it is open to a testatrix in making a Will to permit action that would otherwise be prohibited by reason of being a breach of fiduciary duty. Specifically, if a testatrix wishes to impose on a trustee or executrix a duty which is inconsistent with a pre-existing interest or duty, the trustee or executrix is not debarred from accepting the office or performing the duties which are imposed under it: Mordecai v Mordecai (1988) 12 NSWLR 58 at 66G-67D per Hope JA; Princess Ann of Hesse v Field (1963) 80 WN (NSW) 66 at 73 per Jacobs J; G E Dal Pont, Law of Succession (3rd ed, 2021, LexisNexis) at [12.23]. For example, an executrix may be permitted, in accordance with the terms of the Will, to purchase or retain estate property in circumstances in which, absent any such permission, the conduct would give rise to a conflict for the executrix.

124. In construing cl 12.1 (as with cl 8.1), the context of the making of the Will is important.

125. If the deceased wished the defendant to have an opportunity to retain the Tennyson property (which I accept), it is likely that the deceased would have intended to facilitate a process to ensure that the defendant received a home, and the plaintiff was paid his consideration, by permitting the Tennyson property to be used as security to raise funds to pay the consideration. Put another way, it is unlikely that the deceased would have wished for the defendant to retain the Tennyson property but inhibited or limited her means and options of effectively being able to do so.

126. The powers set out in cl 12.1 of the Will, in context, are powers to facilitate the purposes specified or envisaged by the Will and to facilitate the execution of the trusts created by the Will and the disposition of property. Facilitating a gift to a beneficiary being effected, by enabling that beneficiary to satisfy a condition of the gift, ought to fall within that description. Indeed, as noted above, that much was acknowledged by Ms Glover.

127. The combined scope of the powers in cll 12.1(e) and (q) is extremely broad, something which was accepted by Ms Glover.

128. The plaintiff has asked the Court to decide whether the Will permitted the defendant in her personal capacity to borrow funds from the NAB in order to make the required payment of the consideration, using the Tennyson property as security. In light of what I have said above, I consider that the plaintiff placed undue emphasis on what was said to have done been in the defendant’s “personal capacity”, without clarifying precisely what that meant. Rather, the relevant question is whether the defendant had power under the Will to do what she did, being to mortgage the Tennyson property in order to raise funds to pay the consideration amount to the plaintiff.

129. Framing the question in that way, it would appear that the express power in cl 12.1(q) to “borrow, raise moneys from and to secure by mortgage… the payment, repayment or advances of any money to any persons” permitted the defendant to mortgage the Tennyson property in order to raise funds to pay the consideration amount to the plaintiff. In any case, such action seems to me to amply fall within concept of the executrix being empowered within cl 12.1(e) to “use… or otherwise deal with any real or personal property… on whatever terms as the trustee thinks fit”.

130. The phrasal verb “deal with” is defined in broad terms in the Oxford English Dictionary, online ed, being:

a. to deal with: to act in regard to, administer, handle, dispose in any way of (a thing). b. to handle effectively; to grapple with; to take…

131. I find that the defendant was permitted as executrix, pursuant to cll 12.1(e) and (q), to act in the manner in which she did, being to mortgage the Tennyson property in order to facilitate a beneficiary (in this case herself) raising sufficient funds to satisfy the condition of a gift, being to pay the consideration to the plaintiff. Those actions were clearly for a purpose envisaged by the Will.

132. In the above circumstances, I do not find that there has been any breach by the defendant in her capacity as executrix of any applicable fiduciary duty. For the sake of completeness, I note that there is no suggestion that the defendant in her personal capacity owed any fiduciary duty to the plaintiff.

Issue 3 – Should the grant of probate be revoked?

133. Ms Glover made detailed submissions in relation to the circumstances in which a grant of probate may be revoked.

134. Whilst I have read and considered Ms Glover’s submissions, in light of my findings in relation to the construction of the Will and the issue regarding alleged breach of fiduciary duty, there is no circumstance that arises to warrant any revocation of the grant of probate in favour of the defendant.

Orders

135. Ms Glover did not dispute that, in the event that the Court found there was no breach of fiduciary duty, the declaration sought by the defendant in the cross-claim was appropriate.

136. Accordingly, I will make the declaration as sought by the defendant.

137. On the question of costs, provisionally it seems to me that there was a contestable issue as to the true construction of the Will, and in particular the provisions of cll 8.1 and 12.1.

138. In those circumstances, my provisional view is that the costs of the defendant should be paid out of the estate on the indemnity basis and the costs of the plaintiff and Mr Emanuel (as a submitting defendant) should be paid out of the estate on the ordinary basis. Those costs are to be paid out of residue.

139. If the parties wish to contend for some other costs order, I will give them an opportunity to do so.

140. The orders of the Court are as follows.

1. Declare that, on the proper construction of the will of the late Elaine Fay Boyd (the “Deceased”) made on 24 April 2019, the defendant was permitted to mortgage the real property located at and known as XX Murrays Road, Tennyson in the State of New South Wales (having certificate of title folio identifier X/XXXXX ) (the “Property”) for the purpose of raising funds to pay the plaintiff one-third of the market value of the Property as at the date of death of the Deceased in accordance with clause 8.1 of the Deceased’s will.

2. Order that the plaintiff’s costs and the costs of Mr Emanuel (as a submitting defendant), each on the ordinary basis, and the defendant’s costs, on the indemnity basis, be paid out of the residue of the estate.

3. Grant liberty to any party to apply to Meek J within 7 days by email correspondence to the Associate to Meek J to vary order 2, failing which the costs order will become a final order.

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Amendments

18 September 2024 - [140(1)] - change "allow" to "mortgage"

Decision last updated: 18 September 2024