Coote v Price

The will

1. On 16 June 2014, 11 days before he died, the deceased made a will which provides, in effect, that his interest in the Dulwich Hill hotel business be divided equally between his four daughters, but only at the "Termination Date"; that is the earlier of when Amanda receives $1 million income from the hotel business, or dies.
2. That is, by the will, Diane and Suzanne still receive one half of the hotel business, but only if and when Amanda receives $1 million from that business, or she dies.
3. Further, the deceased stopped paying the premiums under the policies, causing them to lapse. Carol only found out about this shortly before the deceased died.
4. In those circumstances, Carol, Diane and Suzanne have brought these proceedings against the deceased's estate claiming damages for breach of the Stipulation for Judgment and declaratory and other relief.
5. Under the will, the deceased appointed Amanda and an accountant, Ms Ella Montgomery, to be his executors.
6. The executors filed a defence but, shortly before the hearing before me, sought and were granted leave to file a submitting appearance.
7. Mr Lever SC, who appeared for Carol, Diane and Suzanne, took me to evidence which satisfies me that neither Amanda, nor the deceased's other two daughters, wish to be involved in defending the claim now made by Carol, Diane and Suzanne.
8. By notice of motion filed on 25 July 2016, Carol, Diane and Suzanne sought to have the executors' defence struck out.
9. However, as the executors have now filed a submitting appearance, and as no other party wishes to resist the claims made in the proceedings, the matter proceeded on a final basis as an undefended matter.

The proper law of the Stipulation for Judgment

1. The Stipulation for Judgment provided that it was to be subject to, and interpreted under, the laws of the state of California.
2. The executors, in their defence, admitted the existence of the Stipulation for Judgment. They did not plead that the law of California differs from that of New South Wales nor was there any evidence before me as to the law of California.
3. In those circumstances, I am satisfied that I can proceed upon the presumption that the law of California is the same as that of New South Wales: see for example Regie National des Usines Renault SA V Zhang (2002) 210 CLR 491; HCA 10 at [70]; Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331; HCA 54 at [115] and M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia, (9th ed 2014, LexisNexis Butterworths) at [17.37ff]).

Carol's claim

1. A legally binding contract to make a will containing particular provisions can be enforced by way of a claim for damages (although not by way of specific performance): see for example Aslan v Kope [1995] NSWCA 26 per Gleeson CJ at 3 (Kirby P (as his Honour then was) and Priestley JA agreeing); Baird v Smee [2000] NSWCA 253 per Giles JA at [64] (Mason P agreeing) and Handley JA at [23]-[26]; see also Campbell v Campbell [2015] NSWSC 784 at [101] per Sackar J.
2. In their defence, the executors admit that the deceased ceased paying premiums due under the policies.
3. I am satisfied that this constituted a breach by the deceased of his obligations in the Stipulation for Judgment and that Carol has suffered damage, in that she has been deprived of what would otherwise have been the proceeds of those policies, namely a total payment of $US2.5 million.
4. Taking into account current exchange rates, Carol is entitled to a judgment against the executors in an amount in the order of $3.125 million.
5. I also propose to award her interest on that sum under s 100 of the Civil Procedure Act 2005 (NSW) to judgment.
6. The precise figure can be calculated when judgment is entered.

Diane's and Suzanne's claims

1. Diane and Suzanne were not parties to the Stipulation for Judgment.
2. However it was, by its terms, clearly made for their benefit in circumstances where I am satisfied that the deceased appointed Carol as trustee of the promises he made for the benefit of Diane and Suzanne (see for example Young CJ in Eq (as his Honour then was) in Dalton v Ellis; Estate of Bristow (2005) 65 NSWLR 134; NSWSC 1252 at [46] and see generally N Seddon, R Bigwood, M Ellinghaus, Cheshire & Fifoot: Law of Contract, (10th ed 2012, LexisNexis) at [7.43]).
3. Hence, Carol is able to enforce the Stipulation for Judgment on behalf of, and as trustee for, Diane and Suzanne.
4. I am satisfied that, by making the will, the deceased acted in breach of the promise he made under the Stipulation for Judgment to bequeath to each of Diane and Suzanne a quarter interest in the hotel business, effective immediately on his death, and not on the "Termination Date"; likely to be many years later.
5. I am satisfied that Diane and Suzanne are entitled to damages representing the difference between the amount that they will receive under the will and the amount that they would have received had the deceased complied with his obligations under the Stipulation for Judgment.
6. But calculation of what those damages are would be a complicated exercise, and one that I am not in a position to make on the evidence before me. That question would have to be referred out if it were to be pursued.
7. Because of that likely difficulty, Carol instead seeks on behalf of Diane and Suzanne: 1. a declaration that the executors hold a one half share of the deceased's interest in the hotel business on constructive trust for Diane and Suzanne; 2. an order that an account be taken of the profits of the hotel business since the deceased's death; and 3. an order that one half of those profits since the date of the deceased's death be paid to Diane and Suzanne.
8. I assume that the proposed constructive trust is to endure only for so long as is necessary for the account of profits to be taken and paid.
9. I am satisfied I have jurisdiction to impose such a trust (see [27]-[28] above; see also Tonkiss v Graham [2002] NSWSC 1093 at [95] per Campbell J). As Handley AJA said in Delaforce v Simpson-Cook (2010) 78 NSWLR 483; NSWCA 84 at [31]: "[E]quity enforces a contract not to revoke a will, or to leave property by will, not by restraining or nullifying an inconsistent will, but by fastening a trust on the estate to give effect to the contract: Birmingham v Renfrew (1937) 57 CLR 666; HCA 52 at 683."
10. I am also satisfied that this is an appropriate case in which to impose such a constructive trust.
11. The evidence makes clear that the deceased, and the executors well knew that the provisions of the deceased's will would contradict and amount to a repudiation of the Stipulation for Judgment.
12. Thus, on 16 May 2014, a month before the date of the deceased's will, Ms Montgomery, one of the executors, wrote to the solicitor who prepared the will: "I have discussed this with [the deceased], and his final instructions (in full acknowledgement that they conflict with the divorce agreement) are - 1. Leave in the clause requiring Diane and Suzanne to meet the CGT liability. 2. Provide for all of the hotel interests to be held in trust until Amanda receives $1m in dividends. He is aware that this construction could be challenged, in which case he would like his executors to have the power to negotiate. Is this achievable?"
13. Several weeks later, on 9 June 2014 (a week before the deceased signed the will) Ms Montgomery wrote to the deceased's solicitor, Ms Fowler: "We have finally had the conversation, in the presence of Amanda, Samantha & Rebecca (who are there with [the deceased]). We have talked through all provisions, the conflict which could arise with the US divorce agreement, the outcomes if the divorce agreement is, in my terms, more powerful than the will… At the end Amanda summed up by saying something like 'Greg, does this describe your wishes, or is there anything you want to change or discuss further?'. [The deceased] replied that he wants it to be finalised as is."
14. In these circumstances, I am satisfied that the justice of the case requires that orders be made to the effect of those sought by Carol on behalf of Diane and Suzanne.
15. I will list the matter for directions so that final orders can be made.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 November 2016