Anderson v Dupain

Judgment - EX TEMPORE 1The late Diana Palmer Dupain died on 3 March 2012 leaving a will dated 5 February 2000 and a codicil dated 15 September 2011, probate of which was granted by this Court to her two children (the parties to these proceedings) on 15 August 2012. 2The plaintiff is the daughter of the deceased. The defendant is the son of the deceased. They have fallen into a dispute about the proper construction of that part of the deceased's will (clause 5) that makes specific provision for the plaintiff. 3The plaintiff has filed a summons, and the defendant has filed a cross-summons, seeking declaratory relief as to the proper construction of clause 5. 4The parties are agreed that the deceased's will was drafted by a solicitor, but neither party has attributed particular significance to that fact in argument. 5After relatively minor legacies in favour of the deceased's grandchildren (in clause 4) and the provision made in favour of the plaintiff in clause 5, the will (by clause 6) disposed of the balance of the deceased's estate (her "residuary estate") in favour of "...such of my children as shall be living at my death..." in equal shares. The plaintiff and the defendant are the only children of the deceased. Subject to the provisions of clauses 4 and 5, they take the benefit of the deceased's estate in equal shares. 6Before turning attention to the terms of clause 5 of the will, I note that the parties are agreed that: first, the terms of the codicil have no bearing on the proper construction of clause 5 of the will; and, secondly, clause 5 can, and should, be construed without reference to any evidence extrinsic to the will. 7There is no dispute between the parties as to the principles to be applied in construing clause 5. In particular, both sides of the record have reminded the Court that the deceased's will (including amendments effected by the codicil) must be read as a whole, to ascertain the testamentary intentions of the deceased, by reference to the words she used, having regard to the subject matter. As an aid towards that end, I have been referred, inter alia, to Muir v Winn [2009] NSWSC 857 at [3]-[4] per Bryson AJ, Fell v Fell (1922) 31 CLR 268 at 272-274 per Isaacs J, and Wyatt v Perpetual Trustee Co Ltd (1917) 23 CLR 14 at 19 per Isaacs J. 8In that context it is sufficient for present purposes to extract no more than clauses 5 and 6 of the will: "WHEREAS (a) I have recently transferred by way of a gift to my son the property known as xxxxxxxxxxxxxxx Castlecrag the gross value of which at the time of transfer was $1,250,000 but subject to transfer duty of $54,250.00 which as a condition of the gift was payable by my son resulting in a net benefit to my son of $1,195,750.00 as at the date of such gift. (b) My property xxxxxxxxxxxxxxxxx Newport had a gross value of $1,000,000.00 at the time of the transfer referred to in paragraph (a) and if then transferred by way of gift to my daughter would have attracted transfer duty of $40,490.00 and capital gains tax of $240,560.00 (on a capital gain of $496,000.00) both of which as a condition of gift would have been payable by my daughter, which would result in a net benefit to my daughter of $718,950.00 at the date of the aforesaid transfer. (c) My daughter has requested that I do not transfer the Newport property to her during my lifetime and instead bequeath the Newport property to her under my will. In such event no transfer duty would be payable. (d) I wish by my will to make provision for my daughter and her family which will as far as possible achieve equality between my son and my daughter having regard to the foregoing recognising however that events subsequent to the date of my will may change the amount of transfer duty and capital gains tax which must actually be paid when my Newport property is transferred. NOW I GIVE AND BEQUEATH to my daughter my property known as xxxxxxxxxxxxxxx Newport TOGETHER with the Adjusting Legacy (increased as hereinafter provided to be held by her as trustee upon the terms of the trust set out in Annexure "A" to this will. The Adjusting Legacy shall be increased to an amount equal to the amount represented by A in the formula A = B x C D B = The Adjusting Legacy C = The Index Number released for the quarter year immediately prior to the date of my death, and D = The Index Number released for the quarter year ended 30 June 1998 being 121.4 Where herein used "Index Number" means the Consumer Price Index Number for Sydney (All Groups) released from time to time by the Australian Bureau of Statistics or its equivalent at the date of my death. In this clause the expression "the Adjusting Legacy" means: (i) in the event that the Newport property is not transferred prior to my death - the sum of $436,310.00 increased or reduced (as the case may be) by the amount by which the capital gains tax payable on a capital gain of $496,000 calculated at the date of my death is greater than or less than $240.560; (ii) in the event that the Newport property is transferred prior to my death to a person, company or trust which is not in any way related to my daughter and I receive the whole of the consideration for the transfer - the sum of $1,195,750.00; (iii) in the event that the Newport property is transferred prior to my death for nominal consideration to my daughter or to a person, company or trust that is related to my daughter - the sum of $476,800.00 increased or reduced (as the case may be) by the amount by which the capital gains tax payable on a capital gain of $496,000 calculated at the date of such transfer is greater than or less than $240,560 and further increased or reduced (as the case may be) by the amount by which the transfer duty on a transfer of real property for a consideration of $1,000.000 calculated at the date of such transfer is greater or less than $40,490. 6. I GIVE DEVISE AND BEQUEATH the residue of my estate both real and personal whatsoever and wheresoever situate to my trustees UPON TRUST to pay thereout all my just debts funeral testamentary and administration expenses and to stand possessed of the balance thereafter remaining (hereinafter 'my residuary estate') UPON TRUST for such of my children as shall be living at my death and if both equally between them." 9Despite the reference to it in clause 5, there is no necessity for annexure "A" to the will to be reproduced in this judgment. It established a discretionary trust, named "the Danina Anderson Family Trust" after the plaintiff, principally for the benefit of the plaintiff, a named man I presume to be her husband and any children she might have. The defendant is not named in the trust instrument as an object of the trust. 10For convenience of reference, clause 5 can be divided into three parts. The first is subclauses 5(a) - 5(d), which take the form of a "preamble", containing recitals upon which the dispositive provisions of clause 5 are based. The second part contains the deceased's disposition in favour of the plaintiff, commencing with the words "now I give and bequeath" and concluding with a formula. The third part is the balance of clause 5, which takes the form of a "dictionary". 11The principal focus for attention in these proceedings is the second, dispositive part of clause 5 and, more particularly, the first of the two limbs of that part, namely the words: "Now I give and bequeath to my daughter my property known as x xxxxxxx xxxxxx Newport." 12In a nutshell, the plaintiff contends that those words demonstrate a plain intention on the part of the testatrix to convey to the plaintiff title to the land described by reference to a street address in Newport. The defendant's principal contention is that, in the context of both the "preamble" to clause 5 and the clause's "dictionary" provisions, the expression "my property known as xx xxxxxxx xxxxxx Newport" should be construed as granting to the plaintiff, not the land in specie, but a legacy of $1,195,750 which, upon a reading of clause 5 as a whole, might be deemed to be the value of the Newport property, set by reference to the "net benefit" conferred on the defendant upon the transfer to him, as recited in subclause 5(a), of real estate at Castlecrag. 13The parties' competing contentions must be addressed by reference to the terms of the will itself, without the benefit or distraction (as the case may be) of any evidence extrinsic to the will. No such evidence was adduced, in any event. In substance, the only evidence before the Court is the Court's grant of probate (including the will and codicil) together with an inventory of property of the deceased as at the date of her death. 14Crystallised by reference to the terms of the will itself and the forensic positions taken by the parties, upon an assumption (not entirely unrealistic) that the Newport property has increased in value since the date of the will, the parties are at issue as to whether the benefit of capital appreciation of the Newport property should pass to the plaintiff (with conveyance of the land to her under clause 5) or to both the plaintiff and the defendant (by the land forming part of the deceased's residuary estate for the purpose of clause 6 of the will). 15Subject to one possible qualification, the language of clause 5 is to be construed by reference to the ordinary meaning of the words used by the deceased. 16The qualification attaches to the fact that the words of gift used as the active verbs in the introductory words of the dispositive part of clause 5 are "give and bequeath". Notably, that expression does not use the word "devise". 17That is notable for two particular reasons. First, in days gone by (if not still) the word "bequeath" was generally deployed by lawyers as the verb appropriate to a testamentary gift of personalty, and the word "devise" was generally deployed by them (and perhaps still is) as appropriate to a testamentary gift of land: Fotiadis v Jinks [2002] NSWSC 420 at [22]-[23]. 18Secondly, by contrast with clause 5 the words of gift used as the active verbs in the introductory words of clause 6 are "give, devise and bequeath" and, in grammatical terms, the property that is the object of those words expressly includes (as the deceased's residuary estate) both "real and personal" property. 19Use of the words "I give and bequeath" in clause 5, and omission of the word "devise" from clause 5, might be thought to be indicative of an intention to confine the provision made for the plaintiff by the clause to a monetary legacy, albeit a legacy quantified by reference to real estate. 