Estate of Chaddock (Deceased)

1. [1]

   By a summons filed on 6 December 2024, the plaintiff seeks declaratory relief regarding the proper construction of cll 3(a) and 4 of the last will of Dorothy Chaddock (the deceased) made on 10 July 1981 (the will) who died on 16 March 1996. Clause 3(a) confers on one of the deceased’s daughters, Audrey Chaddock (Audrey), a right to occupy the deceased’s property at 6 Lorraine Place, Merrylands (Merrylands property) and cl 4 confers a power to sell the property in order to provide alternative accommodation for Audrey. What is at issue in these proceedings is the nature of the rights conferred on Audrey by those provisions.

2. [2]

   The plaintiff, Allan Porter, is the trustee under the will. Each of the beneficiaries under the will has been joined as a defendant, has been served with the application and has indicated that he or she does not wish to be heard on the application.

3. [3]

   The principal relief sought in the summons is as follows:

4. [4]

   The plaintiff was represented at the hearing by Margaret Pringle of counsel. Following a request of the Court at the hearing, the plaintiff provided a further affidavit on 13 May 2025 dealing with the alternative accommodation obtained for Audrey.

5. [5]

   Without any disrespect intended, I will refer to Audrey by her first name in these reasons.

The terms of the will

1. [6]

   The will contains only two operative clauses, cl 3 and cl 4. Under cl 3 the whole of the deceased’s real and personal estate would pass to her husband but if he predeceased her, as in fact occurred, she gave her estate to her trustees upon trust as follows:

2. [7]

   Clause 4 deals with the situation, which arose in the present case, of the need to sell the Merrylands property in order to provide alternative accommodation for Audrey. It provides:

3. [8]

   In relation to cl 3(b), in addition to Audrey, the daughters of the deceased were Beryl Kathleen Donaldson (the second defendant), Margaret Porter (the mother of the plaintiff who is now deceased), Barbara Laird (now deceased) and Joan Johnson (now deceased).

4. [9]

   The beneficiaries who are contingently entitled to the interest in the remainder under cl 3(b) are (a) the second defendant; (b) the issue of Margaret Porter, who are the third defendant and the plaintiff; (c) the issue of Barbara Laird, who are the fourth and fifth defendants; and (d) the issue of Joan Johnson, who are the sixth to ninth defendants.

Background

1. [10]

   On 28 June 1996, probate of the will was granted to Allan William Porter, one of the two executors named in the will (the other named executor having renounced). The inventory of property annexed to the grant of probate identified the property owned by the deceased at her death as the Merrylands property with an estimated value of $150,000, a bank account at Westpac with a balance of $7,229, jewellery and the furniture at the Merrylands property.

2. [11]

   The deceased was survived by Audrey, who had lived with her parents at the Merrylands property since birth, having never married or had children, and had provided care to the deceased before she died.

3. [12]

   On 7 January 2003, Audrey appointed Robert Cady as her attorney by an enduring power of attorney.

4. [13]

   The original trustee of the trust created by cl 3(a) of the will was Allan William Porter. On 16 August 2005, he executed a deed by which he retired as trustee and appointed his son, the plaintiff, as the new trustee of the estate. The deed was registered on 30 November 2005.

5. [14]

   By mid to late 2020, it had become apparent to the plaintiff and a number of family members that Audrey (who was now 88 years old) was unable to continue to occupy the Merrylands property given her age and state of health. It was decided that the Merrylands property should be sold and Audrey should move into a retirement village.

6. [15]

   On 22 September 2020, Audrey entered into a Residence and Accommodation Agreement (R&A Agreement) with Southern Cross Care (NSW & ACT), the operator of the John Woodward Residential Aged Care Facility. The agreement confers on her the right to occupancy of a room at the Cardinal Gilroy Village, Merrylands West, and use of the communal areas for the rest of her life. The agreement required her to pay a refundable accommodation deposit (RAD) of $550,000 and ongoing fees for her care.

7. [16]

   The RAD was paid by Audrey as to $250,000 from her own funds and as to the balance of $300,000 by a loan made to her by the plaintiff under the Deed referred to below sourced from the proceeds of sale of the Merrylands property.

8. [17]

   On 20 August 2021, Audrey made a request in writing (through her attorney) that the Merrylands property be sold and in late 2021 a contract for the sale of the Merrylands property for a price of $765,000 was entered into. Completion of the contract occurred on 20 January 2022. The net proceeds of sale totalled $746,855.84 which was deposited into the trust account of the plaintiff’s solicitor.

9. [18]

   On 28 June 2022, the plaintiff and Audrey, by her attorney, executed a Deed of Loan and Family Arrangement (Deed) which provided for the plaintiff to make a loan to Audrey in the sum of $300,000 for the purpose of paying the balance of the RAD to the Cardinal Gilroy Village, and Audrey, as borrower, gave a direction to the plaintiff, as lender, to pay the amount of the loan to an account in the name of Southern Cross Care (NSW & ACT) (cll 3.3 and 3.4). The loan was made by payment to Southern Cross Care (NSW & ACT) on 28 June 2022.

10. [19]

    Under cl 6.1 of the Deed, the loan is repayable in full on the earlier of relevantly, Audrey’s death or her exit from the retirement village. Under the terms of the R&A Agreement, the RAD is refundable (less permitted deductions) in these circumstances (cl C7 and cl D14).

11. [20]

    On 6 December 2024, the plaintiff’s solicitors commenced these proceedings by Summons in order to clarify how the remaining balance of the estate’s account of some $400,000 being the ‘surplus funds’ following the sale were to be dealt with. The plaintiff’s position was that it should be invested to produce income for Audrey’s benefit. Some of the beneficiaries under the will had previously indicated a contrary view as to the proper construction of cll 3 and 4 of the will which was that the proceeds of sale should be divided equally between the five daughters of the deceased and that, if they are no longer living, then to their respective children.

Issues

1. [21]

   The issues which arise are:

   1. (1)

      whether cl 3 confers on Audrey an equitable life estate or a mere personal right of occupation;

   2. (2)

      whether cl 4 authorised the sale of the Merrylands property and the acquisition of the alternative accommodation for Audrey;

   3. (3)

      whether the plaintiff is to hold the surplus moneys from the sale of the Merrylands property in trust for Audrey, as the life tenant, during her lifetime.

Principles

1. [22]

   The starting point for the construction of a will is the following statement of Viscount Simon LC in Perrin v Morgan [1943] AC 399 at 406:

2. [23]

   In the same case, Lord Romer said at 420:

3. [24]

   This fundamental principle was recently stated by White JA (with whom Gleeson JA agreed) in De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351 at [50]:

4. [25]

   The ‘armchair principle’ referred to in the above passages was summarised by White J (as his Honour then was) in an earlier decision, Parry v Haisma [2012] NSWSC 290 at [10] (emphasis in original):

5. [26]

   As part of the process of construction it is necessary to consider the terms of the will as a whole and seek to ascertain the basic scheme which the deceased had conceived for dealing with his or her estate and then to construe the will, if possible, to give effect to that scheme: Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234 at [19].

6. [27]

   Isaacs J in Fell v Fell (1922) 31 CLR 268; [1922] HCA 55 at 273-275 identified a number of principles of construction, including relevantly the following (citations omitted):

7. [28]

   Consistently with the second proposition stated by Isaacs J in Fell v Fell above, a word or phrase used in a will is given its ordinary and natural meaning, unless the context provided by the will as a whole or admissible extrinsic evidence indicates that the testatrix used it in a different sense or the ordinary meaning makes no sense in light of the surrounding circumstances, whereas a secondary meaning does make sense: GE Dal Pont, Law of Succession (3rd ed, 2021, Lexis Nexis) at [8.6]; P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [31.40(6)]. Where the ordinary meaning applies on this approach, it will be adopted even though the result of giving the word its ordinary meaning may appear harsh.

8. [29]

   Section 32 of the Succession Act 2006 (NSW) permits the admission of extrinsic evidence to assist in the construction of a will if the will or any part of it is meaningless or ambiguous. It was not suggested that it is relevant in the present case.

Equitable life estate or a mere personal right of occupation?

1. [30]

   The plaintiff submitted that cl 3(a) conferred on Audrey an equitable life estate in the Merrylands property and not a mere personal right of occupation. I agree.

2. [31]

   Clause 3(a) of the will requires the trustee to hold the Merrylands property ‘upon trust ... for [Audrey] for and during her lifetime’ subject to an obligation to maintain the property in tenantable repair etc, and then ‘from and after her death’, for her other daughters, per stirpes. The words ‘upon … trust for [Audrey] for and during her lifetime’ clearly indicate an intention to create an equitable life estate in the trust property in her favour: B Edgeworth, Butt’s Land Law (7th ed, 2017, Law Book Co) at [3.240]. Accordingly, no issue as to whether a mere personal right to reside at the Merrylands property rather than a life estate arises.

3. [32]

   As a consequence of being the life tenant, Audrey was entitled to occupy the Merrylands property or, if it was rented out, to the net income from doing so (subject to complying with her obligation to maintain and repair the property, keep it insured, and pay rates, taxes and other outgoings). The rights of a life tenant were explained in Sinclair v Lee [1993] Ch 497 at 506 (in the context of a trust under a will of a parcel of shares in favour of the deceased’s husband for his life and after his death to her son) as follows:

Whether clause 4 authorised the sale of the Merrylands property and the acquisition of the alternative accommodation for Audrey

1. [33]

   The plaintiff submitted that cl 4 authorised the sale of the Merrylands property and the application of part of the proceeds for sale to the payment of the RAD to provide Audrey with a residence appropriate to her needs.

2. [34]

   Clause 4 of the will, by the use of the words ‘my trustees may’, confers two powers on the trustee. The first is a power to sell the Merrylands property on the written request of Audrey. This power was exercised by the plaintiff when he entered into and completed the contract for sale of the Merrylands property.

3. [35]

   The second is a power to use the proceeds of sale of the property to ‘purchase another dwelling house or residence to be held by [the trustees] together with any surplus moneys arising out of such sale and purchase’ upon the same powers and trusts and for the same persons who are beneficiaries under cl 3. In my view, what this power authorises is the purchase by the trustee of another dwelling house or residence and not the transaction which was actually undertaken here, which involved the plaintiff making a loan of $300,000 to Audrey pursuant to the Deed funded from the proceeds of sale to enable her to pay the balance of the RAD. It was Audrey who acquired a right to occupy a unit in the retirement village pursuant to the R&A Agreement. The plaintiff acquired only the right to repayment of the loan under the Deed.

4. [36]

   The plaintiff’s power as trustee to undertake the transaction must be found, instead, in the Trustee Act 1925 (NSW). Section 14DA provides:

5. [37]

   Section 14DA was enacted to overcome the decision in In the Will of Sherriff [1971] 2 NSWLR 438. Being remedial legislation, it is to be given a liberal and beneficial construction: Public Trustee v O’Donnell [2008] SASC 181 at [64]. It and associated provisions extending the powers of trustees were introduced into the Trustee Act by the Trustee Amendment (Discretionary Investments) Act 1997 (NSW) which commenced on 13 March 1998, but applies to trusts created before or after that date: Trustee Act, Schedule 2, cl 3.

6. [38]

   Importantly, the power conferred by s 14DA(1)(b) is not limited to the purchase of a dwelling-house or residence (in contrast to cl 4 of the will), and extends to an agreement or arrangement to secure for a beneficiary a right to use a dwelling-house as a residence. The word ‘secure’ should be given its ordinary meaning. The dictionary definition of ‘secure’ as a verb relevantly includes: ‘8. to get hold or possession of; obtain; 9. to make secure from danger or harm; make safe; 10. to make secure or certain; ensure.’: Macquarie Dictionary, 3rd ed (1997). This conveys the central idea of the ordinary meaning of the word in this context.

7. [39]

   In my view, the entry into and performance by the plaintiff of the Deed was authorised by s 14DA(1)(b), because the Deed is ‘an agreement or arrangement to secure for [Audrey] a right to use a dwelling-house as a residence’. The word ‘dwelling-house’ is defined in subsection (5) to include part of a building designed for use as a residence and hence includes a unit in the retirement village. It is clear that it is not necessary for the trustee to acquire title to the relevant dwelling-house or the occupancy right, but rather it is sufficient that the trustee has entered into an agreement or arrangement to secure for the beneficiary that occupancy right. That is what has occurred in the present case. The payment of the balance of the RAD payable by Audrey under the R&A Agreement of $300,000 funded by the loan under the Deed secured to her the occupancy right to her room in the retirement village because it was a condition of obtaining that right that the RAD be paid in full.

8. [40]

   While s 14DA(1) is expressed to operate subject to the terms of the will, there is nothing in the terms of the will which would preclude the application of that section to the trust created by cl 3(a) of the will. In particular, cl 4 merely confers a power on the trustee to purchase a replacement property suitable for Audrey while she is capable of independent living and does not, expressly or by implication, exclude the power conferred by s 14DA which enables the trustee to enter into an alternative arrangement to secure for her accommodation when, as now, she is no longer capable of living independently.

