Re Cobcroft

1. [1]

   HIS HONOUR: These reasons are provided with respect to three pieces of litigation. Here and throughout this judgment I will refer to people by their first name, without meaning any disrespect, because the surname in almost every case is Cobcroft. The three pieces of ligation are:

2. [2]

   Case A involves questions as to the construction of clause 10 of John’s will. There are also two cross-claims. The first by the first and second defendants, the two sons of Brien, Nicklas and David. This cross-claim is for rectification of clause 10. The second cross claim by the six minor children of Nicklas and David, the eldest of whom is Daisy, is that John’s will of 27 May 2005 and Brien’s will of 1 August 2005 were mutual wills.

3. [3]

   Case B involves some questions as to the construction of clauses 15 to 18 of Brien’s will. There are also two cross-claims analogous to those filed in respect of John’s estate.

4. [4]

   In both Cases A and B, the plaintiffs are the executors or surviving executors of the will.

5. [5]

   Case C is a claim by Jennifer under s 59 of the Succession Act 2006 (NSW) (a family provision claim) in respect of Brien’s estate. Case C only becomes a case that has to be tried if Jennifer is unsuccessful in Cases A and B.

6. [6]

   I had previously heard proceedings involving John’s will when I had to construe clause 9. My judgment is [2013] NSWSC 774 and is reported (2013) 9 ASTLR 397. I refer to this later as “my former judgment”.

7. [7]

   I heard the present three sets of proceedings together on 23 February 2015. Mr NC Hutley SC and Mr M Green appeared for the plaintiff in Case A. Mr BJ Burke appeared for the plaintiffs in Case B. Mr MS Willmott SC appeared for Nicklas and David and Mr Raoul Wilson SC appeared for Jennifer. Mr C Harris SC appeared for Daisy and those in like interests.

8. [8]

   All counsel provided helpful written submissions. Mr Willmott’s submissions very helpfully set out the facts in a logical manner. I indicated at the hearing that I would adopt those facts if there was no objection, and there was none. Accordingly, with thanks to Mr Willmott for his industry, I set out the following statements of fact about which there is no contest.

9. [9]

   I should add:

10. [10]

    All interested parties were joined: those whom I have not mentioned filed submitting appearances.

11. [11]

    It is now necessary to set out part of John’s will and part of Brien’s will.

12. [12]

    John’s will, so far as presently relevant provides,

13. [13]

    Brien’s will is, so far as presently relevant provides,

14. [14]

    The only matter of fact that I should make clear is that under John’s will in clause 9 (vi) his widow Denise was to receive the income from Bodumba Pty Limited. Under Brien’s will, his shares in Bodumba Pty Limited passed to Jennifer as well as the direction that the Trustees should cause Bodumba Pty Limited or Parraweena Pastoral Co to pay Jennifer during her life one thousand dollars ($1,000.00) per week, indexed.

15. [15]

    I now turn to the questions which I am asked to answer. In Case A they are (a) to (f ) as follows:

16. [16]

    In Case B, they are (a) to (m) as follows:

17. [17]

    After the proceedings were commenced, Mr Hutley SC gave a comprehensive opinion. I have not seen that in accordance with the usual procedure in will construction cases, but it would seem that all other counsel agreed with almost everything that Mr Hutley SC had written. Two consequences flow from this. First, because all the eminent counsel in this case agree on the answer and my consideration of their written and oral submissions confirm that they were correct in taking this course, I can very briefly answer most of the questions which are posed. The second is a point raised by Mr Willmott and supported by Mr Wilson that these proceedings which were initially listed for three days (but which were heard in one), were overkill. The Trustees should merely have sought judicial advice and that the extra costs should not be borne by the residuary beneficiaries. I will come to this in due course.

18. [18]

    So far as questions of construction in John’s will are concerned, the focus is on John’s Bodumba shares. He held a hundred B shares and three preference shares. In his will these pass to Denise, in Denise’s will they pass to Brien, in Brien’s will they pass to Jennifer. Mr Hutley SC poses the question “did the act of distribution by John’s executors comply with the will which preserved his interest in the Parraweena properties?”. Mr Hutley SC submits that the answer to this question is, “yes”. Basically this is because the hundred B shares had no substantial rights, no interest in capital and the three preference shares were really just vehicles for dividends. Mr Wilson would agree with this. Mr Willmott, on the other hand, submits, though I must confess, relatively faintly, that the Bodumba shares were part of the gift of the testator’s direct or indirect interest in Parraweena or the Parraweena Highlands.

19. [19]

    I need accordingly to turn to questions (a) and (b) in John’s estate.

20. [20]

    As noted in fact (f) above, at the date of John’s death, Parraweena comprised land in nine titles, three of which were in John’s sole name, two in Brien’s sole name and four in the name of Parraweena Pty Ltd. Parraweena Highlands Pty Ltd was the proprietor of the whole of Parraweena Highlands.

21. [21]

    The two properties were also worked in partnership by the various interests of which John and Brien were equal venturers.

22. [22]

    It is thus clear that John did not own the whole of the land comprising Parraweena or Parraweena Highlands in his own right, neither did Brien.

23. [23]

    What then does the gift to the Trustees to “maintain and preserve the interests that I own directly or indirectly with my brother Brien in the rural properties known as “Parraweena” and “Parraweena Highlands” together with my interests in the business known as “Parraweena Pastoral Co” cover?

24. [24]

    There are a number of cases where a testator has purported to give land in his will whereas in fact he did not own the land but a company which he wholly owned had the title to it and the courts have had no difficulty in holding that the expression, the gift of my real estate, passed the shares in the company. The most prominent examples are Hendry v Perpetual Executors & Trustees Association of Australia Ltd [1961] HCA 44; 106 CLR 256 and Re Balcock [1968] 2 NSWR 697.

25. [25]

    It would seem quite clear under this principle, and indeed, it was not seriously contended otherwise that John’s shares in Parraweena Pty Ltd and Parraweena Highlands Pty Ltd pass under this gift. There was no argument that John’s shares in Langlo Pty Ltd fell into the same category as did the one share his company GJB Cobcroft Pty Ltd had in Parraweena Highlands Pty Ltd also passed. The disputed question was that whether the shares in Bodumba also passed.

26. [26]

    Nicklas and David say that those shares did so pass. This is strongly resisted by Jennifer who is otherwise the proprietor of the shares.

27. [27]

    The facts are that Bodumba holds public company shares said to be worth about 3.2 million dollars. It has substantial cash holdings as well as a loan to the Parraweena group. Bodumba also holds 30,800 cumulative preference shares in Langlo Pty Ltd. Langlo Pty Ltd owns 1,000 fully paid shares in Parraweena Pty Ltd.

28. [28]

    Mr Wilson submits that the link between Bodumba and Parraweena is too remote to characterise John’s interest in Bodumba as an indirect interest in Parraweena. Bodumba’s only interest is to a fixed culmulative preference dividend and a right of return of $30,800 capital. As I noted earlier, Mr Hutley SC agrees with this.

29. [29]

    Having read the written submissions and re-read the transcript of the oral submissions, it does not seem to me that there is much logical opposition to this position. It seems to me that it is too remote. Furthermore, the position put forward by Mr Wilson is supported by clause 9(vi) of John’s will which makes provision for the dividends of Bodumba to flow to his widow Denise.

30. [30]

    Accordingly, I can answer questions (a) and (b), “the land holdings of the Trustee in Parraweena Pty Ltd and Parraweena Highlands Pty Ltd and his shares in Parraweena Pty Ltd and Parraweena Highlands Pty Ltd and Langlo Pty Ltd and the one share that GJB Cobcroft Pty Ltd held in Parraweena Highlands Pty Ltd”.

Question (c)

1. [31]

   It is now agreed that the answer to this question is “on the death of Jennifer”.

Questions (d) and (e)

1. [32]

   These questions relate to paragraph 10(c) A and B of the will which essentially provide that the net proceeds of sale of the Parraweena properties are to pass to David and Nicklas “on condition” in each case “that he applies out of such gifts sufficient funds to provide for the maintenance, education and well being of his children. The persons affected are Daisy, her siblings and cousins, being children of Nicklas and David for whom Mr Harris appears.

2. [33]

   In his written submissions, Mr Willmott puts that there are two possible constructions of these gifts. First, that the words are merely precatory. Secondly, that there is some sort of Gill v Gill (1921) 21 SR (NSW) 400 condition, such as I held to be the case in my former judgment with respect to clause 9 of John’s will. Mr Willmott puts that the words are merely precatory. He submits (vide page 12 of his written submissions) that if there was a Gill v Gill condition, so that equitable obligations were imposed on David and Nicklas to provide sufficient for their children, there are very great problems in working out what is meant by the words “sufficient funds” and for how long David and Nicklas will be liable to provide for maintenance, etcetera. There are no easy answers of Mr Willmott for these questions, so it is submitted that the better view is that the direction is precatory only.

3. [34]

   I consider that this submission is correct. Indeed, I do not see any of the other counsel putting a significant argument to the contrary.

4. [35]

   Accordingly, I answer this question, none, save that there is a moral obligation on the father of each of the sets of defendants to provide sufficient maintenance for them.

Question (f)

1. [36]

   This question cannot be simply answered, indeed, with respect, the question does not really cover all the possibilities.

2. [37]

   It is clear, as Mr Willmott submits, that the fund must be 50% of the net proceeds of sale of John’s interest in Parraweena and Parraweena Highlands because the other 50% of the proceeds are dealt with in clause 10(c)(iv)A and B.

3. [38]

   The question asks when and how the gifts vest in interest. It is not clear to me whether this is meaningful in the present context.

4. [39]

   The gifts are contingent upon the children to take, attaining 25 years and complying with the other clause about satisfying the trustees that they have not been convicted of indictable offence involving drugs. I agree with Mr Willmott that the class closes on Denise’s death so that only the six existing children can take. I also agree that the gift is a gift per capita, and not per stirpes.

5. [40]

   Accordingly, as each of the 10th to 15th defendants attain 25 years and can satisfy the other conditions, they take a vested interest of one sixth. If some of those defendants fail to attain 25 then the other children will increase their share.

6. [41]

   I now turn to the question of rectification of John’s will.

7. [42]

   Because John and Brien died in different years, the case of rectification in John’s estate must be considered under s 29A of the Probate and Administration Act 1898, but in the case of Brien’s will the problem must be considered under s 27 of the Succession Act 2006.

8. [43]

   There is a material difference in the two sections but it does not seem to me in the instant case that it affects the consideration of the problem.

9. [44]

   In each case the rectification sought is to produce the same result that I have already reached in the case of John and, as will subsequently appear, have reached in the case of Brien, with the exception that the cross-claimant would have the shares in Bodumba included as well. If I were to make an order for rectification of the will then it would only be an order that excluded Bodumba.

10. [45]

    Mr Willmott cites three cases which he says are authority for the proposition that “even if a construction of (the will) would produce the same result, it will nevertheless be appropriate to order rectification”. Application of Spooner; the Estate of David (Hodgson J, 28 July 1995, unreported); Rawack v Spicer [2002] NSWSC 849 (Campbell J) and Tantau v Macfarlane [2010] NSWSC 224 at [49] (Ward J). I should add the decision of Estate of Cross (M McLelland CJ in Eq, 9 May 1996, unreported).

11. [46]

    With respect, I consider Mr Willmott has overstated the position. The question of rectification when construction could be enough was dealt with by Campbell J in the Rawack case at [25] where his Honour said:

12. [47]

    This makes it clear that the order for rectification is possible out of more abundant caution. It does not say that this is the ordinary result of a case where there is an obscure provision in the will that is capable of being construed that rectification must necessarily follow.

13. [48]

    As I mentioned in Re Morgan [2015] NSWSC 194 at [5], the reason for making the rectification order is so that people searching in the future can see exactly what is meant by the will rather than have them have recourse to a judgment of the court. However, it is not good practice to combine a rectification suit with a construction suit because in a construction suit one is very limited by the rules as to when one may look to surrounding circumstances and direct evidence of intention. If one combines a rectification suit with a construction suit a whole lot of extra evidence can be admitted and can be the subject of cross-examination which leads to much longer proceedings and greater costs to the estate so there is less money to the beneficiaries. It is a matter for the discretion of the judge whether he or she will grant rectification when there is a fairly clear construction of the will.

14. [49]

    In the present case, the construction is fairly clear. As Mr Wilson points out in his submissions, the test is not whether it is convenient that the will be rectified or that rectification would assist in the construction of the will, there needs to be material to suggest that the will contains an error or fails to carry out the testamentary intentions.

15. [50]

    Whichever way one looks at it, the cross-claim for rectification should be dismissed.

16. [51]

    I now turn to Brien’s will.

17. [52]

    Mr Burke, for the plaintiffs suggests that the answers to the questions are as follows:

18. [53]

    Counsel’s submission generally speaking was, it is difficult to determine what Brien was stating in regard to these conditions. I cannot use that escape route but I can say “not answered”. The reason why I should say this is that it is really a matter for the future and a matter as to what the trustees in their bonafide yet otherwise subjective view take about the standard of satisfaction.

19. [54]

    Assuming that the trustees take the view that although there are some lands involved by the time clause 16 and 17 take effect, the lands have been converted so that there is no need to satisfy any condition, one would have thought that the trustees would be justified in taking the assurance of Nicklas and David that they would respect and honour the provisions of John’s will.

20. [55]

    So far as Nicklas is concerned in question (h), the testator’s scheme was that Nicklas would take Parraweena and David would take Parraweena Highlands. Parraweena Highlands appears to be less valuable than Parraweena so that Nicklas should pay owelty.

21. [56]

    The will in clause 16 provides that the gift to Nicklas of Parraweena is “conditional upon” Nicklas satisfying the trustees about respecting John’s will “and further that Nicklas will adjust”. The “and further” does not seem to be part of the condition.

22. [57]

    What then is the effect of the “and further”? It seems to me they have used a precatory condition that the testator desires that Nicklas put a proposal to David and the trustees as to how, in order to demonstrate some parity between the two devises, he will compensate David. However, it is not a condition of forfeiture nor even a Gill v Gill condition which would lead to equitable remedy.

23. [58]

    As I say, the best response is “not answered” because so much depends on the attitude of the trustees and as to what evidence they will think themselves satisfied at the appropriate time. I may however, have given a hint which will be of guidance.

24. [59]

    Three matters remain. (1) Jennifer’s claim under the Succession Act for provision out of the estate of Brien. (2) The second cross-claim filed in each set of proceedings alleging that John and Brien’s wills were mutual wills, and (3) how the costs of these proceedings should be borne.

Conclusion

1. [60]

   There is no doubt on the authorities as to what a claimant has to establish for there to be mutual wills. The Court of Appeal dealt with it thoroughly in a short but unfortunately unreported judgment of Baird v Smee [2000] NSWCA 253.

2. [61]

   It is however, helpful to start off with a general excursis of the law of mutual wills. As good as place as any to start is Certoma’s Law of Succession in New South Wales, Fourth Edition (Law Book Company, 2010) [paragraph 4.260]. The text (edited) reads:

3. [62]

   The principal authority cited for the last statement is Gray v Perpetual Trustee Company Ltd [1928] AC 391, the decision of the Privy Council upholding the decision of the High Court of Australia.

4. [63]

   However, as McPherson J said in Bigg v Queensland Trustees Ltd [1990] 2 QdR 11 at 13 said:

5. [64]

   In Baird v Smee (supra) Mason P said at [5]:

6. [65]

   The key factual matter to be decided is whether an agreement not to revoke the wills can be inferred from the facts of this case including the terms of the will. Mr Harris, whose clients seek the declaration that there are mutual wills, puts that there are factors in this case that point strongly in that direction. First, he points out that this is not a case involving husband and wife so that any rule about not implying intention to create legal relations between husband and wife has no place. I would agree.

7. [66]

   Secondly, in the present case the wills were made where one of the testators was suffering from a terminal illness with a very reduced life expectancy and indeed, John died several weeks after the 2005 will was signed.

