Green v Green

Family Provision Act 1982 s 16 Income Tax Assessment Act 1936 (Cth) s 102AG LEGISLATION CITED : Succession Act 2006 s 27 Wills Probate and Administration Act 1898 s 29A

Green v Green [1998] NSWSC 272 Mortensen v New South Wales (C/A 12/12/1991 unreported) Rawack v Spicer [2002] NSWSC 849 Re Brisbane (Powell J 19/06/1992 unreported) CASES CITED : Re Burrows (1906) 6 SR (NSW) 606 Re Hogg (Young J 12/03/2001 unreported) Re Johnson [1953] 4 DLR 777 Rhodes v Rhodes (1882) 7 App Cas 192 Sophron v Nominal Defendant (1957) 96 CLR 469 Trimmer v Lax [1997] NSWSC 189 Trustee of the AW Furse No 5 Will Trust v Federal Commissioner of Taxation (1990) 91 ATC 4007 Warren v McKnight (1996) 40 NSWLR 390

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROBATE LIST

116903/07 - RE SWAIN (DAWN) JUDGMENT 1 YOUNG CJ in EQ: This is an application under s 29A of the Wills, Probate and Administration Act 1898 for rectification of the codicil to the will of the late Dawn Swain made on 8 March 2005. 2 Mrs Swain died on 11 March 2005. 3 On 30 August 2005, the testatrix's son Anthony Swain took out probate in Mrs Swain's estate. 4 Under Mrs Swain's will which was made 25 June 2002, in the events which have happened, Anthony Swain took the whole estate. This is the result of cl 4 of the will by which the testatrix said: "I give the whole of my estate to my son" 5 The codicil is in simple terms. It has two clauses, the second of which merely confirms the will. The first reads as follows: "1. I ADD an additional clause 8 to my said Will, as follows: '8. Excluded from my assets in clause 4 herein are the following: (i) all my debentures; (ii) all my bank accounts; (iii) all my shares and stocks; (iv) the real estate property, [address given]; and (v) all my allocated Pensions; These assets will go into a discretionary trust for the benefit of my son, Anthony … and his family.' " 6 The testatrix died with an estate of about $4.46 million of which, it would seem, about $3 million would have fallen within cl 8 should it have operation. 7 On 5 October 2007, Anthony Swain filed a summons in these proceedings seeking rectification of the codicil. This was twice amended, the most recent amendment being the document filed in court when the argument in this matter was considered by me on 1 December 2008. The final version of the summons claims orders: (1) extending the time for making the application; (2) a declaration that the codicil failed to carry out the testamentary intentions of the deceased; and (3) that the codicil be rectified by deleting from cl 8 the words "These assets will go into a discretionary trust for the benefit of my son, Anthony … and his family" and replacing them with the words "I give the above assets to the Dawn Swain Testamentary Trust. The terms of the trust shall be established by this codicil and shall be those contained in the Discretionary Trust Deed made 8 March 2005 between Michael Paul Carroll and Anthony James Edgar Swain." 8 At the hearing of the proceedings, Mr D B McGovern SC appeared for the plaintiff. There was no other appearance. Anthony Swain is the only person who could take the estate under the will and codicil as unrectified and is the next of kin on intestacy. The reason why he seeks rectification is quite clear. He says that during the final illnesses of his parents, there was discussion between him and them as to the tax effectiveness of benefactions under wills. He was firmly of the view that in order that his children could have the benefit of s 102AG(2) of the Income Tax Assessment Act 1936 (Cth), there would need to be a testamentary trust, that is, income of a trust estate that resulted from a will (vide s 102AG(2)(a)) and see Trustee of A W Furse No 5 Will Trust v Federal Commissioner of Taxation (1990) 91 ATC 4007. Otherwise, because Anthony Swain's children would be under age, any monies held on trust for them would attract tax at a high rate rather than a graduated rate of tax applicable to individual taxpayers. 9 The matter is, of course, academic unless Mr Anthony Swain wishes to divert part of the income to his children, but that seems to be an unspoken premise in this case. 10 Section 29A of the 1898 Act has now been replaced by s 27 of the Succession Act 2006 which contains a less ample provision covering the same field. However, at the date of the testatrix's death, s 29A was the operative section. 11 The section reads: "29A(1) 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. (2) An application for an order under this section shall not be made after the expiration of the period of 18 months after the death of the testator, except as provided by subsection (3). (3) The Court may grant leave to make an application for an order under this section after the expiration of the 18-month period if the Court is satisfied that sufficient cause is shown for the failure to make the application within that period." 12 The questions that arise in this case are:

