Hobhouse v Macarthur-Onslow

[2016] NSWSC 1831

Supreme Court

New South Wales

Medium Neutral Citation:	Hobhouse v Macarthur-Onslow [2016] NSWSC 1831
Hearing dates:	18 – 21 April 2016 and 13 July 2016
Decision date:	16 December 2016
Jurisdiction:	Equity
Before:	Robb J
Decision:	(1) The parties are directed to bring in short minutes of order to give effect to these reasons for judgment in accordance with par 639.  (2) The parties are invited to make submissions on the costs order that should be made by the court
Catchwords:	SUCCESSION – wills, probate and administration – testamentary instruments – wills – deceased died leaving two wills – the 1988 will divided estate almost equally between two adult children, being the plaintiff and first defendant, while the 2004 will had the effect of giving the first defendant control of the exercise of the discretion of the trustee of a family discretionary trust that would permit the first defendant to distribute a substantial portion of the property controlled by the deceased as he saw fit, including to himself – deceased suffered from moderate dementia leading up to the making of the 2004 will – plaintiff sought grant of probate of 1988 will – cross claimants sought grant of probate of 2004 will –plaintiff alleged lack of testamentary capacity by the deceased and lack of knowledge and approval of the deceased in relation to 2004 will – principles relevant to testamentary capacity and absence of knowledge and approval of contents of will by a testator with a cognitive disability considered – held testator had testamentary capacity – held testator did not by reason of her cognitive disability sufficiently know and approve of the terms of the 2004 will that gave the first defendant control of the trustee of the family discretionary trust to justify those terms being included in the will admitted to probate – held that the 2004 will should be admitted into probate with those terms excised   SEVERANCE – severance of part of will – whether the excision of disputed clauses would involve the making of a new testamentary instrument – where the deceased wished to achieve two testamentary outcomes which were mutually inconsistent – held that the consequence of which the deceased did not know and approve was by and large of equal or greater importance to the deceased – held that probate of the 2004 will should be granted with certain terms excised
Legislation Cited:	Conveyancing Act 1919 (NSW) Guardianship Act 1987 (NSW) Powers of Attorney Act 2003 (NSW) Successions Act 2006 (NSW) Vendor Duty Act 2004 (NSW)
Cases Cited:	A v N [2012] NSWSC 354 ASIC v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Atter v Atkinson (1869) LR 1 P & D 665 Bailey v Bailey (1924) 34 CLR 558; (1924) 30 ALR 230 Ball v Mannin (1829) 1 Dow & Cl 380; 6 ER 568 Banks v Goodfellow (1870) 5 QB 549 Barry v Butlin (1838) 2 Moo PC 48 Beverley v Watson [1995] ANZ ConvR 369 Church v Mason [2013] NSWCA 481 Dalle-Molle (by his next friend Public Trustee) v Manos [2004] SASC 102 Dore v Billinghurst [2006] QCA 494 Estate of George Aeneas McDonald; Howard v Sydney Children’s Hospital Network (Randwick & Westmead) [2015] NSWSC 1610 Fuller v Strum [2002] 1 WLR 1097 Gibbons v Wright (1954) 91 CLR 423; [1954] HCA 17 Hoff v Atherton [2004] EWCA Civ 1554; [2004] All ER (D) 314 King v Hudson [2009] NSWSC 1013 Nock v Austin (1918) 25 CLR 519 Osborne v Smith (1960) 105 CLR 153 Pates v Craig; Estate of JJ Cole (NSWSC, unreported, 28 August 1995) Petrovski v Nasev; Estate of Janakievska [2011] NSWSC 1275 Public Trustee (WA) v Brumar Nominees Pty Ltd [2012] WASC 161 Re Estate of Stanley William Church [2012] NSWSC 1489 Re Estate of Tsilfidis; Stavrakakis v Tsilfidis [2015] NSWSC 1720 Tobin v Ezekiel (2012) 83 NSWLR 757; [2012] NSWCA 285 Tyrrell v Painton [1894] P 151 Varma v Varma [2010] NSWSC 786 Worth v Clasholm (1952) 86 CLR 439
Texts Cited:	Mason and Handler, Succession Law and Practice New South Wales (LexisNexis Butterworths)
Category:	Principal judgment
Parties:	Katrina Julia Denzil Hobhouse (plaintiff) Lee Macarthur-Onslow (first defendant) Perpetual Trustee Company Limited (second defendant) John Ashton Beardow (third defendant) Stephen John Rogers (fourth defendant) Andrew William Martin (fifth defendant)
Representation:	Counsel: M S Willmott SC/M Gorrick (plaintiff) M Walton SC/M Sneddon (first and fourth defendants)   Solicitors: Woolf Associates (plaintiff) Bartier Perry (first, third, fourth and fifth defendants) Diamond Conway (second defendant)
File Number(s):	2013/231129
Publication restriction:	None

Judgment

The parties

1. The plaintiff, Lady Katrina Julia Denzil Hobhouse, is the daughter of Lady Dorothy Wolseley Macarthur-Onslow, who died on 10 May 2013.

2. The first defendant, Mr Lee Macarthur-Onslow, is the brother of the plaintiff, and the son of Lady Macarthur-Onslow. The deceased had no other children.

3. The plaintiff, the first defendant and Perpetual Trustee Company Ltd (Perpetual), which is the second defendant, were nominated as the executors of the deceased under her will dated 14 July 1988 (1988 will).

4. The deceased executed a later will on 15 October 2004 (2004 will).

5. The executors nominated in the later will were Mr Macarthur-Onslow, and the third to fifth defendants, who are respectively Mr John Ashton Beardow, Mr Stephen John Rogers and Mr Andrew William Martin.

6. Sir Denzil Macarthur-Onslow was Lady Macarthur-Onslow’s husband, and the father of Lady Hobhouse and Mr Macarthur-Onslow. Sir Denzil died in 1984, at the age of 80, after suffering from Alzheimer’s disease.

The parties’ claims

7. By her amended statement of claim filed on 25 July 2014, the primary relief claimed by Lady Hobhouse is an order that probate of Lady Macarthur-Onslow’s 1988 will be granted to herself and the first and second defendants.

8. Mr Macarthur-Onslow, Mr Rogers and Mr Neil Robert Hillman have filed a cross claim on 27 June 2014, in which they seek an order that probate of the 2004 will be granted to them in solemn form. This application is made on the basis that Mr Beardow and Mr Martin are unwilling to act as executors, and Mr Hillman was appointed by the will as an alternative executor. For the sake of simplicity, as the cross claimants are in the same interest as the defendants, I will generally refer to them all as the “defendants”, at least where there is no particular reason to distinguish between the parties other than the plaintiff.

9. Lady Hobhouse filed an amended defence to the cross claim on 27 August 2014, in which she pleaded that, at the time Lady Macarthur-Onslow made the 2004 will, she lacked testamentary capacity; and furthermore that she did not know and approve the contents of the will.

10. Lady Hobhouse also raised a defence that the deceased was subject to undue influence at the time she made the 2004 will. The court was informed by senior counsel for Lady Hobhouse at the commencement of the hearing that she abandoned her claim based upon undue influence.

Additional issue

11. The parties’ pleadings raised the issue of whether probate should be granted of the 1988 will or the 2004 will.

12. However, at the end of his final oral submissions, senior counsel for Lady Hobhouse raised the possibility that, if the court determined that Lady Macarthur-Onslow did have testamentary capacity at the time she executed her 2004 will, and she knew and approved of some parts of that will, but not others, the court could admit to probate the parts of the 2004 will of which Lady Macarthur-Onslow knew and approved, and excise those parts of which she did not know or approve. I raised this issue with senior counsel for the defendants, and the course that emerged was that I permitted the parties to deliver supplementary written submissions on the issue.

13. Lady Hobhouse’s submissions canvassed in detail the relevant authorities; but she ultimately adopted the position that, on the facts of the present case, the court should wholly pass over the 2004 will, and only admit the 1988 will to probate.

14. The position adopted by the defendants was that they maintained their contention that the 2004 will should be admitted to probate in its entirety; but they submitted that, if the court found that Lady Macarthur-Onslow had testamentary capacity, but the evidence did not overcome any suspicion that she did not know and approve the whole of the provisions of the 2004 will, the only parts of the 2004 will that were at risk of excision were cll 16(a)(i) and (ii) and 17(a)(i) and (ii).

15. Both parties’ additional submissions appear, as I read them, to accept the possibility that the court could admit the 2004 will to probate, with identified provisions excised, notwithstanding the terms of the pleadings.

The deceased’s 1988 will

16. On 14 July 1988, Lady Macarthur-Onslow executed a will, the material parts of which are as follows:

THIS IS THE LAST WILL AND TESTAMENT of me DOROTHY WOLSELEY MACARTHUR-ONSLOW of Mount Gilead, Campbelltown in the State of New South Wales, Grazier.

1.   I REVOKE all former Wills and testamentary dispositions heretofore made by me and declare this to be my last Will.

2.   I APPOINT PERPETUAL TRUSTEE COMPANY LIMITED of 39 Hunter Street, Sydney, my son LEE MACARTHUR-ONSLOW and my daughter KATRINA JULIA DENZIL MACARTHUR-ONSLOW Executors and Trustees of this my Will.

3.   I DECLARE that in the interpretation of this Will and in the administration of my estate:

(a)   The expression “my Trustee” shall mean and include the Executor, Executors, Trustee and Trustees for the time being hereof whether original or substituted;

(b)   “PERPETUAL” is the Perpetual Trustee Company Limited.

(c)   “LEE” is my son the said LEE MACARTHUR-ONSLOW; “KATRINA” is my daughter the said KATRINA JULIA DENZIL MACARTHUR-ONSLOW;

(d)   “HOME UNIT NO. 31B” is my Home Unit known as No. 31B at No. 11 Sutherland Crescent, Darling Point, including the Carport used therewith;

(e)   “Kalemon” is Kalemon Investments Pty Limited

(f)   “Mount Gilead” is Mount Gilead Pty Limited;

(g)   “1972 Trust” is the Discretionary Trust dated 23rd November 1972 therein referred to as the “The Mount Gilead Trust”;

(h)   “Nominated Director” is the Officer of Perpetual who is appointed and is acting at any particular time as a Director of either Kalemon or Mount Gilead.

...

6.   I GIVE AND DEVISE to KATRINA my Home Unit No. 31B and this gift and devise shall include all furniture and domestic and household effects (if any) which belong to me at my death and are situate in the Home Unit.

...

9.   I GIVE AND BEQUEATH all shares held by me at my death in Kalemon (hereafter “my Kalemon shares”) to my Executors and Trustees (Perpetual, Lee and Katrina) and I DIRECT that the provisions and stipulations as hereafter contained shall apply in relation to my Kalemon shares namely:-

(a)   Perpetual and such one or more of Lee and Katrina as are living at my death and thereafter shall hold my Kalemon shares as my Executors and Trustees (“my Trustee”) upon and subject to the trusts hereafter contained.

(b)   I DIRECT that my Trustee shall adopt the usual procedure in applying for and obtaining transmission of the Kalemon shares in the books of Kalemon in the order appointed by this Will namely, Perpetual, Lee and Katrina.

(c)   I DIRECT my Trustee to take such action as may be appropriate to arrange for an Officer of Perpetual to be appointed from time to time as a Director of Kalemon to act as such with such of Lee and Katrina as may be Directors from time to time. And I express the wish that both Lee and Katrina will from time to time co-operate with Perpetual in arranging such appointment. And as provided by Clause 3 of this Will any Officer of Perpetual so acting from time to time is called “Nominated Director”.

