Butler v Kenny

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0083

TREVOR EDWARD BUTLER (WHO IS SUED AS THE EXECUTOR OF THE WILL OF ERNEST EDWARD BUTLER, DECEASED, AND PERSONALLY)	Applicant
v
DALLAS WILLIAM ROSSITER KENNY & ORS (ACCORDING TO THE ATTACHED SCHEDULE)	Respondents

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JUDGES:	KYROU, McLEISH and WALKER JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	10 May 2022
DATE OF JUDGMENT:	31 May 2022
MEDIUM NEUTRAL CITATION:	[2022] VSCA 102
JUDGMENT APPEALED FROM:	[2021] VSC 350 (McMillan J)

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WILLS, PROBATE AND ADMINISTRATION – Conflicting wills – Deceased’s son and certain grandchildren to each receive half of estate under earlier formal will – Son to receive entire estate under later informal will – Son sought probate of informal will – Settlement reached providing for payment following grant of probate of informal will – Registrar refused probate of informal will but granted probate of formal will – Grandchildren contended terms of settlement no longer binding – Whether certain terms subject to condition precedent that probate of informal will be granted – Leave to appeal granted – Appeal allowed.

CONTRACTS – Interpretation – Conditions precedent – Whether payment and release obligations subject to condition that probate of informal will be granted – Probate of informal will referred to throughout terms – Whether condition precedent or merely vehicle for effecting settlement – Terms directed to achieving resolution of all disputes – Definition of essential term ambiguous – Preferable construction best reflects language of clause and overarching purpose to resolve all disputes – Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, applied.

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Counsel
Applicant:		Mr R Antill
Respondents:		Mr J McComish
Solicitors
Applicant:	Casey Business Lawyers
Respondents:	Vinci Solicitors & Conveyancers

KYROU JA

McLEISH JA

WALKER JA:

Introduction and summary of conclusions

This appeal arises out of a dispute over the will of Edward Butler (‘the deceased’), who died on 31 July 2016. He left a will dated 16 December 2005 (‘the 2005 will’) and an unsigned will purportedly drafted in accordance with instructions given to his solicitor on 5 July 2016 (‘the informal will’). His estate was worth approximately $873,000, and included a property in Nyora (the ‘Nyora property’).
Under the terms of the 2005 will, the deceased’s son, Trevor Butler (the applicant in this proceeding), was to receive half the residuary estate and the deceased’s daughter, Colleen Kenny, was to receive the other half. The 2005 will provided that, in the event of either Trevor or Colleen failing to survive the deceased, then their children (if any) would take their parent’s share in the estate. Colleen died before the deceased. She had three children: Dallas, Shenae and Chase (‘the Kennys’, who are the respondents in this proceeding). Thus, under the 2005 will, the Kennys were entitled to half the estate (or around $436,000). In contrast, under the terms of the informal will, Butler was to receive the whole residuary estate and the Kennys were to receive nothing.
On 2 May 2018, the Kennys filed a caveat (‘the probate caveat’) against any dealing in relation to the will or estate of the deceased. On 9 October 2018, Butler sought a grant of probate of the informal will (the ‘informal will proceeding’). Following an unsuccessful mediation, the parties signed terms of settlement in April 2019, which are set out in full later in the judgment. In summary, the terms of settlement provided that:
(a)the parties consented to the grant of representation to Butler in respect of the informal will, and agreed to removal of the probate caveat (cl 1);
(b)within six months and one week of that grant of representation Butler, as executor, would pay the sum of $210,000 to the Kennys (‘the new bequest’), with $100,000 of that sum to be paid within 30 days of the grant of representation (cl 2);
(c)the terms of settlement were entered into in full satisfaction of any claim the Kennys may have had against the estate and Butler arising out of pt IV of the Administration and Probate Act 1958 or otherwise (cl 5); and
(d)upon payment of the new bequest in full, the parties mutually released each other from all claims in relation to the estate (cl 6).

These terms of settlement — and their effect on Butler’s administration of the estate — are the subject of this appeal.

