Serwin v Dolso

HIS HONOUR: In these proceedings, commenced by Summons filed 7 June 2019, Halina Serwin, a niece of Juliana Johnson (the deceased) seeks the opinion, advice and direction of the Court in respect of the following question:

She also seeks:

Whilst the first question was framed as a claim for judicial advice under s 63 of the Trustee Act 1925 (NSW), in reality, and in the events that have happened, the relief sought concerns the proper construction of the deceased's Will made on 20 February 2013 and also a question about administration of a deceased estate.

On 21 October 2014, this Court granted Probate in common form of the deceased’s Will to Adriana Margherita Dolso and Caroline June Salvio, the Defendants named in the proceedings.

On 23 July 2019, the Defendants filed a Statement of Cross-Claim, in which they sought the following relief:

The questions posed in the Statement of Facts, the original of which was marked as Exhibit D1, and to which I shall later refer, are:

On 31 July 2019, the Plaintiff filed a Defence to the Cross-Claim, in which she denied that “any agreement has been concluded or settlement reached between any of the parties because none of the parties accepted the terms of the other’s proposals”. The Plaintiff added that “even if there was an agreement [between a number of named persons] such an agreement has not been accepted by the cross-claimants”.

The dispute about whether an agreement had been reached did not remain the subject of dispute at the hearing. Rather, counsel for the parties accepted that the claim for relief under s 73 of the Civil Procedure Act 2005 (NSW) was not being pursued: Tcpt, 13 February 2020, p 2(04–09).

That this issue was no longer to be the subject of the relief claimed meant that a substantial part of the evidence that had been filed and served, and some of the facts the subject of dispute, were no longer relevant, and were not referred to. It was accepted that the part of the Cross-Claim that referred to that claim for relief (being paragraphs 2 and 3) should be dismissed: Tcpt, 13 February 2020, p 37(39) – p 38(03).

At the hearing, Mr K Morrissey of counsel appeared for the Plaintiff/Cross-Defendant and Ms M Pringle of counsel appeared for the Defendants/Cross-Claimants. Prior to the hearing, both had confirmed that the hearing would be concluded within one day. They also agreed that the Court should treat the matters relating to the Will of the deceased as a construction suit rather than an application for judicial advice. As well, counsel for the Defendants referred to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 54.3, which relevantly provides that proceedings may be brought for the determination of any question which could be determined in administration proceedings, including, amongst other things, “(b) any question as to the composition of any class of persons (i) having a claim against an estate, or (ii) having a beneficial interest in an estate, or (iii) having a beneficial interest in property subject to a trust”: Tcpt, 13 February 2020, p 20.

The nature of judicial advice proceedings was explained by Lindsay J in Re Estate Late Chow Cho-Poon (2013) 10 ASTLR 251; [2013] NSWSC 844 at [29]–[49]. His Honour noted that, while a construction suit will involve the joinder of parties who have an interest in opposing the relief sought, in judicial advice proceedings the manner in which other parties are given an opportunity to be heard is set out in ss 63(4) to 63(8) of the Trustee Act. As well, the Court’s jurisdiction whether to give advice is discretionary and may not be suitable for resolving disputed questions of fact.

Although the other children of Stanislaw were not joined as parties to the proceedings, I am satisfied that all are well aware of the proceedings. In any event, none of them sought to be joined as a party.

As stated, the Defendants filed and served a Statement of Facts (being Exhibit D1). The Plaintiff, in response, filed and served a Statement of Disputed Facts, a copy of which was marked Exhibit P2.

The following facts have been taken from these exhibits. What follows should be regarded as the findings of the Court.

The deceased was born in Uszen, Poland, in September 1922 and she died on 27 June 2014, at the age of almost 92. Her parents were Stanislaw and Karolina Habel, both of whom predeceased her. She had one known surviving sibling, Stanislaw Habel (to whom I shall refer as “Stanislaw”). He was born in October 1925, in Poland, where he resided continually until his death, in Poland, on 18 November 2014, at almost 89 years of age.

The deceased resided in Australia, continuously, from 1950 and adopted the surname “Johnson”.