(d)   I EXPRESS the wish that the Nominated Director of Kalemon shall assist Lee and Katrina in the performance of the duties and responsibilities of Kalemon as Trustee of the 1972 Trust. And I request that if any difference arises at any time between Lee and Katrina as Directors of Kalemon in relation to the administration of the 1972 Trust or the exercise of the discretions conferred on or vested in Kalemon as the Trustee thereof in regard to the distribution of income or capital or the fixing of a Vesting Date or any other matter on which Kalemon has a power or discretion under the provisions of the 1972 Trust Deed then the Nominated Director shall use his best endeavours to resolve any such difference in an amicable manner and shall if necessary use his vote as a Director to enable a decision to be taken on any matter on which any such difference may have arisen.

(e)   I REQUEST that if at the date of my death Kalemon is the holder of shares in Mount. Gilead then my Trustee will make such arrangements as may be appropriate for the appointment from time to time of an Officer of Perpetual as a Director from time to time of Mount Gilead. And I further request that if any difference arises at any time between Lee and Katrina as Directors of Mount. Gilead then the Nominated Director shall use his best endeavours to resolve any such difference in an amicable manner and shall if necessary use his vote as a Director to enable a decision to be taken on any matter on which any such difference may have arisen.

…

AND in relation to the foregoing provisions of this clause I hereby record that I have made those provisions in the belief that they will assist both Lee and Katrina in relation to the affairs of Kalemon, Mount Gilead and the 1972 Trust by their having the advantage and experience of an Officer of Perpetual being a Director with them of both Kalemon and Mount Gilead and in making a contribution as a Nominated Director of both companies to the satisfactory administration of the affairs of those two Companies and of the 1972 Trust.

10.   I GIVE DEVISE AND BEQUEATH the whole of the rest and residue of my real and personal estate wheresoever situate to my Trustee UPON TRUST to pay thereout all my debts funeral and testamentary expenses and all duties (if any) payable in consequence of my death and I DIRECT my Trustee to hold the balance thereof after all such payments (hereafter “my residuary estate”) UPON TRUST to divide the same into two one-half parts and I direct my Trustee to hold such two one-half parts upon the trusts hereafter declared.

11.   (a)   I DIRECT my Trustee to hold one of such one-half parts UPON

TRUST to pay the income therefrom to my son LEE until he attains the age of fifty-five (55) years and on my son Lee attaining that age I DIRECT my Trustee to pay and transfer to him the whole of the capital of such one equal part;

…

12.   (a)   I DIRECT my Trustee to hold the other one-half part of my

residuary estate UPON TRUST to pay the income therefrom to my daughter KATRINA until she attains the age of fifty-five (55) years and on my daughter Katrina attaining that age I DIRECT my Trustee to pay and transfer to her the whole of the capital of such one equal part;

…

17. By cl 8, Lady Macarthur-Onslow gave a small pecuniary legacy to Ms Christine Sinclair, her housekeeper, and cl 14 nominated a default beneficiary if the residuary gift in the 1988 will failed.

18. The most significant aspect of the 1988 will, for present purposes, is that, save for the gift to Lady Hobhouse in cl 6, it provided for equality in the distribution of the estate as between Lady Hobhouse and Mr Macarthur-Onslow; including in respect of ownership of the shares in Kalemon Investments Pty Ltd (Kalemon), which, as will be seen, is the trustee of a discretionary trust which holds a substantial proportion of the family assets.

19. Lady Macarthur-Onslow dealt with the possibility of deadlock between Lady Hobhouse and Mr Macarthur-Onslow by making Perpetual an executor, and by including a number of arrangements to facilitate Perpetual being in a position to break any deadlock.

The deceased’s 2004 will

20. The last will executed by Lady Macarthur-Onslow was the 15 October 2004 will, which contained the following provisions, insofar as they are relevant to the present proceedings:

This is the last Will and Testament of (Lady) Dorothy Wolseley Macarthur-Onslow of “Mount Gilead”, Appin Road via Campbelltown in the State of New South Wales, Grazier.

1.   I revoke all former wills and testamentary dispositions heretofore made by me and declare this to be my last Will.

2.   I appoint my son Lee Macarthur-Onslow, John Ashton Beardow solicitor, Stephen John Rogers Chartered Accountant and Andrew William Martin Company Director, all of Sydney the Executors and Trustees of this my Will.

…

4.   I declare that in the interpretation of this Will and in the administration of my estate:

(a)   the expression “my Trustees” shall mean and include the Executor, Executors, Trustee and Trustees for the time being hereof whether original or substituted;

(b)   “Lee” my son the said Lee Macarthur-Onslow and “Katrina” is my daughter Katrina Julie Denzil Hobhouse (nee Macarthur-Onslow);

(c)   “DWMO” is DWMO Investments Pty Limited ACN 071 460 154;

(d)   “Kalemon” is Kalemon Investments Pty Limited ACN 000 330 692;

(e)   “Macarthur-Onslow Nominees” is Macarthur-Onslow Nominees Pty Limited ACN 109 280 524;

(f)   “Mount Gilead” is Mount Gilead Pty Limited ACN 008 499 189;

(g)   “The Mount Gilead Trust” is the Discretionary Trust established by Deed dated 23 November 1972 between Dorothy Gladys Scott (“The Settlor”) and Kalemon (“the Trustee”);

(h)   “First Determined Sum” is the value of the property known as Kippilaw near Goulburn New South Wales (presently comprised in Certificates of Title Folio 1/78825 and Folio 1/845087) owned by DWMO as at the date of my death determined by two independent valuers appointed by my Trustees (other than Lee) or if those valuers cannot agree the value determined by an umpire who is a third independent valuer appointed in writing by the first two valuers before they enter on the valuation;

(i)   “Second Determined Sum” is the amount of any stamp or other duty that would be payable by a purchaser of Kippilaw for a consideration equal to the First Determined Sum;

(j)   “Third Determined Sum” is the amount of any GST (as that expression is defined in the A New Tax System (Goods and Services Tax) Act, 1999, C’th) that is found to be payable on any sale of Kippilaw by DWMO.

...

8.   I give and bequeath free of all duties payable in consequence of my death to my son Lee:

(a)   the First Determined Sum;

(b)   if he (or his nominee) should purchase Kippilaw pursuant to acceptance of the offer referred to in clause 10(b) of this my Will, the Second Determined Sum;

(c)   if on a purchase to which paragraph (b) above refers DWMO is liable to pay GST on the price (being equivalent to the First Determined Sum), the Third Determined Sum.

9.   I give and bequeath all shares held by me at my death in each of Kalemon, Mount Gilead, DWMO and Macarthur-Onslow Nominees (hereafter “my shares”) to my Trustees and I direct that the provisions and stipulations as hereafter contained shall apply in relation to my shares namely:

(a)   my Trustees shall hold my shares upon and subject to the trusts hereafter contained;

(b)   I direct that my Trustees shall adopt the usual procedure in applying for and obtaining transmission of the shares in the books of the companies concerned in the order appointed by this Will namely, Lee, John Ashton Beardow, Stephen John Rogers, Andrew William Martin and (if applicable) Neil Robert Hillman;

(c)   I authorise my Trustees upon becoming registered as the holders of my shares in any of the companies aforesaid (if they have the power to do so vis-à-vis any other holder of shares in that company) to appoint all of any of them (as shall consent to act) to be Directors of that company;

(d)   I empower each of my Trustees who is acting as a Director from time to time of any of Kalemon, Mount Gilead, DWMO or Macarthur-Onslow Nominees to receive such reasonable Director’s fees as may be determined by the shareholders of such company including my Trustees as holders of my shares in such company;

(e)   I direct that all dividends received by my Trustees in relation to my shares shall fall into and form part of the income of my residuary estate and that capital moneys received in respect of my shares shall be held by my Trustees as part of the capital of my residuary estate.

10.   Upon my Trustees becoming registered as the holders of my shares in DWMO:

(a)   I direct that my Trustees (other than Lee):

(i)   cause the valuation of Kippilaw, referred to in the definition of First Determined Sum set forth in clause 4 of this my Will, to be effected,

(ii)   charge the cost of and incidental to the effecting of that valuation against my residuary estate;

(b)   I direct that my Trustees exercise their control of the company to cause the company to offer to Lee the sale of Kippilaw for the price equivalent to the First Determined Sum plus any GST for which DWMO would be liable on a sale of Kippilaw at that price and otherwise on such terms and conditions as they may in their absolute discretion determine and to hold such offer open for acceptance by him or his nominee for a period of three (3) months after it has been made; and

(c)   upon acceptance of any offer made in accordance with paragraph (b) above then I empower my Trustee to enter into a contract for the price and on the terms and conditions agreed and to complete the same or exercise all such powers that they may have as a vendor if there is a default on the part of the purchaser in completing that contract.

11.   I give and bequeath the farming and grazing business carried on by me at the property known as “Mount Gilead” (presently comprised in Certificates of Title Folios 1/807555 and 2/807555 and Volume 10211 Folio 26 owned by Mount Gilead) and elsewhere including all of the assets thereof identified in clause 12 of this my Will (“my farming and grazing business”) to my Trustees upon trust to:

(a)   conduct the same until the vesting date being the date twenty-one (21) years after the date of my death or such earlier date that my Trustees may in their absolute discretion determine but without limiting that discretion having regard to the provisions of the Put and Call Option dated 13 August 2004 between Mount Gilead and Australand Holdings Limited ACN 008 443 696 and in so doing comply with the obligations on my part expressed in Property Licence dated 13 August 2004 expressed to be between Mount Gilead and me;

(b)   pay all or part of the income arising from the conduct thereof to any one or more of my children (Lee and Katrina) in the shares and amounts and at the times my Trustees in their absolute discretion think fit without any obligation to make payments for all or any of my children or to ensure equality among those to whom payments are made and with power to accumulate income not so paid; and

(c)   on the vesting day to pay the capital thereof as an accretion to the capital of the parts (established by my Trustees as hereafter provided) into which my residuary estate is divided at that time in equal shares.

…

15.   I give devise and bequeath the whole of the rest and residue of my real and personal estate wheresoever situate to my Trustees upon trust to pay thereout all my debts, funeral and testamentary expenses and all duties (if any) payable in consequence of my death and I direct my Trustees to hold the balance thereof after all such payments (hereinafter “my residuary estate”) upon trust to divide the same into four (4) parts made up as hereafter provided and I direct my Trustees to hold such parts upon the trusts in respect thereof hereafter declared.

16   (a)   I direct my Trustees to make up one part of my residuary          estate to comprise:

(i)   fifty-one (51) of my hundred (100) “A” class redeemable preference shares in Kalemon,

(ii)   two thousand five hundred and forty-one (2,541) of my five thousand and eighty (5,080) “B” clause shares in Kalemon,

(iii)   all of my cumulative preference shares in Mount Gilead,

(iv)   all of my shares in Macarthur-Onslow Nominees,

and to hold that part upon trust to pay the income therefrom to my son Lee until he attains the age of sixty (60) years and on my son Lee attaining that age I direct my Trustees to pay and transfer to him the whole of the capital of that part.

…

17.   (a)   I direct my Trustees to make up another part of my residuary

estate to comprise:

(i)   forty-nine (49) of my one of my hundred (100) “A” class redeemable preference shares in Kalemon,

(ii)   two thousand five hundred and thirty-nine (2,539) of my five thousand and eighty (5,080) “B” class shares in Kalemon,

(iii)   the sum of nine thousand five hundred and six-two dollars ($9,562),

and to hold that part upon trust to pay the income therefrom to my daughter Katrina until she attains the age of sixty (60) years and on my daughter Katrina attaining that age I direct my Trustees to pay and transfer to her the whole of the capital of that part.

