Harry Bernard Thynne v Jevny Pty Limited

[2022] NSWSC 1774

Supreme Court

New South Wales

Medium Neutral Citation:

Harry Bernard Thynne v Jevny Pty Limited and Anor [2022] NSWSC 1774

Hearing dates:

13 and 14 December 2022

Date of orders:

22 December 2022

Decision date:

22 December 2022

Jurisdiction:

Equity

Before:

Hammerschlag CJ in Eq

Decision:

The plaintiff is to withdraw caveat AS583181

Catchwords:

EQUITY – LAND LAW – SUCCESSION – Real Property Act 1900 (NSW) s 74MA – where deceased made a will and signed a memorandum of wishes which was countersigned by his wife (the second defendant) who survived him – where under the memorandum of wishes he bequeathed to her a real property on the understanding and agreement with her that she would leave it or any other property bought to replace it or the proceeds of its sale to a son of the deceased’s first marriage (the plaintiff) and a child of the marriage between her and the deceased in equal shares – where the plaintiff lodged a caveat on the property contending that she holds it in trust for the two sons – HELD – no trust created, no caveatable interest, caveat to be removed

Legislation Cited:

Real Property Act 1900 (NSW)

Cases Cited:

Barns v Barns (2003) 214 CLR 169

Birmingham v Renfrew (1937) 57 CLR 666

Category:

Principal judgment

Parties:

Harry Bernard Thynne – Plaintiff
Jevny Pty Limited ACN 001737864 – First Defendant
Victoria Diane Sheringham – Second Defendant

Representation:

Counsel:
S.V. Shepherd – Plaintiff
A.F. Fernon SC with M Barnes – First and Second Defendants

Solicitors:
I D Haege – Plaintiff
O’Neill McDonald Lawyers – First and Second Defendants

File Number(s):

2022/220085

JUDGMENT

Introduction

1. HIS HONOUR:    This judgment principally concerns whether a caveat lodged by the plaintiff on a real property in Darling Point, Sydney, owned by the second defendant, is supported by a caveatable interest.

2. The secondary question is whether, if the caveat is supported, its removal should be ordered because its maintenance is against the balance of convenience.

3. Where in this judgment I refer to persons by their first names, no disrespect is intended.

Background

4. James Bernard Thynne (the deceased), a solicitor and one-time partner in the law firm once known as Allen Allen & Hemsley, died on 22 June 2011.

5. The deceased married Catherine Reid on 3 December 1982 and the plaintiff, Harry Bernard Thyne (Harry), was born to them on 9 November 1983.

6. The deceased and Catherine Reid divorced in 1990.

7. On 14 September 1996, the deceased married the second defendant, Victoria Dianne Sheringham (Victoria). Their son, Patrick Lachlan Thynne (Patrick), was born on 6 December 1996.

8. The deceased owned a property (Mona Road) at 26 Mona Road, Darling Point, Sydney, being Lot 1 in Strata Plan 15755.

9. He also had a farming business consisting of cattle grazing and a macadamia orchard conducted on a property known as Elanora on the Pacific Highway at Valla, New South Wales (in the Nambucca Heads region). The land at Elanora had originally been owned by the parents of the deceased but on 9 December 1981 was transferred to the first defendant company (Jevny).

10. Jevny has two shares on issue. One of them was transferred to Victoria on 2 November 2006, and the other on about 2 March 2012. She still holds those shares.

11. The deceased left a will dated 25 March 2011 (the Will).

12. He appointed Victoria, together with his friend Martin Braden and one Andrew Napier Aitken, to be executors and trustees of the Will. The Will provides for a number of specific bequests to Harry, Patrick and Victoria.

13. References below to clauses are, unless the context otherwise indicates, references to clauses of the Will.

14. Clauses 5, 6 and 7 provide:

5. I GIVE all my Interest in the capital of Jevny Pty Ltd and in the Macadamia Nut Business and Cattle Grazing currently carried on by me at "Elanora”, Valla (including but not limited to all trees, produce, plant and equipment) to my said wife VICTORIA DIANE SHERINGHAM.