20In support of that contention one might point to subclause 5(d) of the will, the last of the four subclauses in clause 5 that serve as recitals introducing the dispositive section of the clause. In clause 5(d) the deceased stated it to be her intention "by my will to make provision for my daughter [the plaintiff] and her family". The word "provision" might be thought to be indicative of an intention to confer a monetary benefit and too oblique to be read as an intention to transfer land to the plaintiff. 21For her part, the plaintiff contends that the deceased's intention, expressed in the language of the will, was plainly that, by clause 5, she is to receive: (a) the land identified in clause 5 immediately after the words of gift in her favour (i.e., the real estate at Newport); and (b) a quantifiable sum of money described as "an Adjusting Legacy". 22The present proceedings do not involve any arithmetical dispute about the quantification of the "Adjusting Legacy", although the defendant relies upon each of the paragraphs of the dictionary provisions of clause 5, especially the second, as an aid to construction of the critical, dispositive part of the clause. The focus of attention is on the nature, and extent, of the gift made to the plaintiff in clause 5 and, as I have noted, the words that comprise the first limb of the dispositive part of the clause. 23My outline of the parties' competing contentions summarises their respective provisions but does not elaborate, in particular, alternative constructions advanced by the defendant. 24With greater precision, clause 3 of the defendant's Outline of Submissions contends that the Court should grant "declarations that, on its proper construction: (a) clause 5 provides for a legacy in the sum of $1,195,750 to the plaintiff; (b) in the alternative, clause 5 provides for a specific devise of the property described as xx xxxxxxx xxxxxx Newport to the plaintiff and the defendant as tenants in common in the following shares and upon the following trusts: (i) the plaintiff as to a share to the value of $1,195,750, to be held on trust in accordance with clause 5 and annexure "A" to the will; and (ii) the plaintiff and the defendant in equal shares as to the remainder, to be held on trust in accordance with clause 6 of the will." 25It is common ground between the parties that, of the three paragraphs numbered (i), (ii) and (iii) in that part of clause 5 constituting the "dictionary", that paragraph which applies in these proceedings, in the light of events as they happened, is the first. The Newport property was not transferred away from the deceased's ownership prior to her death. It comprises a part of her estate. 26Although the terms of clause 5 themselves dictate that notice be taken of the deceased's desire to achieve a balance between her children that might be characterised as "fair" and "equal", the Court is in no position itself to speculate about the respective entitlements of the parties in terms of fairness or equality. 27In that context I note, for example, the absence of any evidence bearing upon the present value of the Castlecrag property given to the defendant shortly before the date of the will or, for that matter, the present value of the sum of $1,195,750 (referred to as the "net benefit" conferred upon the defendant at the time of the transfer of the Castlecrag property to him) although, of course, the formula set out in clause 5 anticipates that, at least for some purposes in connection with clause 5, the parties will need to have reference to fluctuations in the Consumer Price Index. The Court's task is limited to construction of clause 5, in the context of the will (as amended by the codicil) as a whole, with a view to ascertaining the testamentary intention of the deceased in relation to the particular words the subject of dispute. 28In my opinion, the construction of clause 5 for which the plaintiff contends is the correct one. At the end of the day, the words used in the first limb of the dispositive part of clause 5 are, in my opinion, clear. They cannot be read as gifting to the plaintiff a legacy calculated as the "equivalent" of a deemed value of real estate. 29I do not attach any special importance to use of the word "bequeath" in clause 5 or the absence of the word "devise" from the clause. The word "bequeath" can refer to a gift of land: Whicker v Hulme (1851) 51 ER 381 at 385; Galligan v Galligan [1913] 13 SR (NSW) 291; 30 WN (NSW) 80 at 81. 30Even amongst lawyers, let alone lay people, the subtleties of any historical differences between the words "devise" and "bequeath" have generally been lost to view, and both have been overshadowed by the more general word "give". Each of the words "give" and "bequeath" is capable of embracing a testamentary gift of real estate. 31Use of the word "bequeath" in subclause 5(c) appears, to me, to demonstrate an intention that it be equated with a "transfer" of land. The word "bequeath" is used there in close association with the word "transfer" and in company with the word "instead", suggesting that the word "bequeath" was regarded by the deceased as, materially, the same as the word "transfer". 32Identification in clause 5 of the deceased's property at Newport by reference to its street address is, in my opinion, indicative of an intention on the part of the deceased that the plaintiff become entitled to the land itself, not merely some monetary equivalent of the land. 33The presence of the word "devise" in clause 6 might, as the plaintiff suggests, reflect the generic form of reference to both real and personal property in that clause, without any reference to identified real property as is found in clause 5. Whether or not that suggestion is correct, the more natural reading of clause 5, in my opinion, is that it contemplates a transfer of land to the plaintiff. 34I do not regard reference to the sum of $1,195,750 in both clauses 5(a) and 5(ii) as indicative of an intention that the first limb of the clause 5 provision made for the plaintiff be limited in some way to, or by reference to, that sum. 35The simple point I draw as to the deceased's intention from the recital subclauses generally, as well as from the dictionary provisions, including paragraph 5(ii), and from a comparison of subclauses 5(a) and 5(b) in particular, is that the deceased regarded her Castlecrag property (transferred to the defendant by way of inter vivos gift) as significantly more valuable than the Newport property (earmarked for the plaintiff) in terms of market value at or about the time the Castlecrag property was transferred to the defendant. 36On the face of subclauses 5(a) and 5(b), the differential in favour of the defendant at that time was perceived by the deceased to have been $476,800 (representing the sum of $1,195,750 less the sum of $718,950). As a figure, that differential finds reflection in the dictionary paragraphs of clause 5, and it is at least conceivable, given the references to adjustments in those paragraphs, that the differential bears some deliberate relationship with paragraph 5(i) and, through that paragraph, the formula for indexation of the "adjusting legacy". 37Senior Counsel for the defendant has demonstrated that such a deliberate relationship can be teased out of the figures, and references in particular to transfer duty and capital gains tax in various parts of clause 5. The case for which the defendant contends is, in this respect, elaborated in paragraphs 19-29 of his outline of submissions: "The Adjusting Legacy 19. The bequest in clause 5 of the will provides for an 'Adjusting Legacy', being a sum determined according to a formula and certain other provisions of the will. 20. It will be recalled that at the date of the Castlecrag transfer to [the defendant], the net benefit to [the defendant] and [the plaintiff] from the Castlecrag and Newport properties was $1,195,750 and $718,950 respectively. 21. The intent of the Adjusting Legacy is to provide [the plaintiff] with a further sum which compensates for the difference in net benefit. The further sum is calculated by a formula set out in the will which takes a fixed amount depending on the owner of the Newport property and indexes that amount to changes in the value of money. 22. That compensatory intention may be seen from the three subclauses of the Adjusting Legacy as they operate at the time of [the deceased's] passing addressed in turn below: (i) If [the deceased] retains the Newport property - [the plaintiff] should receive the Newport property plus a sum which, taking account of certain changes in capital gains tax, ensures that [the plaintiff's] net benefit is $1,195,750. Clause 5(b) states that the net benefit to [the plaintiff] from the property is $718,950 and assumes transfer duty of $40,490 which, coupled with a legacy of $436,310 under the first subclause of the Adjusting Legacy, is $1,195,750.) (ii) If the Newport property has been transferred to an entity not related to [the plaintiff], and [the deceased] received the whole of the consideration for the transfer - [the plaintiff] should receive the sum of $1,195,750. (iii) If the Newport property has been transferred to an entity related to [the plaintiff] for nominal consideration - [the plaintiff] should receive the sum of $476,800 plus a further sum which, taking account of certain changes in capital gains tax and duty, ensures that the combined net benefit to [the plaintiff] and the related transferee is $1,195,750. (Clause 5(b) states that the net benefit to [the plaintiff] from the property is $718,950 which, coupled with a legacy of $476,800 under the third subclause of the Adjusting Legacy, is $1,195,750.) 23. These subclauses are uniform in their result. In the first and second cases, [the plaintiff] receives a net benefit of $1,195,750, and in the third case, [the plaintiff] together with any related transferee receive a net benefit of $1,195,750. It is tolerably clear that the three subclauses are intended to preserve the relativity between the net benefit going to each of [the defendant] and [the plaintiff] from the transfer of the Castlecrag property and the hypothetical transfer of the Newport property. 