(1) Whether the period for making the application should be extended;

(2) What is meant by the words "the testator's intentions" in s 29A?

(3) What needs to be established when a court is asked to rectify a will?

(1) Whether the period for making the application should be extended 13 The statute makes it quite clear that applications "shall not be made" [my emphasis] after the period unless there is sufficient cause shown. Mr McGovern, who I must compliment for his thorough submissions, puts that sufficient cause where there can only be one person affected by the result of the case, that being the applicant, should not be viewed too strictly. 14 Mr McGovern refers to cases decided under s 16(3) of the Family Provision Act 1982, which prescribes an 18 month period for making applications unless sufficient cause is shown for the application not having been made within time. Mr McGovern in particular refers to the decision of Hodgson J, as his Honour then was, in Warren v McKnight (1996) 40 NSWLR 390 at 394, that there are four principal factors relevant to the exercise of the court's discretion to extend time, viz: (a) the sufficiency of the explanation of delay in making the claim; (b) any prejudice to beneficiaries if the period were extended; (c) whether there has been any unconscionable conduct by the plaintiff; and (d) the strength of the plaintiff's case. 15 In Green v Green [1998] NSWSC 272, I said that: "The words 'sufficient cause' are common in connection with statutes setting a time and allowing the court to extend it. It is not possible just to take over the learning from one statute to another because each has set a time limit for the particular purpose of the statute and the interests involved."

I adhere to those words. Furthermore, in that case I quoted words of the High Court in Sophron v Nominal Defendant (1957) 96 CLR 469 at 474-5: "[E]very case must be determined on its own facts. Fixed formulae cannot be substituted for the wide words of the subsection … [I]t is a mistake to attempt to reduce the expression 'sufficient cause' to a closer or more rigid definition than the legislature has chosen to provide. The words no doubt are concerned with the justice of the case. There must be some positive reason for concluding that as between the parties it would be just to extend the period for giving notice." 16 I noted also in Green's case that there had not to that date been any contested application to determine what is "sufficient cause" under s 29A, but the decision of Hodgson J in Trimmer v Lax [1997] NSWSC 189 suggested that it might be appropriate to extend time when the only persons who could possibly be affected were the persons before the court and there was some carelessness shown in not presenting the application in time. I indicated that the determination as to what was sufficient cause under s 29A should await another day. 17 As far as I am aware, there has been no judicial utterance since on the point. Campbell J did mention the point in Rawack v Spicer [2002] NSWSC 849 at [32], but noted that the delay there was well explained, no submission was put as to prejudice and no one opposed the granting of leave. 18 The law clearly is that an application can be made under s 29A even after grant. This was initially decided by Powell J in Re Brisbane (19 June 1992, unreported). His Honour came to that view because he so read the words of the section but he was also reinforced in his view by the fact of the way the Law Reform Commission had expressed its reasons for the enactment of s 29A which included that a person who did not know about the terms of the will before probate was granted should be able to bring a claim under the section. It should be noted that in Re Brisbane the testator died on 25 October 1991, probate was granted on 28 January 1992 and the application under s 29A was made on 29 May 1992, so that it was within the 18 month period despite the fact that probate had been granted. Likewise in Re Hogg (12 March 2001, unreported) where I followed Re Brisbane, the application was made within the 18 month period. There has not been a decision as far as I am aware, where an application has been made after probate has been granted and after the expiry of the 18 month period. 19 It does seem to me that the grant of probate is a very relevant factor to take into account. A grant of probate is an order in rem. The court certifies to all the world that it is satisfied that the will produced to it is the last will of the testator. Once the grant issues, it is produced to all manner of companies and government authorities as evidence as to how they should transmit the property that was formerly the testator's. To recall the grant after a substantial period because the will needs to be rectified is a rather serious step to take and the fact that probate has been granted, a fortiori where probate has been granted on the application of the present applicant for rectification, there is a serious factor against there being sufficient cause. 20 I now turn to consider whether, apart from that matter, there is an adequate explanation for the delay. 21 The plaintiff puts in his affidavit of 12 September 2007, that he made contact with his tax accountant in October 2006. In December 2006 the accountant raised some suggestions that there might be a problem with the so called testamentary trust and suggested legal advice be obtained. This was eventually obtained and the proceedings were commenced on 5 October 2007. The affidavit finished by saying: "I acknowledge that a statutory time limit exists in respect of making such applications for rectification. I had no anticipation that any problem existed with the construction of my mother's Will until I sought to gain taxation advice in respect of my mother's Estate. It was my expectation that my mother's Estate should be in order as I had engaged legal advice at the time of the drafting of my mother's Codicil and it is only now that I understand that such construction was flawed."