On 6 May 2019, consistently with the terms of settlement, the Kennys removed the probate caveat. However, on 18 September 2019, the Registrar of Probates refused Butler’s application for a grant of probate of the informal will.
On 11 November 2019, Butler applied for a grant of probate of the 2005 will. In an affidavit filed in support of his application, Butler undertook to distribute the estate in accordance with the terms of settlement (rather than in accordance with the terms of the 2005 will). On 20 November 2019, the Registrar of Probate granted probate of the 2005 will to Butler.
On 22 November 2019, the Kennys informed Butler that they did not consider themselves bound by the terms of settlement. In summary, they contended that the terms of settlement were subject to a condition precedent, namely a grant of probate of the informal will. They lodged a caveat over the Nyora property (the ‘property caveat’). Butler, on the other hand, contended that the terms of settlement were not subject to a condition precedent, but reflected a compromise in relation to any and all claims in relation to the deceased’s estate.[1]
[1]Re Butler; Kenny v Butler [2021] VSC 350, [26] (‘Reasons’).
On 13 January 2020, the Kennys commenced a proceeding seeking, amongst other things, a declaration that the terms of settlement had lapsed on the refusal of the Registrar to admit the informal will to probate or, alternatively, that the terms of settlement were void ab initio or void from such date as the court declares or, in the further alternative, that the terms of settlement were unenforceable. They also sought a declaration that they were beneficiaries under the 2005 will according to its terms, and that their claim in the property caveat was ‘good’.
With the consent of the parties, the judge determined the proceeding on the papers. Her Honour held that the grant of probate of the informal will was not a condition precedent to the formation of a contract,[2] but was a condition precedent to Butler’s obligation under cl 2 of the terms of settlement to pay the new bequest out of the estate to the Kennys.[3] Further, she held that the mutual releases in cl 6 were also conditional on payment of the $210,000.[4] The judge held that the consequence of the non-fulfilment of the condition precedent was that the whole of the terms of settlement were voidable, by either party.[5] Her Honour held that the Kennys’ letter of 22 November 2019 had ‘sufficiently evidenced their intention to avoid the terms of settlement’.[6] Accordingly, her Honour held that the terms of settlement were void from that date.
[2]Reasons, [28].
[3]Reasons, [38].
[4]Reasons, [40].
[5]Reasons, [40].
[6]Reasons, [44].
However, the judge held that orders in the terms sought by the Kennys were not appropriate. Rather, she held that the following declarations were appropriate:[7]
(i) the terms of settlement were void from 22 November 2020;
(ii)the defendant [Butler] is released from his undertaking to distribute the deceased’s estate in accordance with the terms of settlement;
(iii)distribution of the deceased’s estate is to be made in accordance with the terms of the 2005 will; …
[7]Reasons, [47].
Butler now seeks leave to appeal from the judge’s decision on seven grounds, as follows:
1.The primary judge denied the applicant procedural fairness by constructing an alternative analysis (different to the case advanced by the respondents) and determining that:
(a)The grant of probate of the informal will was a condition precedent to payment of the new bequest and the releases provided pursuant to clause 6;
(b)The consequence of the non-fulfilment of the condition precedent was that the whole of the terms of settlement were voidable by both parties;
(c)By the letter dated 22 November 2019 from the respondents’ solicitor and the reference to the lodging of a caveat, the respondents sufficiently evidenced their intention to avoid the terms of settlement;
(d)The terms of settlement were therefore void from 22 November 2020;
without giving the applicant prior notice that her Honour proposed to do so and an opportunity to address these matters.
2.The primary judge denied the applicant procedural fairness by making the following declarations:
(a) The terms of settlement were void from 22 November 2020;
(b)The defendant is released from his undertaking to distribute the deceased’s estate in accordance with the terms of settlement;
(c)Distribution of the deceased's estate is to be made in accordance with the terms of the 2005 will;
where these declarations had not been sought either by the respondents in their originating motion or by the applicant, and the applicant was not provided with prior notice that her Honour proposed to make such declarations and an opportunity to address these matters.
3.The primary judge erred and denied the applicant procedural fairness by making an order under [rule] 4.07 of the Rules that the proceeding continue as if it had been commenced by writ without giving the applicant prior notice that her Honour proposed to do so and an opportunity to address this matter, and without either:
(a)making an associated order that pleadings be served between the parties (including liberty to apply for particulars thereof) and that the parties have discovery of each other; or
(b)making an associated order that any affidavits already filed in the proceeding shall stand as pleadings, with liberty to any of the parties to add thereto or to apply for particulars thereof.
4.The primary judge erred in her determination that the grant of probate of the informal will was a condition precedent to payment of the new bequest and the releases provided pursuant to clause 6 (and clause 5 as incorporated into clause 6).
5.The primary judge erred in her determination that the consequence of the non-fulfilment of the condition precedent was that the whole of the terms of settlement were voidable by both parties.
6.The primary judge erred in her determination that by the letter dated 22 November 2019 from the respondents’ solicitor and the reference to the lodging of a caveat, the respondents sufficiently evidenced their intention to avoid the terms of settlement.
7.The primary judge erred in not dealing with the validity of the respondents’ [property] caveat ….
As can be seen, grounds 1, 2 and 3 each raise issues of procedural fairness. In contrast, grounds 4, 5, and 6 each raise issues concerning the correctness of the judge’s substantive conclusions. Ground 7 concerns the judge’s failure to deal with the issue of the property caveat over the Nyora property. That ground was resolved in the hearing in this Court, by the parties consenting to an order that the Registrar remove the property caveat, and we need not deal further with it.
In our opinion, the judge erred in the manner alleged in ground 4. That is, properly construed, the terms of settlement did not provide that a grant of representation in respect of the informal will was a condition precedent to the operation of cls 5 and 6. Nor was a grant of representation an element of the ‘new bequest’, as defined in cl 2, although, as Butler accepted, such a grant of representation was a condition precedent to the obligations set out in cl 2. For that reason, we would grant leave to appeal, allow the appeal and set aside the judge’s orders.
In those circumstances it is unnecessary to decide the remaining grounds of appeal. Rather, it is appropriate for this Court to make the orders that should have been made below. In that regard, Butler sought an order dismissing the Kennys’ application. We will make that order.

