Avon Downs Pty Ltd v Federal Commissioner of Taxation

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROBATE LIST

1 HIS HONOUR: On 12 January 2000, four persons named in a purported will of the late Max Frederick Dippert of 2 April 1996 sought probate of that will. However, in the events which have happened, they sought orders:

(a) that probate be granted of the document under s 18A of the Wills Probate and Administration Act 1898;

(b) that probate be granted of such will in a rectified form under section 29A of that Act (after an appropriate dispensation extending the time for making that application); and

(c) that the will be construed. 2 It is very odd to find such a concatenation of applications being contained in the same summons. However, after a couple of false starts, the matter came on for hearing before me in the Probate List on 5 March 2001. On that occasion, Mr Knoll of counsel appeared for the plaintiffs and Mr Neal, solicitor, appeared for Claire Maxine Dippert who had originally been one of the plaintiffs but is now the defendant. By consent, the construction issue, (c) above, was postponed until after the disposition of all other issues. 3 The facts are rather odd. The deceased retained a solicitor to assist him with the making of a will. That solicitor, "J", was in 1996, suffering from extreme emotional problems. J gave evidence in the witness box that because of those problems he was not as attentive to matters as he would normally have been and also that he has made his peace with the Law Society about his activities that year. J gave evidence that the deceased rang him about 25 January 1996 and said, "I want to make a new will, I will fax over what I want and you can do it up." On that day, J received a fax purportedly from the deceased, setting out his wishes, and upon receipt of the fax telephoned him. The instructions for the will were that the deceased wanted his estate with respect to the shares he held in a company controlled by him, M F Dippert Pty Ltd, dealt with in one way and the residue of his property dealt with in another way. There is no problem in this case about the disposition of the residue so I will concentrate on the gift of shares. 4 The original instructions, which were by facsimile, noted that 25% of the shares were to pass to Max Christian Dippert, 20% to Claire Maxine Dippert, 20% to Philip John Dippert, 20% to Lynette May Bruderlin and 5% each to Margaret Anne Forrester, Paul George Thompson and Raymond Clive Wilcoxon. 5 Shortly after this conversation, J wrote to the testator saying: "I am not aware what the structure of the issued capital is at the present time or what shares are owned by any of the persons whom you propose to name as beneficiaries of the shares. I have therefore provided that each of the beneficiaries will receive sufficient to bring their total holdings in the Company to the percentages specified by you. It would be desirable to discuss this aspect with your accountant as it would create difficulties if the number of shares which you hold in the Company is not divisible between the proposed beneficiaries in whole shares. It may be necessary for further shares to be allotted so that they can be divided in the proportions directed by you. … I would be pleased to discuss this matter with you at your early convenience."

J said that he telephoned the testator and said, "Max, I think I had better talk to your accountant. I can recall that there were some trusts involved which had shares in the company and, unless they have been wound up, you would need to consider who beneficially owns the shares. Also you may need to issue further share capital to enable the division you have in mind. Is Mr Butler still your Accountant? Can you give me his number?" The testator replied "No, he's gone. I've got some bloke over at Lakemba." J said, "If you give me his name and number, I can ring him" to which the testator replied, "No. I don't want you to do that. I will check with him. Just draw up the will and send it to me." 6 Some months after he had sent the will to the testator J rang him again and said, "Max about the will. You were going to talk to your accountant about the trusts and whether any further share capital should be issued." The testator replied, "I've spoken to him. All the shares are in my name. There is no need to issue further shares." 7 J then prepared a revised draft of the will and sent it to the testator on 1 April 1996. He called on the testator the next day and the will was signed in his presence. 8 However, J was the only witness to the will in whose presence the testator signed. J took the will back to his office where he had his secretary add her signature. 9 This almost incredible event means that the will is formally invalid. 10 However, the circumstances provide the clearest case for granting probate of an informal will under s 18A of the Wills Probate and Administration Act 1898. 11 Section 29A of the Wills Probate and Administration Act 1898 empowers the Court to rectify a will in certain circumstances. Subsection 1 of that section says: "If the Court is satisfied that a will is so expressed that it fails to carry out the testator's intentions, it may order that the will be rectified so as to carry out the testator's intention." 12 Subsection 2 then provides that there is a period of 18 months after the death of the testator in which, if any application for rectification is to be made, it must be made subject to subsection 3, which allows the Court to extend that period if it is satisfied that sufficient cause is shown for failure to make the application within the period. 13 In the present case, the testator died on 10 May 1996 and the original summons was filed on 12 January 2000, well outside the period laid down in s 29A(2). As I am of the view that the claim for rectification must fail, it is unnecessary to consider whether the time should have been extended. Normally, of course, that question will be the first to be considered. However, in the rather singular way this matter got before me as Probate List Judge, I need to deal with the matter on the merits. 14 Even before the enactment of s 29A there was limited power in the Court to rectify a will by omitting words from the probate. The law is discussed by Hardingham in his article "The Jurisdiction of Courts of Probate to Rectify errors in Wills" (1972) 46 ALJ 221. One of the prime examples is Perpetual Trustee Company v Williamson (1929) SR (NSW) 487, where Harvey CJ in Eq held at 490 that: "Where the draftsman is doing the merely ministerial act of copying what he thinks the testatrix has written in her instructions if the mistake is proved and the mistake had not been brought to the notice of the testatrix, I think the word inserted in error must be omitted from the probate…".

However, as Williamson's case showed, cases beyond this could not be dealt with under the inherent jurisdiction of a court in probate. 15 The Court of construction could for practical purposes bring about a rectification in that it could declare that words used by the testator were to be given a sense other than the usual because of all the surrounding factors. 16 However, these methods of dealing with mistakes in wills were insufficient and after a report from the Law Reform Commission, section 29A was inserted in the Act. However, as Rowland points out in (1993) 1 APLJ 87 and 193, in his article "The Construction or Rectification of Wills to take account of Unforeseen Circumstances affecting their Operation", s 29A does not cover all the problems in this area of the law. See also Voyce "Statutory Reform of Rectification of Wills in NSW" (1991) 8 Aust Bar Rev 49. 17 The section has been construed so as to apply the basic principles of rectification worked out in contract cases. Accordingly, what one must look for is an error which has occurred in the transcription of the will or where one can see what the intention of the testator was but the words used have not fulfilled that intention. What one cannot do is to look at unforeseen circumstances and speculate what the testator might have done in those circumstances and then supply words to meet those circumstances. 18 Thus in Mortensen v NSW, NSWCA 12 December 1991 unreported, Sheller JA said: "The Court's discretion, assuming it is satisfied that the will is so expressed that it fails to carry out the testator's intentions, is limited to rectifying the will in such a manner 'as to carry out the testator's intention'".

Thus where there is no evidence to show what the testator's intention was in the event of certain things happening, the Court cannot rectify the will under s 29A. 19 Before turning to the actual facts of this case, I should note that, although the Court of Probate and the Court of Equity are now merged, there are still very good reasons why questions of construction of wills should not be dealt with in summonses filed principally for the grant of probate. 20 Before the merger of the courts, the principles quite clearly were that the Court of Probate had limited power of construing a will, the power to be exercised only so that the Court of Probate could carry out its tasks in ascertaining what was the last will of a free and capable testator and for dealing with questions of accounts of executors etc; see eg Re Hawksley's Settlement [1934] Ch 384 and Re Fawcett [1941] P 85. The question is well discussed in Certoma "The Law of Succession in NSW" 3rd ed (LBC, Sydney, 1997) pp 140 and following. One of the principal reasons for confining the powers of the Court of Probate in construing wills in this way is because the evidence which is properly received by a Court of Probate a fortiori when a Court of Probate is considering a rectification case, ranges over a wide range of matters including declarations of intention and what the testator said to his solicitor. When a Court of Equity is construing a will the Court is confined to the words used by the testator plus the factual matrix in which the will was made. 21 Even though it is now theoretically possible to include both questions in the one summons, the evidentiary problems usually make it appropriate to deal with the matters separately. 22 In the instant case, justice has been done by postponing the questions of construction until after the grant. However, ordinarily, the same summons should not contain both types of matters. 23 At the time the will was made, the testator was in an advanced stage of suffering from terminal cancer and as I have said, J had his own problems. From these problems and other circumstances, the facts about the holding of the shares in the Dippert company were not properly investigated. In fact, as J had thought, the testator had set up a series of trusts for his children in respect of the shares. Moreover, these trusts had a vesting date which in virtually every case, had been reached before the testator died. As a result, as at the testator's death, some of his children already owned a greater percentage in the company than the testator wished to give them. 24 I have used the word "owned" in the previous paragraph deliberately to use a neutral term. Nothing had been done to register the children as proprietors of the shares in the company's records. The share register has been tendered in evidence and it still shows the testator as being the registered holder of the shares, though the share register is marked in various folios "as Trustee of the X Trust" etc. 25 Section 169(5) of the Corporations Law requires a non-listed company with a share capital to indicate in its register any shares that a member does not hold beneficially. Section 1091C(10) provides that except as provided in s 1091C or 216B (a reference which the legislature has failed to update to 169(5)), no notice of trust whether express, implied or constructive shall be entered on a register of members. 26 This carries out the general principles of Corporations Law that the register of members will only contain information relating to the member's holding that is required by law: Re W Key & Son Ltd [1902] 1 Ch 467 and Re T H Saunders & Co Ltd [1908] 1 Ch 415. 27 The relevance of saying this is that ordinarily courts assume that references to the holding of shares refers to the registered holding; see eg Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; Federal Commissioner of Taxation v Patcorp Investments Ltd (1976) 140 CLR 247. The provisions of the Corporations Law show that the argument presented, that one could look to the endorsements in the register as to who the beneficiaries were, or the trust deed could be looked at to see who was the holder, could not be sustained. 28 As at the testator's death, the shares in the company were beneficially held as follows:

