Ell, Richard Austin v Ell, Stephen Maxwell

Court of Appeal (NSW)|2015-02-23|Before: Basten JA, Ward JA, Gleeson JA, Robb J

Background documentation

The structure of the will has already been noted: the dispute turned on the operation of cl 5 which read as follows: "5. IF MY WIFE Mary Josephine Ell shall predecease me then I release my son the said Richard Austin Ell from any and all monies owed to me by my said Son on the security of 64 Military Road, Neutral Bay."
Some background circumstances relevant to this provision are not in dispute. First, the testator's wife did predecease him. Secondly, both at the date of execution of the will (25 June 2002) and at the date of testator's death (24 May 2007) there were moneys which had been provided to Richard Ell from one of his parents or from their company Investment Ell Pty Ltd, which were characterised as loans repayable to Richard Ell's parents, and thus ultimately to his father. Thirdly, the outstanding loans, both at the time of the will and the date of death, were made up of advances by (it may be assumed for present purposes) the testator to meet Richard Ell's debts, including particularly repayments under a mortgage held by the Commonwealth Bank over the appellant's residential property at 64 Military Road, Neutral Bay. Fourthly, at the time the testator executed his will there was an expectation (unfulfilled at any time) that the outstanding moneys would be secured by Richard Ell granting a second registered mortgage over his home. In these circumstances, the issue was whether cl 5 was effective to release any debts, the proposed mortgage in favour of the deceased not having come to pass.
The terms of the agreement of 22 October 2007 were more expansive than cl 5 of the will, but not by much. They were to be found in a document in the names of Stephen Ell and the appellant which read, in full, as follows: "Richard, With regard to Max's Estate and the amounts owing by you to the Estate totaling in excess of $800,000, it is proposed by the beneficiaries, Michael, Catherine and myself, that we reduce this debt to $400,000 provided that: - 1. You agree to put $1,000,000 of your future share of the Estate into a Managed fund type investment, or other like product under the guardianship of Michael Ell. The purpose is to provide income for the future and preserve your capital. 2. You agree to repaying the agreed half debt by reducing your entitlements by 50% until the half debt ($400,000) is extinguished. As discussed with you, Catherine Michael and myself are also intending to put a large proportion of our share of the Estate in income producing assets. regards Stephen Ell 22 oct, 2007 Agreed Richard Ell 22 Oct, 2007."

Other evidence

For parties involved in litigation of this kind, the court proceedings are usually the conclusion of, or at least an integral part of, a long standing relationship. Each has a story to tell, no doubt in the belief that true justice will only be accorded if his or her circumstances are fully understood. The role of legal representatives is to curb (with due explanation) those entirely understandable expectations. However, that constraint is not always rigorously applied. In the present case there was significant evidence tendered and admitted which could only be relevant to infer an intention on the part of the testator or of the parties to the October 2007 agreement. So far as the evidence of the intentions of the testator were concerned, admissibility depended on the operation of s 32 of the Succession Act 2006 (NSW), as well as the Evidence Act 1995 (NSW) and, if relevant, the general law. [1] No party raised an issue as to admissibility under the Succession Act with respect to the construction of the will and it need not be addressed further. With respect to the October 2007 agreement, evidence of subjective intention may have been inadmissible: however, a failure to take that point is now immaterial - evidence as to subjective intention remains irrelevant to the legal issue to be determined, which is the objective meaning of the terms of the agreement, having due regard to the circumstances known to the parties at the time of execution of the document.
While the distinction between evidence demonstrating surrounding circumstances and evidence of the subjective intention of a particular person may readily be stated, the distinction is not sharply defined. That is because a statement in a document may only properly be understood with the benefit of knowledge of the matters known to the responsible party, which may explain the intention revealed by the words used. For example, the term "security" in cl 5 of the will might well have included an equitable proprietary interest in the land in respect of payments made to the mortgagee to secure the interest of the mortgagor. On the other hand, as the evidence demonstrated in this case, where the lender anticipated obtaining a registered second mortgage to secure advances made to the owner of the land, the term "security" might be understood, as was accepted in the present case, as referring to such a second mortgage. That is to say, the testator intended to use the term in that (limited) sense. Evidence as to the extrinsic circumstances will thus allow an inference to be drawn as to the intention of the testator in adopting particular language in his will. Such evidence is admissible, in a way that evidence as to what the testator said as to his intentions would not be. [2]
Applying this principle the Court is entitled to look at particular evidence as to circumstances regarding the arrangements between the appellant and his father before and around the time that the will was executed in 2002. Relevantly, the appellant stated in his affidavit: [3] "In or about 2002 or 2003 I agreed with my father that the Loan Moneys would be secured against my home, then located at 64 Military Road, Neutral Bay. He said words to the effect: He said: 'Placing a mortgage on your home which is your only significant asset will protect you against any financial problems that could arise in the future'. I said: 'Look, I think that's really not necessary, but if that's what you want to do then that's fine. I have no intention of selling the property.' He said: 'It's not to protect our financial position, but it's just to protect you'."
The testator's personal solicitor was Mr Peter Williams of Miranda. He received instructions from the testator to prepare his will and a mortgage in connection with advances made by him to his son Richard Ell. Based on his notes of a conference which took place with the testator on or about 19 June 2002, Mr Williams recounted the following conversation: [4] "At this conference Max instructed with words to the following effect: Max: 'The total mount owing as at 21 May 2002 is $486,185.' 'Prepare a loan agreement which is to show an interest free loan, repayable on demand, secured by mortgage over Neutral Bay. I expect to continue to pay the mortgage on the house.' 'Include a clause in the will that on the death of both Mary and myself the whole of the amount secured by the mortgage is to be forgiven.'"
The documentary evidence indicated that Mr Williams undertook a search of the appellant's property and prepared a mortgage and loan agreement. Copies of the unexecuted documents were in evidence. The documentation also revealed correspondence between Mr Williams and the manager, Commonwealth Bank of Australia, dating from January 2002, seeking advice as to the Bank's requirements with respect to its consent to a second mortgage. These details were not forthcoming for some time, but on 6 June 2002 Mr Williams was able to provide a statement of his clients' assets, presumably being in part fulfilment of the Bank's requirements.
It is clear that no second mortgage was registered over the appellant's property. Mr Williams' affidavit concluded with the following statement: [5] "I ultimately drew up a mortgage document in registrable form and a deed. … I recall I provided these documents to Max to obtain execution by Richard. I do not know if they were ever signed and I have never seen signed originals or copies of executed versions."
On the basis of this material, the following inferences were available: at the date the will was executed (25 June 2002) the testator: (1) was aware that amounts totalling in excess of $486,000 had been advanced to the appellant, much of it being by way of payments of the appellant's mortgage over his home in favour of the Commonwealth Bank; (2) expected to continue to make payments to the Commonwealth Bank under the mortgage; (3) had sought and obtained agreement from the appellant that he would execute a registered mortgage in favour of the testator to protect the equity in the home from creditors other than the Commonwealth Bank; (4) intended to release the appellant from his obligation to repay the advances so secured, in the event that he died after his wife; (5) knew that the mortgage had been prepared but not executed, and (6) gave no instructions to distinguish between amounts advanced to the appellant for different purposes.
In those circumstances, to read cl 5 as ineffective to release the appellant from his obligations to repay the advances, because it only applied to secured loans and none were secured by the mortgage which was never executed or registered over the appellant's home, would, arguably, be to adopt a literal reading of the language of the clause which was inconsistent with the testator's intention to be inferred from the objective circumstances as to his knowledge of affairs at the date the will was executed. On the assumption that such a finding is open, it is appropriate to consider whether the appellant is precluded from pursuing that argument in this Court.