The plaintiff's consolidated affidavit of 1 December 2008 produced the same material. 22 There is no doubt, as I have mentioned, that Mr Swain is the only person who could benefit from his mother's estate. However, I do not consider that it is necessarily sufficient cause that no one is apparently prejudiced by a late application under s 29A because of that factor. The grant of probate by this court, even in common form, is a judgment in rem and is communicated to all the world. 23 I have very great doubt as to whether the test as to what is sufficient cause for a Family Provision Act application being late can just be read across into s 29A. The fact that we are dealing with a public document operating in rem is a very strong distinguishing factor. Again, as the High Court said in Sophron's case, one must look to see what the legislature meant in this particular statute, and it seems to me in this particular statute the legislature was directing its mind to a fairly strict time limit for people to take advantage of the boon being given by the enactment of the section. 24 If the Warren v McKnight test is applicable, then there has been no prejudice to any beneficiaries, nor any unconscionable conduct. I have doubts about the sufficiency of the explanation of delay, but I need to look at the strength of the plaintiff's case and then come back to this matter when I am summing up the whole of the material.

(2) What is meant by the words "the testator's intentions" in s 29A? 25 Section 29A refers to the intention of the testator. In Mortensen v New South Wales (NSWCA, 12 December 1991, unreported) Sheller JA, with whom Mahoney and Meagher JJA agreed, said that s 29A: "is available for mistakes, not for lack of vision or perception or knowledge. It is a section directed at mistakes in expressing the testator's intentions." 26 In that case the testatrix had made it manifestly clear that she did not want her money to "go to the government" which for all intents and purposes meant she did not want to die intestate. However, there was a failure of one of the gifts she made and the result was that there was a partial intestacy. It was argued that the testatrix's intentions were that no monies should go to the government, and accordingly the will should be rectified. 27 The Court of Appeal, like Needham J at first instance, dismissed the application. Sheller JA said that it would seem on the evidence that the will was so expressed as not to carry out the testatrix's intentions. However, the section does not only require the court to find that fact, but also to find that the court can rectify the will "as to carry out the testator's intention". In the Mortensen case even though the intentions were that no monies should pass to the government, the testatrix had not indicated which of the possible options she would wish to pursue had she realised that her primary gift failed. Accordingly, the will could not be rectified. 28 In the instant case there are a number of problems facing the plaintiff in establishing how the will should be rectified as to carry out the testatrix's intention. 29 The evidence is quite clear that there was a general understanding in the family, including an understanding of the testatrix, that she was willing to leave her estate to the plaintiff in the form of a testamentary trust in order to allow the family to minimise its liability to federal income tax. She left all the arrangements to her son. 30 Accordingly, it was the plaintiff, not the testatrix, who went and saw the solicitor. Indeed, it gets worse because the son said he tried to contact the family's regular solicitor, and when he was unable to do so, consulted another solicitor who was working in the same building in which he was working. 31 That other solicitor never saw the testatrix. He got his instructions from the son. 32 The evidence before me is that the plaintiff's current solicitors asked that solicitor to make an affidavit, but was met by a telephone call from a lady who indicated she was employed by LawCover that no such affidavit would be forthcoming. I can draw inferences from this. The plaintiff could, of course, have subpoenaed the solicitor, he did not do so. The inference is, however, that the solicitor's reticence to give evidence is that he might be sued for negligence if he gave more details as to what happened so I should not draw the inference that usually applies when a witness is available and is not called that he could not assist the plaintiff's case. 33 On Wednesday 9 March 2005, the son attended the solicitor's office where he was introduced to an employed solicitor. The principal solicitor handed the son some documents and said: "This is a codicil and a trust deed." He indicated the employed solicitor and said: "Daniel will go to the hospital with you to see your mother and have these executed". The documents were a document which began "This is the first codicil" and bore a typewritten date of 8 March 2005 and a document called "Discretionary Trust Deed". A handwritten date of 8 March 2005 was put on it. It may be that what took place happened on 8 March rather than 9 March but it is of no moment on which date it was. 34 The son and the solicitor Daniel travelled to the Wolper Jewish Hospital and saw the testatrix. The son said she was sitting up in bed and alert, but in pain. He introduced Daniel to his mother and Daniel said: "Do you know what I am here for?" to which the testatrix replied: "Yes I have already discussed this with Anthony. I know what it is all about." Daniel then explained in general terms what the documents were and the testatrix executed both the codicil and the discretionary trust deed. She died on Friday 11 March 2005. 35 It should be noted that we not only have a situation here where the testatrix personally did not give instructions to the solicitor who prepared the will either personally or by document, but the instructions were given by the principal beneficiary. Secondly, that the solicitor who witnessed the codicil did not actually read it nor did he read the trust deed, but "explained [them] in general terms". 36 The solicitor "Daniel" has sworn an affidavit to say that he observed the testatrix and was satisfied he did not need to conduct his usual lucidity test. Daniel said in his affidavit: "I do not now have a clear recollection of my conversation with Mrs Swain regarding the codicil but believe that I showed her the codicil, asked her to read it and we had a conversation in words to the following effect: [Solicitor]: 'Are you happy with the contents of the document and do you understand it?' [Testatrix]: 'If my son is happy with it, it is fine with me. Just do what my son says.'"

The solicitor Daniel said he has no current recollection of personally explaining the details of the codicil and deed to the testatrix. 37 The deed is 20 pages in length. It constitutes the plaintiff as the trustee and states that the primary beneficiaries are the plaintiff, his wife, his then child and any other child or grandchildren of the plaintiff and any person whom the plaintiff as trustee determines is a primary beneficiary. The deed makes sure the vesting date is within the perpetuity period, it makes provision for discretionary applications of capital and interest, gives wide power to invest, to carry on business and to encumber the trust property, it also contained other detailed provisions dealing with administration. It is clear that the testatrix never read it, however, she signed it. 38 A more significant matter is that the settlor never signed the deed. In accordance with common practice the settlor was a solicitor (not Daniel), whom the deed said had settled $10. A trust does not come into existence until someone declares it. A document that is merely accepted by the trustee or by the trustee and the so called "appointor" is not a declaration of trust; see eg Re Burrows (1906) 6 SR (NSW) 606. Accordingly, not only does the codicil not set up a testamentary trust, but it also cannot operate so as to make a benefaction to an existing trust. 39 However, if the intention of the testatrix was to set up by her will a trust in the terms of the discretionary trust deed, the last two lines of cl 1 of the codicil are inadequate unless words were added at the end such as "in accordance with the document described as 'Discretionary Trust Deed' signed by me this day." 40 The testatrix, however, never read the deed, nor does it appear that it was fully read to her and even if it had been, there is great doubt as to whether she understood it. Can it be said that it was her intention that her property should go in accordance with that deed? 41 It must be remembered that courts only grant probate where the courts can see that the testamentary document is intended to be the testatrix's last will. Probate was granted of the will including the codicil as it presently exists, albeit in common form. 42 The law clearly is that a testatrix does not have to have understood all the words in her will. As Lord Blackburn said when giving the judgment of the Privy Council in Rhodes v Rhodes (1882) 7 App Cas 192 at 199-200: "[T]here is no difference between the words which a testator himself uses in drawing up his will, and the words which are bona fide used by one whom he trusts to draw it up for him. In either case there is a great risk that words may be used that do not express the intention." 43 As Williams on Wills, 9th ed (Butterworths, 2008) says at 58: "In some cases where the testator employs an expert draftsman to provide the appropriate wording to give effect in law to the testator's intentions, the testator has to accept the phraseology selected by the draftsman without himself really understanding its esoteric meaning and in such a case he adopts it and knowledge and approval is imputed to him." 44 A decision of the New Brunswick Court of Appeal is useful in this connection. I refer to Re Johnson [1953] 4 DLR 777, where the argument was put that because the will had been prepared by the principal beneficiary it did not express the testator's mind. At 782-3, Harrison J, with whom the other judges agreed said: "As to whether the testator was aware of all the contents of the will - so long as he was a man of sound mind, memory and understanding and adopted the document as his will, his knowledge of the contents is immaterial, he has chosen to rely on the person who prepared the document and has made it his own by signing it of his own free will as his will and testament." 