6. I GIVE my Interest in the property known as 26 Mona Road, Darling Point to my wife VICTORIA DIANE SHERINGHAM. This bequest is made on the understanding made at the time of execution of this Will that she will in her Will provide that the said interest in the property or in any interest acquired as a result of the sale of the property less any expenditure required for the maintenance of my said wife VICTORIA DIANE SHERINGHAM and my said son PATRICK LACHLAN THYNNE or of the properties known as 26 Mona Road, Darling Point (or such other principal place of residence, of my said wife VICTORIA DIANA SHERINGHAM from time to time) and known as “Elanora” at RMB 7136 Pacific Highway, Valla, will be left by her in her Will to my sons HARRY BERNARD THYNNE and PATRICK LACHLAN THYNNE In equal shares per stirpes.

7. I GIVE DEVISE AND BEQUEATH the rest and residue of my Estate of whatsoever nature and wheresoever situate unto my trustees UPON TRUST after payment thereout of all my just debts funeral and testamentary expenses and any taxes, death or estate duties payable in consequence of my death to such of my sons HARRY BERNARD THYNNE and PATRICK LACHLAN THYNNE as shall survive me and attain the age of twenty five (25) years and if more than one in equal shares upon attaining the age of twenty five (25) years that share or interest which his, her or their parent would otherwise have taken under this clause of my Will PROVIDED FURTHER THAT should all of the above trusts fail then UPON TRUST for my said wife VICTORIA DIANE SHERINGHAM PROVIDED FURTHER THAT should she not then be living THEN for such or my cousins KATHERINE NOLAN, MARGOT CORBETT and CHRISTINE OWEN as are then living and if more then one in equal shares PROVIDED FURTHER THAT should any of my said cousins not then be living leaving issue him her or them surviving then such issue shall take it and if more than one in equal shares on attaining the age of twenty five (26) years that share or interest which his, her or their parent would otherwise have taken under this clause of my Will.

15. Contemporaneously with the Will, the deceased signed a Memorandum of Wishes (the Memorandum), which was counter-signed by Victoria, who agreed to and acknowledged its terms.

16. References below to paragraphs are, unless the context otherwise indicates, references to paragraphs of the Memorandum.

17. Paragraphs 3, 4 and 5 provide:

3. The Farm

In the event of my death I wish for Victoria to assume the sole management of my faming (sic) business (cattle grazing and macadamia orchard) conducted at RMB7136 Pacific Highway Valla NSW 2448 (the Farm) in consultation with the current farm managers Clyde Drury and Robyn Drury of RMB7136 Pacific Highway Valla NSW 2448 and Harry and Patrick. Victoria should have the unfettered discretion to make ultimate decisions in respect of all matters pertaining to the Farm including but not limited to the management, maintenance and sale of the Farm.

I wish for Victoria to use her reasonable endeavours to ensure that the Farm is operated on a financially stable and profitable basis from year to year and not to sell the farm unless financially obliged to do so.

In addition to managing the Farm, Victoria will have priority over all other members of the family, including Harry and Patrick, in deciding who shall occupy the principal residence of the Farm at any time. l wish for Victoria to be able to occupy the principal residence of the Farm and to live there without interference during her lifetime if she so wishes.

4. The Thynne Family Trust

I wish that upon my death that the sole shareholder of Jevny Pty Ltd (the Trustee of the Thynne Family Trust) be my wife Victoria Diane Sheringham and that she appoint any additional director or consult with any other person or persons she thinks appropriate to assist her. If the Farm is sold, then I wish the Trust be wound up and the nett assets distributed as to 50% to my son Harry, per stirpes and the remaining 50% to my wife Victoria and/or my son Patrick as she wishes.

5. The Darling Point Property

I have left the family home at 26 Mona Rd Darling Point NSW 2027 (the Darling Point Property) and its contents to Victoria. Victoria hereby agrees to leave the Darling Point Property or any other property that she has bought to replace the Darling Point Property or the proceeds of sale of any such property to both Harry and Patrick ln equal shares (as reflected in her will dated on or about the date of this Memorandum) at the time of her death, having taken into account any advances (including the $100,000 bequeathed to Harry under my last will and testament or gifted to Harry by Victoria after my death using funds derived from my Superannuation) made to either Patrick or Harry In anticipation of the payment of their share. I acknowledge that Victoria may need to use the proceeds of the sale or rental of the Darling Point Property for her maintenance and upkeep, the maintenance and education of Patrick and the maintenance of the Darling Point property and of the Farm.