The deceased was pre-deceased by her first husband, Angelo Josef, whom she married in 1951, and then by her second husband, Lucjan Rgeletski, whom she married in 1975. So far as the evidence goes, she did not marry, or enter into a de facto relationship, at any time thereafter. There were no children of either marriage.

On 20 February 2013, the deceased made her last Will appointing the Defendants as her executors (Cl 2(a)). She left the whole of her estate on trust to pay each of the executors a pecuniary legacy of $1,000 (Cll 3(a) and 3(b)). After the gift of the pecuniary legacies, Clause 3(c) of the deceased’s Will provided:

Stanislaw had not died at the date of the deceased’s Will and he survived the deceased. The sole question, the parties agreed, was whether he died “before attaining a vested interest”.

Stanislaw was survived by his three children, being Jan Habel, who was born in Poland, in September 1954, and who now resides in Canada; the Plaintiff, Halina Serwin née Habel, who was born in Poland in June 1959, and who continues to reside there; and Bozena Dadej née Habel, who was born in September 1969 and who, also, now resides in Canada.

The parties did not require the Court to determine who was to take Stanislaw’s interest, in the event that he was found to have died having attained a vested interest. As counsel agreed (Tcpt, 13 February 2020, p 20(31)–(45)):

In the Inventory of Property attached to, and placed inside, the Probate document, the deceased’s estate was disclosed as having an estimated, or known, value of $1,951,663. (I have omitted and shall continue to omit a reference to cents.) The estate was said to consist of real estate at Sylvania, a suburb in southern Sydney, New South Wales, about 22 kilometres south of the Sydney central business district (the Sylvania property) ($900,000), and moneys in current accounts and financial institutions on deposit (in total, $1,051,663). There were also personal effects and contents of no substantial value.

On 3 November 2014, the Defendants completed the sale of the Sylvania property. On 4 November 2014, the Defendants received the net proceeds of sale of that property ($1,019,167). On 13 November 2014, they received the net proceeds of sale of the personal effects and contents ($450). On 24 November 2014, they received the proceeds of the bank accounts ($1,074,056).

The total of the amounts received was $2,093,673 and it has been invested in an interest bearing account controlled by the partners of the Defendants’ solicitors, at various interest rates, calculated at between 0.7% and 2.5% per annum. (In the Defendants’ submissions, the amount said to have been collected was $2,101,663. The difference of $7,990 was not explained.)

Debts, funeral and testamentary expenses were paid, including the deceased’s electricity account, accountancy fees, taxation, legal expenses and executors’ commission. In a diary note, dated 9 September 2014, the Defendants are noted to have informed their solicitor that they “will apply for commission”: Exhibit P4.

In June 2018, the Defendants applied for, and were allowed, such commission or percentage for their “pains and trouble” as was just and reasonable pursuant to s 86 of the Probate and Administration Act 1898 (NSW).

On or about 7 November 2014, the estate’s solicitors received a letter with a declaration attached, from Stanislaw, in relation to his entitlement in the deceased’s estate.

On 14 November 2014, the executrix, June Salvio, made an interim distribution of the deceased’s personalty to Stanislaw. The items were shipped to the office of his Polish lawyer, Marek Eilmes.

Stanislaw Habel survived the deceased by more than 30 days (as is relevant for the purposes of s 35 of the Succession Act 2006 (NSW)).

On or about 21 November 2014, Mr James Soothill contacted the estate solicitor to advise that Stanislaw had died on 19 November 2014.

By 28 November 2014, the Defendants’ solicitors had retained accountants “to attend to the finalisation of [the deceased’s] taxation obligations”: see Exhibit P4.

On 9 December 2014, the solicitors for the executors wrote to the insurers of the deceased’s real estate confirming that the real estate had been sold with completion of the sale having occurred on 3 November 2014: Exhibit P4.

By letter dated 22 March 2016, the solicitors for the executors informed Mr Eilmes that “[o]ur clients are applying to the Supreme Court of New South Wales to pass their accounts and to allow commission or payment for their efforts in administering the estate …”: Exhibit P4.