…

19.   I direct that my Trustees divide the remainder of my residuary estate into two (2) equal parts (being the third and fourth of the four parts referred to in clause 15 of this my Will) but so that there is included in each part one-half in number of the shares in DWMO to which I am beneficially entitled, such parts hereafter called “remainder parts”, and hold the same upon the trusts hereafter declared. The trusts hereafter declared in respect of the remainder parts are subject in all respects to the exercise by my Trustees of the powers in respect of my shares in DWMO expressed in clause 10 of this my Will.

20.   (a)   I direct my Trustees to hold one remainder part upon

trust to pay the income therefrom to my son Lee until he attains the age of fifty-five (55) years and on my son Lee attaining that age I direct my Trustees to pay and transfer to him the whole part of the capital of such part.

21.   (a)   I direct my Trustees to hold the other remainder part upon

trust to pay the income therefrom to my daughter Katrina until she attains the age of fifty-five (55) years and on my daughter Katrina attaining that age I direct my Trustees to pay and transfer to her the whole part of the capital of such part.

…

21. It will be sufficient for the present to note that the gift of the home unit at Darling Point to Lady Hobhouse in cl 6 of the 1988 will was deleted, as was the small pecuniary legacy to Lady Macarthur-Onslow’s housekeeper in cl 8. The identity of the default residuary beneficiary was also changed.

22. By cll 8 to 10, the 2004 will made provision for Mr Macarthur-Onslow to receive sufficient money from the estate to enable him to purchase, in his own name, a farming property called “Kippilaw”, which was owned by DWMO Investments Pty Limited (DWMO), a company controlled by Lady Macarthur-Onslow.

23. Most importantly, the 2004 will treated Lady Hobhouse and Mr Macarthur-Onslow differently in the manner in which it distributed to them Lady Macarthur-Onslow’s shares in Kalemon. The effect was to give Mr Macarthur-Onslow voting control in general meetings of members of Kalemon. Consequently, he could control the identity of the board of directors, and by that means control how Kalemon, as trustee, exercised the powers of the trustee under the discretionary trust referred to above.

24. That is the matter which is the principal source of the dispute between the parties in these proceedings.

Family companies

25. The Macarthur-Onslow family held their assets partly through a number of companies. Two of those companies are of particular significance to the present proceedings.

26. The first is Kalemon. Kalemon was incorporated in New South Wales on 8 August 1960. Sir Denzil was the governing director of the company from its incorporation until his death on 30 November 1984. Lady Macarthur-Onslow was appointed a director on 9 September 1960, and remained a director until her death on 10 May 2013. Lady Hobhouse and Mr Macarthur-Onslow were appointed directors on 25 July 1977.

27. In circumstances that will be considered below, on 20 February 2004, Lady Macarthur-Onslow, acting in the capacity of the governing director of Kalemon, removed Lady Hobhouse as a director of the company.

28. The ASIC search that is in evidence shows that the present directors of Kalemon are Mr Macarthur-Onslow, Mr Rogers (who is the fourth defendant, and was the family accountant, and was appointed as an additional director on 28 May 2013, shortly after the death of Lady Macarthur-Onslow), and Lady Hobhouse. I was informed during the course of the hearing that Lady Hobhouse remains a director of the company because of a court order to the effect that her removal as a director was invalid.

29. At the time of Lady Macarthur-Onslow’s death, she and each of Lady Hobhouse and Mr Macarthur-Onslow held 5080 B class shares in Kalemon. In addition, Lady Macarthur-Onslow held 100 A class shares, which she had inherited from Sir Denzil.

30. The constitutions of the companies are not in evidence, and I have relied upon statements made by Lady Macarthur-Onslow’s solicitor, Mr Beardow, in a memorandum of advice that he sent to Lady Macarthur-Onslow on 12 February 2014, as the source of information concerning relevant constitutional provisions of the companies. These matters were not in issue.

31. Article 68 entitled Sir Denzil to act as governing director of the company, and article 74 authorised him to appoint some other person by his will to be governing director. Sir Denzil exercised that power in his will by appointing Lady Macarthur-Onslow. Article 71 empowered the governing director to remove and replace any other director.

32. The A class shares were preference shares and the B class shares were ordinary shares.

33. Every member had under article 61 a vote on a show of hands at a general meeting.

34. Article 60 provided that upon a poll every member shall have one vote for every share, however, the governing director was entitled to 5 more votes than the holders of the rest of the shares in the company were entitled to.

35. The consequence was that, so long as Lady Macarthur-Onslow was governing director of Kalemon, she and either Lady Hobhouse or Mr Macarthur-Onslow commanded just over 75% of the votes that could be cast at a general meeting of members.

36. Relevantly, if Lady Macarthur-Onslow’s shares in Kalemon were distributed equally to Lady Hobhouse and Mr Macarthur-Onslow on her death, each would hold 50% of the shares, and there would be a potential for deadlock.

37. The inventory of property annexed to the executor’s affidavit sworn by Mr Rogers on 24 March 2016 valued Lady Macarthur-Onslow’s 100 A class shares in Kalemon at $200, and her 5,080 ordinary shares at $12,641,500. This value was said to be represented by shares in listed public companies, a property known as “Southlands”, and a property at Darling Point. Lady Hobhouse gave evidence that Kalemon’s assets were valued at about $42 million, comprising a listed company share portfolio ($29 million), a rural property ($5 million), a home unit at Darling Point ($3.2 million), shares in a private company ($190,000 – $350,000) and intercompany receivables ($4.65 million).

38. More importantly, Kalemon held 10 shares in another company that is of importance in this dispute, being Mount Gilead Pty Ltd (MGPL), which is the trustee of a trust known as the “Mount Gilead Trust” (Trust).

39. Whoever controls Kalemon would therefore control the trustee of the Trust, and would accordingly be able to control the exercise of the trustee’s powers under the relevant trust deed.

40. MGPL was incorporated in the Australian Capital Territory on 20 October 2000. Sir Denzil was also the governing director, but the constitution did not contain a provision empowering him to appoint a successor as governing director in his will. On 25 July 1977, Lady Macarthur-Onslow, Lady Hobhouse and Mr Macarthur-Onslow were appointed directors of MGPL.

41. Lady Macarthur-Onslow remained a director until her death.

42. Lady Hobhouse was removed as a director of MGPL on 27 February 2006.

43. Mr Beardow, Mr Rogers and Mr Martin were appointed as directors on 12 October 2004, but Mr Beardow resigned on 28 May 2013, and Mr Martin resigned on 25 August 2011.

44. The present directors of the company are Mr Macarthur-Onslow and Mr Rogers.

45. The share capital of MGPL is comprised of 9,562 cumulative preference shares, which were held by Lady Macarthur-Onslow at the time of her death. These shares entitled the holder to a fixed cumulative preference dividend of 6% per annum and a return of paid-up capital, but no other entitlement to participate in the company’s profits or assets. The share capital also comprised 438 ordinary shares. 10 of the ordinary shares were issued to Kalemon.

46. Lady Hobhouse gave evidence concerning the assets and liabilities of MGPL. She estimated that the current value of the assets of the company was not less than $35 million and could be in excess of $90 million.

47. The company owes a debt of approximately $3.47 million to Kalemon. It has a listed company share portfolio with a current market value of around $7 million. It also owns two rural properties in the Goulburn area, which Lady Hobhouse valued at between $4 million and $7.4 million.

48. Accepting Lady Hobhouse’s estimates as being indicative of value (her estimates were not specifically challenged, and the precise values are not material) the net value of these assets would be about $8 million to $11.4 million.

49. Most importantly for present purposes, MGPL is the owner of a property known as “Mount Gilead” on Appin Road in the Campbelltown City Council area. Mount Gilead is an historical farming property of particular significance. It was transferred by Sir Denzil to MGPL. Mount Gilead has been the family home since before the birth of Lady Hobhouse, and is the place of her present residence. It has an area of 740.8 ha (or 1,831 acres).

50. The evidence does not include a conventional valuation of Mount Gilead. The amount that it is capable of realising will depend upon whether and in what manner it can be rezoned, as the evidence establishes that it has a substantial potential for being rezoned for the purpose of residential development.

51. Mr Rogers in cross-examination suggested that the “unimproved value” of Mount Gilead (which I understand to mean its improved value under its present zoning) is approximately $25 to $30 million.

52. The evidence shows that, on 13 August 2004, MGPL entered into a put and call option agreement with Australand Holdings Ltd (Australand). If exercised, the option would have involved the sale of 610 ha of Mount Gilead. In practical terms, the agreement was contingent on necessary rezoning for residential development. The intent was to construct 4,300 dwellings. The purchase price was an amount of not less than $175 million, together with 7.5% of the gross proceeds realised by Australand.

53. The evidence, though limited, suggests the agreement with Australand has terminated, and that MGPL has entered into a new agreement with Lend Lease. The terms of that agreement are not known.

54. Lady Hobhouse gave evidence, which was not challenged, that she was informed by Mr Macarthur-Onslow that, if approval is granted for the rezoning of Mount Gilead for residential development of a 450 acre part of Mount Gilead, there would likely be a sale of that area to a major developer for $60 million, for the development of 1,200 residential allotments. Mr Macarthur-Onslow said that the 450 acres would likely realise up to $15 million if sold prior to rezoning.

55. While the evidence does not permit a finding as to the net value of the assets of MGPL with any precision, the range of possible values is indicated by the circumstances considered above.

56. At the time of her death, Lady Macarthur-Onslow was also the owner of 749,706 ordinary shares in DWMO. In addition, Kalemon held one ordinary share in DWMO. DWMO was a company through which Lady Macarthur-Onslow held substantial assets, including the rural property near Goulburn called “Kippilaw”.

57. Finally, Macarthur-Onslow Nominees Pty Ltd was a company owned equally by Lady Macarthur-Onslow and Mr Macarthur Onslow, as to one ordinary share each, and was the vehicle for investments made by the shareholders.

The trust deed

58. The Trust was created by deed dated 23 November 1972, between Lady Hobhouse’s maternal grandmother as settlor and Kalemon as trustee.

59. The effect of cll 1(b), (c) and (d) is that the Vesting Date of the trust is 31 December 2022, or such other date as is fixed by the Trustee.

60. The Primary Beneficiaries were Lady Macarthur-Onslow, Lady Hobhouse, Mr Macarthur-Onslow, any child or spouse of the latter two, and any company or trust of which the latter two are beneficiaries.

61. Clause 2 provides that, on the Vesting Day, the Trustee shall hold the capital for all or such one or more of the Primary Beneficiaries as the Trustee may determine.

62. Under cl 3, until the Vesting Day, the Trustee is required to pay the whole or any part of the income of the Trust for the maintenance, education, advancement or benefit of all or such one or more of the Primary Beneficiaries in such shares as the Trustee in its absolute discretion may determine.

63. As Kalemon holds all of the issued ordinary shares in MGPL, all of the assets of that company are subject to the discretionary powers of Kalemon under the trust deed.

Effect of 2004 will

64. Mr Rogers set out in par 13 of his executor’s affidavit an estimate of the value of the property that would be distributed to the beneficiaries in accordance with the 2004 will. It is not necessary to set out in detail the assets in the estate or their estimated value. I will set out the total estimated value of the gifts to Lady Hobhouse and Mr Macarthur-Onslow, as that is necessary in order to understand the significance of Mr Macarthur-Onslow being given a control of the Trust. The property given to Lady Hobhouse was estimated to have a value of about $21 million dollars, and the property given to Mr Macarthur-Onslow about $24 million. The difference is represented by the value of Kippilaw. The value of the assets in the Trust was not included in the estimates of the value of the property passing under the will (save that I infer that Kalemon’s shares in MGPL were valued at $1 each, as Kalemon was a trustee. Kalemon is not the beneficial owner of those assets.