9. [41]

   The exercise of the trustee’s power under s 14DA is subject to the requirement that the trustee observes his obligations of prudence: Trustee Act, ss 14A and 14C; Garrett v Yiasemides [2004] NSWSC 828 at [20]. I am satisfied that the plaintiff did so in the present case.

10. [42]

    In so far as the balance of the proceeds of sale are concerned, again there is no express power in the will as to how this is to be invested. The trustee can take advantage of the broad power of investment created by s 14 of the Trustee Act which provides:

11. [43]

    In the present case, the investment of the balance of the proceeds of sale in an interest-bearing account is authorised by s 14.

12. [44]

    It is necessary when investing the surplus moneys for the plaintiff to bear in mind the obligations of prudence in s 14A and the requirements of s 14C, and also the need when making that investment to preserve the proper balance between the interests of the life tenant and remaindermen: JD Heydon and MJ Leeming, Jacob’s Law of Trusts in Australia (8th ed, 2016, Lexis Nexis) at [18-35].

Whether the surplus moneys from the sale of the Merrylands property are held in trust for Audrey, as the life tenant, during her lifetime

1. [45]

   The plaintiff submitted that the surplus moneys from the sale of the Merrylands property were held on the trust created by cl 3(a) due to the concluding words of cl 4.

2. [46]

   As the power in cl 4 of the will to use the proceeds of sale of the Merrylands property to purchase another dwelling house or residence was not exercised, the concluding words of cl 4 of the will that the relevant dwellinghouse or residence and any ‘surplus moneys’ will be held on the terms of cl 3 will not apply.

3. [47]

   Nonetheless, on ordinary principles, where a trustee sells trust property and acquires other property with the proceeds of sale, pursuant to a power in the trust instrument or conferred by statute, the newly acquired property will form part of the trust fund to be held on the same trust as the property which was sold. As Page-Wood VC said in Frith v Cartland (1865) 71 ER 525 at 526: ‘But so long as the trust property can be traced and followed into other property into which it has been converted, that remains subject to the trust’. See also Foskett v McKeown [2001] 1 AC 102 at 108H per Lord Browne-Wilkinson and 127G per Lord Millett.

4. [48]

   Accordingly, the rights conferred on the plaintiff pursuant to the Deed (including the obligation of Audrey to repay the loan) and the surplus moneys from the sale of the Merrylands property (and any investment made with those moneys) form part of the trust fund subject to the trust created by cl 3(a) of the will.

5. [49]

   As a consequence of Audrey being the life tenant under the trust, she will be entitled to all income from the investment of the surplus moneys until the life estate comes to an end on her death. At that time, the loan under the Deed will be repaid and it together with the balance of the surplus moneys in their invested form will pass to the remaindermen under cl 3(a).

Costs

1. [50]

   The plaintiff seeks an order for his costs on the indemnity basis to be paid out of the surplus moneys from the sale of the Merrylands property. The court has power to make such an order under s 93(3) of the Trustee Act and r 42.25 of the Uniform Civil Procedure Rules 2005 (NSW). The trustee has brought this proceeding reasonably, in order to clarify a question of construction of the trust instrument. Accordingly, it is appropriate that the plaintiff’s costs are paid out of the funds held in the bank account kept by the plaintiff for the surplus moneys from the sale and I will so order.

Conclusion

1. [51]

   For the above reasons the Court will make the following orders:

   1. (1)

      DECLARES that on the proper construction of cll 3(a) and 4 of the will dated 10 July 1989 of Dorothy Clara Eastment Chaddock (the will), the first defendant was entitled to a life estate in the estate realty situate at and known as 6 Lorraine Place, Merrylands in the State of New South Wales being the land contained in Lot 4 of Deposited Plan 30998 (the Merrylands property) for her sole use and benefit during her lifetime.

   2. (2)

      DECLARES that the plaintiff is required to hold the surplus moneys from the sale of the Merrylands property (and any investment made with those moneys) in trust for the life tenant, Audrey Florence Chaddock, during her lifetime on the terms of cl 3(a) of the will.

   3. (3)

      ORDERS that the plaintiff’s costs calculated on the indemnity basis be paid from the property referred to in order 2.