Factual background

It is necessary to address some factual aspects in greater detail.
On 23 September 2019, shortly after the Registrar of Probates had refused Butler’s application for a grant of probate of the informal will, Butler’s solicitor had a telephone conversation with the Kennys’ solicitor. On the same day, Butler’s solicitor sent a letter to the Kennys’ solicitor. That letter:
(a)referred to the telephone discussion;
(b)enclosed a copy of the Registrar’s decision;
(c)referred to the terms of settlement; and
(d)suggested, relevantly, that Butler would apply for probate of the 2005 will,[8] and that he would distribute the estate in accordance with the terms of settlement.

The letter concluded by requesting that the Kennys’ solicitor ‘confirm your clients’ irrevocable instructions that you can consent for us to act on this path’.

[8]The letter states ‘it has been suggested that we … Apply for Probate’ of the 2005 will. The word ‘we’ connotes the solicitors who acted for Butler, one of whom was the author of the letter; thus it is appropriate to understand the letter as suggesting that Butler apply for probate of the 2005 will. (The source of the suggestion is unclear, given the passive voice.)

There was no response from the Kennys’ solicitor to the 23 September letter until the letter sent on 22 November 2019 (discussed in more detail below).
Notwithstanding the final paragraph of the 23 September letter, and the fact that no confirmation of the Kennys’ instructions had been received, on 23 October 2019, Butler advertised his intention to apply for a grant of probate of the 2005 will on the Supreme Court of Victoria website. No separate notice of that application was given to the Kennys.
On 11 November 2019, Butler applied for probate of the 2005 will. In his affidavit in support of this application, Butler undertook to distribute the estate in accordance with the terms of settlement. On 20 November 2019, Butler obtained a grant of probate of the 2005 will. The grant of probate made no reference to the undertaking proffered by him.
In the 22 November letter to Butler’s solicitor, the Kennys’ solicitor relevantly stated that:
(a)the Kennys did not consider themselves bound by the terms of settlement;
(b)the terms of settlement did not entertain the possibility of either will being admitted to probate, but were entered in contemplation of only the informal will being admitted;
(c)the condition precedent of the informal will being admitted to probate was unable to be satisfied;
(d)the terms of settlement could not be given effect;
(e)because probate of the 2005 will had been granted, the Kennys were entitled to 50 per cent of the deceased’s estate in accordance with the terms of that will and would seek their full entitlements; and
(f)the Kennys’ solicitor had lodged the property caveat.
On 10 December 2019, Butler’s solicitor lodged an application with the Registrar of Titles under s 89A(3) of the Transfer of Land Act 1958 for removal of the property caveat.
On 13 January 2020, the Kennys filed their originating motion seeking the following relief or remedy:
1.An order that the Plaintiffs have leave pursuant to Order 45.05 to commence this proceeding by Originating Motion in the form prescribed as Form 5C, and that the requirements of Rules 5.03(1) and 8.02 be dispensed with.
2.A Declaration that the terms of settlement in writing dated 9 April 2019 made by and between Trevor Edward Butler, the Defendant, and Dallas William Rossiter Kenny, Shanae Janiece Kenny and Chase William Rossiter Kenny, the Plaintiffs, are no longer extant but lapsed on the refusal of the Registrar to admit the Informal Will to probate, or alternatively, void ab initio or void and as from such date as the Court declares;
3.In the alternative, a declaration that the terms of settlement are unenforceable, the condition precedent to same has lapsed; and
4.A declaration that the Plaintiffs are beneficiaries under the Formal Will as per its terms and the claim in the said caveat as to land and the estate or interest claimed is good.
5.Such further or other orders or declarations as to this Honourable Court may seem fit.
6.An order that the Defendant pays the Plaintiffs’ costs on an indemnity basis.
On 13 January 2020, the Kennys notified the Registrar of Titles that a court proceeding was on foot to substantiate the Kennys’ claim in relation to the Nyora property. As a consequence the property caveat did not lapse.
On 26 August 2020, the Court sent the parties an email referring to two sets of proposed orders provided to the Court by the parties. The email said as follows:
Upon review of these documents it would appear the only difference between the positions of the plaintiff and the defendant is that the defendant seeks orders providing for the matter to be determined on the papers, while the plaintiff seeks orders for the matter to be fixed for hearing or alternatively, be determined on the papers. Could you please clarify if this is correct.
On that same day, in response to the Court’s email, Butler’s solicitor sent an email to the Court in the following terms:
(a)The defendant is content for the matter to be determined according to the written submissions and does not wish to make oral submissions, unless the Court would be assisted by further oral submissions.
(b)The defendant does not intend to call or cross-examine any witnesses and is content with his evidence as contained in his affidavit sworn 28 May 2020 and filed in the proceeding on 29 May 2020.
(c)The defendant does not envisage disputation with respect to the admissibility of the affidavit material filed in the proceeding to date.
On 9 February 2021, Butler’s solicitor sent an email to the Court enquiring if the Court required any further assistance from the parties.
On 29 March 2021, the Court sent an email to the parties asking to be provided with a scanned copy of the grant of probate made to Butler on 20 November 2019. On 30 March 2021, Butler’s solicitor sent an email to the Court attaching a scanned copy of the grant of probate.

