Ornella Garbett v Rae Dawn Bear

1. [1]

   These proceedings concern the will of the late Edward Bear (“the testator”) who died on 13 April 2014. The testator is survived by his son Rodney Barnett Bear (“Rodney”) and his daughters Marilyn Gay Watts (“Marilyn”), Christine June Haines (“Christine”) and Cheryl Jon Fowler (“Cheryl”). Rodney has two children, Kerryn Stacey Bear (“Kerryn”) and Roxanna Lenice Bear (“Roxanna”). Mrs Rae Dawn Bear (“Rae”) had been married to Rodney but they were divorced at the time of the will. Marilyn, Christie and Cheryl were children of the testator from his first marriage and Rodney was an adopted son of the testator’s marriage to his second wife Joan (referred to as ‘Nan’). Joan predeceased the testator.

2. [2]

   By his will the testator appointed Ornella Garbett (“Ornella”) as his executrix. Ornella is not a relative and I shall describe her connection with the testator below. Dr S Chapple of Counsel appears for Ornella. Mr G Waugh of Counsel appears for Rae. Mr A Rogers of Counsel appears for Rodney and Mr M Gorrick of Counsel appears for Kerryn and Roxanna. I have been much assisted by the submissions of Counsel.

3. [3]

   The beneficiaries of the will are Rodney, Rae, Kerryn, Roxanna and Ornella. Some of the other family members have brought claims pursuant to s 59 of the Succession Act 2006 (NSW) (“the Act”) but those claimants have chosen not to take an active part in these proceedings which concern the construction of the Will.

4. [4]

   The will is dated 11 November 2009. Probate was granted of that will, which I shall refer to as “the Will” in the balance of these reasons, on 13 October 2014. Although the Will was produced by a firm of solicitors it was not drafted by those solicitors and the testator did not accept their advice. It not only contains a number of typographical errors but it is written in a style that is quite unusual and problematic. All Counsel in the case accept that the Will contains clauses that are inconsistent.

5. [5]

   It is agreed that, contrary to the impression created by the Will, the only asset of the testator are two shares in a company called Bear’s Pty Ltd (“BPL”). BPL was owned and controlled by the testator. The business of BPL appears to have been farming and the shares are regarded as having a value for the purposes of probate of $5 million although the actual value of a number of loans made by BPL is very much in doubt. The most substantial asset of BPL is real estate located at Bungalora in NSW. The property is contained in three contiguous lots and is known as the Bungalora Farm (“the Property”). The Property is 109 hectares in size and it is valued for the purposes of probate at $2 million: see Exh A p 91. Located on the Property are two substantial dwellings- one a home (referred in the submissions as “Dwelling 1”) in which the testator had lived for many years and a second dwelling (referred to as “Dwelling 2” in the submissions) in which Rae has resided since 1984 (“the Dwellings”). There was at the time of the testator’s death no written lease or license or right of property by which Rae occupied Dwelling 2.

6. [6]

   Ornella lives in a property adjoining or close to Bungalora Farm and she, for a number of years, assisted the testator in relation to BPL. In his later years she also provided nursing type assistance for the testator.

7. [7]

   A copy of the Will is found at pp 104- 106 of Exh A. A copy of the Will with clause numbers added is Exh B. I shall utilise those clauses for ease of reference but I note that Mr Waugh submitted that the testator had deliberately eschewed the use of clauses and that the numbering should not be used for any purpose other than that. I set out the entirety of the Will with the added clause numbering:

8. [8]

   The questions posed in the Summons are:

   1. (1)

      Whether on a true construction of the [Will] of the late Edward John Bear (the Testator) dated 11 November 2009…, the Executor is directed to subdivide the property at 840 Terranora Road, Bungalora NSW (the Property) into three lots:

   2. (2)

      If the answer to Prayer 1 is 'Yes', whether on a true construction of the will of the late Edward John Bear, the Testator:

