In the Estate of Christine Leanne Farrell
[2024] ACTSC 382
•4 December 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | In the Estate of Christine Leanne Farrell |
Citation: | [2024] ACTSC 382 |
Hearing Date: | 12 August 2024 |
Decision Date: | 4 December 2024 |
Before: | Ainslie-Wallace AJ |
Decision: | See [71] |
Catchwords: | WILLS, PROBATE & ADMINISTRATION – RECTIFICATION –– Principles of rectification pursuant to s 12A of the Wills Act 1968 (ACT) – whether will ought to be rectified so as to give effect to testator’s probable intention – where testator’s will executed in the UK – where testator subsequently moved to Australia – property purchased in Australia |
Legislation Cited: | Administration and Probate Act 1929 (ACT) s 8C |
Cases Cited: | Brown v Heffer (1967) 116 CLR 344 |
Parties: | Josephine Walden (Applicant) |
Representation: | Counsel W Sharwood (Applicant) |
| Solicitors MV Law (Applicant) | |
File Number: | SC 116 of 2024 |
AINSLIE-WALLACE AJ:
By application filed on 25 March 2024, the applicant, Josephine Walden (the executor), as executor of the will of the late Christine Farrell (the testator), seeks orders to rectify certain clauses of a will executed in the United Kingdom (the UK) by the testator on 17 July 2020. The testator died on 8 March 2023 in Australia.
The proceedings were conducted ex parte.
It is helpful to set out some factual background to give context to the present application.
Background
The testator lived in Australia and married here. There are three children of that marriage, Sonja, Scott and Anna. The testator moved to the UK where she married again and of that relationship there were two children, Sophie and Megan, who is also known as Gretel.
The testator and the executor were in a relationship. The executor lives in the UK.
On 17 July 2020 in the UK, the testator executed a will. At that time, the testator owned real property in the UK and held investments there.
At the beginning of 2022 the testator was diagnosed with Alzheimer’s disease.
In January 2022, the testator moved from the UK to live in Canberra because she wished to be closer to her children of her first marriage who lived in Canberra, for their support in her illness and because Australia offered better health care services. She moved to Canberra on 28 January 2022. Her health had deteriorated to the extent that the testator was admitted to hospital on her arrival.
Towards the end of 2021, the testator sold her house in the UK and the sale was settled on 11 February 2022. The executor, who at that time held the testator’s power of attorney, transferred the sale proceeds to the testator’s Australian bank account.
10. One of the testator’s children living in Australia, acting as the testator’s financial manager, used part of the proceeds of the sale of the UK property to buy an investment property in the ACT on the testator’s behalf. The testator never lived in that property.
11. At the date of the death of the testator, the estimated value of her property in the ACT was in the order of $1,119,628. In the UK, she held a sum of £358,744 in a bank account. There were no liabilities in the estate.
Domicile
12. The Supreme Court has jurisdiction to grant probate of a will of any deceased person leaving property within the Australian Capital Territory (s 9 of the Administration and Probate Act 1929 (ACT)). Section 8C of that Act says that on an application for a grant of probate, the Supreme Court must not grant the relief sought unless it has made a finding about the domicile of the deceased person at the time of death.
13. The will was executed by the testator while she was living in the UK in 2020. The will expressed her domicile as the UK. At the time of her death, she was living in Australia.
Had the domicile of the testator changed?
14. The evidence establishes that the testator had clearly formed the intention to change her domicile to Australia and had acted on it by selling her property in the UK and moving to Australia for the express purpose of living close to her children and being able to access better health care.
Applicable Law
15. Additional submissions were sought on the question of the appropriate law to be applied to the resolution of the issues in this case.
16. Section 15G of the Wills Act 1968 (ACT) (the Wills Act) provides:
The construction of a will shall not be affected by reason of any change in the testator’s domicile after the making of the will.
17. In Re Lungley, Deceased [1965] SASR 313 at 316, Napier CJ said:
Prima facie the presumption is that a will is to be construed and to take effect under the law in force in the domicil [sic] of the testator …
18. A reference to the law in force in the domicile of the testator has been held to be the law of the testator’s domicile at the time of making of the will.