Relevant legal principles concerning the construction of a contract

There was no dispute below as to the proper principles to be applied in the construction of a settlement agreement; nor is there any real dispute about those principles on the appeal. In summary:[9]
[9]See Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116–17 [46]–[51] (French CJ, Nettle and Gordon JJ); [2015] HCA 37. See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551 [16]–[17] (Kiefel CJ, Bell and Gordon JJ); [2017] HCA 12; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109 (Gibbs J); [1973] HCA 36 (‘Australian Broadcasting’); Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522, 529 [16] (Gleeson CJ, McHugh, Gummow and Kirby JJ); [2005] HCA 17; Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201 [70] (Whelan JA and Riordan AJA), [254] (McLeish JA).
(a)The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to the text, context and purpose of the contract. The context includes the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract.
(b)The determination of the meaning of the terms of a commercial contract is an objective exercise. It is necessary to ask what a reasonable businessperson in the position of the parties would have understood the terms to mean. That will require consideration of the language of the contract, the circumstances addressed by the contract and the commercial purpose to be secured by the contract.
(c)Ordinarily, a contract is construed by reference to the terms of the contract alone. If an expression in a contract is unambiguous, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
(d)However, sometimes, recourse to events, circumstances and things external to the contract is necessary.
(i)First, such recourse may be necessary in determining the proper construction where a provision is ambiguous, such that there is a constructional choice to be made.
(ii)Second, such recourse may be necessary in order to identify the commercial purpose of the contract. In that context, an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating may assist in identifying the commercial purpose.
(e)Even if recourse is had to events, circumstances or things external to the contract, those matters are nonetheless objective. That is, what may be referred to are external events, circumstances or things (including those established by evidence of prior negotiations) that are known to the parties or which assist in identifying the purpose or object of the transaction. What is inadmissible is evidence of the parties’ statements and actions which merely reflect their actual intentions and expectations.
(f)Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result. A commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
(g)The court must have regard to all of the words used in the agreement so as to render them harmonious with one another and to ensure the congruent operation of the various components as a whole.

As to conditions precedent, a condition may be a condition precedent to the formation of a contract, or a condition precedent to the obligation of a party to perform their part of the contract. In the former case, the transaction between the parties creates no rights or obligations unless and until the condition is fulfilled. In the latter case, there is a binding contract creating rights capable of enforcement, but the obligation of a party (or, depending on the terms, of multiple parties) to perform depends upon fulfilment of the condition. In that latter context, non-fulfilment of the condition entitles a party to terminate the agreement. A condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion.[10]
[10]Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 551–2 (Mason J); [1982] HCA 29.
An obligation subject to a condition precedent to performance is immediately binding; it is merely the performance of the obligation that is delayed pending satisfaction of the condition. The ordinary consequence of non-satisfaction of such a condition is not that the contract is automatically void, but that it is voidable by one or some or all of the parties.[11] But, ultimately, the consequence of the failure of a condition precedent is a question of construction of the contract.
[11]Etna v Arif (1999) 2 VR 353, 370 [45] (Batt JA); [1999] VSCA 99, referring to Suttor v GundowdaPty Ltd (1950) 81 CLR 418, 441–2 (Latham CJ, Williams and Fullagar JJ); [1950] HCA 35 and New Zealand Shipping Co v Société des Ateliers et Chantiers de France [1919] AC 1, 9 (Lord Atkinson).

The terms of settlement

It is appropriate at this point to set out the terms of settlement in detail.
First, the header to the terms of settlement may be noted: it contains the number of the informal will proceeding — No S PRB 2018 16782 — alongside the Court’s details, and is followed by the details of the parties to the proceeding, in the same manner as a document that is to be filed with the Court.
Secondly, the terms of settlement contained recitals, relevantly as follows:
A.Whereas on 9 October 2018 [Butler] filed an application for a Grant of Probate of [the informal will]; and
B.Whereas [Butler] has made an application under section 9 of the Wills Act 1958 for the Court to admit to probate the will of a deceased person a document which has not been executed in the manner in which a will is required to be executed by the said act; and
C.Whereas the [Kennys] have filed a caveat against the making of the said Grant of Representation; and
D.Whereas the [Kennys] are, in equal shares, 50% beneficiaries of the estate of the deceased, as the survivors of the deceased, pursuant to the terms of the [2005 will]; and
E.Whereas the [Kennys] have foreshadowed bringing a claim under Part IV of the Administration and Probate Act 1958; and
...
G.Whereas the parties hereto desire to resolve the various disputes between them
Thirdly, the terms of settlement were relevantly as follows:
1.The parties hereto consent to a grant of representation being made to [Butler] in respect of the informal will and to facilitate removal of the caveat.
2.Within six months and one week of the making of that grant of representation in respect of the informal will [Butler], as executor of the estate of the deceased, will pay out of the estate of the deceased to the [Kennys] the sum of $210,000 (‘the new bequest’) There will be an interim distribution, being part of the new bequest, of $100,000 made to the [Kennys] approximately thirty days after the grant of representation.
3.Such payments will be made to the solicitors for the [Kennys].
4.Payment of the new bequest is inclusive of the [Kennys’] costs of and incidental to this proceeding.
5.These terms are entered in full satisfaction of any claim the [Kennys] may have against the Estate of the Deceased and [Butler] arising out of:
(a)any claim they had, may now have, or in the future may have under the provisions of Part IV of the Administration and Probate Act 1958; and
(b)otherwise against the estate of the deceased, or to participate in the distribution of the estate of the deceased, or in any other way whatsoever.
6. Upon payment of the new bequest in full:
(a)the [Kennys] will thereupon release and for ever discharge [Butler] (both in his representative capacity and in his own personal capacity) from all claims, suits, demands and claims for costs arising out of or in relation to the matters the subject of this proceeding and in relation to the claims the [Kennys] may have against [Butler] referred to in paragraph 5 hereof.
(b)[Butler] (both in his representative capacity and in his own personal capacity) will thereupon release the [Kennys] from all claims, suits, demands and claims for costs which he or the estate now has or may hereafter have arising out of or in relation to the matters the subject of this proceeding and in relation to the claims the [Kennys] may have against [Butler] referred to in paragraph 5 hereof.
...
8.The parties will together make all reasonable endeavours to obtain a grant of representation of the informal will as soon as possible.