   3. (3)

      If the answer to Prayer 1 is 'No', or the Property cannot be subdivided in accordance with the Testator's direction, whether on a true construction of the will of the late Edward John Bear:

   4. (4)

      If the answer to Prayer 3 is 'No', whether on a true construction of the Will:

   5. (5)

      Whether on a true construction of the will of the late Edward John Bear, the shares in Bear's Pty Ltd:

   6. (6)

      Whether on a true construction of the will of the late Edward John Bear, the sums of money held in Suncorp Bank Fixed Term Deposit Number 605304547 and Suncorp Bank Fixed Term Deposit Number 605658250 are:

   7. (7)

      Such further or other orders as the Court thinks fit.

   8. (8)

      Costs.

9. [9]

   Dr Chapple in his written submissions outlined the well settled approach to construction of wills referring to:

   1. (1)

      the observations of Isaacs and Powers JJ in Sidle v Queensland Trustees Ltd [1915] HCA 48; (1915) 20 CLR 557 at 560- 561 that:

   2. (2)

      the duty of the Court to ascertain from the testator’s language the intention, reading the will as a whole

   3. (3)

      the consideration that

   4. (4)

      the warning sounded by Joyce J in Re Sandford [1990] 1 Ch 939 at 941 that

   5. (5)

      in Hatzantonis v Lawrence [2003] NSWSC 914 Bryson J emphasised the importance of ascertaining the basic scheme which the testator has conceived for dealing with his estate

10. [10]

    To these principles can be added relevantly:

11. [11]

    The Will does not actually deal with the shares in BPL. The Will proceeds on the assumption that notwithstanding the fact that the testator did not own the Property and assets to which he refers he can direct what is to be done with the assets of BPL. There is authority for the proposition that a testator who is a sole shareholder and controller of a company can direct the transfer of property owned by the company: see Re Leigh's Will Trusts [1970] Ch 277, Re O'Callaghan (decd) [1972] VR 248 and Re Bowcock (decd); Box v Bowcock [1968] 2 NSWR 697 and see a recent application of this in Ireland as Executor of Estate of the late Gordon v Retallack [2011] NSWSC 846. No party disputed that the testator could direct his executrix whom he appointed as ‘managing director’ of BPL to deal with the assets of BPL. Mr Rogers contends however that Ornella cannot receive the shares as part of the residue because the testator did not want her to have any shares: see clause 13 of the Will.

12. [12]

    There are contained in Exh A earlier wills which had been prepared for the testator. No one submitted that those earlier wills assist the Court except to note that in all of those wills the executors appointed were family members whereas in the last will Ornella was appointed as executrix. The testator explained in clauses 12 and 13 why he had appointed Ornella in the Will. The circumstances of the preparation of the Will are summarised in Dr Chapple’s submissions:

13. [13]

    In my view the essential problem with the Will is that it contemplates sale of the Property with a division 7/10 to one group of family members (which I shall call “the clause 8 gift”) and 3/10 to the other group of family members (which I shall call “the clause 9 gift”) on the one hand, but on the other hand specifies that the sale will not include the Dwellings. The Dwellings are on land within the Property and cannot be excised from the Property without subdivision. If subdivision is not available in a fashion which will permit the creation of a 7,000 square metre block and a 3,000 square metre block then the two interests cannot both subsist. There was no evidence led that the council’s position on subdivision is likely to change within the next few years or indeed at any time.