The Notice of Assessment of income tax of the estate, for the financial year ended 30 June 2015, was issued on 11 March 2019: Exhibit P4.

The Court was informed, without objection, that the current amounts held on behalf of the estate of the deceased were $2,110,382 and $26,571, making a total of $2,136,953: Tcpt, 13 February 2020, p 10(19–31).

The deceased’s Will was drafted by Mr Lou Polito, who was also one of the attesting witnesses to the deceased’s signature on that Will. The other attesting witness was said to be Jessica Davis, described in the Will as “Secretary”.

Mr Polito did not depose an affidavit that was read by either party at the hearing. However, what appeared to be, the complete contents of the Will file relating to the Will of the deceased, were put into evidence: Exhibit D5.

In the documents tendered, were two relevant diary notes, one handwritten (presumably of Mr Polito) dated 16 January 2013 and one typewritten dated 17 January 2013. I set out the terms of each:

As stated, the only aspect for determination is the meaning of the term in the deceased’s Will “before attaining a vested interest”.

Counsel for the Plaintiff relied on authorities that support the proposition that a Will should be construed in such a way that effect is given to every word in it: see, for example, Re Croxon; Croxon v Ferrers [1904] 1 Ch 252 at 257–258 (Kekewich J); Re Evans; Public Trustee v Evans [1920] 2 Ch 304 at 309 (Russell J), 317 (Lord Sterndale MR).

Counsel seemed to accept, however, that the principle must yield to the fundamental principle that it is the duty of the Court to ascertain the deceased’s intention, and that words ought ordinarily to be given their ordinary meaning.

Counsel then referred to a number of cases which stated that, when used, the term “vested interest” meant “vested in possession”. He relied, in particular, on Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; [1965] AC 694; and Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; [1990] HCA 45.

He also relied upon a passage in Theobald on Wills (17th ed, 2010, Thomson Reuters) (at [18]):

Counsel also relied upon the decision of Rein J in Application by Elizabeth Marie Robinson [2015] NSWSC 1387, where his Honour had construed a Will which was in part, in the same terms. I shall return to this decision in more detail later in these reasons.

Counsel then submitted:

Counsel submitted that the words “dies before attaining a vested interest” required that the deceased’s estate must have been administered to the point where the executors were ready to distribute it, to Stanislaw, at the date of his death. Since that was not possible on 18 November 2014:

Counsel for the Defendants acknowledged that the decision of Rein J in Application by Elizabeth Marie Robinson:

Counsel accepted that no contrary intention to s 35(1) of the Succession Act appeared in the deceased’s Will.

Counsel referred also to s 93 of the Succession Act which relates to the protection given to a legal personal representative upon the publication of notice of intention to distribute the estate, such distribution not to take effect until six months after the date of death, and submitted that “[t]he interplay of these sections prevented the defendants - as executrices who were not able to exclude the possibility of a claimant for provision even though the estate could be distributed within the six month period - from making a final distribution to Stanislaw Habel before he died” and that “has an enduring effect on the administration of estates in general, and has the potential to cause or contribute to the entitlement problem which has arisen in this estate”.

The determination of this matter requires consideration of the principles, to some of which reference was made in the submissions of each of the parties, relating to the construction of wills.

In relation to the construction of a testamentary document, the object of a will construction suit is to ascertain the intention of the deceased as expressed in her, or his, Will, or codicil, when it is read as a whole. The intention of the maker of the testamentary instrument has been referred to as the “pole star” in the construction of wills: Thomson v Thomson [2008] VSC 375 at [11] (Vickery J).

As was observed by McMillan J in Re De Bruyn [2016] VSC 6 at [17]: “[t]he Court’s role is not to give a more rational meaning to the deceased’s [W]ill but merely to determine the intention as stated, or interpret what has been expressed in the [W]ill. In interpreting words in the context of the [W]ill as a whole, the Court may ignore, change or read in words by necessary implication”.

This was clearly expressed in Towns v Wentworth [1858] EngR 371; (1858) 11 Moo PC 526 at 543:

Campbell JA, in Byrne v Macquarie Group Services Australia Pty Ltd [2011] NSWCA 68, wrote at [2], in another context, that “construction is a process of coming to understand the meaning of a text whose meaning is disputed. It involves a consideration of the disputed text in itself, both as a whole, and in its constituent parts.”