(a) background

In response to the claims based on the construction of cl 5 of the will and, in the alternative, for rectification of cl 5, the respondents' pleaded that they and the appellant had "conducted their affairs regarding the deceased's estate since the deceased's death on the mutually assumed and agreed basis that the [appellant] admitted and acknowledged that he was indebted to the estate in the sum of at least $800,000." [6] It was further alleged that the written agreement was entered into "[p]ursuant to the mutual assumption". The respondents alleged detriment resulting from distributions having been made on the basis of the mutual assumption and alleged that the appellant was estopped from resiling from the mutual assumption.
On the last day of the hearing, the respondents sought leave to amend to plead that the agreement of October 2007 constituted an "accord and satisfaction" of the appellant's claim that the debt had been released pursuant to cl 5 of the will. The trial judge refused the belated application to amend. [7] He did so on two bases. The first was that he could not exclude the possibility that the appellant may have been entitled to lead further evidence relevant to the nature of the agreement. With regard to the evidence then before him, he noted that Stephen Ell had given evidence that he (Stephen) "entered into the agreement on the basis that there was no issue about the enforceability of the debt". [8] That, the trial judge noted, rendered it "doubtful that the [respondents] could establish an accord and satisfaction on the evidence."
This finding appears to have fortified the judge in his view that the amendment might have reopened the evidence, a course which he was entitled to reject, but it also raised a second issue as to the precise nature of the supposed compromise. Referring to the analysis of the Victorian Court of Appeal in Osborn v McDermott [9] the trial judge noted that a different analysis might arise depending upon whether the accord was effective immediately or whether it was conditional upon performance of executory elements of the agreement. The judge noted, [10] referring to the "sparse terms" of the letter of 22 October 2007: "The letter itself seems to suggest that the debt of 'in excess of $800,000' was intended to be replaced by an obligation to pay $400,000 in the form of a reduction of Richard's entitlement to participate in distributions of the estate, but upon the agreement by Richard to put $1 million of his future share in the estate into a managed fund type investments."
The trial judge considered that a different analysis might, however, be available, based on the finding that, once the beneficiaries had terminated their agreement, the executors were entitled to rely upon the original debt owing to the estate. [11]
In this Court the respondents effectively ignored the question of further evidence and sought to rely upon the actual findings of the trial judge with respect to the effect of the agreement, combined with factual findings as to what the appellant "understood" or believed to be a common assumption underlying the agreement of October 2007.

(b) construction of October 2007 agreement

For the purposes of construing the agreement, factual findings as to the state of mind of the appellant were beside the point. Nor were they relied upon by the trial judge in construing the agreement: they occurred in an earlier discussion concerned with issues of credit. In considering the terms of the agreement, the trial judge identified three issues of construction. These concerned the meaning of various phrases, namely, (a) "your future share of the Estate", (b) "Managed fund type investment, or other like product", and (c) "under the guardianship of Michael Ell". [12] In considering the meaning of the second phrase, the judge looked at the surrounding circumstances and stated: [13] "Putting aside the terms of the actual negotiations, it is clear that the purpose of the [respondents], which [the appellant] appears to have understood and accepted, was that the beneficiaries other than [the appellant] were prepared to forego their shares in half of the debt that [the appellant] owed to the estate, provided that he put at least $1,000,000 of the amount to be distributed to him from the estate into an investment that would preserve his capital, and ensure the availability of income to protect [the appellant] into old age. The source of the other beneficiaries' concern that led them to make the offer was [the appellant's] long history of entering into inappropriate, if not improvident, transactions. The underlying essence of the agreement was, objectively, that the relevant assets would be managed by a professional asset manager, and not by [the appellant] himself, whether directly or through his control of the trustee of his testamentary trust."
After considering a proposed variation to the agreement and the question of breach, the trial judge returned to consider a further issue of construction of the agreement, namely whether the proposed reduction was to be one-half of the acknowledged debt, or such amount as left $400,000 outstanding. He resolved that issue in favour of the latter construction. [14]
It is noteworthy that, except when considering the application for leave to amend, the trial judge made no finding as to the effect of the agreement on the construction of cl 5 of the will or any entitlement of the appellant to rely upon cl 5 of the will. Leaving to one side the question of common assumptions or understandings, the agreement was entirely silent with respect to a number of issues, including the precise amount of the debt, whether the whole of the debt was owed to the estate, whether any part of that identified in the inventory was unenforceable for reasons other than cl 5 of the will, as well as the possible effect of cl 5. If there had been an abandonment of an asserted legal right, one might have expected an express provision to that effect, identifying with some care the dispute or disputes which were being compromised and settled. If there were a compromise of a claim with respect to the estate, one would have expected the agreement to be made on behalf of the executors, though not necessarily excluding the beneficiaries.
The amended notice of contention relied upon by the respondents in this Court stated in part that: [15] "[T]he agreement had been validly terminated, not ab initio but as at 15 January 2009 … and accordingly, the contracting other residuary beneficiaries had an accrued contractual right to have the estate administered on the basis that the … Appellant was indebted to the estate for the debt of $857,953.09 or a right to damages on that basis." Whilst that is described in the notice of contention as a "fact", it is a restatement of conclusions reached by the trial judge as to termination as at 15 January 2009, with certain inferences alleged to flow from that finding. However, the finding is untenable. It is impossible to derive from the agreement any contractual right to sue for the precise amount nominated: there is no reference to such an amount, either stated or by implication, in the agreement. The best one can say is that the respondent beneficiaries may have been entitled (prior to termination) to require the appellant to pay $400,000 to the estate in accordance with the mechanism specified in the agreement.
There is no rational basis for concluding that the agreement replaced a possibly contested claim by the estate with an uncontestable entitlement to the same amount. To the extent that the amended notice of contention challenged the rejection of the application to amend the defence, based on the existence of such a contractual right, that contention might have been rejected as not reasonably arguable. In any event, the course taken by the trial judge in the exercise of his discretion to reject an amendment proposed after the trial (including submissions) had concluded was not attended by any relevant error.

