Foody v Horewood & Ors

In *Foody v Horewood & Ors*, the High Court of Australia considered an appeal concerning the interpretation of a will. The dispute arose between the beneficiaries of the late Mr. Horewood's estate, specifically regarding the distribution of certain assets. The primary issue before the Court was whether a specific bequest of shares in a company, which had undergone a significant corporate restructure prior to the testator's death, should be interpreted to include the new shares received by the testator as a result of that restructure.

The central legal question before Hayne J was whether the will's disposition of shares in "Horewood Pty Ltd" should be construed as including shares in "Horewood Holdings Pty Ltd," the successor entity following a demerger and share swap. The testator had held shares in the original company, and these were exchanged for shares in the new holding company. The Court had to determine if the specific bequest adeemed (failed) due to the change in the subject matter of the gift, or if the intention of the testator, as evidenced by the will, was to pass on the underlying economic interest represented by the shares.

Hayne J applied the principles of testamentary construction, focusing on ascertaining the testator's intention from the language of the will itself, read in light of the surrounding circumstances. His Honour referred to established authorities on ademption, noting that a gift of specific property will fail if that property no longer exists in the form described at the time of the testator's death. However, where the subject matter of the gift has been changed by a transaction that does not fundamentally alter its nature or identity, the gift may still be effective. In this instance, Hayne J found that the corporate restructure, while changing the legal form of the shares, did not alter the fundamental nature of the testator's investment in the Horewood enterprise. The testator's intention was to bequeath his interest in that enterprise, which was preserved in the new shareholding.

The appeal was allowed, and the orders of the lower court were set aside. The High Court declared that the specific bequest of shares in Horewood Pty Ltd was to be construed as a bequest of the shares held by the testator in Horewood Holdings Pty Ltd at the time of his death.