19. Here, the relevant law is that of the UK as at July 2020, the date of the making of the testator’s will, namely the Administration of Justice Act 1982 (UK).
20. The issue and the application of the law of the domicile of the testator was explained by Thomas J in Re Blyth [1997] 2 Qd R 567 on the question of which law is to be applied to the construction of a will. He said that questions of construction are to be determined according to the law of the testator’s domicile at the time of making the will and
[m]ost other relevant questions, including essential validity of the will, validity of a particular gift, status of a recipient, law applicable to the trust and its administration and in general the administration of the estate are determined according to the law of the testator’s domicile at the time of his or her death.
(Citations omitted.)
21. His Honour continued and said at 571, line 31 that
[b]roadly speaking questions of construction are those affecting the way in which the court endeavours to understand the intention of the testator.
22. Here, the question is the testator’s intention and that falls to be determined according to the law of the UK.
23. In Marley v Rawlings [2015] AC 129 Neuberger LJ succinctly formulated that approach in the following terms at 144, [19]:
19 When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party’s intentions.
(Citations omitted.)
24. Lord Neuberger continued:
20 When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context.
(Citations omitted.)
25. It was submitted that the approach developed by Neuberger LJ has been adopted and cited with approval in Australian cases. I accept that whether the Court is applying the UK law or the law of the ACT, the nature of the enquiry under both acts to determine the testator’s intention is the same.
26. Where the testator’s intentions are ambiguous or unclear, the Court would have regard to s 21 of the Administration of Justice Act 1982 (UK) to ascertain those intentions and, once those intentions are established, to determine the validity of those intentions and to give effect to them, the law of the ACT, that is the Administration and Probate Act 1929 (ACT), is to be applied.
27. There are two clauses of the testator’s will, Clauses 5 and 6 to which the application for rectification relates.
28. At the time the will was signed, the testator was living in the UK and had property and investments there. The evidence before the Court comprised amongst other things, an affidavit of the executor setting out conversations she had with the testator and the notes of the solicitor who took instruction to prepare the testator’s will.
29. It is clear that at the time the will was made, it was expected that the testator’s estate would be subject to the Inheritance Tax Act 1984 (UK) (the IHT Act). The terminology of both Clause 5 and 6 speak directly to that act.
30. In broad terms, the effect of the IHT Act is that there is a financial threshold beyond which a person’s estate is taxed. At the time of the making of the will that threshold was £325,000. The tax levied on the estate above that amount was 40%.
Clauses 5 and 6
5. Gift of my Residence
5.1 “My Residence” means my qualifying residential interest ( within the meaning of the Inheritance Tax Act 1984) at the time of my death. “The Residence Nil Rate Band” means the relief conferred by s8D inheritance Tax Act 1984 “Residence Nil Rate Band Beneficiaries” means My Children SONJA ROCHEL IRWIN ( nee Pryor) and SCOTT GRANVILLE LEE PRYOR of 6 South Wood Retreat Bonython Act 2701 Australia and ANNA NADINE PRYOR of 22 Fingleton Crescent Gordon ACT 2906 Australia and the biological children of the above named SONJA and SCOTT and ANNA.
5.2 I leave My Residence(or the proceeds of the sale thereof) to my children SONJA and SCOTT and ANNA in equal shares. If either of them shall die before me leaving a child/children who survive me then such child/children shall take the share of the Residence which the deceased beneficiary would have taken if they had survived me. If there shall be more than one child they shall take in equal shares.
5.3 My Trustees shall pay the income of the share to the Residence Nil Rate Band Beneficiaries (including any who take a share under the above sub-clause) during his or her life. Section 31 of the Trustee Act 1925 shall not apply.
(Errors in original.)
31. The term “qualifying residential interest” is defined in the IHT Act as a home used as a residence within the person’s estate which was used as a dwelling house immediately before the person’s death.
32. Where in Clause 5 the will refers to “residential nil rate band”, that is a reference to a benefit to the estate where, after death, a person’s residential interest goes to the person’s descendants (s 8D of the IHT Act). From the solicitor’s notes, it seems that to devise the testator’s interest in the residential property to her three children would add some £175,000 to the tax-free portion of the estate.