14. [14]

    The most important issue is how the inconsistency between the clause 8 and clause 9 gifts on the one hand, and the gift to Ornella of the Dwellings (on 7,000 and 3,000 square metre blocks) on the other, in a context where subdivision to allow for two small lots is not possible is to be dealt with. There are four logical possibilities:

    1. (1)

       that the gift of the Dwellings to Ornella on the specified square metreage (“the block gifts”) be treated as having ousted the clause 8 and clause 9 gifts

    2. (2)

       that the clause 8 and clause 9 gifts be treated as standing and the block gifts treated as having failed because subdivision is not possible

    3. (3)

       that Ornella be permitted not to sell the Property for such time, however long, as subdivision is not permitted

    4. (4)

       that both the clause 8 and clause 9 gifts and the block gifts, being irreconcilable, fail in the circumstances

15. [15]

    Ornella’s position is reflected in [14](3) with a further option suggested by Dr Chapple which is that if the Property must be sold that Ornella be entitled to the share of the net proceeds that 10,000 square metres bears to the 109 hectares (or to 50% of the 109 hectares because that is the percentage of level land).

16. [16]

    Rodney and his daughters propound [14](2).

17. [17]

    No party represented before me propounded [14](4) although were both the clause 8 and clause 9 gifts and the block gifts to fail because of inconsistency the Property would, in effect, fall into residue because the shares in BPL would pass to Ornella subject to the separate argument concerning the conflict between clauses 13 and 15.

18. [18]

    There was agreement on one matter however and that concerns Rae. All parties before me accept that the testator’s intention was to ensure that Rae be able to continue to reside in Dwelling 2 for as long as she wishes or at least until she is able to afford alternative accommodation. It was agreed that if there is to be a sale of the Property the sale could, and should, include a term that will permit Rae to continue to occupy the dwelling for so long as she wishes or until she can afford alternative accommodation. When she will be able to afford alternative accommodation depends, at least in part, on what she receives as her 6% of the net sale proceeds. I might add that the testator was keen that Dwelling 2 have a curtilage of 3,000 square metres so that any license to occupy should reflect that fact. Rae’s interest in Dwelling 2 is not a life interest but a license to remain in that house for so long as she is unable financially to afford other accommodation “in town”: see Askew v Askew [2015] NSWSC 192 at [15] and the cases there cited and see Hoppe v McDavitt [1961] VR 381 per Pape J at p 387.34- p 389.30 and Pagano v Ruello [2001] NSWSC 63 per Simos J at [12]- [14]. Although there was no discussion about this, there may be some scope for agreement between Ornella and Rae concerning the abandonment of the right to occupy Dwelling 2 in return for the payment of a minimum sum that will ensure that Rae has accommodation elsewhere.

19. [19]

    Mr Waugh on behalf of Rae supported the plaintiff’s approach but he also contended that there was a variation to [14](3) available to the Court which is that since the subdivision into lots no less than 40 hectares in size is permitted the Property could be divided into two such lots, one of say 40 hectares and one of 69 hectares and the 40 hectare lot area would include the Dwellings. The 69 hectare lot could be sold and if in the future smaller lots were permitted the 40 hectare lot could then be subdivided by Ornella as the executrix. No other party endorsed that idea. It would create a 40 hectare lot to accommodate a 1 hectare endowment. It would defer the sale of that lot for a very long time and which for reasons I give below is not available.

20. [20]

    In my view the scheme which the testator had in mind had these five elements:

    1. (1)

       to appoint Ornella as his executrix and to ensure that she have full power to control BPL

    2. (2)

       to provide, out of the proceeds of sale of the Property, a significant fund of which Rodney and his daughters would receive 7/10ths and the other relatives, Rae and Ornella would receive 3/10ths

    3. (3)

       to ensure that Rae (who is now 71 years of age) was able to continue to live in Dwelling 2 until she is able to afford alternative accommodation

    4. (4)

       to ensure that the Dwellings were not sold or rented out to third parties and to that end to give the Dwellings to Ornella

    5. (5)

       the residue of his estate to go to Ornella

21. [21]

    I have described the major inconsistency of the Will. It assumes that the 3,000 and 7,000 square metre lots could be created and the balance of the land sold with (or even, on one reading without) subdivision, an assumption which has proved to be erroneous.