In Marley v Rawlings [2015] AC 129; [2014] UKSC 2, a decision of the Supreme Court of the United Kingdom, which involved the rectification of wills, Lord Neuberger (with whom Lord Clarke, Lord Sumption and Lord Carnwath agreed), wrote, at [20], that “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 ...”. His Lordship also observed (at [23]) that this guidance is consistent with the historic principle that a will is to be construed from the testator’s armchair in the light of her, or his, surrounding circumstances at the time.

What has been described as the ten ‘incontestable principles’ for the construction of wills described by Isaacs J in Fell v Fell (1922) 31 CLR 268; [1922] HCA 55, at 273–275 should be remembered:

In Pohlner v Pfeiffer (1964) 112 CLR 52 at 77; [1964] HCA 8, the High Court considered whether the testatrix in her Will had evinced a contrary intention to a particular rule of construction. Windeyer J stated that he thought that the correct view was that:

In Coorey v Coorey (Supreme Court (NSW), Powell J, 22 February 1986, unrep), Powell J (as his Honour then was) said, in a passage approved by Bryson J (as his Honour then was) in Perpetual Trustee Co Ltd v Wright; Re Will of James Paul Gee Cox Junior, Deceased (1987) 9 NSWLR 18 at 32–33, repeated again by Hamilton J in Hatzantonis v Lawrence [2003] NSWSC 914 at [10], by Gzell J in Peoples v Simpson [2005] NSWSC 355 at [6], and by Campbell JA in Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234 at [19]:

In Muir v Winn [2009] NSWSC 857, Bryson AJ added at [24]:

In relation to the term “vested”, Campbell JA in Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234 wrote at [35]–[37]:

In Arnott v Kiss [2014] NSWSC 1385, I wrote at [41]–[43]:

In HS Theobald, SM Cretney and G Dworkin, Theobald on Wills (13th ed, 1971, Stephen & Sons) the following passage appears at [430]:

In Jepson v Bowman [2014] VSC 590, McMillan J wrote at [79]:

From all of the above, it is clear that the search is for the deceased’s “expressed intentions, not what she meant to say, but what she actually said”: Farrelly v Phillips (2017) 128 SASR 502; [2017] SASCFC 111 at [32] (Stanley J), citing Perrin v Morgan [1943] AC 399 at 406.

Of course, in New South Wales, in relation to the estate of a person who dies after 1 March 2008, it is necessary to consider the Succession Act 2006 (NSW), which, so far as is relevant, by s 32, provides:

The language is ambiguous if it can reasonably be interpreted in more than one way, or the words used can reasonably be given more than one meaning. The ambiguity may be apparent on the face of the will itself or when construed in the light of the surrounding circumstances. The section permits the Court to have regard to extrinsic material in construing a will. Extrinsic evidence can also be admitted under the section to assist in the interpretation. It is not open to the Court, even in the light of such evidence, to interpret the will in a way that is inconsistent with the words used.

In James v Douglas [2016] NSWCA 178, Meagher JA (with whom Leeming and Simpson JJA agreed) wrote, at [19]:

In Application by Elizabeth Marie Robinson, Rein J was asked to consider a bequest, and the gift of residue in a Will which provided:

At [6], Rein J noted that “[t]he critical question is what is the meaning of the phrase ‘dies before attaining a vested interest’”. His Honour then referred to authorities in favour of the word “vest” meaning “vested in interest” and others that were in favour of the word meaning “vested in possession”.