Ground 4: the condition precedent issue

It is convenient to commence with a consideration of ground 4, which is that the judge ‘erred in her determination that the grant of probate of the informal will was a condition precedent to payment of the new bequest and the releases provided pursuant to clause 6 (and clause 5 as incorporated into clause 6)’.

The judge’s decision on the condition precedent issue

The judge held that the grant of probate of the informal will was not a condition precedent to the formation of a contract between the parties.[12] There is no challenge to that aspect of her Honour’s decision. However, the judge held that the grant of probate of the informal will was a condition precedent to Butler’s obligation to pay the new bequest out of the estate to the Kennys.[13]
[12]Reasons, [28].
[13]Reasons, [38].
Her Honour further held that the releases to be provided pursuant to cl 6 (including releases in respect of the claims the subject of cl 5) were conditional on payment of the new bequest, which was conditional upon the grant of probate of the informal will.[14] That was because cl 6 commenced with the statement ‘[u]pon payment of the new bequest in full’, indicating that the releases then set out were only effective upon that payment. Further, the judge observed that cls 3 and 4 related to the payment of the new bequest. Her Honour concluded as follows:
Given the interlinkage between the obligation to pay the new bequest and the balance of the terms of settlement, [Butler] cannot be excused from performance of that obligation while the terms of settlement remain on foot. Rather, the consequence of the non-fulfilment of the condition precedent is that the whole of the terms of settlement were voidable … .[15]
[14]Reasons, [40].
[15]Reasons, [40].
Her Honour held that, in so far as this might appear to be a poor outcome for Butler, it is not the Court’s role to ‘relieve [him] from a bad bargain’.[16]
[16]Reasons, [41].