Clause 6
6 Legacies
6.1 I give SMILE TRAIN UK registered charity 1114748 such a sum as shall constitute a donated amount equal to TEN per cent (%) of the baseline amount in relation to the general component of my estate and
6.2 I give MEDECINS SANS FRONTIERES (UK) registered charity 1026588 such a sum as shall constitute a donated amount equal to TEN per cent (%) of the baseline amount in relation to the general component of my estate.
33. In Clause 6, the term “baseline amount in relation to the general component of my estate”, is a reference to the taxable part of a person’s estate. Where a testator makes a bequest to a charity of 10% or more of the baseline amount, the overall tax rate on the estate reduces to 36%.
34. The solicitor’s file notes that the impacts of the IHT Act were the subject of a number of discussions with the testator. For example, a file note of 10 July 2020 contains:
[G]eneral discussions about IHT. The NRB and the Residence NRB as well as how leaving more than 10% to charity affects IHT and how IHT is calculated.
35. A file note of 13 July 2020 accompanying the second draft of the will contains a reference to “using the IHT allowances”. There are further calculations of the effect of the bequest to charities. It is noted that after deduction of the baseline amount and the Residence Nil Rate Band, a sum was left that would be taxed at 36% which clearly comprehends the lower overall tax rate referable to the charitable donations.
36. It was argued and I accept that the testator’s intentions in relation to both Clauses 5 and 6 are clear, and the words are unambiguous. In relation to Clause 5 she intended her three children living in Australia to have the benefit of the house in the UK or its proceeds.
37. At the time of death, the testator was domiciled in Australia. The property in the UK had been sold, the proceeds transferred to her Australian bank account and another property in the ACT purchased using those funds.
38. By an email of 21 July 2023, the solicitor for the estate sought an opinion on the effect of these changes from Mr Will Mumford, a solicitor in the UK specialising in probate, trusts and wills. He said in relation to Clause 5:
The gift defines Residence by with [sic] reference to “my qualifying residential interest” which is a term in IHT legislation which refers to a home used as a residence within a person’s estate immediately before the person’s death … This does not apply to [the testator’s] estate.
… I do not think that the words “or proceeds of sale thereof” save the gift as [the testator] did not own a qualifying residential interest at the date of her death.
39. The principle of “ademption” would also apply, that is, as explained by the plurality in Brown v Heffer (1967) 116 CLR 344 at 348:
But ademption occurs also where the property has been so dealt with that by the rules of equity it must be considered at the death as having been converted into other property, such as money, which the words of gift are not apt to comprehend.
(Citations omitted.)
40. In relation to Clause 6, Mr Mumford said:
The charity gifts are expressed as being an “amount equal to 10 per cent (%) of the base line amount”. The term base line amount is derived from IHT legislation and is, broadly speaking, the taxable part … of a person’s estate ...
…
1. the baseline amount is only relevant if the estate is subject to IHT. If we succeed in establishing that [the testator] did not have a deemed UK domicile, and no IHT is therefore payable, the gifts to the charities fail ...
41. Again, the testator’s intention is clear, to leave 10% of part of her estate to the two nominated charities. As with Clause 5, the issue is not what the testator meant but how to give effect to those intentions having regard to the changed circumstances of the testator.
42. This then leads to the provisions of s 12A of the Wills Act.
Rectification
43. Section 12A of the Wills Act provides:
(1)If the Supreme Court is satisfied that the probate copy of the will of a testator is so expressed that it fails to carry out his or her intentions, it may order that the will be rectified so as to carry out the testator's intentions.
44. Before an order for rectification can be made, the Court must be satisfied that one of the circumstances set out in s 12A(2) of the Wills Act exist.
(a) any of the following apply in relation to circumstances or events (whether they existed or happened before, at or after the execution of the will):
(i) the circumstances or events were not known to, or anticipated by, the testator;
(ii) the effects of the circumstances or events were not fully appreciated by the testator;
(iii) the circumstances or events arose or happened at or after the death of the testator; and
(b) because of the circumstances or events, the application of the provisions of the will according to their tenor would fail to give effect to the probable intention of the testator if the testator had known of, anticipated or fully appreciated their effects.