24. The will thus proceeds upon the assumption that the net benefit to [the defendant] and [the plaintiff] from the Castlecrag and Newport properties is that which would have obtained at the date of the transfer of the Castlecrag property to [the defendant]. Value of the Newport property and capital gains tax 25. That the will assumes an equal net benefit to [the defendant] and [the plaintiff] from the Castlecrag and Newport properties is confirmed by further assumptions made in the will about the value of the Newport property over time. 26. Although the first and third subclauses of the Adjusting Legacy purport to make an adjustment for changes in capital gains tax, the only adjustment in fact made is for an increase or decrease in 'the capital gains tax payable on a capital gain of $496,000'. Provision is made only for changes in the rate of tax payable on capital gains. There being no adjustment for an increase or decrease in the capital gain on which capital gains tax is payable, the will assumes that the capital gain will remain fixed at $496,000 - in order [sic] words, that the value of the Newport property will not change. 27. The same assumption is made by the third subclause of the Adjusting Legacy, which expressly assumes that the 'consideration' for a sale of the Newport property will be $1 million. 28. Contrary to that assumption, there can be no doubt that the Newport property has substantially increased in value (from $1 million to $3 million), with the result that the likely consideration and capital gain will be substantially larger than the $1 million and $496,000 assumed by the will. 29. The entrenchment of the size of the capital gain at $496,000, and of the consideration for a transfer of the Newport property at $1 million, mean that the bequest to [the plaintiff] of the Newport property must be construed as a bequest of a sum representing the value of the Newport property at the time of the Castlecrag transfer, and not as a devise of the Newport property itself or a sum representing its true value." 38At the end of the day, the defendant's approach requires that the words "my property known as x xxxxxxx xxxxxx Newport" in the dispositive part of clause 5 be read as saying something that they do not, in terms, say. 39It is difficult, unless one turns one's mind to the task with that deliberate purpose, to read the words "my property known as x xxxxxxx xxxxxx Newport" as a reference, not to a conveyance of land, but to the provision of a legacy calculated by reference to a value attributed to the land in former times. 40Some significance might attach to the deceased's recitation in subclause 5(c) of a request, by the plaintiff that the Newport property not be transferred to the plaintiff during the deceased's lifetime, but that, instead, it be bequeathed to the plaintiff in the deceased's will. The Newport property appears here to have been earmarked, in specie, for the plaintiff. 41That construction is reinforced by the contemplation, in subclause 5(d), that there would come a time, in the contemplation of the deceased, when it could be said that her "Newport property is transferred". 42Ultimately, the words of the first limb of the dispositive part of clause 5 have a clarity which must, I find, reflect an intention that the land at Newport be conveyed to the plaintiff. 43I discern nothing in the terms of clause 5, read in the context of the will as a whole, that indicates an intention on the part of the deceased to confine the specific provision made for the plaintiff to a monetary legacy or to confer upon the defendant a share of any increase in the value of the Newport property between the date of the will and the date of the deceased's death. 44Accordingly, I make a declaration as sought in paragraph 1 of the summons and I order that the cross-claim be dismissed. 45[His Honour heard submissions about costs and continued] 46I have heard brief argument from counsel about the costs consequences that should follow from the substantive orders that I have made. 47Ordinarily, where a testator or testatrix might be said to have caused litigation by his or her use of ambiguous language, costs may be ordered to come out of the Estate. The justice of such an order is often reinforced by the fact that several persons other than the parties in fact before the Court may be affected as persons beneficially interested in an estate. 48In the current proceedings I am disinclined to follow this "ordinary" approach for two reasons. First, I do not regard the language used by the deceased as so ambiguous as to warrant the costs of the proceedings being a charge on the Estate generally. Secondly, the only parties affected by these proceedings in any material way are the plaintiff and the defendant personally, and they have pursued these proceedings for their own personal forensic interests. The stance they adopted, although helpful to the Court, was essentially an adversarial one. 49I do not regard it as necessary for me to characterise the defendant's case as one that was untenable in order to depart from what I have had urged upon me by the defendant as the ordinary form of costs order to be made. I am quite prepared to accept that the arguments advanced by the defendant were open to him to advance, and reasonably open to him to advance. I have, indeed, been assisted greatly by the submissions made on his behalf. 50Nevertheless, the position remains, as it seems to me, that these proceedings have the character of adversarial proceedings by two parties who represent no material interests other than their own. 51In those circumstances the appropriate order for costs, which I make, is an order that the defendant pay the costs of the proceedings.