His Honour then wrote at [28]–[32]:

Apparently, there was no reference made by counsel in Application by Elizabeth Marie Robinson, to s 93 of the Succession Act and his Honour did not refer to it. That section is in the following terms:

It is necessary to bear in mind what was written in Tanner v New Zealand Guardian Trust Co Ltd [1992] 3 NZLR 74 (CA) at 77 the Court of Appeal stated:

As Cairns J said in In the Estate of Muirhead, Deceased [1971] P 263 at 265:

In this case, there are a number of aspects that I consider are of importance in determining the meaning of the deceased’s Will. These are:

It seems to me that there are three possible meanings of the words “dies before attaining a vested interest” in Cl 3(c) of the deceased’s Will, namely: (a) that they are tautologous and mean the same as “if [he] dies before does not survive me”; (b) that they mean “vested in possession” and that means the time when Stanislaw would take the estate beneficially; or (c) that they mean “before the estate is fully administered and available to be distributed”: see De Martin v Jacobs [2008] NSWSC 1378 at [13] (Young CJ in Eq).

Counsel characterised the question as being whether the phrase means “vested in interest” or “vested in possession”. However, I am of the view that the three alternatives better express what needs to be determined.

In the present case, the Court must place reliance on “the testator’s intentions as deduced from the will as a whole”. The Court should ascertain what the basic scheme that the deceased had conceived for dealing with her estate was, and then construe her Will, if it be possible, to give effect to the scheme so revealed.

The deceased was concerned with the order of succession. She intended to make provision for three eventualities, including that Stanislaw died before attaining a vested interest in the residuary estate. In that circumstance, she intended the Plaintiff, only, to receive her residuary estate.

Considering all of the matters to which I have referred, the deceased intended that the term “dies before attaining a vested interest” in Cl 3(c) of the deceased’s Will meant dies “before the estate is fully administered and available to be distributed” to him. The addition of the words referred to indicate that merely by surviving the deceased, Stanislaw would not be treated as having a vested interest and that more was required. To construe the Will otherwise would give no work to the expression referred to.

There is another way of looking at the matter. At the outset, it is useful to repeat what was stated by Professor Hayton in “Uncertainty of Subject-Matter of Trusts” (1994) 110 LQR 335. At 338, he wrote:

In White v Shortall (2006) 68 NSWLR 650; [2006] NSWSC 1379 at [170], Campbell J (as his Honour then was) described that analysis of the position of the beneficiary in an unadministered estate as “impeccable”.

Equity does not recognise or create, for residuary legatees, a beneficial interest in the assets in the executors’ hands during the course of the administration. Hence, a residuary beneficiary has no equitable interest in the assets of a deceased estate, other than the interest to ensure due administration which, it might be said, annexes to those assets, until such time as the executor assents to the holding of the residuary estate upon trust for the residuary beneficiary. The only right which the residuary beneficiary may exercise is that to compel the due administration of the deceased estate by the executor. The trust created is to preserve the assets, to deal properly with them, and to apply them, in the due course of administration, for the benefit of those interested according to that course.

An assent is the legal method by which the executor indicates that he, she or it, does not require particular property of a deceased person for the discharge of the liabilities of the estate, and that the property may pass to the beneficiary: “[i]t is an act by which an executor indicates that an asset is to vest in a beneficiary. It means that the executor no longer requires property of the deceased to pay debts, funeral expenses, or general pecuniary legacies of the testator. Whether or not an executor has assented is a question of fact”: Simmons v Ross [2018] VSC 306 at [77] (Derham AsJ).

Approaching the matter in this way, the fact that the Defendants distributed the deceased’s personalty to Stanislaw before his death meant only that they no longer required the personalty to pay debts, funeral and testamentary expenses, or the two pecuniary legacies. At the date of Stanislaw’s death, there was no trust fund consisting of the deceased’s residuary estate in which Stanislaw could be said to have any beneficial interest. Other than in respect of the personalty, there had been no assent by the Defendants. Indeed, at the date of Stanislaw’s death, they were not in any position to assent as they had not, by then, paid all of the debts, funeral and testamentary expenses of the estate.

It follows that Stanislaw had not attained a vested interest at the date of his death in the deceased’s residuary estate and that the Plaintiff is now entitled to the whole of the deceased’s residuary estate, as other than the costs of these proceedings, the administration of the deceased’s estate is complete.

Any issue about costs disappeared as there was really no dispute that the Defendants were entitled to their costs, calculated on the indemnity basis, of the proceedings. There is no need to make an order for costs in the Plaintiff’s favour as she inherits the whole of the deceased’s estate.

In the circumstances, the Court: