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[2015] NSWCA 38

Ell, Richard Austin v Ell, Stephen Maxwell

(1)Allow the appeal and set aside order (2) made in the Equity Division on 19 March 2014 dismissing the proceedings brought by Richard Austin Ell. (2)Set aside the order made on 5 May 2014 that the plaintiff, Richard Austin Ell, pay the defendant’s [sic] costs on the ordinary basis. (3)Declare that, pursuant to cl 5 of the will of Austin Maxwell Ell, deceased, the amount of $857,953 owing by Richard Austin Ell to the deceased was released. (4)Order that the defendants pay one-half of the plaintiff’s costs of the trial. (5)Order that the respondents pay the appellant’s costs of the appeal. (6)Grant the parties liberty to apply, exercisable within 28 days of the date of this judgment, with respect to any consequential orders or directions. (7)Grant the respondents a certificate under the Suitors’ Fund Act 1951 (NSW) in respect of the costs of the appeal.

Catchwords

CONTRACT – agreement between testamentary beneficiaries on conditional release of debt to the estate – whether agreement created debt enforceable by executors – effect of termination of agreement ESTOPPEL - estoppel by convention – whether agreement between beneficiaries of the estate founded on common assumption that there was an enforceable debt to the estate – whether agreement revealed adoption of common assumption SUCCESSION – wills – construction of will – whether the will released debt owing to the testator – whether release conditional upon debtor having provided registered security for debt – use of evidence of surrounding circumstances evidence to identify knowledge and intentions of testator

Cases cited

  • Agricultural and Rural Finance Pty Ltd v Gardiner[2008] HCA 57; 238 CLR 570
  • Allgood v Blake (1873) LR 8 Ex 160
  • Coghlan v SH Lock (Australia) Ltd(1985) 4 NSWLR 158
  • Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd[1986] HCA 14; 160 CLR 226
  • Fell v Fell[1922] HCA 55; 31 CLR 268
  • Grundt v Great Boulder Proprietary Gold Mines Ltd[1937] HCA 58; 59 CLR 641
  • Legione v Hateley[1983] HCA 11; 152 CLR 406
  • Osborn v McDermott [1998] 3 VR 1
  • Petersen v Moloney[1951] HCA 57; 84 CLR 91
  • The August Leonhardt [1985] 2 Lloyds Rep 28
  • Thompson v Palmer[1933] HCA 61, 49 CLR 507
  • Waterman v Gerling Australia Insurance Co Pty Ltd[2005] NSWSC 1066; 65 NSWLR 300

Legislation cited

  • Civil Procedure Act 2005 (NSW), § 6, Div 1
  • Succession Act 2006 (NSW), § 32

Judgment

  1. [1]

    BASTEN JA: The father of the appellant, the late Austin Maxwell Ell, died on 24 May 2007. In 2002 he had made a will appointing the first three respondents (Stephen Maxwell Ell, Michael Richard Ell and Edmund Francis Brailey) as executors and trustees, in the event that his wife predeceased him, as came to pass. Mr Brailey (referred to in the evidence as Ted) was the husband of the fourth beneficiary, Catherine Mary Brailey, the testator’s daughter. The scheme of the will was to leave the estate of the testator (referred to in the evidence as Max) in equal shares to his four children. Only one provision was controversial, namely cl 5, which purported to release the appellant from liability for moneys owed to the testator. One issue on the appeal related to the proper construction of cl 5 of the will.

  2. [2]

    On 22 October 2007, some five months after the testator’s death, the appellant entered into an agreement with the other beneficiaries (namely his three siblings) by which (broadly speaking) his siblings forgave half of the debt owed by the appellant to the estate on condition that his remaining obligation would be met out of his entitlements as a beneficiary and that $1 million of his share of the estate would be placed into a fund under the guardianship of his brother, Michael Ell. The second major issue in the case was whether any dispute as to the amount owing to the estate was resolved by the agreement or, in some other way, he was estopped from denying the existence of the debt.

  3. [3]

    Although the issues in dispute fell within a relatively short compass, their disposition gave rise to a three day hearing in the Equity Division. The proceedings were commenced by the present appellant, seeking relief on three broad bases, namely:

  4. [4]

    Robb J dismissed the proceedings with costs: Richard Austin Ell v Stephen Maxwell Ell [2014] NSWSC 259. With respect to the October 2007 agreement, the judge found that the respondents had lawfully terminated the agreement because the appellant was in breach. That finding is not challenged. With respect to the construction of cl 5 of the will, the judge held that the appellant’s debt was not released and, the October 2007 agreement having been terminated, remained payable in full to the estate. The application for an extension of time within which to seek rectification was rejected, although rectification would not have been provided in any event. On that basis, it became unnecessary to determine whether the appellant was estopped from alleging that he was released from the debt by cl 5 of the will. Nevertheless, the judge found that he would not have upheld the estoppel defence, had it been necessary to determine the matter.

  5. [5]

    The arguments for the appellant on appeal focused on the proper construction of cl 5 of the will and, in the event that it was necessary to seek rectification, the failure of the trial judge to grant an extension of time for such an application to be made.

  6. [6]

    The respondents resisted the appeal, including by reference to a number of grounds set out in an amended notice of contention, which may be summarised as raising three matters, namely:

  7. [7]

    The manner in which the respective arguments were presented (both at trial and on appeal) invited a degree of confusion as to the inter-relationship of the legal principles being invoked. A further element of confusion appears to have arisen from the presentation of evidence from each party, particularly with respect to the intentions of the deceased, which resulted in factual findings, but was not relevant to the legal issues to be determined. It is desirable to commence by setting out the written terms of the will and of the October 2007 agreement, on which the case primarily turned.

Background documentation

  1. [8]

    The structure of the will has already been noted: the dispute turned on the operation of cl 5 which read as follows:

  2. [9]

    Some background circumstances relevant to this provision are not in dispute. First, the testator’s wife did predecease him. Secondly, both at the date of execution of the will (25 June 2002) and at the date of testator’s death (24 May 2007) there were moneys which had been provided to Richard Ell from one of his parents or from their company Investment Ell Pty Ltd, which were characterised as loans repayable to Richard Ell’s parents, and thus ultimately to his father. Thirdly, the outstanding loans, both at the time of the will and the date of death, were made up of advances by (it may be assumed for present purposes) the testator to meet Richard Ell’s debts, including particularly repayments under a mortgage held by the Commonwealth Bank over the appellant’s residential property at 64 Military Road, Neutral Bay. Fourthly, at the time the testator executed his will there was an expectation (unfulfilled at any time) that the outstanding moneys would be secured by Richard Ell granting a second registered mortgage over his home. In these circumstances, the issue was whether cl 5 was effective to release any debts, the proposed mortgage in favour of the deceased not having come to pass.

  3. [10]

    The terms of the agreement of 22 October 2007 were more expansive than cl 5 of the will, but not by much. They were to be found in a document in the names of Stephen Ell and the appellant which read, in full, as follows:

  4. [11]

    The document was duly signed by Stephen Ell and Richard Ell. By 20 August 2007 (two months before the date of the agreement) an inventory of property had been filed on behalf of the estate in which the loan from the appellant was identified as an asset, in an amount of $857,953. In his affidavit in the proceedings (dated 26 October 2012) the appellant acknowledged that he had seen the amount recorded although he stated that he had “never verified” the quantum of the loan.

  5. [12]

    On 18 January 2009 Stephen Ell sent the appellant an email in the following terms:

  6. [13]

    At trial, this document was construed as a notice of termination of the October 2007 agreement for breach (or possibly anticipatory breach) of the appellant’s obligation to place the sum of $1 million into a managed fund, or similar investment. As the amount was to come out of the appellant’s share of his father’s estate, commitment of those moneys to other purposes allowed the trial judge to find that breach of contract had been demonstrated and that the respondents’ act of termination was lawful in all the circumstances. That finding is not challenged: however, the legal consequence of the termination of the agreement was squarely in issue on the appeal, not because the appellant sought to rely upon the agreement, but because the respondents asserted by way of contention that they had an “accrued contractual right to have the estate administered on the basis that the appellant was indebted to the estate for the debt of $857,953 …”. The contractual right was said to arise from the terminated October 2007 agreement.

Other evidence

  1. [14]

    For parties involved in litigation of this kind, the court proceedings are usually the conclusion of, or at least an integral part of, a long standing relationship. Each has a story to tell, no doubt in the belief that true justice will only be accorded if his or her circumstances are fully understood. The role of legal representatives is to curb (with due explanation) those entirely understandable expectations. However, that constraint is not always rigorously applied. In the present case there was significant evidence tendered and admitted which could only be relevant to infer an intention on the part of the testator or of the parties to the October 2007 agreement. So far as the evidence of the intentions of the testator were concerned, admissibility depended on the operation of s 32 of the Succession Act 2006 (NSW), as well as the Evidence Act 1995 (NSW) and, if relevant, the general law. [1] No party raised an issue as to admissibility under the Succession Act with respect to the construction of the will and it need not be addressed further. With respect to the October 2007 agreement, evidence of subjective intention may have been inadmissible: however, a failure to take that point is now immaterial – evidence as to subjective intention remains irrelevant to the legal issue to be determined, which is the objective meaning of the terms of the agreement, having due regard to the circumstances known to the parties at the time of execution of the document.

  2. [15]

    While the distinction between evidence demonstrating surrounding circumstances and evidence of the subjective intention of a particular person may readily be stated, the distinction is not sharply defined. That is because a statement in a document may only properly be understood with the benefit of knowledge of the matters known to the responsible party, which may explain the intention revealed by the words used. For example, the term “security” in cl 5 of the will might well have included an equitable proprietary interest in the land in respect of payments made to the mortgagee to secure the interest of the mortgagor. On the other hand, as the evidence demonstrated in this case, where the lender anticipated obtaining a registered second mortgage to secure advances made to the owner of the land, the term “security” might be understood, as was accepted in the present case, as referring to such a second mortgage. That is to say, the testator intended to use the term in that (limited) sense. Evidence as to the extrinsic circumstances will thus allow an inference to be drawn as to the intention of the testator in adopting particular language in his will. Such evidence is admissible, in a way that evidence as to what the testator said as to his intentions would not be. [2]

  3. [16]

    Applying this principle the Court is entitled to look at particular evidence as to circumstances regarding the arrangements between the appellant and his father before and around the time that the will was executed in 2002. Relevantly, the appellant stated in his affidavit: [3]

  4. [17]

    The testator’s personal solicitor was Mr Peter Williams of Miranda. He received instructions from the testator to prepare his will and a mortgage in connection with advances made by him to his son Richard Ell. Based on his notes of a conference which took place with the testator on or about 19 June 2002, Mr Williams recounted the following conversation: [4]

  5. [18]

    The documentary evidence indicated that Mr Williams undertook a search of the appellant’s property and prepared a mortgage and loan agreement. Copies of the unexecuted documents were in evidence. The documentation also revealed correspondence between Mr Williams and the manager, Commonwealth Bank of Australia, dating from January 2002, seeking advice as to the Bank’s requirements with respect to its consent to a second mortgage. These details were not forthcoming for some time, but on 6 June 2002 Mr Williams was able to provide a statement of his clients’ assets, presumably being in part fulfilment of the Bank’s requirements.

  6. [19]

    It is clear that no second mortgage was registered over the appellant’s property. Mr Williams’ affidavit concluded with the following statement: [5]

  7. [20]

    On the basis of this material, the following inferences were available: at the date the will was executed (25 June 2002) the testator:

  8. [21]

    In those circumstances, to read cl 5 as ineffective to release the appellant from his obligations to repay the advances, because it only applied to secured loans and none were secured by the mortgage which was never executed or registered over the appellant’s home, would, arguably, be to adopt a literal reading of the language of the clause which was inconsistent with the testator’s intention to be inferred from the objective circumstances as to his knowledge of affairs at the date the will was executed. On the assumption that such a finding is open, it is appropriate to consider whether the appellant is precluded from pursuing that argument in this Court.

(a) background

  1. [22]

    In response to the claims based on the construction of cl 5 of the will and, in the alternative, for rectification of cl 5, the respondents’ pleaded that they and the appellant had “conducted their affairs regarding the deceased’s estate since the deceased’s death on the mutually assumed and agreed basis that the [appellant] admitted and acknowledged that he was indebted to the estate in the sum of at least $800,000.” [6] It was further alleged that the written agreement was entered into “[p]ursuant to the mutual assumption”. The respondents alleged detriment resulting from distributions having been made on the basis of the mutual assumption and alleged that the appellant was estopped from resiling from the mutual assumption.

  2. [23]

    On the last day of the hearing, the respondents sought leave to amend to plead that the agreement of October 2007 constituted an “accord and satisfaction” of the appellant’s claim that the debt had been released pursuant to cl 5 of the will. The trial judge refused the belated application to amend. [7] He did so on two bases. The first was that he could not exclude the possibility that the appellant may have been entitled to lead further evidence relevant to the nature of the agreement. With regard to the evidence then before him, he noted that Stephen Ell had given evidence that he (Stephen) “entered into the agreement on the basis that there was no issue about the enforceability of the debt”. [8] That, the trial judge noted, rendered it “doubtful that the [respondents] could establish an accord and satisfaction on the evidence.”

  3. [24]

    This finding appears to have fortified the judge in his view that the amendment might have reopened the evidence, a course which he was entitled to reject, but it also raised a second issue as to the precise nature of the supposed compromise. Referring to the analysis of the Victorian Court of Appeal in Osborn v McDermott [9] the trial judge noted that a different analysis might arise depending upon whether the accord was effective immediately or whether it was conditional upon performance of executory elements of the agreement. The judge noted, [10] referring to the “sparse terms” of the letter of 22 October 2007:

  4. [25]

    The trial judge considered that a different analysis might, however, be available, based on the finding that, once the beneficiaries had terminated their agreement, the executors were entitled to rely upon the original debt owing to the estate. [11]

  5. [26]

    In this Court the respondents effectively ignored the question of further evidence and sought to rely upon the actual findings of the trial judge with respect to the effect of the agreement, combined with factual findings as to what the appellant “understood” or believed to be a common assumption underlying the agreement of October 2007.

(b) construction of October 2007 agreement

  1. [27]

    For the purposes of construing the agreement, factual findings as to the state of mind of the appellant were beside the point. Nor were they relied upon by the trial judge in construing the agreement: they occurred in an earlier discussion concerned with issues of credit. In considering the terms of the agreement, the trial judge identified three issues of construction. These concerned the meaning of various phrases, namely, (a) “your future share of the Estate”, (b) “Managed fund type investment, or other like product”, and (c) “under the guardianship of Michael Ell”. [12] In considering the meaning of the second phrase, the judge looked at the surrounding circumstances and stated: [13]

  2. [28]

    After considering a proposed variation to the agreement and the question of breach, the trial judge returned to consider a further issue of construction of the agreement, namely whether the proposed reduction was to be one-half of the acknowledged debt, or such amount as left $400,000 outstanding. He resolved that issue in favour of the latter construction. [14]

  3. [29]

    It is noteworthy that, except when considering the application for leave to amend, the trial judge made no finding as to the effect of the agreement on the construction of cl 5 of the will or any entitlement of the appellant to rely upon cl 5 of the will. Leaving to one side the question of common assumptions or understandings, the agreement was entirely silent with respect to a number of issues, including the precise amount of the debt, whether the whole of the debt was owed to the estate, whether any part of that identified in the inventory was unenforceable for reasons other than cl 5 of the will, as well as the possible effect of cl 5. If there had been an abandonment of an asserted legal right, one might have expected an express provision to that effect, identifying with some care the dispute or disputes which were being compromised and settled. If there were a compromise of a claim with respect to the estate, one would have expected the agreement to be made on behalf of the executors, though not necessarily excluding the beneficiaries.

  4. [30]

    The amended notice of contention relied upon by the respondents in this Court stated in part that: [15]

  5. [31]

    There is no rational basis for concluding that the agreement replaced a possibly contested claim by the estate with an uncontestable entitlement to the same amount. To the extent that the amended notice of contention challenged the rejection of the application to amend the defence, based on the existence of such a contractual right, that contention might have been rejected as not reasonably arguable. In any event, the course taken by the trial judge in the exercise of his discretion to reject an amendment proposed after the trial (including submissions) had concluded was not attended by any relevant error.

(c) conventional estoppel

  1. [32]

    It is not entirely clear whether the respondents pursued a defence of conventional estoppel, absent the existence of a contractual entitlement arising from the October 2007 agreement. However, on the assumption that the respondents sought to maintain their pleaded defence, that claim should be addressed. The pleading stated [16] that the parties had conducted themselves on the basis of a common assumption as to a particular matter, where it would be unjust for either party later to depart from the common assumption. [17] The common assumption was said to be an admission and acknowledgement by the appellant that he “was indebted to the estate in the sum of at least $800,000”, reflecting the introductory words to the October 2007 agreement. Perhaps because it was forensically strategic to do so, the respondents noted that a “convention may be created by the operative terms of the contract so that the parties contract to be estopped.” [18] However, it is not entirely clear why it is necessary to speak in terms of a “contractual convention”: if there is a contractual agreement, for example that certificates or statements of account will be taken to be final, it is the terms of the contract which will preclude a party from challenging the relevant document. In any event, if the agreement did not give rise to a term of sufficient particularity in the present case, reliance on a “contractual convention” will not assist.

  2. [33]

    Where the conventional basis upon which the parties conducted themselves is not revealed by the contract, it is open to the parties to establish a common assumption by other means. There may be respects in which such a common assumption can be articulated will be imprecise; nevertheless, it must be clear that there was a common assumption and as to the core content. [19]

  3. [34]

    There is authority for the view that the common assumption must be communicated or manifested by both parties; [20] that reflects the explanation given by Dixon J in Thompson v Palmer [21] (and repeated in Grundt v Great Boulder Proprietary Gold Mines Ltd [22] ) that “[w]hether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party.” In Coghlan v SH Lock (Australia) Ltd [23] Samuels JA (with whom Hope JA agreed), observed in relation to this passage “I do not think that, in the context of Grundt’s case, the reference to ‘the adoption’ of the assumption excludes estoppel if … the assumption was originated by the party asserting the estoppel and fostered by the opponent.” The High Court has since reiterated that “there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship”. [24] That raises a factual question.

  4. [35]

    Because it is necessary that both parties have adopted the common assumption as the conventional basis of their transaction, [25] at the very least the common assumption should be capable of articulation, once the factual circumstances have been established. In the present case, the material relied on was that the agreement assumed the existence of a debt owed by the appellant to the estate. In order to preclude the appellant running the construction argument, a further element was necessary, namely that the appellant and the respondents, being aware of cl 5 of the will, all accepted that it did not release the debt.

  5. [36]

    There was no evidence that the appellant entertained that assumption. In his first affidavit, the appellant identified a conversation with his father in the following terms: [26]

  6. [37]

    His attitude thereafter was set out in the following passage: [27]

  7. [38]

    With respect to the circumstances immediately preceding the 22 October 2007 agreement, the appellant gave evidence in the following terms: [28]

  8. [39]

    In the course of cross-examination, the discussion in the days preceding and including 22 October 2007 were put to the appellant, but not in a manner which challenged the evidence in his affidavit. In particular the following exchange took place: [29]

  9. [40]

    He was taken back to that answer in re-examination: [30]

  10. [41]

    At that point objection was taken and he was not allowed to complete the answer.

  11. [42]

    If there was a common assumption as to the debt to the estate and the effect of cl 5, it was not one shown to have been accepted by the appellant: indeed, the cross-examiner expressly sought to avoid the topic being touched upon.

  12. [43]

    The agreement of 22 October 2007 was negotiated between the appellant and Stephen Ell, who signed the relevant document. Mr Stephen Ell referred to the circumstances leading up to the agreement in the following terms: [31]

  13. [44]

    Stephen Ell was cross-examined at some length in relation to the tension between his father’s express wish to treat his children equally and the advances made during his lifetime to the appellant. In particular, he was asked whether he had discussed a mirror provision to cl 5 of his father’s will which was to be found in his mother’s will and of which he became aware following her death. He said he had not discussed it with his father. [32] With respect to cl 5 in his father’s will, the following questioning occurred: [33]

  14. [45]

    This evidence does not permit an inference that the agreement of 22 October 2007 was entered into upon a common assumption that cl 5 of the will did not release the appellant’s debt to the estate.

  15. [46]

    The trial judge dealt with the defence of conventional estoppel “upon the assumption that, as a matter of law, the will released the debt”, contrary to his conclusion with respect to the construction of cl 5. [34] His relevant factual findings were as follows:

  16. [47]

    The trial judge then proceeded to address the question as to whether a departure by the appellant from the common assumption would “cause detriment” to the respondents. The judge was not persuaded that it would. [35] That conclusion followed from a finding that the respondents had received increased benefits, to which they were not entitled if the debt had been forgiven and which they would therefore have to repay to the estate. No issue was raised as to the obligation to repay, nor was there any evidence of change of circumstances in reliance upon the payments.

  17. [48]

    There was a challenge to this finding by the respondents, on the basis that the agreement of 22 October 2007 “objectively compromised the dispute.” For the reasons explained above, no dispute had been articulated and no compromise recorded. Nor did the evidence support a finding that the parties proceeded on the basis of such a compromise. However, had it been necessary to pursue the issue further, a question might have arisen as to how the compromise operated. The appellant’s statement of claim asserted a breach of fiduciary duty on the part of the respondents in terminating the agreement in January 2009. The breach was said to arise from a duty not to profit from their position as executors and trustees and not to act in a manner involving a conflict of interest as against the beneficiaries. That claim was rejected on the basis that the 22 October 2007 agreement was “between the four beneficiaries, and not between [the appellant] and the three executors.” [36] That left open a separate question as to how the common assumption (if there were such) between the beneficiaries would bind the executors, one of whom was not a party to the agreement, when the appellant sought to enforce his rights against the estate. In the circumstances, it is not necessary to address these questions further. On the basis that there was no contractual compromise of any dispute as to the operation of cl 5 and an absence of any assumption that the debt was legally owing to the estate, subject to one further issue, there is no bar to the appellant pursuing his claims based on the operation of cl 5 of the will.

(d) inconsistent claims for relief

  1. [49]

    The remaining issue, raised at trial, and repeated on the appeal, was that the appellant could not pursue inconsistent claims. That is, he could not both seek to enforce his contractual entitlements under the agreement of 22 October 2007 and maintain that his debt to his father had been waived by cl 5 of the will. That was because the agreement was based on the assumption that an amount was owing to the estate from the appellant. The trial judge disposed of this submission on the basis that the appellant was entitled to make claims in the alternative, although he would not be able to obtain relief on inconsistent bases.

  2. [50]

    The question of inconsistent relief did not arise at trial because, although the appellant succeeded in establishing a binding agreement entered into on 22 October 2007, he was found to have been in breach of the agreement at the time of its termination in January 2009 and thus not entitled to enforce its terms. He also failed on his argument as to the proper construction of cl 5 of the will. The issue was pressed by the respondents on appeal in circumstances where the appellant did not seek to challenge the findings with respect to the agreement, but did seek to pursue his argument that cl 5 released his debt to the estate. The respondents’ written submissions stated the issue in the following terms:

  3. [51]

    This submission fails for two reasons. First, although the appellant is bound by the unchallenged finding as to the existence of the 22 October 2007 agreement, that agreement was lawfully terminated by the respondents (or at least the three of them who were party to the agreement) and is not the source of the relief sought by the appellant. Secondly, for the reasons already outlined, there was no “accrued contractual right” to the indebtedness to the estate, arising from that agreement.

  4. [52]

    It is not necessary in the circumstances of this case to consider whether the entry into the contract should have led to an election between inconsistent rights, in the sense discussed in Agricultural and Rural Finance Pty Ltd v Gardiner, [37] the case not having been run on this basis.

Construction of clause 5 – findings

  1. [53]

    The background circumstances in which the will was prepared have been set out above. [38] It has been noted that although the reference to moneys owing to the testator might have been ambiguous or uncertain, the proceedings have been run on the basis that the amount referred to was all of the moneys advanced by the testator, his wife and moneys paid from the family investment company. The debt was $857,953. There might also have been ambiguity or uncertainty as to the meaning of “security”. Again, however, the case was run on the basis that it referred to a second mortgage to be granted by the appellant to the testator over his home in Neutral Bay. Finally, it is common ground that no such mortgage was executed or registered. A different issue might have arisen if the mortgage, prepared by Mr Williams, had been executed, but not registered.

  2. [54]

    The construction issue is, in substance, whether the reference to moneys owed “on the security of” the appellant’s home was intended to identify that which was owing (which was not in dispute) or was intended as imposing a condition on the release, that is, the release would be effective only if security were granted. In determining which of these alternative constructions should be accepted, no objection was taken to reliance upon the extrinsic evidence set out above. The extrinsic evidence demonstrated that the purpose of seeking security was to protect the residual equity in the home from possible third party creditors of the appellant. There was no basis for any inference that the release of the debt was intended to be conditional upon the existence of such security. Indeed, the effect of the release would be to render the security unnecessary and ineffective.

  3. [55]

    The evidence indicated that the outstanding debts at the time the will was prepared were in the order of $450,000; the debts increased by a further $400,000 between the date of the will and the date of the testator’s death. Over that period, the testator continued to make advances with, it should be inferred, knowledge that the security he had sought in 2002 was not in place. The evidence that Mr Williams forwarded a mortgage in registrable form to the testator for execution, but that the testator took no further steps to have it executed by the appellant, supports the inference that he knew no security was in place. There is no basis for concluding that his intention, at the time the wills were drawn up and executed, to release the appellant from all moneys owing to him (and his wife) was abandoned. If the reference to security in the will was intended as a precondition for such release, one would have expected that he would have taken steps to have the mortgage executed. The fact that he did not do so, nor change his will, supports the conclusion that the reference to security was intended as a means of identifying the debts, rather than as a precondition to the operation of the release. That construction should be accepted. Accordingly, the effect of cl 5 was to release the appellant from liability to the estate for the agreed amount of $857,953.

  4. [56]

    This conclusion having been reached as a matter of construction of the terms of cl 5, it is unnecessary to address the availability of relief by way of rectification.

Conclusions

  1. [57]

    These conclusions require that the appeal be allowed and that there be a declaration as to the effect of cl 5 of the testator’s will. However, the notice of appeal sought further orders, namely a declaration as to the amount owing by the estate to the appellant and an order that the respondents “be brought to account to make good” that amount, together with interest. Whether orders to that or any similar effect could properly be made could not be determined on the basis on which the appeal proceeded. Although it is true that all the beneficiaries and the executors were before the Court, it was also common ground that the estate was finally administered some years ago. If there is to be some further relief sought in these proceedings, which is otherwise than by consent, the matter will need to return to the Equity Division. If orders can be made by consent, the parties should have leave to provide short minutes to the Registrar of this Court. Without wishing to curtail the possibility of reaching consensus, liberty to apply for the purpose of filing consent orders should be limited to a period of 28 days after the date of this judgment. (Legal representatives and parties are reminded of their obligations under Pt 6, Div 1 of the Civil Procedure Act 2005 (NSW).

  2. [58]

    There remains a question as to the appropriate order for costs with respect to the trial. Although the judgment below will be set aside, counsel for the respondents noted that a major part of the case at trial was taken up with matters on which the appellant was ultimately unsuccessful, and remains so. Counsel for the appellant acknowledged that there was force in that submission and suggested that the appellant should receive one-half of the costs of the trial, as a fair apportionment. [39] That submission should be accepted.

Orders

  1. [59]

    The Court should make the following orders:

  2. [60]

    WARD JA: I agree with Basten JA.

  3. [61]

    GLEESON JA: I agree with Basten JA.

Unofficial copy. Source: NSW Caselaw. Refer to the official version for authoritative text.