65. Compared to the values of the property specifically given to Lady Hobhouse and Mr Macarthur-Onslow under the 2004 will, at the time of the will was executed it was hoped that Australand would exercise its option, in which case MGPL would, as I have noted above, received $175 million, plus 7.5% of the gross proceedings of sale of 4300 residential lots realised by Australand.

The lay evidence

66. It will be convenient to consider the parties’ lay evidence, before I deal with the evidence of the medical experts called by each party.

67. Lady Hobhouse gave evidence, as did a relative of Sir Denzil, and a friend of the Macarthur-Onslow family, Ms Susan Hayman.

68. Mr Macarthur-Onslow did not give evidence, although he sat in court throughout the hearing.

69. Mr Macarthur-Onslow called evidence from Mr Beardow, who is a very senior solicitor, who acted for the family companies from some time in the late 1980s, and who some time later began to act for Lady Macarthur- Onslow personally. Mr Beardow took instructions from Lady Macarthur-Onslow for the preparation of her 2004 will; he drafted the will; and explained its terms to Lady Macarthur-Onslow on the day that she executed the will. The adequacy of that explanation is contentious. He also acted for Lady Macarthur-Onslow and the family companies generally in relation to the transactions that were the context for the dispute within the family, which will be considered below.

70. Mr Martin, and Mr James Daniel Lane, also gave lay evidence in the defendant’s case.

71. There were in addition a number of other witnesses, who gave less significant evidence, and who need not be identified now.

The plaintiff’s lay evidence

72. I will deal with Lady Hobhouse’s evidence generally, and then consider two particular matters; being a conversation between Lady Hobhouse and her mother that took place on 10 September 2004, which was recorded by Lady Hobhouse; and evidence concerning statements made by Lady Macarthur-Onslow to the effect that she intended that her two children would share equally in her estate.

Lady Hobhouse’s evidence

73. Lady Hobhouse gave evidence about the deterioration in her mother’s mental capacity, and the consequential effect on her behaviour, in her principal affidavit.

74. Relevant to this evidence is the evidence that Lady Hobhouse gave concerning the similar fate that was suffered by Sir Denzil, as the earlier experience that Lady Hobhouse had concerning the deterioration of her father may, to some extent, have attuned her to the physical and behavioural changes that may herald a person’s decline due to Alzheimer’s disease.

75. Lady Hobhouse said that, by about 1975, it had become apparent that Sir Denzil suffered from some form of cognitive impairment. She gave detailed evidence of the symptoms and behavioural consequences of Sir Denzil’s condition (pars 65 to 78). By about 1975, Sir Denzil’s impairment had progressed to a stage where the symptoms were markedly observable and where his mental capacity had been significantly affected. Sir Denzil died on 30 November 1984, apparently from the consequences of Alzheimer’s disease.

76. Lady Hobhouse lived in England in 1991 and 1992, and from 1993 to 1999.

77. According to Lady Hobhouse, when she returned to Australia in late 1999, she noticed that her mother had become extremely forgetful, and she repeated things that she had already told Lady Hobhouse several times previously. Lady Hobhouse gave detailed evidence concerning the progressive decline in her mother’s mental state and behaviour (pars 101 to 204). She also gave evidence concerning her mother’s condition in the period between late 2004 and 2007, during which Lady Hobhouse was the principal carer for Lady Macarthur-Onslow (pars 205 to 226). Lady Macarthur-Onslow was institutionalised in Lulworth House as a high care Alzheimer’s patient in 2008, where she remained until her death in 2013.

78. Lady Hobhouse gave evidence that generally supported the particulars concerning her mother’s mental condition and behaviour set out in pars 9 and 10 of the defence, and additional particulars given by letter dated 3 December 2015. I use the word “generally” to reflect the fact that the overall effect of the evidence supports the particulars given; although the evidence is less probative of some of the particulars in relation to the precise way in which they have been expressed; and others of the particulars are made out more by evidence produced by Lady Macarthur-Onslow’s neurologist, Dr Darveniza, during the course of his treatment of her.

79. I will set out below only the more general or significant observations made by Lady Hobhouse concerning her mother’s mental state and behaviour; except where the evidence of certain events appears to have particular significance.

80. Much of the evidence given by Lady Hobhouse related to the conduct of her mother that took place in the presence of, or with the knowledge of, Mr Macarthur-Onslow. This evidence is of particular significance given that Mr Macarthur-Onslow did not give evidence, and accordingly did not contradict any of this evidence given by his sister, which he must have been in a position to do, if it was his recollection that Lady Hobhouse’s evidence was either untrue, or was exaggerated in some way.

81. Lady Hobhouse gave evidence that, shortly after her return to Australia in 1999, her mother insisted that Mr Macarthur Onslow leave his diary close to the home phone, and that her mother habitually used the diary as a general writing pad. She said that Mr Macarthur-Onslow said that he had tried to explain to his mother that it was his farm diary but: “It is a waste of time because she forgets and just continues to use it as a writing pad.”

82. Before Lady Hobhouse went to live in England, her observation was that her mother’s bookkeeping was very efficient, accurate and precise. Lady Macarthur-Onslow knew precisely where everything was in the office, and all the correspondence was filed in good order. Lady Hobhouse began to do the farm accounts when she returned in 1999. It was then that she became aware that, in the previous 12 months, the accounts kept by her mother contained numerous mistakes and did not follow the system which her mother had devised many years earlier. Further, many accounts received in the last 12 months had not been written up. Lady Macarthur-Onslow said that she could not do the bookwork and accounts any longer, because it had become too complicated for her.

83. Lady Macarthur-Onslow ceased to know where everyday items in the kitchen such as pots and pans, spoons and the like were kept.

84. Lady Macarthur-Onslow became irritated over small things and seemed to react disproportionately.

85. Lady Hobhouse said at par 109:

My mother’s behaviour reminded me of my father’s behaviour during the progression of his Alzheimer’s disease. The forgetfulness, irritations, repetition of conversations, the inability to carry out some simple tasks, not knowing how to do things which she could easily have done before such as the accounts, not knowing where things were in the kitchen and in the house, suddenly starting a project with enthusiasm but just as quickly forget it and leave it unfinished and eventually inability to think ahead or to plan all reminded me of my father’s behaviour which I have described above in this Affidavit during his Alzheimer’s illness.

86. Lady Hobhouse and her mother were in the habit of taking tea together. During and after 2002, Lady Macarthur-Onslow would ask if Lady Hobhouse wanted a cup of tea, and then bring several cups of tea in quick succession, or forget about it altogether. On other occasions, she would forget the tea and just bring hot water; or bring tea with no milk and sugar.

87. Lady Hobhouse recounted episodes from 2001 onwards when her mother often appeared disoriented or confused. At breakfast, from time to time, Lady Macarthur-Onslow would stand in the kitchen looking at the cupboards without doing anything. On being prompted, Lady Macarthur-Onslow would ask to be told where the breakfast cereal was.

88. From about late 2002 onwards, Lady Hobhouse became aware that her mother was unable to recall the amounts she paid to the cleaners and other staff, and would ask Lady Hobhouse to pay the staff.

89. In 2002, or possibly 2003, Lady Macarthur-Onslow damaged her car by reversing it with the driver’s door wide open. From this point, Lady Hobhouse realized that Lady Macarthur-Onslow was no longer capable of driving a car, except on the property at Mount Gilead.

90. In June 2002, Lady Hobhouse persuaded her mother to see Dr Darveniza. The result of Dr Darveniza’s consultation with Lady Macarthur-Onslow is set out in his letter dated 28 June 2002, which will be considered in more detail below. Dr Darveniza advised Lady Hobhouse that her mother had Alzheimer’s disease.

91. Lady Hobhouse said that, progressively during 2002, her mother became much less active, staying in bed or on the front veranda of Mount Gilead.

92. In August 2003, Dr Darveniza recommended that the strength of the medication prescribed for Lady Macarthur-Onslow’s dementia should be doubled.

93. In about late 2002 or in 2003, Lady Macarthur-Onslow’s general practitioner informed Lady Hobhouse that her mother needed to be accompanied on future visits to her doctor.

94. As a result of events concerning the proposed sale of part of Mount Gilead, which will be considered in more detail below, Lady Macarthur-Onslow took steps to remove Lady Hobhouse as a director of the family companies in February 2004. Lady Hobhouse gave evidence at par 150:

About an hour later, I was standing in the kitchen with mother. I said to mother: “How dare you knock me off the family company Boards”. Mother said in a voice and tone of surprise: “I haven’t knocked you off the family company Boards. What are you talking about?” To which Lee said: “Yes mum, you are removing her from the Boards of Mount Gilead Pty Ltd and Kalemon Investments.” He then put his arm around mother and guided her out of the kitchen away from me.

95. Lady Hobhouse gave considerable evidence concerning her relationship with her brother, following a substantial disagreement that had arisen concerning the basis upon which a substantial part of Mount Gilead should be sold to Australand. This disagreement caused a high level of acrimony within the family. Lady Macarthur-Onslow took Mr Macarthur-Onslow’s side in this dispute. Lady Hobhouse gave evidence that, on numerous occasions, her brother made very disparaging remarks concerning Lady Hobhouse’s behaviour and financial acumen in the presence of their mother; and that Lady Macarthur-Onslow often “parroted” Mr Macarthur-Onslow’s comments to Lady Hobhouse.

96. Lady Hobhouse gave evidence of a number of occasions when Lady Macarthur-Onslow was physically violent towards her, which according to Lady Hobhouse was entirely out of keeping with Lady Macarthur-Onslow’s previous attitude to her daughter. On the morning of 13 April 2004, Lady Hobhouse and her brother and mother were in the kitchen. Mr Macarthur-Onslow made a disparaging comment towards his sister in an angry voice, and then (par 172): “Mother was there listening and after a little while she said to me: ‘Silly bitch’ and she hit me over the head and face with the newspaper”. On a later occasion, on 5 August 2004, after an argument between Lady Hobhouse and her mother (par 196): “[M]other hit me on the back of the head when my back was turned. She hit me with a heavy broom handle with such force that it broke in two. I had a huge red lump behind my ear. It was completely out of character for my mother to strike me with such a heavy instrument which could cause serious injury”.

97. Lady Hobhouse said that, from around 2004 onwards, her mother increasingly looked blankly during conversations, or withdrew from conversations before they had concluded (par 179). From 2002 and continuing in 2004, while Lady Macarthur-Onslow was taking the Alzheimer’s medication, there were many occasions when Lady Macarthur-Onslow’s conversations were unclear and imprecise. She would be monosyllabic, or there would be intervals in conversations when she would suddenly go blank and become silent. Lady Hobhouse said (par 180): “At this time during 2004 there were whole mornings or whole afternoons when mother was not lucid. This was the case many days of each week”.

98. Lady Hobhouse also said that, from about 2001 onwards, her mother became increasingly distrustful when it came to money, and gave examples of this conduct.

99. On one occasion in July 2004, as recalled by Lady Hobhouse, her mother was washing tea towels in dog bowls. When she pointed this out to her mother, Lady Macarthur-Onslow said (par 193): “[T]hey are not dog bowls”. Lady Macarthur-Onslow showed her daughter two dog bowls, one of which still had dog food in it.

100. In her cross-examination, Lady Hobhouse was not challenged in any detail concerning her evidence of the various events and circumstances that tended to suggest that Lady Macarthur-Onslow was suffering from dementia with increasing disability from no later than 2002. Her evidence concerning specific instances was not challenged.

101. At T 90.6, Lady Hobhouse was referred to an opinion expressed by Dr Darveniza in his report of a consultation with Lady Macarthur-Onslow on 30 November 2004, that she retained testamentary capacity as at that date. Lady Hobhouse declined to agree that Dr Darveniza’s conclusions caused her to doubt the evidence given in her primary affidavit concerning her mother’s capacity.

102. The cross-examination then continued as follows (T 90.16 to 90.30):

Q. I want to suggest to you that the incidents that you recount in that affidavit are at least exaggerated by you.

A. No.

…

Q. You have deliberately exaggerated in your evidence the accounts and exchanges that you describe in that affidavit with your mother to suit your own purposes in this litigation, haven’t you, Lady Hobhouse?

A. No.

103. It may be that senior counsel for Mr Macarthur-Onslow was inhibited in the extent that he could challenge Lady Hobhouse’s evidence, because of the fact that Mr Macarthur-Onslow should have been in a position to give evidence to contradict or deny the truth of much of his sister’s evidence, if it was false to his recollection, but he did not do so.

104. The fact remains that, apart from the general suggestion of deliberate exaggeration made in the extract from the cross-examination set out above, the cross-examiner did not in any detailed or comprehensive way challenge the evidence given by Lady Hobhouse.

105. At T 97.1, the following exchange occurred in the cross-examination, in the context of the evidence given by Lady Hobhouse concerning her confrontations with her mother concerning the powers of attorney that Lady Macarthur-Onslow granted during 2004 (and which will be considered in more detail below):

Q. I want to suggest to you also that during these confrontations your mother was quite firm and quite lucid.

A. There were times when she was lucid and there were times when she weren’t, wasn’t lucid. That would be correct.

106. Lady Hobhouse accepted that there were times when her mother appeared to be lucid. However, upon a careful reading of her principal affidavit, it is in my view clear that Lady Hobhouse did not give evidence contrary to the proposition that there were times when her mother appeared to be lucid.

107. As became apparent during the final oral submissions made on behalf of Mr Macarthur-Onslow, his case was that there were times during 2004 when Lady Macarthur-Onslow acted in an apparently lucid manner. Subject to the bare assertion made in cross-examination that Lady Hobhouse intentionally exaggerated her mother’s mental condition and conduct, Mr Macarthur-Onslow’s case did not directly challenge the evidence given by Lady Hobhouse.

108. Instead, Mr Macarthur-Onslow’s case built upon Lady Hobhouse’s acceptance that there were periods when her mother appeared to be lucid, by leading evidence of Lady Macarthur-Onslow’s participation in conferences and negotiations, as part of the proposal for the sale of a substantial part of Mount Gilead; and the circumstances in which she granted powers of attorney and made her will. I will come to this evidence below.

109. This is a convenient point to set out my findings concerning the credibility of Lady Hobhouse’s evidence. I accept Lady Hobhouse as a witness of truth. Lady Hobhouse was a careful and meticulous witness, and was prepared, on the few occasions when it may have been necessary, to make concessions against her interest (such as the concession referred to above that her mother had periods of apparent lucidity). She was calm, careful, responsive, and immediate in addressing the questions put to her.

110. Lady Hobhouse gave detailed evidence in her primary affidavit, concerning the conduct of her mother in respect of the issue of Lady Macarthur-Onslow’s mental capacity. The detail in which Lady Hobhouse offered her evidence exposed her to specific contradiction. She was not contradicted in any substantial way.

111. The defendants criticised Lady Hobhouse’s evidence on the ground that she has a direct interest in the result of these proceedings, which has coloured her evidence, and led her to exaggerate her mother’s condition.

112. It is true that Lady Hobhouse gave evidence in her own interest, but it does not follow that she has coloured or exaggerated the evidence of Lady Macarthur-Onslow’s condition. My strong assessment that Lady Hobhouse did her best to tell the truth according to her actual recollection must be weighed in conjunction with the fact that she invited contradiction by Mr Macarthur-Onslow, by saying that many of the significant events happened in his presence, but Mr Macarthur-Onslow did not give evidence. I will return to this matter below.

113. The defendants also argued that Lady Hobhouse’s evidence was unreliable as it was largely anecdotal, with insufficient context properly to explain the anecdotes. It is true that the evidence that Lady Hobhouse gave concerning general and specific aspects of her mother’s conduct was anecdotal and episodic. It could hardly have been otherwise. This is not a ground for discounting the evidence significantly, although the weight to be given it should take the defendants’ argument into account.

114. The primary relevance of this evidence is only, in any event, to assist in making a general assessment of Lady Macarthur-Onslow’s cognitive ability at relevant times.

115. While aspects of the detail of parts of the evidence may not be entirely reliable, the significance of the events described by Lady Hobhouse was great, and the events so unusual, that it is reasonable for the court to accept the substance of much of her evidence, without perhaps relying upon the precise detail.

116. I accept that the reconciliation of Lady Hobhouse’s evidence with the evidence given by other witnesses concerning Lady Macarthur-Onslow’s apparently competent participation in a substantial number of commercial meetings concerning the proposed arrangement with Australand is challenging. That is a task that is also made more difficult by the failure of Mr Macarthur-Onslow to give evidence, and is a matter to which I will return at the appropriate time.

117. It is sufficient at this point to record that I accept Lady Hobhouse’s evidence as being truthful and reflecting her genuine recollection of events; subject however to conventional considerations going to the weight of that evidence, by reason of the passage of time since the events occurred, and the fact that the events the subject of the evidence are necessarily reported in an anecdotal and episodic way.

The conversation between the plaintiff and the deceased on 10 September 2004

118. On 10 September 2004, Lady Hobhouse had a conversation with Lady Macarthur-Onslow, which the former secretly recorded.

119. The defendants tendered a compact disc containing the recording, and also a transcript of the recording.

120. In submissions, counsel for Mr Macarthur-Onslow said that the present is an exceptional case, in which the court has the benefit of a recording of a conversation involving the deceased that was virtually contemporaneous with the making of the will, to assist the court in deciding whether the deceased had testamentary capacity.

121. The transcript is some 15 pages long, and the following extract is limited to the more material parts of the conversation, and focuses on the parts relied upon by the parties in their final submissions:

K:   … Mother, I have just received this from my solicitor… Do you realise what you have done?

D:   I have no idea what’s in the letter, dear. I have not the slightest remote idea what’s in there.

K:   Will, would you like to read this, please?

…

K:   You have read – you have read – you have read these documents.

D:   I’ve signed these documents, darling – the fact that I don’t want you and Lee spending the rest of your lives fighting each other and getting nowhere. Now, at the present moment, you’re not making sense about anything you do. You’re just being – I discussed the matter with Beardow. Beardow has looked into it very carefully, found reasonable people to look after my affairs when I no longer am able to, and (indistinct) not coming in on this, because all you want to do is what you want to do. You’re completely incapable of dealing with (indistinct).

K:   Well, have you –

D:   Have I thought about it? Yes, I have thought about it, and I think it’s very sad that I’ve been forced to do this.

K:   You want Lee to be the one who is running all of the family properties?

D:   I do at the present moment, yes – not you, quite frankly.

K:   Why is that, mother?

D:   You’ve been nothing but difficult all the way through, or complain bitterly about it, darling.

…

K:   Mother, are you happy for Lee to be in control of all the family companies –

D:   Yes, I am.

…

K:   Why am I not making reasonable sense?

D:   Well, darling, you know, I can’t explain it. They don’t want to get involved with you – none of them will want to work – they say you’re impossible to deal with. (Indistinct), sweetheart.

…

K:   So you think it is the best thing that Lee should be running the family companies and all the family properties?

D:   Yes, I do – better than you, darling, because if you come in on it, all you do is you stand and you fight and you fight and you fight.

K:   But you have given Lee the right to have complete control over me.

D:   Well, I think is more sensible, darling.

…

D:   He’s got to do the affairs with Beardow, darling.

K:   Mother, do you realise in those accounts – in those documents you have given Lee the right to control all the bank accounts?

D:   He’s got to also go into it with Beardow, darling.

…

K:   So you’re happy for him to do that to the exclusion of me?

D:   With – with the consent – with the attention and if Beardow is not available, then those other members such as – what – there’s a list of them – who will take control.

…

D:   And looking after it. But, darling, you don’t realise, you just put everyone in the wrong position. I think Beardow is as good a person as we can find.

K:   Mother, you have given Lee a power of attorney here for the farming of the four properties, which gives him absolute control.

D:   No, it’s not absolute control. He’s got to discuss it with Beardow.

K:   Why does he have to discuss it with Beardow?

D:   I think you’ll find that’s the thing.

K:   Can you see in these documents that it says Lee has to discuss the farming with Beardow?

D:   Not only the farming, darling, but the running of the business. They take over, Darling.

…

K:   So you’re giving Lee complete control of the finances and the farming activities?

D:   No, not at all. Beardow is also going to look into it.

K:   The farming?

D:   Not the farming, dear. The finances, I said.

…

K:   And in fact do you realise that you said that I would be sharing equally with Lee in all respects?

D:   No, I didn’t say that.

K:   You did, mother.

D:   You’ll get the same amount of money as Lee gets, darling.

…

K:   With all the farming activities that are going on, but do you realise that you have given Lee complete control over the farming?

D:   Well, someone’s got to have the control, darling.

122. Lady Macarthur-Onslow appeared to me, from listening to the recording of this conversation, to have been reasonably lucid. In stating that view, I have borne in mind that the evidence does not permit a comparison between Lady Macarthur-Onslow’s conversational capacity at this time, and at earlier times before the commencement of her dementia. I have also borne in mind that the conversation was a casual conversation between mother and daughter, in circumstances where Lady Macarthur-Onslow was unaware that the conversation was being recorded. Lady Macarthur-Onslow’s participation in the conversation appeared to be well within the range of a reasonably mentally competent person.

123. The recording, and the related transcript, are not entirely supportive of Mr Macarthur-Onslow’s case. The context in which the conversation took place was Lady Hobhouse’s discovery of the terms of the powers of attorney granted by her mother. The conversation did not relate to Lady Macarthur-Onslow’s proposed will, of which Lady Hobhouse was ignorant at the time.

124. However, there is in my view a reasonably strong appearance from the content of a number of statements made by Lady Macarthur-Onslow that she did not fully understand the effect of the various powers of attorney that she had granted; notwithstanding the explanation that Mr Beardow said that he gave to her. In some parts of the conversation, the participants appeared to be talking about control of the family companies; in other parts, control of the farming businesses; and in yet further parts, control over both. There is a reasonably strong appearance that Lady Macarthur-Onslow understood that in each of these situations Mr Macarthur-Onslow would not have sole control; but that he would have to act with the agreement of Mr Beardow, or the other attorneys. That was generally correct, but not in relation to the operation of the farming businesses, where the power of attorney granted solely to Mr Macarthur-Onslow was paramount. That appears most clearly from Lady Hobhouse’s statement concerning the power of attorney for the farming of the four properties, which gave Mr Macarthur-Onslow absolute control. Lady Macarthur Onslow replied: “No, it’s not absolute control. He’s got to discuss it with Beardow”. The issue was pursued by Lady Hobhouse in the conversation, and Lady Macarthur-Onslow repeated her view that “they take over” not only in relation to the farming, but the running of the business. It is unclear whether Lady Macarthur-Onslow corrected her misapprehension, when she said in relation to Lady Hobhouse’s reference to the farming: “Not the farming, dear. The finances, I said”.