45 I think that line of thinking must be applied in the instant case. What is to be taken as the testatrix's intention is what she meant either from the will and codicil that she signed (whether she actually read it or not) as well as extrinsic evidence. 46 It seems to me that on the material in this case that the intention was that cl 8 of the will as added by the codicil should operate so that the trust in the deed which she signed contemporaneously would govern the benefaction.

(3) What needs to be established when a court is asked to rectify a will? 47 As in all rectification cases, not only must it be established that there is a mistake, but also what should be written down to express the intention. Here there is clearly a mistake. What, however, is to be substituted? 48 The plaintiff's summons has given various versions of this. However, they all appear to be inadequate. In argument, Mr McGovern put that in view of the invalidity of the trust document one needed merely to add words at the end of cl 1 of the codicil: "such trust to be in accordance with the provisions of the Discretionary Trust Deed executed by me contemporaneously with this will." However, should there be any debate about this, then the plaintiff should not take out the formal order until the matter is mentioned again before me.

(4) What is the proper result in the instant case? 49 I then have to come back to consider whether sufficient ground has been shown for extending the time. 50 I do have doubts about this case. We do have the situation which should not be allowed to occur where the public has been given the impression for at least a year over the 18 months that they can safely act on the grant of probate in common form of the unrectified codicil. Moreover the excuse for taking so long to proceed is not really very strong. 51 However, there is no one amongst the beneficiaries who could be prejudiced by the order, in view of the fact that the son would take the whole of the property under the will unrectified, no outsider could be prejudiced, there has been a glitch in the procedure which the testatrix intended to put in place and accordingly, I think justice requires that I should find that there has been sufficient cause shown to extend the time. Accordingly I so find in this case on the facts, but I maintain my stance that it may well be inappropriate to apply the test in the Family Provision Act cases and that a more stringent test applies when endeavouring to discover what sufficient cause is within the meaning of s 29A(3) of the Wills, Probate and Administration Act or s 27 of the Succession Act because the public interest is more involved. 52 Accordingly: (1) The court extends the time for making this application to 5 October 2007. (2) The court orders that the codicil of the testatrix bearing date 8 March 2005 be rectified by adding at the end of clause 1 thereof the words: "such trust to be in accordance with the provisions of the Discretionary Trust Deed executed by me contemporaneously with this will." (3) The court orders that the grant of probate in common form be recalled and that the Registrar reissue the same in the appropriate form taking into account the order for rectification made by these orders.

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.