This amounts to 67.6%. One V H Gow owned 0.02% and it would seem that the testator beneficially owned 32.4% (because of rounding these figures exceed 100%). The matter is further complicated in that the shares were split into 8 classes designated A to H, only the A and B shares held by the testator and Mr Gow carrying votes. 29 The gifts to Max Christian Dippert and Claire Maxine Dippert could not take effect because they already had more than a 20% holding in the company. The gift to Philip John Dippert would be topped up to a maximum of 20%. 30 The plaintiffs say that the way to remedy the problem is to omit from the will the words "as will when added to the number of shares already held by the persons referred to hereunder result in those persons holding the percentage of the issued capital of the company referred to hereunder, that is to say". 31 The reason given for excluding those words is that if they are in the probate, the plain construction of the will will be that the whole gift fails and the shares in the company will fall into residue. 32 I cannot see how this is so. I do not want to construe the will at this stage of the proceedings, but I would have thought that it would be quite possible to construe the words so that those beneficiaries who already held 20% of the company would take nothing further under the will, and that the other gifts would abate pro rata so long as no-one exceeded the cap provided for in the will. However, that question should really await another day if necessary. 33 The second reason why one would not omit the words is that one certainly could not find that the effect of the will with those words omitted would necessarily conform with the testator's intention. 34 I note that in the submissions of the plaintiffs there is reference to the South Australian case of Wesley v Wesley (1998) 71 SASR 1; Trimmer v Lax (Hodgson J - 9 May 1997, unreported) and my decision in Green v Green (24 June 1998, unreported). None of these cases give any support to the proposition that one can rectify the will other than in cases where there is clear proof of the testator's actual intention and that even if the evidence tends towards indicating what the testator would have intended had he or she considered the matter, that is not enough. 35 Accordingly, the case on rectification must fail. 36 Before finalising these reasons I should mention a couple of other unsatisfactory matters. 37 The first is that when the Registrar in Probate made requisitions in this estate, he was met in reply with a document from the plaintiffs' solicitors which asks for further and better particulars, that is about four pages in length. This is not the way in which the Court expects requisitions to be dealt. If a solicitor cannot understand requisitions, then he or she should get counsel's advice: he or she does not interrogate the Court. 38 Secondly, there was a request to dispense with service or notification of the minor beneficiaries on the basis that they were going to benefit from the attitude the plaintiffs took in any event. This is not a good reason why people who are interested in the estate should not be informed of their rights and be given an opportunity to state their position. 39 Thirdly, the summons involves both questions that are strictly matters for the Court of Probate and questions of construction in the one summons. 40 However, I have managed, as much as possible, to deal with the merits of the case. I declare that the "will" bearing date 2 April 1996 is the last will of the testator Max Frederick Dippert. I decline the application for rectification. I refer the matter to the Registrar to complete the grant. The costs of all parties to date may come out of the estate. I am, however, concerned that the costs of the plaintiffs' solicitors have been increased by a lot of unnecessary work. Unless the costs are agreed to by the solicitor for the defendant, they should be moderated by the Registrar or assessed by a costs assessor. 41 I reserve further consideration as to costs. I stand the summons over for mention before me on 2 April 2001 for consideration as to what should be done with the postponed question of construction set out in 4.3 of the amended summons.

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