125. There is also a question as to what Lady Macarthur-Onslow meant when she said: “You’ll get the same amount of money as Lee gets, darling”. That was a response to a disagreement concerning Lady Hobhouse’s statement: “And in fact do you realise that you said that I would be sharing equally with Lee in all respects?” As I have mentioned above, the context in which this conversation took place was in relation to the grant of the powers of attorney, and not the terms of Lady Macarthur-Onslow’s will. However, upon an objective consideration of the whole conversation, it is unlikely that Lady Macarthur-Onslow’s statement that Lady Hobhouse would get the same amount of money as Mr Macarthur-Onslow was intended to be limited by her to the division of money from the operation of the companies and the farming businesses through the exercise of the powers of attorney. While the matter is not free from doubt, the better view is that Lady Macarthur-Onslow intended to express a general understanding as to the equality of sharing as between her two children. If that is a correct view, it will be of significance in relation to Lady Macarthur-Onslow’s understanding of the effect of the will that she executed about one month after the conversation.

Conversations concerning equality of testamentary treatment

126. Lady Hobhouse gave evidence, starting from the time when Sir Denzil was alive, of family conversations in which Lady Hobhouse and Mr Macarthur-Onslow were informed that “both of you will equally share and control the family assets when your mother and I are dead” (par 12). Lady Macarthur-Onslow made similar statements over the years (pars 12, 16 (1984), 77 (late 1970’s), 90 (1988), and 99 (1999)).

127. Lady Hobhouse said, in par 202, that in October 2004, she was sitting in the sitting room at Mount Gilead with her brother and mother, during which they had a conversation to the following effect:

L:   There are four attorneys looking after things. You will get your share.

D:   See, you will get your share.

K:   But mother, the attorneys only last while you are alive.

L:   The attorneys are the directors and they continue to run the company.

D:   The directors will be continuing to run the company.

K:   But mother, as governing director, Lee could dismiss all the directors and leave himself as the sole director, just as you removed me as a director. The articles have been changed so only one director is needed for Mount Gilead. Lee could then do what he likes with the money and this leaves me very vulnerable.

L:   There are four attorneys who are also directors. They are all good people and everything is going to be done legally. Nothing is going to change. You will get your share.

D:   Katrina, I don’t think you know what you are saying. You get these funny ideas in your head. You have heard that there are four attorneys and directors and you will get your share. Now, what are you going on about?   

128. This evidence is potentially highly significant, as it suggests that Mr Macarthur-Onslow made statements that would tend to cause his mother to link her desire that each of her children should share equally in her estate with the ability of the independent directors of the companies to ensure that Mr Macarthur-Onslow did not act solely in his own interests, and that she responded on that basis. Evidence of specific conversations of this nature given a decade after the event is usually considered to be suspect; but again it is significant that Mr Macarthur-Onslow did not give evidence to contradict it, and it was not put to Lady Hobhouse in cross-examination that the conversation did not occur, or was in materially different terms.

129. Lady Hobhouse said that, later in the same conversation, Lady Macarthur-Onslow said that she would talk to Mr Beardow about it. About half an hour later, Lady Hobhouse reminded her mother that she should remember to talk to Mr Beardow the following day, and Lady Macarthur-Onslow replied: “Talk to Beardow about what?”

130. Lady Hobhouse then gave evidence, in pars 203 and 204, that on about 30 October 2004, her mother and brother arrived at Mount Gilead after a visit to Sydney. In response to a question as to whether he and his mother had been to see Mr Beardow, Mr Macarthur-Onslow replied: “Yes, we have all had meetings with Sydney Gas and Australand.” Lady Hobhouse said she then had the following conversation with her mother:

K:   Mother, have you talked to John Beardow about the governing directorship as you said you would on Wednesday afternoon?

D:   I have not seen Beardow. What do you mean by the governing directorship?

K:   Lee said you have seen him, either yesterday or the day before.

D:   I don’t remember. Lee, I haven’t seen Beardow?

L:   Yes, you have had meetings with him.

131. Lady Hobhouse said, in par 207, that she had the following conversation with Lady Macarthur-Onslow in November 2004:

K:   Are you still intending that I should be inheriting equally everything with Lee?

D:   I don’t know what you mean darling. Of course you are getting everything equally with Lee.

132. Lady Hobhouse also gave evidence, in par 212, that she discussed Lady Macarthur-Onslow’s testamentary intentions with her mother on a number of occasions, in which Lady Macarthur-Onslow said words to the effect: “You get exactly the same money as Lee”; “as far as I know you’re equal in everything”; “you’ll get exactly the same as Lee”; “you’ll get your share”; “the directors will be continuing to run the companies”; “you are being treated equally”, “go and see Beardow”; “Beardow is running things”; “Beardow controls things”.

133. These statements, which Lady Hobhouse attributes to her mother, are all straightforward in their meaning, so that their effect in Lady Hobhouse’s memory is not likely to have been diminished or confused by the passing of time. Once the court accepts that Lady Hobhouse is a truthful witness, it becomes reasonable to accept in substance that Lady Macarthur-Onslow said words to the effect related by Lady Hobhouse.

134. The possibility that Lady Macarthur-Onslow made statements of this type to her daughter to placate her, and to avoid a fuss, when she did not really mean what she said, is substantially dispelled by evidence of similar statements made to her doctor, Dr Darveniza, and her solicitor, Mr Beardow, which will be considered below.

The evidence of Ms Susan Hayman

135. Ms Susan Hayman’s father was a first cousin of Sir Denzil, and accordingly she is a second cousin of Lady Hobhouse and Mr Macarthur-Onslow. She first met Lady Macarthur-Onslow in about 1952, at the time of her marriage to Sir Denzil. Ms Hayman saw and spoke to Lady Macarthur-Onslow regularly up until the time of her death.

136. Ms Hayman said that, in the period from 1952 until about 1999, she never observed Lady Macarthur-Onslow to be anything other than highly intelligent, and an amusing person to talk to. She was a sympathetic and helpful person. She was always immaculately dressed; she always wore smart clothes, very fashionable and appropriate for the occasion; she always had her hair done and her face made up and on appropriate occasions would wear one or more of the pieces from her large collection of jewellery.

137. Ms Hayman said that she first noticed that Lady Macarthur-Onslow was not her normal self in the winter of 1999. Previously, Ms Hayman had known Lady Macarthur-Onslow to be a good and cautious driver. On one occasion, Ms Hayman was being driven by Lady Macarthur-Onslow as a passenger in her car, and she recalled that Lady Macarthur-Onslow was driving all over the road, and not observant of the traffic around her. She drove with confidence but in the wrong lane, changed lanes frequently, and narrowly missing nearby cars. Lady Macarthur-Onslow would also start saying something and then not finish it, and then digress and talk about something else. Lady Macarthur-Onslow appeared to have forgotten what she was about to say in mid-sentence. Lady Macarthur-Onslow had appeared to have forgotten the name of a very close friend of hers. Lady Macarthur-Onslow made unkind comments about Lady Hobhouse, which Ms Hayman believed was quite out of character. Lady Macarthur Onslow was not well dressed and had on very old and tired clothes.

138. After this occasion, Ms Hayman noticed whenever she saw Lady Macarthur-Onslow that her clothes looked old and tired, as if they had not been properly cleaned or pressed for a very long time.

139. Ms Hayman thereafter noticed in conversations that she had with Lady Macarthur-Onslow that she repeated herself, she could not remember names, and she was not aware of the names of people who Ms Hayman knew that she knew well.

140. In June 2000, shortly after the death of Ms Hayman’s husband, Lady Macarthur-Onslow made a statement to Ms Hayman that the latter thought was the cruellest thing. She said: “You must be pleased he is gone. You can do what you want with your life now. You can go overseas.” Lady Macarthur-Onslow continued in this vein notwithstanding that Ms Hayman was weeping. Previously, Ms Hayman had always experienced Lady Macarthur-Onslow as being a compassionate person.

141. Ms Hayman said that, after this time, Lady Macarthur-Onslow would call her weekly or sometimes twice weekly, and on each occasion there was no reference or apparent knowledge of the conversation they had had a week or a few days earlier. On several occasions, Lady Macarthur-Onslow would ask exactly the same questions and say exactly the same things as she had said previously.

142. Ms Hayman gave similar evidence in relation to various subsequent events, in which Lady Macarthur-Onslow appeared in shabby old clothes, and appeared not to remember the names of persons that she knew.

143. On 9 October 2003, Lady Macarthur-Onslow visited Ms Hayman’s home in response to an invitation to meet Ms Hayman’s new grandson, following a request by Lady Macarthur-Onslow to meet the child. Ms Hayman said that Lady Macarthur-Onslow did not appear to know what she had come for. She did not look at the baby, nor ask any questions about him. She looked unkempt and scruffy. She did not enter into any conversation, she sat at the table hunched, and appeared to be unhappy to be there.

144. Between 9 October 2003 and February 2005, Ms Hayman had a few telephone conversations with Lady Macarthur-Onslow. Ms Hayman said that they were all incoherent; it was extremely difficult to converse with Lady Macarthur-Onslow; and she was not lucid. Ms Hayman gave examples of such conversations.

145. On 18 February 2005, Lady Macarthur-Onslow and Ms Hayman were both guests at a house party. Ms Hayman said that Lady Macarthur-Onslow looked scruffy, and was dressed for working in a kitchen. Lady Macarthur-Onslow said: “I don’t know a soul here”, when to Ms Hayman’s knowledge, of the approximately 100 people in attendance, Lady Macarthur-Onslow knew most of the guests, many of whom were members of her family. Lady Macarthur-Onslow’s conversations were not coherent.

146. Ms Hayman gave evidence that Mr Macarthur-Onslow was present at a number of the events at which Lady Macarthur-Onslow had acted in the manner described by Ms Hayman.

147. Ms Hayman was cross-examined. The cross-examination did not in any significant way seek to contradict the evidence she gave. Ms Hayman confirmed her evidence in what I consider to be a credible and persuasive way.

148. Ms Hayman was shown a photograph of the persons who attended the signing in 2004 of the Australand documents, to which I will refer elsewhere. Ms Hayman agreed that, on that occasion, Lady Macarthur appeared to be well groomed and dressed, and wore appropriate jewellery.

149. Otherwise, it was only suggested to Ms Hayman that her difficulties in communicating with Lady Macarthur-Onslow may have been attributable to increasing hearing difficulties on Lady Macarthur-Onslow’s part. Ms Hayman did not accept this explanation.

150. Further, it was only suggested to Ms Hayman that she was not in a position to know what Lady Macarthur-Onslow’s real thought processes were, or what the nature of Lady Macarthur-Onslow’s conduct was at the times that Ms Hayman was not present or conversing with Lady Macarthur-Onslow.

151. I consider Ms Hayman to be an independent witness, in so far as she was a relative of the whole of the Macarthur-Onslow family. The contrary was not put to her, and it was not suggested that she was partial to Lady Hobhouse’s case, or that she had reason to colour her evidence in order to damage Mr Macarthur-Onslow. I understand from her evidence that she was primarily a friend of Lady Macarthur-Onslow.

152. I accept the substance of Ms Hayman’s evidence, subject to the necessary qualification that her recollection of the details of events that occurred so long ago may not be precisely reliable.

The defendants’ lay evidence

The evidence of Mr Beardow

153. Mr Beardow was the primary witness for the defendants' case, in that he gave evidence of much of the relevant background; as well as evidence concerning the making of the 2004 will.

