ASLAN v KOPF

Court of Appeal (NSW)|1995-05-09|Before: Windeyer J, Gleeson CJ, Kirby P, Priestley JA

ASLAN v KOPF SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, KIRBY P and PRIESTLEY JA 9 May 1995, 16 May 1995 [1995] NSWCA 26

WILLS - mutual wills - withdrawal by one testator in lifetime of others - whether promise of irrevocability - held: No such promise expressly made or to be implied. Birmingham v Renfrew (1936) 57 CLR 666 appld.

LEASE - repudiation - evidence of whether duty to seek specific performance held: Not. WILLS - mutual wills - three testators with long personal and business relations - mutual wills made on eve of departure of one testator for China subsequent falling out of testators - wealthiest testator in lifetime of others announces change of his will - one testator dies adhering to mutual will wealthiest testator subsequently dies leaving different will - proceedings by remaining testator for enforcement of agreement to make and adhere to mutual wills - whether agreement that wills would be irrevocable - trial judge (Windeyer J) rejects evidence of express agreement of irrevocability - whether circumstances give rise to inference of promise of irrevocability - held: (Gleeson CJ; Kirby P and Priestley JA concurring): They did not. Birmingham v Renfrew (1936) 57 CLR 666; Bigg v Queensland Trustees Ltd [1990] 2 QdR 11 (SC) applied.

CONTRACT - breach - repudiation of agreement for lease of residential properties - repudiation accepted - calculation of damages - evidence held to be unreliable - remaining evidence held to be insufficient for precise calculation - valuer's evidence rejected by trial judge - allowance made by judge challenged on appeal - held: The judge's duty was to do his best on the evidence presented and no error of principle or of fact was shown. Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 (FC) applied.

LEASE - repudiation - evidence of repudiation - lessee repents bargain - minimisation of damages - no obligation to seek order for specific performance - challenge to findings rejected.

Gleeson CJ This is an appeal from a decision of Windeyer J in proceedings which raised a number of separate issues arising out of dealings between three men, two of whom are now deceased.

The late Albert Thomas Cox, who died in November 1990, owned three residential properties in Redfern, which were occupied by persons such as students and others seeking low rent accommodation. At the time of his death the late Mr Cox was aged ninety-three. Several years before his death Cox formed personal and business relationships with the appellant Ahmed Aslan, and with a man named Elias Napti. Napti died in 1989 aged seventy-nine. Cox was a man of considerable means. When he died his estate was valued at about $730,000. The estate of Napti was valued at about $7,000. There was no evidence as to the

value of the assets of the appellant. valued at about $7,000. There was no evidence as to the value of the assets of the appellant.

In 1986, apparently because his age made it difficult for him to manage the residential properties personally, it was agreed that Cox would grant to the appellant a lease of each of the three Redfern properties for a term of ten years. Under the leases, the appellant had certain obligations in relation to maintenance and repair. It was contemplated that the appellant, assisted by Napti, would attend to the day to day operation of the properties, collect the rents, and pay a head rent to Cox. Unregistered leases were entered into. It was common ground at first instance, and on this appeal, that they operated in contract as agreements for lease. The leases were prepared by the appellant's solicitor, Mr Shehadie.

In July 1986 the appellant borrowed money from a bank, and Cox guaranteed his debt, giving a charge to the bank over one of the Redfern properties.

There were other financial and business dealings between the three men, but it is unnecessary for present purposes to go into their detail.

According to the evidence of the appellant, in August 1986 the appellant's wife, who was living in China, became seriously ill, and the appellant found it necessary to make an urgent visit to her. The appellant said that Cox suggested that the appellant should make a will. Cox apparently regarded a visit to China as a hazardous undertaking. Napti took the suggestion further, by proposing that the three men should make mutual wills. They proceeded to do so. The wills were prepared by Mr Shehadie. Each man appointed the other two the executors and sole beneficiaries of his will. The wills were dated 1 August 1986.

The appellant went to China to see his wife. Whilst he was away Cox took independent legal advice. He consulted a solicitor about the leases and the guarantee, and also discussed the matter of the mutual wills. Apparently on legal advice, on 2 September 1986, Cox wrote to the sub-tenants of the Redfern properties telling them that they should pay rent to him. The letter said that the arrangements between Cox and the appellant had been terminated. Cox also made a new will, and told Napti of this. Neither Napti nor the appellant benefited under the new will.

Following the appellant's return from China the three men fell into dispute, principally about the leases. Ultimately there was a meeting in Mr Shehadie's office, which was attended by Cox, his solicitor, Napti and the appellant. There was argument about various aspects of their dealings. At the meeting, Cox's solicitor informed the other people present that Cox had made a new will. As was noted, that was already known to Napti, but it appears that it was the first that the appellant or Mr Shehadie had heard of it.

From October 1986 Cox received the rent of the Redfern properties from their occupants. He excluded the appellant and Napti from the properties. Between that time and June 1988 little relevantly occurred. In June 1988 Mr Shehadie wrote to the occupants directing them to pay rent to the appellant, and at the same time legal proceedings were commenced claiming that Cox had repudiated the lease agreements, and asserting that the commencement of the proceedings was to be taken as an acceptance of such repudiation. It is not entirely clear what was the object of the demand that the occupants pay rent to the appellant, but it was never complied with.

In December 1988 Cox sold two of the Redfern properties. He sold the third in August 1990.

The respondent to this appeal, who was the defendant in the proceedings before Windeyer J, is the executrix of the will of Cox. The proceedings before Windeyer J involved a claim by the appellant for damages for breach of the lease agreements, and a cross-claim by the estate of Cox for an amount owing to him pursuant to his guarantee of the appellant's debt to the bank, which had been called upon by the bank.

Windeyer J found that Cox had been in breach of the agreements for lease, that the agreements had been repudiated, and that the repudiation had been accepted by the appellant He calculated the damages to which the appellant was entitled, together with interest, in the sum of $221,275. On the cross-claim in relation to the guarantee, including interest, he found for the cross-claimant in the amount of $109,257. In the result, there was a judgment for the appellant for the difference between the two amounts ie $112,018.

No appeal is brought in relation to-the cross-claim. In relation to the damages for breach of contract the appellant claims that the damages awarded by Windeyer J were too low, and there is a cross-appeal by the respondent contending that there should have been no finding of breach of contract.

The most interesting aspect of the appeal, however, relates to a different matter. The appellant claims that the agreement between Napti, Cox and the appellant in relation to the making of mutual wills resulted in an entitlement in the appellant to damages, or, alternatively, to a declaration that the estate of Cox is held on trust for the appellant and the estate of Napti.

Windeyer J found against the appellant in relation to the claim based upon the mutual wills. It is convenient to address that issue first.

It is of no advantage to the appellant merely to assert, as is undoubtedly true, that Cox, Napti and the appellant agreed to make mutual wills. They in fact made mutual wills, on 14 August 1986, and to that extent carried out their agreement The problem for the appellant is that, a few weeks later, Mr Cox made a new will thereby revoking the August will. At the time, Napti and the appellant were still living, and Cox's solicitor informed Napti, the appellant, and the appellant's solicitor of the new will. The question is whether there was anything to prevent Cox from doing that or, more accurately, whether, that having been done, the appellant had any continuing rights, either in contract or in trust, against Cox or his estate.

A person can enter into a binding contract to make a testamentary disposition in favour of another, provided the usual requirements of form or consideration are satisfied. Further, although a will is, by its nature, revocable, a testator may enter into a binding contract not to revoke a will, and breach of such a contract will give to the other contracting party a right of action for damages, and, depending upon the circumstances, a possible claim for equitable relief.

A particular application of these general principles arises in the case of people who, in a contractual context, make mutual, or corresponding, wills. (People may, of course, make mutual wills in a context where there is nothing more to it than that, and they regard themselves as free to alter their wills as they please or as circumstances alter). The law on this subject was explained by Dixon J in Birmingham v Renfrew (1936) 57 CLR 666. (See also Bigg v Queensland Trustees Ltd (1990) 2 QdR 11).

If two persons make mutual wills, and agree, expressly or by implication, and either conditionally or unconditionally, not to revoke their wills, a breach of that agreement gives an entitlement to an equitable remedy. If the agreement is

express, equity will give effect to it according to its tenor. If it is implied, it will be important to identify with precision the nature of the implied promise

It may, in a particular case, and depending upon the circumstances, be proper to conclude that the parties to an agreement to make mutual wills by implication agreed, unconditionally, never to revoke their wills. Ordinarily, however, and especially when all that is relied upon for the implication is the conduct of the parties in making mutual wills, the proper implication is that neither party will revoke his or her will without notice to the others.

In Bigg, McPherson J considered the problem that arises where a survivor learns, upon the death of the other party to such an agreement, that the other party has secretly revoked his or her will. That question does not arise in the present case. Nor, on the facts, is there any need to explore the difficulties that might arise- out of having an agreement between three, rather than two, testators.

Although no such allegation was pleaded in the statement of claim, an attempt was made to persuade Windeyer J that there was, when the August wills were made, an express and unconditional agreement between Napti, Cox and the appellant that none of them would ever revoke the wills they were then making. The evidence to support such a contention was extremely thin. The appellant attributed to Napti a statement that the three of them would never change their wills, and suggested, in a somewhat vague way, that the other two acquiesced. This evidence was not accepted by the trial judge. For reasons set out in his judgment, which appear to me to be perfectly sound, Windeyer J regarded the appellant as an unsatisfactory witness and was not willing to believe this portion of his evidence. The evidence itself, as given, was distinctly lacking in cogency but, in any event, the trial judge's assessment of credibility, based as it was upon his observations of the appellant, is one with which this court should not interfere. No successful challenge has been made to the finding that there was no express agreement that the three wills would be treated as irrevocable.

It was clearly arguable that there was an implied agreement between Napti, Cox and the appellant that, so long as three of them remained alive, no one of them would revoke his will without giving notice to the other two. No such argument was advanced, no doubt for the reason that such an implication was of no assistance to the appellant. During the lifetime of the other two and, indeed, within a few weeks of the making of the mutual wills, Cox gave Napti and the appellant notice that he was revoking his will.

Windeyer J was not invited to conclude, and it would have been circumstances of this case, an wrong to conclude, that there was, in the implied, unconditional, agreement never to revoke the wills. As was noted above, whilst it is possible that such an implication could be found in the circumstances of an individual case, there is nothing to warrant it in the present case and, at least ordinarily, the mere fact of the making of mutual wills justifies only a more limited implication of the kind mentioned above.

It should be added that there is a feature of the present case which provides an additional reason against a wider and unconditional implication prohibiting revocation at any time. It relates to the circumstances in which the wills were made. It is easy to understand why Cox thought it a good idea, in his own interests, that the appellant should make a will before he went to China. By that time their respective financial affairs were somewhat entangled Cox regarded the appellant's journey to China as dangerous, and that prompted his suggestion that the appellant should make a will. It was following that suggestion that Napti proposed they should make mutual wills. However, there was no particular

reason why the mutuality should subsist following the appellant's safe return from China, at least provided the one who intended to change his will gave notice to the others.

It was also argued that the present case went beyond the mere making of mutual wills, with a related implied agreement concerning revocability. An attempt was made to persuade Windeyer J that this was a case in which there was consideration, over and above the mutuality, for Cox's agreement to make a will in favour of Napti and the appellant. The consideration was said to consist of various financial arrangements between the parties, but as Windeyer J correctly pointed out, all those financial agreements had been entered into a significant time before any question arose about the making of mutual wills. Windeyer J rightly declined to accept this submission.

Upon analysis, the evidence that was accepted by Windeyer J showed nothing more than the fact that mutual wills were made. There was, in the circumstances, no reason why Cox was not at liberty, during the lifetime of the three men and upon giving notice to the other two, to revoke his will. This is what he did almost immediately upon receiving independent legal advice, and, in the result, there was no subsisting claim or entitlement in either Napti or the appellant.

Windeyer J accepted that the appellant was entitled to damages against the estate of Cox for the breach of contract involved in the conduct of Cox in September 1986.