22. [22]

    There is evidence of a valuation of the Property from Herron Todd White (see Exh A pp 120- 138). It values the land at $1,350,000 and the improvements at $650,000, a total of $2 million: see Exh A p 129.

23. [23]

    The valuation notes that the zoning does not permit smaller residential lots but does permit, subject to Council approval, subdivision into two 40 plus hectare parcels: see Exh A p 128.

24. [24]

    There are a number of indications in the Will that the testator did not want the executrix to rush into a sale:

25. [25]

    The Will does not state that the Property is to be subdivided before sale and it seems that apart from the block gifts the testator recognised that the policy of Council may not permit it: see clause 4. The need for subdivision arises solely by inference from the making of the block gifts.

26. [26]

    The testator did grant Ornella as executrix the full power of decision and direction “to carry out the plan” and her decision on all matters is to be “final”. The plan, I infer, is one to obtain the best price possible for the Property.

27. [27]

    The testator speaks in some part of the Will of the “home” (see clause 6) and of “the land” in clause 3 and of “the farm” in clause 3. I do not think that any significance should be placed on the different usage. What was owned by BPL was the Property and I accept that what the testator wanted sold was the Property (see paras 3, 7 and 8) although as I have said he hoped that the Dwellings would not need to be sold.

28. [28]

    I accept that the testator may have thought that Council’s attitude to subdivision might change from when he made the Will but I am unable to accept that the clause 8 and clause 9 gifts were dependant on subdivision being achievable and that in the event that it were not that the gifts to all but Ornella would fail. I am also unable to accept that the testator was willing to see the sale of the Property postponed indefinitely in the hope that the Council might, a long time in the future, change its attitude.

29. [29]

    If the Property cannot be subdivided so as to enable the Dwellings to be contained on separate lots and for that reason no sale were to take place the clause 8 gift and clause 9 gift would be stymied.

30. [30]

    Dr Chapple submitted that Ornella has a power to postpone the sale either because of the words in clause 3, 4, 5, 7 and 15 or because of s 27B of the Trustee Act 1925 (NSW).

31. [31]

    I accept that Ornella does have a power to postpone the sale. I do not accept that the power to postpone sale was granted to her to delay the the sale to allow for the possibility that the Council might, after the testator’s death, change its position and permit subdivision at some unidentified and imprecise time in the future or until the expiry of the perpetuity period. Rather the power to postpone sale could be exercised to delay sale if the real estate market was weak or because, with knowledge of an impending change in legislation, the Property could soon become capable of subdivision. No evidence of that kind was put before me. The only evidence is that subdivision of the kind consistent with the block gifts is not possible.

32. [32]

    My attention was drawn to the fact that in relation to the earlier will the testator had been asked by his solicitors within what time the Property was to be sold (with the legacies not paid until the Property was sold) to which he had suggested that a time limit of ten years apply: see Exh A p 30. The testator obviously did not envisage some indefinitely long period but ultimately he did not choose to specify in the Will any period of time.

33. [33]

    It was clear from the evidence of Ornella (see paragraphs 45- 48) that the testator thought that his Property was worth $20 million based on the sale of a rural property in another location. The testator also told Ornella

34. [34]

    The testator believed that the retention of the Dwellings by Ornella would be “of no detriment to the price achieved” as a “developer [is] interested” in land not houses. Even accepting that a developer would not be interested in the Dwellings the implicit assumption is, of course, that the land can be subdivided. The valuation in evidence is based upon the current reality that subdivision is not possible and that the Dwellings do have substantial value.

35. [35]

    As Mr Gorrick pointed out, clause 6 is not actually expressed in dispositive terms. It does not give land or even the Dwellings to anyone. Clause 16 refers to the homes (by which I infer the testator meant the Dwellings) being “kept”. It says that after the sale these will become the sole property of Ornella- with a provision in the Contract of Sale to be included. Clause 16 does not presume a general subdivision of the Property but rather a sale with the Dwellings being excluded in a manner that is imprecise and unachievable.

36. [36]

    Mr Gorrick draws attention to what was said in Towns v Wentworth:

37. [37]

    There is a general rule that where there is an inconsistency between two parts of a will the later clause or part shall prevail (see 3:11 of ‘Construction of Wills in Australia’ (2007, LexisNexis Butterworths) by David M Haines QC) but this rule will not be applied where it is clear that the testator intended the first clause was intended to dispose of the gift: see Doggett v Lenehan [1926] St R Qd 84 at 88 and the cases there cited: Re Spencer (1886) 54 LT 59, In re Isaac; Harrison v Isaac [1905] 1 Ch 427, 43.

38. [38]

    There is a further rule referred to as the rule in Lassence v Tierney [1843-60] All ER Rep 47, although Mr Haines reminds readers that the rule was better stated in Hancock v Watson [1902] AC 14 at 22 which is to the effect that:

39. [39]

    Mr Gorrick submits that to the extent that the dispositions in clause 6, 16 and 17 are inconsistent with the dispositions in clause 8 and 9, clause 6, 16 and 17 when read together constitute an illegal or imperfect or impossible gift, or otherwise fail because they constitute an alienation of land in perpetuity, are vague and uncertain and “may well be impossible of performance”.

40. [40]

    I have no doubt that the clause 8 and clause 9 gifts were intended to be the principal gifts and were intended to take precedence over the block gifts. Further, since it is not possible to sell the Property without two small parcels of land since that would effectively create a subdivision where none is permitted, I am of the view that the attempted graft of a trust fails because of impossibility. The other problem is that the reason for the testator wishing to make the gift (even if subdivision were possible) is one that is unachievable because he seeks to impose as a condition of the block gifts that Ornella will not sell or rent and will keep them in the condition in which they are in “forever”. I do not accept the contention that the word “forever” should be ignored or read down.

41. [41]

    I do not think it is necessary to consider the question of whether the gift infringes the rule against perpetuities modified as it now is by the Perpetuities Act 1984 (NSW) (including the “wait and see” provisions).

42. [42]

    Dr Chapple has raised the question of whether, if the Property is to be sold, Ornella should be treated as having a notional interest in the sale proceeds reflective of the size of the land which the testator had intended her to have, ie 10,000 square metres. In this connection Dr Chapple refers to Muir v Winn [2009] NSWSC 857 per Bryson AJ (as his Honour had become).

43. [43]

    In Muir the principal asset was a property in rural New South Wales with several dwellings and other improvements, in size approximately 70 hectares. The testatrix direction subdivision with 100 acres to be sold to enable various cash gifts to be made and the balance to be divided between two other persons (clause 1.6.15). There was a clause which provided that if subdivision was refused or not obtained within two years of the date of her death than the executor could sell the whole property “in order to realise the gift referred to above”.

44. [44]

    His Honour noted that the internal logic of the document did not work and stated that there was, on the plaintiff’s argument,

45. [45]

    I think Bryson AJ’s approach in Muir is relevant to two aspects of this case. First, his Honour rejected the contentions of Mr Andrew Muir that the gift to Kathryn failed and the property went to him. In similar fashion I think it could not have been the testator’s intentions that Rodney and other family members would receive nothing if the property could not be subdivided. Dr Chapple’s submissions at [54], entirely properly in my view, concedes that it is unlikely that that was intended by the testator.

46. [46]

    Muir also provides an example of how the gift to Ornella of the two properties could be dealt with, ie, as Dr Chapple suggested that Ornella receive an amount from the net proceeds of sale which the 10,000 square metres bears to the total acreage or, perhaps, to the total level acreage of 50% of the Property.

47. [47]

    I can see some attraction in the approach posited by Dr Chapple but it is necessary to consider whether the testator had, by the terms of his Will, made clear why he wanted the prospective lots to be created and to go to Ornella and whether such a course is consistent with that intention.