154. It will be convenient to consider Mr Beardow’s evidence concerning the history of his involvement with the Macarthur-Onslow family; as well as the transactions that formed the background against which Lady Macarthur-Onslow’s 2004 will was made; before attention is given to the evidence of Mr Beardow that is more directly relevant to the validity of that will. This approach may assist in the analysis of the evidence concerning the making of the will; although it must be acknowledged that many of the relevant events concerning the background transactions and the making of the will were chronologically interspersed.

Mr Beardow’s professional history

155. Mr Beardow was admitted as a solicitor of the Supreme Court of New South Wales on 28 April 1961. It appears that he has had substantial professional experience in acting for private clients in establishing and documenting family business structures; and that his experience includes the preparation of wills and powers of attorney, guardianship advice and estate administration. From 2002, he has practised as special counsel with the law firm known as Norton White.

156. Mr Beardow was named as an executor in the 2004 will, but he renounced his appointment on 13 August 2013, as he did not wish to take on a long-term obligation.

157. Lady Macarthur-Onslow was a long-standing client of Mr Beardow’s former firm, Sly & Russell, as it was then known. Mr Beardow began to act for the family companies in the late 1980s, mainly in relation to a series of transactions that concerned the possible development of Mount Gilead. He later became Lady Macarthur-Onslow’s personal legal adviser.

158. Mr Beardow said that he was aware that Lady Macarthur-Onslow had been a medical practitioner and hospital administrator. He said that she impressed him as an intelligent and capable businesswoman.

557. That is what happened in relation to the preparation by Mr Beardow of the 2004 will.

558. It is clear that the 2004 will was not prepared in the normal way, by the testator being asked to give instructions in a single episode; the draft will being prepared in a relatively short time; and the draft will being explained to and read by the testator on an occasion when the testator would have in mind the whole of the instructions.

559. The 2004 will was prepared as a result of instructions given to Mr Beardow on a number of incomplete occasions over a period of approximately eight months.

560. Lady Macarthur-Onslow instructed Mr Beardow in February 2004, at a time when Lady Hobhouse’s conduct in the negotiations with Australand was uppermost in Lady Macarthur-Onslow’s mind, that she would like her children “to pretty much equally share the assets”.

561. In my view, when Lady Macarthur-Onslow referred to her assets, or her estate, she meant not only the ordinary assets in her estate, but also the assets in the Trust, which she was in a position to control by means of her governing directorship of Kalemon. She was also able to influence who controlled Kalemon by how she distributed her shares in her will. That is the natural way for a person in the position of Lady Macarthur-Onslow to think of distributing the family property to her children. As I understand the defendants’ position, they accept that Lady Macarthur-Onslow’s estate includes assets within its control but of which beneficial ownership lies elsewhere: see final submissions par 13.

562. Mr Beardow responded to Lady Macarthur-Onslow's statement by saying that the structure of the companies and the trust in place after Lady Macarthur-Onslow’s death would not permit her to ultimately control how the assets were distributed, and that if Mr Macarthur-Onslow was given the ability to control the entities, she would have to rely upon him doing the right thing by Lady Hobhouse. It is implicit in Mr Beardow’s response to Lady Macarthur-Onslow’s statement that she would like to share the assets equally that he understood that his client meant to include the assets of the Trust. Otherwise, his reference to the companies and the Trust would have been incongruous.

563. Although these statements were made during a discussion between Lady Macarthur-Onslow and her solicitor, they do not have the hallmarks of a serious or considered advice. They more appear to take the form of unconsidered remarks made in passing. Mr Beardow did not provide any explanation to Lady Macarthur-Onslow of his suggestion that there was no way that she could control the disposition of the Trust after her death, in a manner that would ensure equality of treatment between her children. The subject was never mentioned again.

564. There is force in the submission made on behalf of Lady Hobhouse that the statement that Lady Macarthur-Onslow would have to rely upon her son doing the right thing was cryptic. The statement was not explained by Mr Beardow. There is no mention of it ever having been made again. Yet it is the foundation of Mr Beardow’s belief that he was given an instruction by his client to prepare the 2004 will in a way that gave control not only of MGPL to Mr Macarthur-Onslow, but also the Trust as a whole, and that she was content to leave her primary desire that her estate be divided equally between her children to the whim of her son.

565. I accept that Lady Macarthur-Onslow expressed the preference that Mr Macarthur-Onslow should control the family companies, to the exclusion of Lady Hobhouse, in relation to their commercial activities, and she never deviated from that preference. That was not a decision that was vitiated in any way by her dementia, as it was a simple choice to make, and she maintained that choice consistently.

566. In relation to the fact that this February 2004 conversation was the only source of instructions to Mr Beardow to draft the 2004 will in a way that gave Mr Macarthur-Onslow sole control over the family companies, the evidence given by Lady Hobhouse concerning the increasing displays of animosity by her brother towards her, in the presence of her mother, becomes relevant. I will not summarise that evidence in detail, but note that it is primarily found in Lady Hobhouse’s primary affidavit in pars 174, 191, 192 and 198 to 201. I find that Mr Macarthur-Onslow exhibited extreme animosity towards Lady Hobhouse in front of his mother.

567. The significance of that evidence is that it would have been entirely irrational for Lady Macarthur-Onslow to still believe by 15 October 2004, if she ever did so, that she could achieve equality of distribution of her assets to her children by leaving the outcome solely in the control of her son. This is a major reason why I am unable to accept that Lady Macarthur-Onslow understood the effect of what she was doing when she made the 2004 will, in relation to the part of the will that gave control of the family companies exclusively to Mr Macarthur-Onslow.

568. Mr Beardow’s 12 February 2004 memorandum of advice to Lady Macarthur-Onslow contained a clear explanation of how the discretionary trust worked, in relation to the ability of Kalemon, as trustee, to exercise discretions concerning the distribution of the capital and income of the Trust.

569. It is not clear whether Lady Macarthur-Onslow read the memorandum of advice, or if she did, what she understood it to mean. There is no reason to suppose that Lady Macarthur-Onslow did not read the document, and it is likely that she did. The recommendations made in the memorandum of advice, were not, however, implemented. Mr Beardow did not explain why that is so. He did not give evidence of any discussions with Lady Macarthur-Onslow concerning the fate of the recommendations, so it is not clear how seriously Lady Macarthur-Onslow took them.

570. If it be assumed that Lady Macarthur-Onslow did read the memorandum of advice, it should also be assumed that she read the covering letter. If she did that, she would have understood that Mr Beardow was advising her that the recommended steps were designed to ensure that Lady Hobhouse was “not disadvantaged in regard to her ultimate economic interests”. It cannot be known what Lady Macarthur-Onslow made of that statement, but if she gave it any credence, it would naturally have caused her to understand that, in so far as it was recommended that steps be taken to remove Lady Hobhouse from any position of control of the family companies, that would not disadvantage her economic interest. The statement made by Mr Beardow could only jeopardise the capacity of a person in Lady Macarthur-Onslow’s position, who was suffering from moderate dementia, to understand the consequences of including in the 2004 will provisions that gave control of the family companies and the Trust to Mr Macarthur-Onslow.

571. Lady Hobhouse was removed as a director of Kalemon and MGPL during February 2004, and thereafter she took no part in the management of the companies. That fact may have tended to diminish the significance of the control issue in Lady Macarthur-Onslow’s mind.

572. Mr Beardow became aware on 24 February 2004 that Lady Macarthur-Onslow was suffering from dementia. Thereafter, he did nothing to determine the possible effect of the dementia on his client’s ability to give proper instructions, or to understand his advice, or to understand the effect of any document prepared by him on her instructions. He simply relied upon his own lay judgment, and even then, he does not appear to have adjusted his approach in dealing with Lady Macarthur-Onslow, by questioning her in a way that would give him an objective basis for believing that she actually understood the effect of which she was doing. He did not ask her to respond to questions that demonstrated that she was able to process complicated reasoning in her mind before expressing an appropriate answer.

573. On 14 May 2004, in a conference with Lady Macarthur-Onslow, Mr Beardow sought instructions concerning the number and identity of her executors. He positively advised Lady Macarthur-Onslow that, if she appointed four executors in total, who were her present advisors, that “should provide some comfort to Katrina that views other than Lee’s are taken into account with decision-making”. That simple statement was calculated to cause Lady Macarthur-Onslow to form an understanding that she could give control to Mr Macarthur-Onslow, but Lady Hobhouse would be protected in respect of equality of treatment by the ability of three independent executors to be able to control relevant decision-making. Mr Beardow did not explain to his client that the independent executors could renounce.

574. Sometime after the 14 May 2004 meeting, Mr Beardow had meetings with Lady Macarthur-Onslow in which she gave him instructions to remove the gift of the Darling Point apartment to Lady Hobhouse, to delete the legacy to her deceased housekeeper, and to include arrangements that would result in Mr Macarthur-Onslow receiving Kippilaw in his own name. As I have already observed above, there was nothing complicated about those instructions, and I am satisfied that they reflect Lady Macarthur-Onslow’s true testamentary intentions, uninfluenced by the effect of her dementia.

575. At the meeting held on 20 August 2004, at which Lady Macarthur-Onslow gave instructions to Mr Beardow concerning the gift of Kippilaw, her final instruction was “THEN HALF AND HALF”, as reflected in Mr Beardow’s brief note of the meeting.

576. This was in effect the primary instruction given by Lady Macarthur-Onslow to Mr Beardow concerning the disposition of almost the entirety of her estate, including the assets in the Trust.

577. The fact that Lady Macarthur-Onslow gave that instruction is inconsistent with her continuing to have an understanding that the structure of the companies and the Trust was such that an equal distribution of her estate by her will was the very thing that she could not achieve.

578. Mr Beardow did not respond to the instruction by reminding his client that her instruction was not achievable, or explaining why that was so.

579. On the balance of probabilities, Lady Macarthur-Onslow from this time on would have expected that Mr Beardow would draft the 2004 will in a way that had the effect that her estate would be distributed equally between her children, save for the special gift of Kippilaw.

580. Mr Beardow did not give evidence of ever explaining positively to Lady Macarthur-Onslow that the 2004 will would not necessarily have that effect.

581. Mr Beardow did not complete the preparation of the draft will until a further period of almost two months had elapsed.

582. He did not, as I have already noted, provide a draft of the 2004 will to Lady Macarthur-Onslow, in order to give her time to read and reflect upon the draft at her leisure.

583. In the meantime, on at least one occasion in October 2004, Mr Macarthur-Onslow asserted in discussion with his sister and mother that Lady Hobhouse would be protected by reason of the presence of independent directors and executors, and that Lady Macarthur-Onslow understood that that assertion was correct. I accept the evidence of Lady Hobhouse that her mother made numerous statements consistent with an erroneous belief that the presence of independent directors and executors would have the effect that Mr Macarthur-Onslow would not be in a position to control the companies unilaterally.

584. As I have already noted, at the conference with Lady Macarthur-Onslow on 15 October 2004, at which she executed her will, Mr Beardow relied upon the appearance of his client’s conduct and responses to his questions, in judging her testamentary capacity, but he did nothing of a positive nature to explore the true level of her understanding of the nature and effect of her will.

585. Notwithstanding that he had been given the “half and half” instruction, he did not specifically inform Lady Macarthur-Onslow that the draft will did not implement her instruction, in so far as giving Mr Macarthur-Onslow two more of both the A and B class shares in Kalemon would have the practical effect that Mr Macarthur-Onslow would, after the transfer of those shares to him, be able to control the exercise of Kalemon’s discretion as trustee of the Trust to distribute the income and capital of the Trust otherwise than equally as between Lady Hobhouse and Mr Macarthur-Onslow, and in fact in any way that he thought fit. (The cross claimants did not make any submission that the effect of cll 16(a)(i) and (ii) and 17(a)(i) and (ii) was not substantially inconsistent with the “half and half” instruction).