18. In para 6, the deceased stated that it was his wish that the contents of the Memorandum be kept confidential.

19. Probate of the Will was granted to the nominated persons on 25 March 2011.

20. Mona Road was transferred to Victoria on 7 September 2012 by transmission application pursuant to s 93 of the Real Property Act 1900 (NSW) (the Act).

21. On 27 July 2022, Harry sued out of this Court a Summons against Jevny and Victoria seeking relief which includes, relevantly, a declaration that Victoria holds Mona Road on trust for Harry and Patrick on the terms expressed in the Memorandum.

22. On 27 October 2022, Harry lodged a caveat pursuant to s 74F of the Act, on the title of Mona Road, in the following terms:

ACTION PROHIBITED BY THIS CAVEAT

1. The recording in the Register of any dealing other than a plan affecting the estate or interest claimed by the Caveator.

ESTATE OR INTEREST CLAIMED

Estate In Remainder

By virtue of: Beneficial Interest In Trust

Details Supporting The Claim: Victoria Diane Sheringham acknowledged and agreed by Memorandum of Wishes (MOW) between her and the late James Bernard Thynne to hold the land for the benefit of the Caveator and Patrick Lachlan Thynne in equal shares as tenants in common

23. Victoria’s unchallenged evidence is that the caveat is having a detrimental effect on her.

24. She has mortgaged Mona to Westpac Banking Corporation as security for an overdraft facility.

25. She has continued to operate the cattle and macadamia business on Elanora. She has planted additional macadamia trees, expanded the cattle herd, and maintained Elanora’s infrastructure. She employs three full time workers and two part time workers.

26. On 1 November 2022, Harry filed a Statement of Claim in the proceedings. Amongst others, Harry claims a declaration that Jevny holds Elanora on trust and that it has breached its fiduciary obligations. He maintains the claim for a declaration that Victoria holds her title and interest in Mona Road for him and Patrick in equal shares as tenants in common, and that she has breached that trust, amongst others, by granting Westpac the mortgage and by denying the trust. He seeks a declaration that Victoria is entitled to live at, or rent out, Mona Road or such other property as is acquired with the proceeds of sale.

27. At Victoria’s instance, a lapsing notice for the caveat was issued and served on Harry on 15 November 2022.

28. By Notice of Motion filed 17 November 2022, Harry sought an order extending the operation of the caveat. Lindsay J extended the caveat until further order, reserving to Victoria liberty to apply for an order that the extension order be discharged or varied. His Honour ordered that upon any such application, Harry bears the onus of persuading the Court that the caveat should continue in operation. His Honour stood the proceedings over before the Equity Duty Judge on 13 December 2022 for further consideration of Harry’s motion for extension. The Duty Judge on that day (Kunc J) referred the matter to me for hearing.

29. It is notorious that the area where Elanora is, has had significant flooding over the last two years. Victoria says that Elanora is currently experiencing financial difficulties and additional funds may be needed to ensure additional cash flow until the 2023 harvest. She says that she needs access to additional funds to pay for the litigation and may need access to additional funds to carry the farm through until the next harvest in 2023. She says that she is unable to refinance the mortgage whilst the caveat is registered on the title of Mona Road.

30. Victoria moves under s 74MA for an order that the caveat be removed, although Harry has the onus of establishing that it should be extended.

Caveatable Interest?

31. For the reasons which follow, I find that Harry does not have a caveatable interest in Mona Road. The caveat must be discharged.

32. Harry argues that by the agreement constituted by the Memorandum, Victoria’s interest in Mona Road acquired under the Will is held on trust for him and Patrick. His claim to beneficial ownership in this unqualified way is reflected in the terms of the caveat.

33. During argument, however, Counsel for Harry accepted that on their case, even under the terms of the trust said to be created by para 5, Victoria is entitled to sell Mona Road and use its proceeds to maintain herself, Patrick and Elanora. He argues that she can sell it or rent it, but she cannot mortgage it, and that the reference in para 5 to the Farm is a reference to the land which is Elanora alone, and not the farming business which is, and at all material times has been, carried on there.