The parties’ arguments on the appeal

On the appeal, Butler accepted that a grant of probate of the informal will was a condition precedent to his obligation to pay the new bequest out of the estate to the Kennys. However, he contended that the judge had erred in several distinct ways.
First, he submitted that her Honour’s reading of cl 6 involved reading into that clause additional words (underlined) that the parties could have included, but had not, as follows:
6.Upon the grant of probate of the informal will and the payment of the new bequest in full (a) the [Kennys] will thereupon release and for ever discharge …
Or alternatively
6.Upon the payment of the new bequest in full in accordance with the obligation imposed by clause 2 and not otherwise (a) the [Kennys] will thereupon release and for ever discharge …
In contrast, the Kennys submitted that the judge did not err in this manner. They submitted that it was an explicit textual presupposition of the contract that there be a grant of probate of the informal will, referring to what were said to be 12 textual foundations for that argument. Those 12 textual foundations included, in particular, Recitals A, B and C and cls 1, 2 and 8. Far from reading words into the contract, they contended, the judge’s construction properly had regard to the words actually used, ‘so as to render them all harmonious one with another’.[17]
[17]Australian Broadcasting (1973) 129 CLR 99, 109 (Gibbs J); [1973] HCA 36.
Secondly, Butler submitted that there is a distinction between a condition precedent to an obligation to perform an act, and a condition precedent to performance of an act. In relation to the former, if the condition is not fulfilled then there is no obligation to perform the act, but there is no prohibition on the act being performed. In relation to the latter, if the condition is not fulfilled then the obligation cannot be performed. He accepted that a grant of probate of the informal will was a condition precedent in the former sense, that is a condition precedent to the obligation to make payment of the new bequest within the time frame specified. But he contended that the terms of settlement did not prohibit him from making payment of the new bequest in the event of a grant of probate of the 2005 will, rather than the informal will. Once probate was granted in respect of the 2005 will, Butler would be in a position to sell the deceased’s property and use some of the proceeds to pay the new bequest to the Kennys; and he had undertaken to do so in his affidavit filed in support of his application for probate of the 2005 will. However, the Kennys’ property caveat prevented him from selling the Nyora property and administering the estate, including by paying the new bequest.
Butler submitted that, once payment of the new bequest was made, cl 6 would operate to release him and the estate from any further claim by the Kennys.
In response, the Kennys contended that Butler’s submission turned on a distinction without a difference. They further contended that, as executor, Butler is bound by his fiduciary and other duties to distribute the estate in accordance with the terms of the will in fact admitted to probate — the 2005 will — and that is what, as a matter of law, prohibits him making the new bequest in circumstances where the contingency on which the contract was based has not been fulfilled. They also contended that Butler’s submissions overlook the fact that there is no textual foundation for the idea that proof of the 2005 will would satisfy the conditions of the terms of settlement: all the relevant clauses presupposed proof of the informal will alone.
Thirdly, Butler submitted that, contrary to the statement by the judge, he had not sought relief from a ‘bad bargain’.[18] He contended that the authorities that her Honour had relied upon in relation to the ‘bad bargain’ point involved quite a different context — relief against penalties or forfeiture — and that the relevant principle is different when the court is construing a contract. In that context, he submitted, there is a presumption that the parties did not intend their contract to operate in an unreasonable way, and that where there is ambiguity, the court should select a construction that achieves a reasonable result.[19]
[18]This submission was initially made under cover of ground 5; however, in oral argument it became apparent that it was also relevant to ground 4.
[19]Relying on JW Carter, LexisNexis, Carter on Contract [12-040] and J Kitchen & Sons Pty Ltd v Stewart’s Cash and Carry Stores (1942) 66 CLR 116, 124–5 (Latham CJ and McTiernan J); [1942] HCA 18.
In the present context, he submitted, there was a constructional choice: either the terms of settlement applied only if there was a grant of the informal will, or the terms applied regardless of which will was admitted to probate. He submitted that the first possible construction would result in a ‘bad bargain’ for Butler and a ‘remarkable windfall’ for the Kennys. That is, Butler would receive ‘only’ the removal of the probate caveat and the avoidance of a contested trial, in return for a ‘reduction of $210,000 to Butler’s entitlement under the informal will’. In contrast, under the second construction, the payment of the new bequest to the Kennys equated to ‘splitting the difference’ between the respective best and worst possible outcomes that confronted the parties at the time of settlement.
Thus, Butler submitted, he was not seeking relief from a bad bargain, but rather a construction of the contract by reference to the presumption that the parties did not intend their contract to operate in an unreasonable manner.
In response, the Kennys submitted that her Honour was correct that the courts will not ‘remake the parties’ contract’ simply because it transpires that one party has made a bad bargain, referring to Legione v Hateley.[20] They also submitted that avoidance of a contested trial was a valuable benefit to Butler.
[20](1983) 152 CLR 406, 447 (Mason and Deane JJ); [1983] HCA 11.

Consideration of the condition precedent issue

In our opinion, Butler’s submissions are to be preferred. That is, while the obligations found in cl 2 — to pay the new bequest and the interim payment — were conditional upon a grant of representation in respect of the informal will, the other obligations under the terms of settlement, understood in context and by reference to the Recitals, were not expressed to be, and were not impliedly, conditional upon the informal will being admitted to probate. In particular, cl 6, which contains the releases, was not conditional upon that event. It was only conditional on the payment of the ‘new bequest’ as properly construed. In so far as the judge concluded otherwise, she fell into error.
It must be accepted that there are many references to the informal will in the terms of settlement. And, in the operative clauses, there are no express references to the 2005 will. Further, the terms of settlement were directed at settling a particular proceeding, the informal will proceeding, as is revealed by the use of the court header on the document. These matters suggest that the parties contemplated that the admission of the informal will to probate would be the vehicle by which the settlement was to be carried into effect — that is, the mechanism by which the estate would be admitted to probate so as to enable the payment of bequests to the beneficiaries in accordance with the terms of the settlement. However, the fact that the parties contemplated a particular mechanism by which the settlement would be given effect does not mean that, if that mechanism failed for some reason, each of the various obligations the parties assumed would fall away. Rather, it is necessary to construe the language adopted by the parties to give effect to their settlement, objectively and not by reference to their subjective intentions, to ascertain whether and to what extent the admission to probate of the informal will was a condition precedent to the various obligations imposed on the parties by the terms of settlement.
When that exercise is undertaken, in our opinion it is apparent that the terms of settlement were directed to achieving a final resolution of all of the disputes between Butler and the Kennys concerning the deceased’s estate and that, properly construed, the releases in cl 6 were not conditional upon the admission of the informal will to probate. It is necessary to explain in some greater detail why that is so.
It is convenient to commence with the text of cl 6, which contains the releases. Those releases are not expressed to be conditional upon a grant of representation in respect of the informal will. Rather, those releases are expressed to be conditional ‘upon the payment of the new bequest’. That then requires attention to the term ‘new bequest’, which is defined in cl 2. The fundamental question at the heart of this appeal is the scope of that definition.
It is helpful to set out cl 2 again. It provided as follows:
2.Within six months and one week of the making of that grant of representation in respect of the informal will [Butler], as executor of the estate of the deceased, will pay out of the estate of the deceased to the [Kennys] the sum of $210,000 (‘the new bequest’) There will be an interim distribution, being part of the new bequest, of $100,000 made to the [Kennys] approximately thirty days after the grant of representation.
Clause 2 defines ‘new bequest’ by the expedient of including those words in quotation marks inside brackets, immediately after a sentence containing two clauses. That sentence contains various distinct requirements.
(a)First, it includes a timing requirement: payment is to be made ‘within six months and one week of the making of that grant of representation in respect of the informal will’.
(b)Secondly, it includes a requirement in relation to the capacity in which Butler is to pay the new bequest: as executor of the estate.
(c)Thirdly, it includes a requirement as to the source of the payment: from the estate.
(d)Fourthly, it includes a requirement as to the amount of money ($210,000).