8. [67]

   Moreover, the brothers had not been ad idem as to the operation of Parraweena and its destiny after their deaths for some time. They were interviewed about the same time by the maker of the will and it is relatively clear that there was some compromise reached as to how they would leave the property and as a result of that compromise both modified their real desires and made wills that were complimentary to each other.

9. [68]

   Mr Harris asked rhetorically would John have entered into such compromise and made wills unless there was an implied promise by Brien that he would not revoke his will?

10. [69]

    These are telling points, however, on the other side we have the situation where an experienced will maker was drafting the wills, he was privy to all the matters that I have just covered, yet there is no clause in the will stating that the wills are mutual wills.

11. [70]

    Furthermore, Brien’s will, as we have seen, shows that he expected that his sons would carry out his will, that they would honour Brien’s will and John’s will not only in the letter but in the spirit. The flavour then is that there is the hope expressed by the testator that his sons would honour the wills of himself and John rather than the will containing any legal binding obligation. John’s will, with the Gill v Gill condition in clause 9, dealt with in my earlier judgment, is in the same mold.

12. [71]

    In a number of cases, claims that there are mutual wills have failed because the court has considered that the willmaker’s expectations were founded in honour only. Although the present is not a husband and wife case, I consider it is one where the obligations were binding in honour only.

13. [72]

    The authorities stress that in this sort of case very strong evidence is required for a court to hold that there is mutual wills. As Dixon J said in Birmingham v Renfrew (1937) 57 CLR 666 at 681, with respect to an agreement to make mutual wills and not to revoke them, “such an agreement can be established only by clear and satisfactory evidence. It is obvious that there is a great need for caution in accepting proofs advanced in support of an agreement affecting and possibly defeating testamentary dispositions of valuable property”. See also Latham CJ to same effect at 674 where he refers to a “heavy burden of proof”. I am not satisfied that even accepting the circumstances focussed upon by Mr Harris that these wills are mutual wills. Accordingly, I should dismiss the second cross-claim.

14. [73]

    Thirdly, the question of costs is going to be an awkward one. I am going to postpone that until counsel have had an opportunity to digest these reasons. However, I should make some comments which may assist counsel into seeing where my thinking is at present.

15. [74]

    There is a great temptation in will cases to order that the costs come out of the estate. Particularly is that a temptation where this appears to be a wealthy estate.

16. [75]

    However, as counsel for Jennifer and Daisy point out, to do that would be to cast the burden on the residuary estate which compared to other benefactions does not appear that great. It would seem to me that it is probably unfair to do that. However, the trustees are entitled to an indemnity. Mr Willmott says that they did not behave as one would expect and that they should have applied for judicial advice as to whether they would be justified in bringing these expensive proceedings or, at the very least, have obtained an opinion like that, that was eventually obtained from Mr Hutley SC before embarking on litigation. If they had done that, a great deal of costs would have been avoided and there is no reason why the beneficiaries should have to pay the extra costs. There is something in that point, but it does have to be balanced with others.

17. [76]

    Again, the main debate, as things turned out was over whether the shares in Bodumba passed to the persons who were entitled to Parraweena and Parraweena Highlands. On that issue Nicklas and David were unsuccessful and Jennifer was successful and that must be taken into account when deciding on the proper order for costs.

18. [77]

    The rectification suits failed and that should be at the cost of David and Nicklas.

19. [78]

    The Family Provision claim by Jennifer was really a defence to the rectification suits or if an adverse finding was made on the construction suit: it was purely defensive. It probably should form part of the costs of the actions in John and Brien’s estate.

20. [79]

    A challenge of mutual wills failed and costs should follow the event but they are only miniscule compared with the rest of the costs in the proceedings. With those comments I will leave it to counsel to provide submissions either in writing or orally or both as to what is the proper order for costs to be made and indeed they should also be given the task of preparing short minutes of the orders that I should make.

21. [80]

    I will not be sitting again after this week until the week commencing the 11th of May 2015. It appears that I have half a day on the afternoon of May the 26th. The matter could be fixed for 2pm on that day but I will leave it to counsel to talk amongst themselves and with my associate as to when the matter can be returned to court, but for the purposes of the court computer I will formally now adjourn the matter for short minutes of order and arguments as to costs to 2pm on 26 May 2015 before me.