586. According to his own version of the explanation he gave during the meeting, he did inform Lady Macarthur-Onslow that dividing the hundred voting shares in Kalemon as to 51 to Mr Macarthur-Onslow and 49 to Lady Hobhouse would give the former control of Kalemon “which ultimately controls Mount Gilead and the trust”, and that lady Macarthur-Onslow responded: “Yes, that is what I want”.

587. The difficulty I have with this evidence, even if I were to accept Mr Beardow’s recollection of the conversation as being precisely accurate, is that it suggests that Lady Macarthur-Onslow was simply content to give control of the Trust to Mr Macarthur-Onslow, without asking how that would achieve her primary testamentary intention of treating her children with approximate equality of distribution of her estate.

588. I say primary testamentary intention, because that was the final instruction that Mr Beardow has reported was given to him by his client.

589. Furthermore, as I have already noted, Dr Darveniza was adamant that Lady Macarthur-Onslow told him that it was her plan to distribute her estate equally between her children, and that is apparently a factor that influenced his judgment that she had testamentary capacity. Dr Darveniza made this statement in his 23 June 2004 letter, in the context of having been informed by his patient: “Apparently there have been some family squabbles over their assets and estate etc.” At the time, Lady Macarthur-Onslow was directing her mind to the “squabbles” between her children, yet she expressed her testamentary intention to her doctor in terms of an equal distribution of her estate, not in terms of giving control of the Trust component of her estate to her son.

590. During the meeting at which the 2004 will was executed, Mr Beardow on his own evidence, gave incorrect advice to Lady Macarthur-Onslow that the effect of cl 11 of the draft will was that the income from the farming operations would be distributed by the executors to her two children. That advice was quite wrong, as the executors were given an absolute discretion to distribute the income as they thought fit without any obligation to ensure equality of distribution.

591. That erroneous advice is not directly material, as Lady Hobhouse has not made a submission that the court should not give effect to cl 11 of the 2004 will, if it were otherwise prepared to admit some parts of that will to probate.

592. However, the mistaken advice is significant in a number of important ways.

593. First, it wrongly suggested to Lady Macarthur-Onslow that the draft will created a situation of equality between her children, when in fact it did not do so. That could have lulled Lady Macarthur-Onslow into a false belief that the will generally complied with her principal instruction.

594. Secondly, it suggests that Mr Beardow was less than careful in the way that he explained the terms of the draft will to his client, and that lack of care could have extended to other provisions of the draft, even if not disclosed by Mr Beardow’s present recollection of the advice that he gave.

595. Thirdly, Mr Beardow gave evidence that his client read the will to herself before it was executed, and then said: “Yes, I understand all of that, I am happy to sign it”. It seems clear that Lady Macarthur-Onslow did not read the draft will closely enough to notice that, contrary to her solicitor’s advice, the draft said that the executors had a discretion concerning the distribution of the farming income, which did not require equality between her children. That fact casts considerable doubt on whether Lady Macarthur-Onslow was able to understand all of the terms of the draft will when she read it.

596. Had Lady Macarthur-Onslow not been suffering from moderate dementia, the way in which Mr Beardow went about getting his instructions for the will, and implementing those instructions, may have been reasonable and justifiable, even if somewhat unusual. However, the way in which he did so in this case entirely omitted to guard against the possible consequences of his client having dementia.

597. Ultimately, the most significant circumstance is that the primary instruction that Lady Macarthur-Onslow gave to her solicitor, which was a statement of testamentary intention that she also expressed to her doctor and her daughter, was not achieved by the 2004 will in relation to a proportion of her estate that was then hoped to represent in the order of 80% of the value of that estate. That outcome occurred without any real explanation from Mr Beardow at all, and did so as a result of episodic dealings over an eight month period that, in my view, undermined the practical ability of Lady Macarthur-Onslow to understand the real nature and effect of her will, in its most material part, particularly as a result of the fact that her moderate dementia significantly compromised her faculty of memory.

598. I do not think that this outcome can properly be categorised in the same vein as the case where a testator, with an actual capacity to understand the meaning and effect of the contents of his or her will, gives instructions to the drafter in the conventional way, and then relies upon the competence of the drafter to give effect to the instructions in words, where the testator is bound by the mistake of the drafter. In the present case, the whole of the process over the eight month period over which the 2004 will was prepared must be taken into account, and because of the effect of Lady Macarthur-Onslow’s dementia, cll 16(a)(i) and (ii) and 17(a)(i) and (ii) should not be accepted as expressing the true will of the testator.

Severance

620. The question is whether the court should admit the 2004 will to probate with any parts of that will deleted in respect of which the court is not satisfied that Lady Macarthur Onslow did not know and approve those parts in the relevant sense.

621. As I have noted above, the cross claimants put the submission that, if Lady Macarthur-Onslow did not know and approve part of her 2004 will, that will should be admitted to probate with cll 16(a)(i) and (ii) and 17(a)(i) and (ii) deleted.

622. That, if done, would remove entirely from the 2004 will the provisions which gave two more of Lady Macarthur-Onslow’s A and B class shares in Kalemon to Mr Macarthur-Onslow than to Lady Hobhouse, so that all of those shares would fall into cl 19 and be distributed equally between the two beneficiaries. Mr Macarthur-Onslow would consequently not gain control of meetings of members of Kalemon, and each of the two shareholders would have voting equality, with whatever consequences that might have for the management of the company.

623. Lady Hobhouse resisted this alternative submission by the cross defendants, and submitted that the effect of the absence of knowledge and approval of the terms of the 2004 will was that the entirety of the document should be passed over for probate purposes.

624. First, Lady Hobhouse submitted that there were additional aspects of the 2004 will that were not known and approved by Lady Macarthur-Onslow. The first was the change in the age of entitlement to receive capital from 55 years to 60. The second was the means by which the disposition of Kippilaw was to be achieved. The third was the provision governing the disposition of income from the farming and grazing business in cl 11(b), which Mr Beardow acknowledged he misdescribed to Lady Macarthur-Onslow.

620. I do not accept the submission that Lady Macarthur-Onslow did not know and approve of the change in age of entitlement from 55 years to 60 years. I have set out the part of Mr Beardow’s evidence in which he explained that change to Lady Macarthur-Onslow at par 271 above. That was a simple change, and I do not accept that Lady Macarthur-Onslow’s dementia prevented her from knowing of it or approving it.

621. As I have explained above, I am satisfied that Lady Macarthur-Onslow knew and approved of the arrangements in her will that would have allowed Mr Macarthur-Onslow to purchase Kippilaw from DWMO.

622. However, I have accepted that Lady Macarthur-Onslow did not actually know and approve of the effect of cl 11(b) of the 2004 will, for the reason that Mr Beardow explained its effect in a way that made it consistent with Lady Macarthur-Onslow’s instruction (equality of entitlement between her children), when the real effect of the provision was exactly the opposite.

623. The parties did not address the possibility of whether this shortfall in Lady Macarthur-Onslow’s knowledge and approval of the 2004 will could also be cured by a deletion from the document admitted to probate. If cl 11(b) was simply deleted, the income would fall into residue, and be shared equally between the children in conformity with Lady Macarthur-Onslow’s intention.

624. This submission is not an adequate reason for the court to decline to admit any part of the 2004 will to probate. Although, as I have indicated, a case could be made that the 2004 will should be admitted to probate with cl 11(b) deleted, that is not a course that Lady Hobhouse has asked the court to take. Had Lady Hobhouse taken that course, it would have been available to the defendants to argue that a mistake of this nature was not one that would justify the court in omitting the particular term from the instrument admitted to probate, on the principle identified by McMurdo J in Dore v Billinghurst, referred to above at par 447. The defendants have not been given an opportunity to contest this issue.

625. The second submission put by Lady Hobhouse in support of her position was that the cross claimants have not in any case dispelled the suspicion that Lady Macarthur-Onslow was unable, by reason of her failing mind, to know and approve of the entire will. She relied upon the complexity of the will, the period it took for Mr Beardow to draft it, the fact that Lady Macarthur-Onslow was not given the draft before the conference at which she executed the 2004 will, and many of its provisions had not been the subject of prior instructions.

626. I do not accept this submission, because, for the reasons that I have set out above, I have placed the level of Lady Macarthur-Onslow’s mental infirmity by reason of her dementia at a lower degree of disability than contended for by Lady Hobhouse. I have in effect found that Lady Macarthur-Onslow did know and approve the terms of the 2004 will, except for the effect of the provisions that gave control of Kalemon to Mr Macarthur-Onslow, and that gave the executors power to distribute the income from the farming and grazing properties.

627. The third submission put by Lady Hobhouse was that the excision of the clauses identified by the cross defendants would involve the making of a new testamentary instrument, and one that may not have reflected Lady Macarthur-Onslow’s true wishes.

628. My searches of the authorities that have dealt with the circumstances in which it is permissible for the court to grant probate of a will with some part deleted have not led me to discover any case that is substantially the same as the present one, in relation to the effect of the suggested deletions. As I have noted above, this is not a case where some term has been included that the testator did not know of. This is the case where, on the findings that I have made, Lady Macarthur-Onslow wished to achieve two testamentary outcomes; one being to give control of the companies to Mr Macarthur-Onslow for the purpose of ensuring that MGPL would comply with its agreement with Australand, and gain the benefits of that agreement; and the other being the equal division of her estate between her children, save for the special provision in relation to Kippilaw. Those intentions were mutually inconsistent; at least if the only way they were sought to be implemented in the will was by giving Mr Macarthur-Onslow control of the companies.

629. The problem in the present case is not that the deletion of cll 16(a)(i) and (ii) and 17(a)(i) and (ii) would change the meaning and effect of the balance of the 2004 will. It is that Lady Macarthur-Onslow did know and approve of those provisions in respect of one of the consequences they would have (being the direct consequence of giving control of the companies to Mr Macarthur-Onslow for the purposes of the Australand transaction); but the provisions had an additional consequence that was by and large of equal or greater importance to Lady Macarthur-Onslow, of which she did not know and approve.

630. The issue is whether a term in a will should be deleted from the document admitted to probate when it has two consequences, one of which is intended and the other is not.

631. It seems to me that in principle the resolution of this question must proceed on the basis that the testator either knew of the term and appreciated its effect, so that the term contains the real intention and reflects the true will of the testator, or it does not. In the present case, as I have found, on the basis of Lady Macarthur-Onslow’s objective conduct, her primary testamentary intention was to achieve an actual distribution of the property she owned or controlled equally between her two children, save for the special arrangement in relation to Kippilaw, and I am not satisfied that she knew that her will would not necessarily have that effect.

632. Accordingly, in my view, the 2004 will should be admitted to probate with cll 16(a)(i) and (ii) and 17(a)(i) and (ii) omitted.

633. It follows that probate will not be granted of the 1988 will.

Orders

639. Broadly, orders should be made by the court that have the following effect:

1. The plaintiff’s statement of claim should be dismissed.

2. On the cross claim, an order should be made, with appropriate consequential orders, that the 2004 will should be admitted to probate with cll 16(a)(i) and (ii) and 17(a)(i) and (ii) omitted.

640. I will ask the parties to bring in detailed short minutes of order to give effect to these reasons for judgment.

641. I will hear the parties on the appropriate costs order for the court to make.

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Decision last updated: 11 January 2017