(The requirement to make an interim distribution has similar features, but need not be considered separately, as it does not contribute to the definition of ‘new bequest’).

Unfortunately, the way in which ‘new bequest’ is defined is ambiguous. It is possible to construe it in several different ways.
First, it could refer simply to a payment of $210,000, without any requirement as to the source of the funds, the capacity in which the funds were paid, or the time at which the payment was made. If this construction were accepted, then Butler could have paid the $210,000 from his own funds, and he would have paid the ‘new bequest’ so as to enliven the releases in cl 6. Neither party advanced this construction, and we accept that it is not open when regard is had to the text of the terms of settlement, including the use of the term ‘bequest’, which denotes a testamentary bequest, that is a payment from the deceased’s estate.
A second possible construction is that ‘new bequest’ refers to a payment of $210,000, from the estate, by Butler in his capacity as executor, after a grant of representation in respect of the informal will was made — but without incorporating the specific time for payment. This construction was advanced by the Kennys as the appropriate construction of the definition, and was resisted by Butler.
The principal difficulty with this construction is that it does not sit neatly with the grammatical structure of cl 2. That is, the reference to a grant of representation in respect of the informal will is textually and grammatically linked to the time for payment, not to the nature of the payment. That is reinforced by the comma separating the two clauses within the sentence. In our opinion, this construction is not reasonably open on the text of the provision.
Thirdly, ‘new bequest’ could refer to the entirety of the sentence that immediately precedes it. That is, it could refer to a payment of $210,000, from the estate, by Butler in his capacity as executor, within six months and one week from the date on which a grant of representation in respect of the informal will was made. This construction was advanced by the Kennys as an alternative construction, and was resisted by Butler.
This construction faces a similar grammatical difficulty to the second possible construction. A further difficulty with the third construction is its effect on the operation of cl 6. If this construction were to be accepted then, if Butler made payment of $210,000 from the estate, as executor, six months and eight days after a grant of probate of the informal will, he would not have made payment of the ‘new bequest’ and the releases found in cl 6 would not take effect. In the absence of any indication in the terms of settlement that time is of the essence (and noting that the Kennys expressly stated that they did not submit that time was of the essence), we do not think a construction of ‘new bequest’ with that effect is objectively reasonable. Thus we would reject this construction of the term ‘new bequest’.