Is s 12A enlivened?
45. It is clear that at the time the will was executed, the testator expected her estate to be subject to the IHT Act. Advice received by the solicitor for the executor confirmed that no Inheritance Tax (IHT) is payable on the testator’s estate.
46. It is also clear that the testator intended that her three children living in Australia should receive her UK residence or the proceeds of sale of that residence. She also intended to provide a donation of 10% of some part of her estate to the two charities.
47. As the note from the UK solicitor reveals, the change in domicile and the sale of the UK residence has had the effect that the gifts referred to in both Clauses 5 and 6 fail with the result that the will does not carry out the intentions of the testator and the application of the will provisions as they stand would fail to give effect to the probable intention of the testator.
48. Thus, s 12A(2)(ii) of the Wills Act is enlivened.
49. In In the Estate of Rummer [2017] ACTSC 277; 12 ACTLR 258, after considering the authorities, McWilliam AsJ (as her Honour then was) at [32], set out an approach to the consideration of whether a clause in a will may be rectified, an approach I gratefully adopt.
50. The Court must:
(a)Determine the meaning of the will;
(b)Determine the testamentary intention of the testator;
(c)Determine whether the will accurately reflects that intention; and, if not,
(d)Determine whether the will can be rectified and, if so, in what terms.
Determine the meaning of the will
51. In Re Estate of Love [2017] ACTSC 5, Mossop AsJ (as his Honour then was) considered this issue and in so doing referred to the “fundamental rule” of construction of wills that was stated by Viscount Simon LC in Perrin v Morgan [1943] AC 399 at 406:
[T]he fundamental rule in construing the language of a will is to put upon the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case – what are the “expressed intentions” of the testator.
52. The “expressed intentions” of the testator here were to provide her three children in Australia with the UK residence or the proceeds of sale of it. She clearly intended to provide the two nominated charities with 10% of the baseline amount in the estate.
53. In both respects, those intentions cannot now be fulfilled as I am satisfied that both gifts have failed.
Determine the testamentary intention of the testator
54. Those intentions are clear, that the three Australian children should have the benefit of the UK residence or its sale proceeds. It is probably unnecessary given the wording of Clause 5 to go to the supporting extrinsic evidence which, as I have said, comprises the conversations of the executor with the testator as set out in the executor’s affidavit, the file notes of the solicitor who prepared the will and the testator’s email to the solicitor in the course of the preparation of the will. Importantly, of those documents is a document headed “[t]o whom it may concern – the background to my Will” written by the testator and dated 17 July 2020 – the date on which the will was executed. In that document she makes her intention with regard to Clause 5 clear which is that the three Australian children should have the benefit of the UK house. Additionally, a file note prepared by the testator’s solicitor confirming her advice says:
The value of your residential property goes to the 3 children in Australia £ 550,000 (or what it is sold for at the time of your death or at the time you go into Care).
55. As to the gifts to the charities, as I have already set out, the terms of the will indicate the testator’s intention that the charities should receive 10% of a portion of her estate, and while the calculation of what that is and how it is achieved is not altogether straightforward, it is clear.
Determine whether the will accurately reflects that testamentary intention
56. Given the effect of the testator’s change of domicile and the liquidation of the UK property, the terms of the will in Clauses 5 and 6 do not now reflect that intention.
Clause 5
57. In relation of the gift to the children of the property, the terms of Clause 5 are incompetent to achieve the testator’s intention which was to provide her children with the property. The proposed rectification sought was that in lieu of Clauses 5.1, 5.2 and 5.3, the following appear:
5.1 I leave my property located at 61 Florence Taylor Street, Greenaway ACT (Title reference Volume 1249 Folio 51) equally among my children Sonja Rochel Irwin, Scott Granville Lee Pryor and Anna Nadine Pryor.
5.2 If any of my children do not survive me leaving a child/children who survive me, then such child/children shall take the share of the property which their deceased parent would otherwise have taken if they had survived me. If there shall be more than one child, they shall take in equal shares.
5.3 My Trustees shall pay the income of the share to the Residence Nil Rate Band Beneficiaries (including any who take a share under the above sub-clause) during his or her life. Section 31 of the Trustee Act 1925 shall not apply.