48. [48]

    Leaving aside Rae’s right of residency (to which I have already referred and which can be accommodated), I think the testator has made clear his reason for the block gifts and the reason is that he does not want the houses sold or rented to anyone (but Rae or Ornella). Mr Gorrick described the testator as wishing to create a ‘memorial’ for himself which led Mr Gorrick to submit that the trust which the testator had engrafted on the gift failed, leading to the demise of that provision. Once it is accepted that there are no prospective separate blocks and cannot be because of the inability to subdivide there is not really anything to which the ‘trust’ can be engrafted. Dr Chapple submitted that the gift to Ornella could be seen as a contingent gift subject to subdivision of the land but if there is no prospect of subdivision within a reasonable period the contingency will have not been met and the gift fails.

49. [49]

    Treating the matter at a higher level of abstraction, there are, I think, several indications as to the reason that the testator wished Ornella to have the Dwellings was that he did not want the Dwellings “sold or rented out”. The testator stated that Dwelling 1 “must remain always as I would wish my own home” and that Ornella take the Dwellings with his blessing “for she will I know cherish and keep them for me forever”.

50. [50]

    I am unable to discern from the testator’s own words an intention that Ornella was to have the ‘benefit’ of the properties for any other reason than his desire to maintain the buildings intact and if that purpose could not be achieved then I do not think that the testator should be taken to have intended to bestow the properties on Ornella. In the light of that conclusion to which I have come I do not think that it is appropriate to embark on the course that Bryson AJ found, for good reasons I would respectfully add, attractive in Muir.

51. [51]

    The shares in BPL are another example of inconsistency in the Will because at clause 13 the testator says that Ornella will hold no shares in the company but at clause 15 he gives the residue of his estate to Ornella and the only asset in his estate are the two shares in BPL. Mr Gorrick contends that Ornella can never have a beneficial interest in the shares: T4.35.

52. [52]

    I think that there is a means of reconciling the two provisions which does no violence to the words the testator has used. As executrix Ornella holds the shares because they are the only asset of the testator. Ornella’s ownership of the shares is at present qua executrix on behalf of the estate and not in her own right. She is tasked with selling the Property owned by BPL. When she has completed that task and she has distributed the monies due under the clause 8 and clause 9 gifts she will have completed the task which the testator was keen for her to carry out (without holding the shares in BPL in her own right). There will be no further function for her to perform and she can then assign to herself the beneficial interest in the shares. Whatever is left in BPL will be hers, in effect, by reason of her owning all the shares in the company. I read the restriction on the executrix holding shares as a restriction on her holding the beneficial interest in the shares for so long as the Property remains unsold. I hold, therefore, that the shares in BPL fall into residue and are disposed of by the Will.

53. [53]

    In relation to the sums of money held in Suncorp accounts these monies are assets of BPL with which the testator sought to deal. To the extent that Ornella incurs costs maintaining the Property and, I infer, in arranging the sale of the Property she is entitled to pay for those expenses out of BPL assets.

54. [54]

    The testator intended Ornella to have the balance of funds left in the account but that will be achieved by her holding the shares and her entitlement will depend on whether there are creditors of BPL who are entitled to priority over any interest the testator (and hence Ornella) has.

Conclusion

1. [55]

   It follows that the answers to the questions posed in the Summons at [8] should be:

   1. (1)

      I think it follows from what I have said in [40] above that the answer to (1) is no, but I will give Counsel an opportunity to be heard on whether any other answer flows from my reasons

   2. (2)

      not applicable

   3. (3)

      (a) yes

   4. (4)

      not applicable

   5. (5)

      (a) yes

   6. (6)

      (a) no

Costs

1. [56]

   On the issue of costs, Counsel agreed that the costs of all parties should be paid on an indemnity basis out of the estate. This sensible arrangement reflects the considerable difficulty engendered by the content of the Will.