The fourth possible construction of the term ‘new bequest’, which we prefer, is that it refers to a payment of $210,000 from the deceased’s estate (which would, necessarily, be made by Butler in his capacity as executor of that estate). That in our view reflects the language chosen for the definition itself — ie ‘bequest’, which is a testamentary payment. It also accords with the grammar of the sentence: that is, there is a first clause, concerning the timing of payment of the new bequest, and a second clause, which is concerned with identifying the meaning of the new bequest. The timing of the payment of the new bequest is, in our opinion, a discrete and different issue from what constitutes the new bequest, and it is only the timing of the payment that is conditioned upon the making of a grant of representation in respect of the informal will.
In addition to this understanding of the defined term ‘new bequest’ better reflecting the language of cl 2, we consider that it also better reflects the overarching purpose of the parties, considered objectively and by reference to the language of the terms of settlement as a whole. That is, in our opinion a reasonable businessperson would have understood that the terms of settlement were directed to resolving, once and for all, all the disputes between the parties concerning the deceased’s estate. That is reflected in the Recitals, in particular, which refer to both the informal and formal wills, and the potential pt IV claims, and then conclude, in Recital G, with the proposition that the parties ‘desire to resolve the various disputes between them’.
This aspect of the parties’ agreement is also reflected in cl 5 of the terms of settlement. That clause provides that the terms of settlement were entered into in ‘full satisfaction of any claim’ the Kennys may have against the deceased’s estate arising out of:
(a)any claim they had, may now have, or in the future may have under the provision of Part IV of the Administration and Probate Act 1958; and
(b)otherwise against the estate of the deceased, or to participate in the distribution of the estate of the deceased, or in any other way whatsoever.
Butler submitted that the only claim against the deceased’s estate that the Kennys could have, other than the pt IV proceeding mentioned in cl 5(a), would be a claim under the 2005 will. Thus he submitted that, by cl 5(b) (which is expressly incorporated into the releases in cl 6), the Kennys had accepted the terms of settlement in full satisfaction of (amongst other things) any claim they might have based on the 2005 will, which could only arise if the 2005 will were admitted to probate. If that construction were not accepted, he submitted, then cl 5(b) would be otiose.
In contrast, the Kennys submitted that a potential operation for cl 5(b) would be to preclude them from seeking to revoke a grant of probate in relation to the informal will, which they could otherwise do, at least in theory. They also submitted that cl 5(b) could cover a claim for their costs, which are dealt with in cl 4. In response, Butler submitted that cls 1 and 8 would preclude the Kennys from seeking revocation, thus 5(b) would not be required to deal with such a situation; it remained otiose.
We accept that the preferable construction of cl 5(b) is that it includes any claim the Kennys might have had under the 2005 will. The claims referred to in cl 5(a) are clear and limited. The claims referred to in cl 5(b) are not so clear, although they plainly do not include the pt IV claim. And the Kennys have no claim against the deceased’s estate under the informal will. However, the terms of cl 5(b) are very broad. While those terms might include the claims identified by the Kennys, the language of cl 5(b) is plainly capable of encompassing a claim under the 2005 will. It is not necessary, in those circumstances, to decide whether, if not construed in the manner advanced by Butler, cl 5(b) would be otiose.
That operation of cl 5(b) is a further indication that, by the terms of settlement, the parties were resolving any claim that might have arisen had the 2005 will been admitted to probate.
Support for our conclusion is also found in the amount that the parties agreed would constitute the new bequest, namely $210,000. In an approximate sense, this represented the midpoint between the parties’ best outcomes and worst outcomes. That is, the best outcome for Butler was that he would receive around $873,000 (the whole estate), if the informal will was admitted to probate. The worst outcome for him was that he would receive approximately $436,000, if the 2005 will was admitted to probate. The best outcome for the Kennys was that they would receive approximately $436,000, if the 2005 will was admitted to probate. The worst outcome for them was that they would receive nothing, if the informal will was admitted to probate and they were unsuccessful in a pt IV claim (noting that for grandchildren, a claim of that kind is generally more difficult). The agreement for the payment of $210,000 meant that the Kennys would receive that amount — approximately half-way between zero and $436,000 — and Butler would receive $662,000 — approximately half-way between $436,000 and $872,000. In other words, it can be said that the parties ‘split the difference’. While we do not give this significant weight, we do consider that it supports our conclusion that the purpose of the terms of settlement was to settle all the disputes concerning the estate, regardless of which will was ultimately admitted to probate.
In our opinion, the explanation for the various references to the informal will in the operative clauses of the terms of settlement is that there were already proceedings on foot to obtain a grant of representation in respect of that will. If those proceedings were terminated, and a new proceeding commenced in relation to the 2005 will, that would likely have involved Butler (and ultimately the estate) incurring further, unnecessary costs. Thus, as explained above, a grant of representation in respect of the informal will provided an efficient mechanism to give effect to the parties’ compromise. But it did not mean that the operation of the releases in cl 6 was contingent on a grant of representation in respect of the informal will being made.
The result of our conclusion as to the construction of the defined term ‘new bequest’ is that the payment of $210,000 from the estate will cause the releases in cl 6 to become operative.
For these reasons, we would uphold ground 4.

The other grounds of appeal

Grounds 5 and 6 are predicated upon there being a condition precedent to the payment of the new bequest and the operation of the releases in cl 6. Since we have concluded that there was no such condition precedent, it is unnecessary to consider those grounds. But we respectfully observe that it necessarily follows that the judge was wrong to conclude that the terms of settlement were voidable by reason of the non-fulfilment of the condition, and that the Kennys had sufficiently indicated an intention to avoid the terms of settlement.
Because Butler has succeeded in relation to ground 4, it is also unnecessary for us to consider grounds 1, 2 and 3, concerning alleged breaches of procedural fairness. However, we record that we do not consider that these grounds had merit. The parties agreed that the proceeding was to be resolved on the papers, and the matters on which the judge based her conclusions were inherent in the legal issues raised by the Kennys in their pleading and in their written submissions. We do not accept that the issues in relation to the terms of settlement were such that they would have involved further evidence. Further, to the extent that Butler complains that he did not have an opportunity to put submissions on the issues resolved by the judge, he had a full opportunity on the appeal, such that even if he had been denied procedural fairness, nothing would be achieved by ordering any further hearing.[21]
[21]Nobarani v Mariconte (2018) 265 CLR 236, 248 [39] (Kiefel CJ, Gageler, Nettle, Gordon and Edelman JJ); [2018] HCA 36; Stead v State Government Insurance Commission (1986) 161 CLR 141, 145 (Mason, Wilson, Brennan, Deane and Dawson JJ); [1986] HCA 54.

Conclusion

In light of the above, we will grant leave to appeal and allow the appeal. The declarations and orders made by the judge on 18 June 2021 will be set aside.
As indicated, this is not a case where it is necessary to remit the matter to the Trial Division. Rather, it is appropriate for us to make the orders that ought to have been made at first instance. We will thus order that the proceeding be dismissed.
We will also make, by consent, an order directed to the Registrar of Titles that the property caveat be removed.

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SCHEDULE OF PARTIES

TREVOR EDWARD BUTLER (who is sued as the executor of the will of ERNEST EDWARD BUTLER, deceased, and personally)	Applicant
and
DALLAS WILLIAM ROSSITER KENNY	First respondent
SHENAE JANIECE KENNY	Second respondent
CHASE WILLIAM ROSSITER KENNY	Third respondent

[2022] VSCA 102

31 May 2022