The appellant was entitled to damages arising out of the repudiation of three agreements for the lease of residential properties. Those properties were occupied by sub-tenants. They produced income in the form of the rents paid by the occupants, and there were significant outgoings related to rates, taxes, repairs and maintenance. The agreements for lease were for a term of ten years. They were repudiated by the notice given to the occupants, in September 1986, to cease paying rent to the appellant, by the exclusion thereafter of the appellant from the premises, and by the assertion that the arrangements between Cox and the appellant, which included the agreements for lease, were at an and. That repudiation was accepted, formally, on 28 June 1988.

In his reasons for judgment Windeyer J observed that the evidence adduced in support of the calculation for damages was extremely skimpy. This, apparently, is a matter that was the subject of repeated comment in the course of the trial. The appellant read an affidavit of a valuer, Mr Fleischner. That affidavit simply, and somewhat unconvincingly, estimated the likely rental income from sub-tenants over the remainder of the terms of ten years, deducted the head rent that was payable to Cox, and propounded a claim for the balance. Mr Fleischner was cross- examined about his lack of opportunity to observe the premises, his lack of experience in relation to rental incomes in the area, and his inability to make a proper estimation of future income and outgoings. Windeyer J found his evidence unreliable. Furthermore, he criticised Mr Fleischner's methodology. He said: "It takes no account of rent received up to October 1986; the basis for increasing the rent value after 153 weeks is not acceptable as there had been no inspections; no deduction is made for outgoings which the lessee would have had to bear or for his obligation under the leases for repairs and renovations; and there is no attempt to calculate the present value of a future loss."

Windeyer J, thereupon, and with the limited information available to him, set about making his own calculations. In doing so he had to make allowance, by way of estimate, for outgoings for which the appellant would have been responsible had the agreements for lease run their intended course. Ultimately he arrived at the figures earlier mentioned. I see no error of principle or of fact in the calculations made, bearing in mind the inadequacy of the evidence.

In Tramway Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 658 Jordan CJ said:

"The estimate of damages for breach of contract must be based on evidence. If the evidence proves nothing more than that the contract has been broken only nominal damages can be awarded. If it goes beyond this and shows by reason of the nature of the contract the stage of performance at which the breach occurred and the nature or extent of the breach or all or any of these matters or otherwise that it is more probable than not that substantial damage has been occasioned the tribunal must do the best it can with the material at its disposal to assess the amount of the damage and must not be deterred from doing so by the fact that it may be very difficult indeed to determine the approximate quantum."

Windeyer J did the best he could with the material he was given.

It was faintly argued that Windeyer J was in error in finding that Cox, by his conduct in September 1986, repudiated the three contracts for the lease of the Redfern properties. In my view, his Honour's conclusion was amply justified. Whilst the reasons for his conduct are not entirely clear, and may have been related to legal advice, or to influence brought to bear by another party (as was suggested by the appellant), Cox repented of the bargain he had made in relation to the leasing and future management of the properties. In early September 1986, he countermanded instructions that had previously been given to the occupants to pay rent to the appellant, he told them that his arrangements with the appellant had been terminated, and he excluded the appellant from the premises. Unquestionably, this amounted to repudiation.

In support of the cross-appeal the respondent also advanced a somewhat puzzling argument to the effect that the appellant failed to mitigate his damages by not commencing proceedings for specific performance for the agreements for lease. Having been excluded from the premises, and from the rents, the appellant spent some time in taking legal advice, but otherwise relevantly doing nothing, and ultimately accepted the repudiation of the contracts and rescinded them. He then immediately commenced an action at law for damages He was under no obligation, legal or equitable, to attempt to obtain an order for specific performance, and there was every reason why he should wish to see an end to his business association with Cox. Whatever might have been the personal merits of their falling out, no criticism can be made of the appellant for simply exercising his legal rights, accepting the repudiation of the contract, and suing for damages.

Both the appeal and the cross-appeal should be dismissed with costs.

Kirby P I agree with Gleeson CJ. Priestley JA I agree with Gleeson CJ.

Instructed by: Carroll and O'Dea Counsel for the Respondent: MM Hilberry

At a glance

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Judgment (49 paragraphs)

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