58. It was proposed that Clause 5.3 be deleted.
59. I am satisfied that to rectify the terms of Clause 5 as proposed would have the effect of carrying out the testator’s intention.
Clause 6
60. The proposed rectification of Clause 6 poses some difficulty. As Mr Mumford opined in his email to the solicitor for the executor, the bequest was posited as a percentage of the “base line amount”, which now has no application to the estate of the testator, and leaves open the question; 10% of what?
61. It cannot be doubted that the testator intended to benefit the named charities. The affidavit of the executor was to the effect that the testator always included gifts to charities in her will. For the estate it was submitted that the gift in Clause 6 was intended to benefit the charities but with the additional benefit of reducing the overall amount of tax payable by the estate.
62. The difficulty lies in determining how that 10% is to be arrived at.
63. The solicitor for the executor, Jane Carey, in an affidavit affirmed on 5 August 2024 set out three scenarios which she proposed would give effect to the testator’s intentions.
64. The first sets out the calculation of the estate in Australian dollars as if the IHT Act were to apply, that is, calculating the baseline amount of the estate, $894,805.91, and taking 10% from that amount to reflect the disposition to a charity. The result being $89,480 to each. At the hearing it was conceded that this calculation failed to deduct the total funeral costs of $20,764, which means that 10% in this calculation is something less than $89,480.
65. The second proposed scenario takes the whole of the estate, less the value of the Canberra property, less the liabilities of the estate incurred since the death of the testator, and from the remaining amount of $428,636, deducts 10% to represent the gift to each charity of $42,863.
66. Finally, the third scenario proposes that the charities receive 10% each of the total estate without regard to the gift to the children of the proceeds of sale which would amount to $147,837 each.
67. In determining which of these three posited scenarios best meets the testator’s intention, it is in my view artificial to consider Clause 6 in isolation; rather, Clauses 5 and 6 should be considered together. That is because the testator’s clear intention both from the words of the Clause and the accompanying extrinsic documents was that the children should have the UK house or its proceeds, and here, that translates to the Canberra house. It would not be in accordance with the testator’s intention if it were to be included as part of the total estate for the purposes of working out how the charitable gift of 10% to each charity should be considered. Thus, I do not accept scenario three as properly reflecting the testator’s intention.
68. Further, while the Clauses were clearly drawn understanding that the estate would be subject to IHT, that is no longer applicable and to now construct a “baseline amount” which does not apply would be wholly artificial and would not properly reflect the testator’s intention.
69. It follows that in my view, the calculation of the 10% in relation to each gift to the charities should be as a percentage of the residual estate after deduction of the value of the Canberra property and after deduction of liabilities of the estate incurred since the death of the testator.
70. Clause 6 should be rectified as follows:
6.1 I give to Smile Train UK registered charity 1114748 a sum of $42,863.69.
6.2 I give to Médecins Sans Frontières (UK) registered charity 1026588 a sum of $42,863.69.
Orders
71. I make the following orders:
(1)Clause 5 of the will of the late Christine Leanne Farrell, signed 17 July 2020, be rectified as follows:
(a)5.1 I leave my property located at 61 Florence Taylor Street, Greenaway ACT (Title Reference Volume 1249 Folio 51) equally among my children Sonja Rochel Irwin, Scott Granville Lee Pryor and Anna Nadine Pryor.
(b)5.2 If any of my children do not survive me leaving a child/children who survive me, then such child/children shall take the share of the property which their deceased parent would otherwise have taken if they had survived me. If there shall be more than one child, they shall take in equal shares.
(c)Clause 5.3 be deleted.
(2)Clause 6 of the will of the late Christine Leanne Farrell, signed 17 July 2020, be rectified as follows:
(d)6.1 I give to Smile Train UK registered charity 1114748 a sum of $42,863.69.
(e)6.2 I give to Médecins Sans Frontières (UK) registered charity 1026588 a sum of $42,863.69.
| I certify that the preceding seventy-one [71] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Acting Justice Ainslie-Wallace. Associate: Date: 17 December 2024 |
4
4