34. It is to be observed para 5 does not in terms impress a trust on Mona Road, while in contrast, by cl 7, the deceased bequeathed the residue of his estate (that is, excluding Mona Road) on trust.

35. Paragraph 5 expressly permits Victoria to sell Mona Road. She agrees to leave any other property she has bought to replace it or the proceeds of sale of such property to Harry and Patrick at the time of her death. She is free to deal with Mona Road but is obliged to leave to Harry and Patrick what is left of it when she dies.

36. I interpolate that she accepts the obligation to make a will as required by para 5.

37. The situation here is, in my view, juridically on all fours with that described by Dixon J (as his Honour then was) in Birmingham v Renfrew (1937) 57 CLR 666, 689 as follows:

There is a third element which appears to me to be inherent in the nature of such a contract or agreement, although I do not think it has been expressly considered. The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. That is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is to bequeath what is left in the manner agreed upon. It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor can descend upon the assets at his death and crystallize into a trust. No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivos, is, therefore, not unqualified. But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor’s own benefit and advantage upon condition that at his death the residue shall pass as arranged.

See too Barns v Barns (2003) 214 CLR 169, 199-200 at [85] per Gummow and Hayne JJ.

38. Victoria has the floating obligation referred to by Dixon J which will crystallise into a trust on what is left of Mona Road or its proceeds on Victoria’s death. Harry has no trust interest now.

39. There is no suggestion that Victoria is acting so as to defeat the intention of the compact. Indeed, under para 3, it was the deceased’s wish for her to use her reasonable endeavours to ensure that the farm is operated on a financially stable and profitable basis from year to year, and not to sell it unless financially obliged to do so. Because Victoria can deal with Mona Road or its proceeds, and because (even on Harry’s case) the proceeds of sale or rental can be used for Victoria’s maintenance, Patrick’s maintenance and education, and the maintenance of Mona Road and the Farm, the corpus of the trust (for which Harry contends) cannot be ascertained until Victoria dies.

40. Having found that there is no trust to support the caveat, it is not strictly necessary to consider Harry’s submissions that the reference in para 5 to maintenance of the farm is to the land only, and that Victoria has no entitlement to mortgage Mona Road (as opposed to selling or renting it) to support the Farm. But I would reject both submissions.

41. Paragraph 3 makes it clear that in referring to the Farm, the deceased and Victoria had in mind both the land and the business conducted on it. The paragraph makes reference to the principal residence of the Farm. It gives her rights of management, maintenance and sale of the Farm. The distinction sought to be drawn by Harry between the land and the business operations on it, is artificial.

42. I reject the submission that Victoria can sell Mona Road to raise money to maintain the Farm but cannot mortgage it for that purpose, or for her maintenance or that of Patrick or of Mona Road itself. Mortgaging it involves a lesser disposition than selling it. If, contrary to my view, the terms of the Memorandum restrict Victoria in the manner in which she may deal with Mona Road as Harry suggests, this would in any event not translate into an equitable interest in Mona Road in Harry’s hands, although it may be of the nature of an enforceable negative stipulation.

43. Finally, even if Harry had established an equitable interest in Mona Road, the caveat in its terms extends beyond any interest he claims and could not be permitted to stand anyway.

balance of convenience

44. Victoria argues that the Court should order withdrawal of the caveat in any event because the balance of convenience does not favour maintaining it.

45. If I had found that there was a caveatable interest, I would nevertheless have ordered removal of the caveat.

46. Victoria gives evidence about experiencing financial difficulties and that additional funds may be needed to carry the farm through to the next harvest. She also says that she needs access to additional funds to pay for this litigation. She was not cross examined, but her evidence does not extend to disclosing her actual financial position or that of the farm. Her evidence about the inconvenience caused by the caveat is somewhat thin. Nevertheless, it may be accepted that the caveat is causing her inconvenience. Harry, on the other hand, did not put forward any basis upon which convenience favoured extending the caveat, and the onus is his.

conclusion

47. The plaintiff is, within seven days, to withdraw caveat AS583181.

48. The plaintiff is to pay the second defendant’s costs of this application.

Decision last updated: 22 December 2022