It is not entirely clear whether the respondents pursued a defence of conventional estoppel, absent the existence of a contractual entitlement arising from the October 2007 agreement. However, on the assumption that the respondents sought to maintain their pleaded defence, that claim should be addressed. The pleading stated [16] that the parties had conducted themselves on the basis of a common assumption as to a particular matter, where it would be unjust for either party later to depart from the common assumption. [17] The common assumption was said to be an admission and acknowledgement by the appellant that he "was indebted to the estate in the sum of at least $800,000", reflecting the introductory words to the October 2007 agreement. Perhaps because it was forensically strategic to do so, the respondents noted that a "convention may be created by the operative terms of the contract so that the parties contract to be estopped." [18] However, it is not entirely clear why it is necessary to speak in terms of a "contractual convention": if there is a contractual agreement, for example that certificates or statements of account will be taken to be final, it is the terms of the contract which will preclude a party from challenging the relevant document. In any event, if the agreement did not give rise to a term of sufficient particularity in the present case, reliance on a "contractual convention" will not assist.
Where the conventional basis upon which the parties conducted themselves is not revealed by the contract, it is open to the parties to establish a common assumption by other means. There may be respects in which such a common assumption can be articulated will be imprecise; nevertheless, it must be clear that there was a common assumption and as to the core content. [19]
There is authority for the view that the common assumption must be communicated or manifested by both parties; [20] that reflects the explanation given by Dixon J in Thompson v Palmer [21] (and repeated in Grundt v Great Boulder Proprietary Gold Mines Ltd [22] ) that "[w]hether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party." In Coghlan v SH Lock (Australia) Ltd [23] Samuels JA (with whom Hope JA agreed), observed in relation to this passage "I do not think that, in the context of Grundt's case, the reference to 'the adoption' of the assumption excludes estoppel if … the assumption was originated by the party asserting the estoppel and fostered by the opponent." The High Court has since reiterated that "there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship". [24] That raises a factual question.
Because it is necessary that both parties have adopted the common assumption as the conventional basis of their transaction, [25] at the very least the common assumption should be capable of articulation, once the factual circumstances have been established. In the present case, the material relied on was that the agreement assumed the existence of a debt owed by the appellant to the estate. In order to preclude the appellant running the construction argument, a further element was necessary, namely that the appellant and the respondents, being aware of cl 5 of the will, all accepted that it did not release the debt.
There was no evidence that the appellant entertained that assumption. In his first affidavit, the appellant identified a conversation with his father in the following terms: [26] "He said: 'I am prepared to forego the loan but in return to make it up to your brothers and sister I expect you to have a will that gives the family assets received back to your brothers and sister.' I said: 'Yeah, I'm happy to do that.'"
His attitude thereafter was set out in the following passage: [27] "My father passed away on or about 24 May 2007. At the time, I was unsure how to broach the topic of the Loan Moneys with my siblings. While my father and I had agreed that the debt would be forgiven in return for me writing my siblings into my will, I was not aware if any of them knew this and did not know how they would react if I told them this now (ie in May 2007). For my part, I considered that I had no obligation to repay the Loan Moneys once I executed my will. However, the most important consideration for me at the time was that before my father passed away, I understood that his overriding wish was that my siblings and I be a close knit and supportive family. Accordingly, I did not want to cause further disharmony and was unsure how to proceed. Nevertheless, an opportunity presented itself to strike what I considered to be a fair balance, when I started to discuss the topic of the Loan Moneys with my siblings."
With respect to the circumstances immediately preceding the 22 October 2007 agreement, the appellant gave evidence in the following terms: [28] "Throughout September and October 2007 I had various conversations (both in person and over the phone) with my brothers regarding the Loan Moneys. This culminated in a conversation with Stephen where we said words to the effect: Stephen said: 'Look, I've spoken to the family and we're all in agreement that we are prepared to reduce the loan to $400,000 provided that you put a million in assets that will protect your future.' I said: 'Yeah, I think that's a good compromise.' He said: 'There needs to be one of us to oversee your administration of the million dollars.' I said: 'I'd prefer Michael to take up that duty and I will speak to him about it.'"
In the course of cross-examination, the discussion in the days preceding and including 22 October 2007 were put to the appellant, but not in a manner which challenged the evidence in his affidavit. In particular the following exchange took place: [29] "Q. He suggested a proposal to you to put part of your inheritance into a managed type fund? A. Yeah. Q. If you did that they were agreeable to reducing your debt to the estate down to the figure of about 400,000? A. No, it was 400,000. Yes. Q. Do you agree with that? A. Yes. Q. You were happy enough to do that, weren't you? A. Yes, I was. I would like to say the reason why I was happy? Q. I'm not asking the reason why you were happy. …"
He was taken back to that answer in re-examination: [30] "Q. What were you otherwise happy about? A. Well, the reason that I signed the agreement was that I didn't think I had a financial obligation to repay the loan because of clause 5 and various other, and what my father had told me - "
At that point objection was taken and he was not allowed to complete the answer.
If there was a common assumption as to the debt to the estate and the effect of cl 5, it was not one shown to have been accepted by the appellant: indeed, the cross-examiner expressly sought to avoid the topic being touched upon.
The agreement of 22 October 2007 was negotiated between the appellant and Stephen Ell, who signed the relevant document. Mr Stephen Ell referred to the circumstances leading up to the agreement in the following terms: [31] "12. When my father passed away I was concerned based on Richard's history with money that Richard would receive his share of the inheritance less the loan account and quickly spend it or lose it on bad business decisions. 13. I spoke with Michael and Catherine's husband, Ted. I wanted to create a scheme to make it attractive for Richard to put a large part of his inheritance away in income producing assets with guardianship by one of us. That would ensure that he didn't end up destitute. 14. In or around September 2007, I telephoned Richard about a proposal that Ted and I had discussed to help Richard with his finances. I said to Richard: 'Hi Richard. With regard to Max's estate Michael, Catherine and I want you to put part of your inheritance into a managed fund type arrangement so that you will receive a continual income. If you do this, we will reduce the debt you owe to the estate to $400,000.00.' Richard replied: 'That could work.' I replied: 'Let's meet at a coffee shop and I will bring the document outlining this.' On 22 october 2007 I met Richard at a coffee shop in Neutral Bay. The discussion we had was fairly short and amicable. I said: 'Here is the proposed arrangement we discussed. … 'We are trying to ensure you have a steady income and won't run out of money later in life.' Richard said: 'You all think I'm hopeless with money don't you.' I replied: 'Well your track record is pretty bad but anyway this arrangement should return somewhere better than $50,000.00 per year, 10% will give you $100,000.00 per year and with your other income this should allow you to do what you want.' Richard replied: 'Yeah, OK.'"
Stephen Ell was cross-examined at some length in relation to the tension between his father's express wish to treat his children equally and the advances made during his lifetime to the appellant. In particular, he was asked whether he had discussed a mirror provision to cl 5 of his father's will which was to be found in his mother's will and of which he became aware following her death. He said he had not discussed it with his father. [32] With respect to cl 5 in his father's will, the following questioning occurred: [33] "Q. When you read your late father's will after his death, in particular clause 5, may I suggest in your mind you thought there might be an inequality of treatment towards Richard? A. We would have had a discussion after my father's death about the meaning of clause 5 especially with Ted who looked after - who really dealt with Max on a day-to-day basis so we would have relied on his interpretation. Q. Ted was the accountant for your father and his companies for many years? A. That's correct. Q. When you say you had a meeting, you had a meeting with yourself and the other co-executors about the will, yep? A. Yes. Q: You also had a meeting to discuss what clause 5 might mean? A. We would have had a meeting to discuss a range of issues, operational issues. Clause 5 would have been discussed I'm sure. There would have been a range of matters. … Q. Can I suggest this to you, sir; since your late father's death and up until your entry of the agreement … on 22 October 2007, … you yourself at no time raised with Richard clause 5 of the will, do you accept that? A. I accept that. Q. Indeed after the entry of the agreement on 22 October 2007 you yourself at no time raised at any time with Richard clause 5 of the will, do you accept that? A. I accept that. Nor did he raise it with me."
This evidence does not permit an inference that the agreement of 22 October 2007 was entered into upon a common assumption that cl 5 of the will did not release the appellant's debt to the estate.
The trial judge dealt with the defence of conventional estoppel "upon the assumption that, as a matter of law, the will released the debt", contrary to his conclusion with respect to the construction of cl 5. [34] His relevant factual findings were as follows: "[155] The evidence establishes that Richard entered into the 22 October 2007 agreement with his eyes open. He had a choice between two alternatives. First, he could assert that his debt to Max had been released by the will, but if the other beneficiaries did not accept that outcome, Richard would have to face the consequences of litigation and family disharmony. His alternative was to agree to the offer that was made to him by the other beneficiaries through Stephen, and accept a reduction of the debt by about one half. That would give Richard immediate certainty. He chose that alternative. [156] It is plain that the 22 October 2007 agreement was entered into upon the assumption, made and accepted by all parties to it, that Richard owed a debt to the estate at that time that was greater in amount than $800,000. All parties to the agreement proceeded upon the basis that the original debt was owed to the estate, but had been reduced by about one half, and acted accordingly, until Richard instituted the present proceedings."
The trial judge then proceeded to address the question as to whether a departure by the appellant from the common assumption would "cause detriment" to the respondents. The judge was not persuaded that it would. [35] That conclusion followed from a finding that the respondents had received increased benefits, to which they were not entitled if the debt had been forgiven and which they would therefore have to repay to the estate. No issue was raised as to the obligation to repay, nor was there any evidence of change of circumstances in reliance upon the payments.
There was a challenge to this finding by the respondents, on the basis that the agreement of 22 October 2007 "objectively compromised the dispute." For the reasons explained above, no dispute had been articulated and no compromise recorded. Nor did the evidence support a finding that the parties proceeded on the basis of such a compromise. However, had it been necessary to pursue the issue further, a question might have arisen as to how the compromise operated. The appellant's statement of claim asserted a breach of fiduciary duty on the part of the respondents in terminating the agreement in January 2009. The breach was said to arise from a duty not to profit from their position as executors and trustees and not to act in a manner involving a conflict of interest as against the beneficiaries. That claim was rejected on the basis that the 22 October 2007 agreement was "between the four beneficiaries, and not between [the appellant] and the three executors." [36] That left open a separate question as to how the common assumption (if there were such) between the beneficiaries would bind the executors, one of whom was not a party to the agreement, when the appellant sought to enforce his rights against the estate. In the circumstances, it is not necessary to address these questions further. On the basis that there was no contractual compromise of any dispute as to the operation of cl 5 and an absence of any assumption that the debt was legally owing to the estate, subject to one further issue, there is no bar to the appellant pursuing his claims based on the operation of cl 5 of the will.

(d) inconsistent claims for relief

The remaining issue, raised at trial, and repeated on the appeal, was that the appellant could not pursue inconsistent claims. That is, he could not both seek to enforce his contractual entitlements under the agreement of 22 October 2007 and maintain that his debt to his father had been waived by cl 5 of the will. That was because the agreement was based on the assumption that an amount was owing to the estate from the appellant. The trial judge disposed of this submission on the basis that the appellant was entitled to make claims in the alternative, although he would not be able to obtain relief on inconsistent bases.
The question of inconsistent relief did not arise at trial because, although the appellant succeeded in establishing a binding agreement entered into on 22 October 2007, he was found to have been in breach of the agreement at the time of its termination in January 2009 and thus not entitled to enforce its terms. He also failed on his argument as to the proper construction of cl 5 of the will. The issue was pressed by the respondents on appeal in circumstances where the appellant did not seek to challenge the findings with respect to the agreement, but did seek to pursue his argument that cl 5 released his debt to the estate. The respondents' written submissions stated the issue in the following terms: "If the Appellant's construction and rectification claims were to be entertained on appeal and either of them allowed, it would result in inconsistent findings and relief namely that parties have accrued contractual rights that the Appellant was indebted to the estate for the debt of $857,953.09 on the one hand, and on the other hand that the Appellant was not so indebted."
This submission fails for two reasons. First, although the appellant is bound by the unchallenged finding as to the existence of the 22 October 2007 agreement, that agreement was lawfully terminated by the respondents (or at least the three of them who were party to the agreement) and is not the source of the relief sought by the appellant. Secondly, for the reasons already outlined, there was no "accrued contractual right" to the indebtedness to the estate, arising from that agreement.
It is not necessary in the circumstances of this case to consider whether the entry into the contract should have led to an election between inconsistent rights, in the sense discussed in Agricultural and Rural Finance Pty Ltd v Gardiner, [37] the case not having been run on this basis.

Construction of clause 5 - findings

The background circumstances in which the will was prepared have been set out above. [38] It has been noted that although the reference to moneys owing to the testator might have been ambiguous or uncertain, the proceedings have been run on the basis that the amount referred to was all of the moneys advanced by the testator, his wife and moneys paid from the family investment company. The debt was $857,953. There might also have been ambiguity or uncertainty as to the meaning of "security". Again, however, the case was run on the basis that it referred to a second mortgage to be granted by the appellant to the testator over his home in Neutral Bay. Finally, it is common ground that no such mortgage was executed or registered. A different issue might have arisen if the mortgage, prepared by Mr Williams, had been executed, but not registered.
The construction issue is, in substance, whether the reference to moneys owed "on the security of" the appellant's home was intended to identify that which was owing (which was not in dispute) or was intended as imposing a condition on the release, that is, the release would be effective only if security were granted. In determining which of these alternative constructions should be accepted, no objection was taken to reliance upon the extrinsic evidence set out above. The extrinsic evidence demonstrated that the purpose of seeking security was to protect the residual equity in the home from possible third party creditors of the appellant. There was no basis for any inference that the release of the debt was intended to be conditional upon the existence of such security. Indeed, the effect of the release would be to render the security unnecessary and ineffective.
The evidence indicated that the outstanding debts at the time the will was prepared were in the order of $450,000; the debts increased by a further $400,000 between the date of the will and the date of the testator's death. Over that period, the testator continued to make advances with, it should be inferred, knowledge that the security he had sought in 2002 was not in place. The evidence that Mr Williams forwarded a mortgage in registrable form to the testator for execution, but that the testator took no further steps to have it executed by the appellant, supports the inference that he knew no security was in place. There is no basis for concluding that his intention, at the time the wills were drawn up and executed, to release the appellant from all moneys owing to him (and his wife) was abandoned. If the reference to security in the will was intended as a precondition for such release, one would have expected that he would have taken steps to have the mortgage executed. The fact that he did not do so, nor change his will, supports the conclusion that the reference to security was intended as a means of identifying the debts, rather than as a precondition to the operation of the release. That construction should be accepted. Accordingly, the effect of cl 5 was to release the appellant from liability to the estate for the agreed amount of $857,953.
This conclusion having been reached as a matter of construction of the terms of cl 5, it is unnecessary to address the availability of relief by way of rectification.

Conclusions

These conclusions require that the appeal be allowed and that there be a declaration as to the effect of cl 5 of the testator's will. However, the notice of appeal sought further orders, namely a declaration as to the amount owing by the estate to the appellant and an order that the respondents "be brought to account to make good" that amount, together with interest. Whether orders to that or any similar effect could properly be made could not be determined on the basis on which the appeal proceeded. Although it is true that all the beneficiaries and the executors were before the Court, it was also common ground that the estate was finally administered some years ago. If there is to be some further relief sought in these proceedings, which is otherwise than by consent, the matter will need to return to the Equity Division. If orders can be made by consent, the parties should have leave to provide short minutes to the Registrar of this Court. Without wishing to curtail the possibility of reaching consensus, liberty to apply for the purpose of filing consent orders should be limited to a period of 28 days after the date of this judgment. (Legal representatives and parties are reminded of their obligations under Pt 6, Div 1 of the Civil Procedure Act 2005 (NSW).
There remains a question as to the appropriate order for costs with respect to the trial. Although the judgment below will be set aside, counsel for the respondents noted that a major part of the case at trial was taken up with matters on which the appellant was ultimately unsuccessful, and remains so. Counsel for the appellant acknowledged that there was force in that submission and suggested that the appellant should receive one-half of the costs of the trial, as a fair apportionment. [39] That submission should be accepted.

Orders

The Court should make the following orders: (1) Allow the appeal and set aside order (2) made in the Equity Division on 19 March 2014 dismissing the proceedings brought by Richard Austin Ell. (2) Set aside the order made on 5 May 2014 that the plaintiff, Richard Austin Ell, pay the defendant's [sic] costs on the ordinary basis. (3) Declare that, pursuant to cl 5 of the will of Austin Maxwell Ell, deceased, the amount of $857,953 owing by Richard Austin Ell to the deceased was released. (4) Order that the defendants pay one-half of the plaintiff's costs of the trial. (5) Order that the respondents pay the appellant's costs of the appeal. (6) Grant the parties liberty to apply, exercisable within 28 days of the date of this judgment, with respect to any consequential orders or directions. (7) Grant the respondents a certificate under the Suitors' Fund Act 1951 (NSW) in respect of the costs of the appeal.
WARD JA: I agree with Basten JA.
GLEESON JA: I agree with Basten JA.

Endnotes

Succession Act, s 32(3).
See generally, Allgood v Blake (1873) LR 8 Ex 160 at 162 (Blackburn J giving judgment for the Court); Fell v Fell [1922] HCA 55; 31 CLR 268 at 273-274 (Isaacs J).
Affidavit, Richard Austin Ell, 26 October 2012, par 9.
Affidavit, Peter Williams, 11 November 2013, par 12.
Affidavit, par 18.
Amended defence, 7 August 2013, par 19(a).
Judgment at [173].
Judgment at [174].
[1998] 3 VR 1 (Phillips JA; Winnecke P and Charles JA agreeing).
Judgment at [176].
Judgment at [177].
Judgment at [87], [89] and [95] respectively.
Judgment at [94].
Judgment at [125].
Paragraph 2(b), dealing with the question of material detriment.
Amended defence, 5 August 2013, par 19.
Legione v Hateley [1983] HCA 11; 152 CLR 406 at 430 (Mason and Deane JJ); Heydon, Leeming and Turner, Meagher, Gummow and Lehane's Equity - Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) at [17-045].
Referring to K R Handley, Estoppel by Conduct and Election (2006, Thompson) at [8-004].
See generally, Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; 65 NSWLR 300 at [91] (Brereton J).
K R Handley, op cit, [8-011], referring to The August Leonhardt [1985] 2 Lloyds Rep 28 at 34-35 (Kerr LJ).
[1933] HCA 61, 49 CLR 507 at 547.
[1937] HCA 58; 59 CLR 641 at 676.
(1985) 4 NSWLR 158 at 167F-G.
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; 160 CLR 226 at 244 (Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ).
See McHugh JA in Coghlan at 176E.
Affidavit, 26 October 2012, par 17.
Affidavit, par 20.
Affidavit, par 21.
Tcpt, 11/12/13, p 48(10)-(20).
Tcpt, p 70(10)-(15).
Affidavit, 15 May 2013.
Tcpt, 12/12/13, p 90(5).
Tcpt, pp 93 and 98-99.
Judgment at [152].
Judgment at [169].
Judgment at [127].
[2008] HCA 57; 238 CLR 570 at [84], [88]-[89] and [95] (Gummow, Hayne and Kiefel JJ; Heydon J agreeing); see also Petersen v Moloney [1951] HCA 57; 84 CLR 91 at 102 (Dixon, Fullagar and Kitto JJ).
See [16]-[20] above.
Tcpt, CA, 23/02/15, p 43(35)-(45). 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: 06 March 2015

Suitors' Fund Act 1951(NSW)

Solicitors: Bull, Son & Schmidt (Appellant) Hunt & Hunt Lawyers (Respondents) File Number(s): 2014/110681 Decision under appeal Court or tribunal: Supreme Court Citation: Richard Austin Ell v Stephen Maxwell Ell [2014] NSWSC 259 Date of Decision: 19 March 2014 Before: Robb J File Number(s): 2012/340482

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Judgment (10 paragraphs)

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Legislation Cited (4)

Cases Cited (10)

Cited By (5)