mixed. Admitted to probate: clauses 1 to 11 of the December 2014 will; clauses 3, 10 and 11 of the August 2015 codicil. Excluded from probate: the remaining clauses of the December 2014 will, the other...
Key principles
Where the presumption of a testator's knowledge and approval is displaced, the proponent of a will bears the onus of proving affirmatively that the testator knew and approved the...
A testator may possess testamentary capacity (the Banks v Goodfellow standard) despite advanced age, visual impairment and mild short-term memory deficits; the court found the...
Complex testamentary provisions dealing with corporate and trust structures and broad discretionary 'claw-back' powers require clear, intelligible explanation to the testator;...
The court may admit parts of a testamentary instrument to probate while excluding other clauses that fail the knowledge and approval requirement; accordingly clauses 1 to 11 of...
Issues before the court
Did the testator possess testamentary capacity at the times she executed the December 2014 will and the 2015 codicils?
Did the testator 'know and approve' the contents of the contested testamentary documents (knowledge and approval)?
Plain English Summary
Parker J held that Mrs Lewis had testamentary capacity, but that the complex corporate/trust-related clauses and broad 'claw-back' powers in the later instruments (largely drafted by her son David) had not been shown to have been understood and approved by her. The Court therefore admitted straightforward parts of the December 2014 will and limited parts of the August 2015 codicil to probate, but excluded the other contested clauses. Earlier wills were valid but revoked by the later admitted instrument.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Was the 2011 will (and other earlier wills) validly proved despite defective attestation, and if valid should they be admitted to probate?
Can parts of a will be rejected while other parts are admitted?
Cited legislation
2 cited instruments linked from this judgment.
Deep Dive
1,570 words · generated 30/06/2026
What happened
This is a contested probate case concerning the late Pamela (Anne) Lewis, who died in February 2017. After a family dispute culminating in a tax-driven restructuring of the family investment company (the "succession plan" implemented in early 2012 by the testator's son David), a sequence of testamentary instruments followed: the June 2011 will (prepared by Peter), a December 2014 will and two 2015 codicils (prepared or drafted largely by David and executed with the involvement of solicitor John Rickard). Litigation followed the corporate reorganisation, ultimately producing a judgment by White J (July 2015) that the restructuring should be rescinded and that the testator and David had breached fiduciary duties.
When Anne Lewis died, David propounded the December 2014 will and its 2015 codicils. Peter resisted probate and propounded the 2011 will (and earlier wills). The Supreme Court (Parker J) was therefore asked to determine (1) whether the testator had testamentary capacity, and (2) whether she "knew and approved" the contents of the instruments, an inquiry sharpened by the fact that David had played a central role in drafting and stood to exercise broad powers under the contested clauses.
Parker J admitted only parts of the December 2014 instrument (clauses 1 to 11) and parts of the August 2015 codicil (clauses 3, 10 and 11). The remaining contested clauses, in particular the provisions giving broad powers over the Hughes companies and trusts and the extensive 'claw-back' provisions directed at Peter and others, were excluded from probate. Earlier wills (June 2011 and July 2010) were found to have been validly made but were revoked by the later instrument(s).
Why the court decided this way
Two separate legal inquiries drove the result.
Testamentary capacity (Banks v Goodfellow). The judge accepted contemporaneous medical reports (notably Dr Wong's MMSE results: 28/29 in 2012 and July 2015, with later deterioration after a November 2015 stroke). Lay evidence described some short-term memory issues and earlier episodic excessive drinking, but overall the court found that the testator had sufficient cognitive function, she was "articulate and engaged" and the cognitive deficits were mild until after the stroke. Hence the court concluded she had testamentary capacity at the relevant times.
Knowledge and approval (Tobin v Ezekiel). On proof of capacity and due execution a presumption arises that the testator knew and approved a will's contents. But that presumption can be displaced where the surrounding circumstances create a well-grounded suspicion; once displaced the proponent must prove actual knowledge and approval. The judge applied that framework with particular care because (a) the estate and testamentary provisions were complex (companies and discretionary trusts), and (b) David, who significantly shaped and drafted the instruments and stood to benefit via powers and control, occupied the classic 'beneficiary-drafter' posture that triggers "particular vigilance".
Parker J found the evidence wanting on the knowledge-and-approval front. The salient features were:
The complex provisions were drafted largely by David (confirmed in the emails and draft history), and Mr Rickard acted more as a conduit than as an independent adviser.
Mr Rickard's file notes were minimal; he did not follow recommended Law Society practices for handling potentially vulnerable testators (such as obtaining the testator's own summary or asking open-ended questions and recording the responses).
The 'succession plan' was conceptually complex; the testator had limited grasp of trust structures and their legal consequences (she thought assets had been placed into "trust accounts in the name of the family") and was heavily dependent on David.
The claw-back clauses were long, conceptually diffuse, and able to operate punitively to defeat beneficiaries' legacies; the judge considered it improbable that such sweeping effects had been explained to or understood by the testator.
Because those crucial contested clauses lacked reliable evidence of their appreciation by the testator, the court excluded them from probate while admitting straightforward and mechanical provisions that posed no risk of abuse by a controlling drafter.
Before and after state of the law
Before: The decision sits within established New South Wales probate doctrine:
Banks v Goodfellow provides the classic capacity test.
Tobin v Ezekiel provides the modern statement of the knowledge-and-approval presumption and the circumstances in which it is displaced, including the onus implications and the need for particular vigilance where an interested drafter is involved.
Hobhouse v Macarthur-Onslow supports the practical ability of a court to admit parts of a will while excluding other parts that fail the requisite standards.
After: Parker J's decision applies these authorities in a fact-rich setting featuring corporate restructuring, limited-record practice by a solicitor, and a family member who both drafted and benefited. The decision reinforces that:
A finding of basic testamentary capacity will not suffice where complex or self-serving provisions require detailed explanation and appreciation.
Courts will scrutinise the process by which complex instruments are produced, including the solicitor's conduct and records; sparse file notes and a dominant lay drafter weaken the evidential case for knowledge and approval.
Partial probate remains a practical remedy to reflect mixed evidentiary outcomes.
Key passages with plain-English translation
Selected passages (judgment references in-text):
"I am satisfied that ... the testator possessed testamentary capacity." (plain English: despite age and mild memory problems, Mrs Lewis was capable of making a will when she signed the contested documents.)
"Particular vigilance is required where a person who played a part in the preparation of the will takes a substantial benefit under it." (plain English: if someone who helped write the will benefits from it, the court will closely examine whether the testator really approved that arrangement.)
"I am not satisfied that the testator had sufficient knowledge and paid sufficient attention to satisfy the knowledge and approval requirement [for the complex trust and claw-back clauses]." (plain English: the court does not accept that Mrs Lewis really understood those complicated provisions, so they are excluded from probate.)
Operational order: "Admit clauses 1, 11 of the Dec 2014 will and clauses 3,10,11 of the Aug 2015 codicil to probate; exclude the rest." (plain English: only the straightforward parts of the later will and codicil will stand.)
What fact patterns trigger this precedent
This judgment will be particularly relevant where:
A family member who is also a principal drafter of testamentary documents stands to gain control or discretionary power under the will, and the testator has any cognitive frailty or limited understanding of complex financial arrangements;
Testamentary dispositions attempt to operate on or through recent corporate or trust restructures that significantly alter who owns assets and who controls distributions;
The solicitor who drafts or arranges execution keeps minimal or no contemporaneous notes demonstrating explanation to the testator, and commonly relies on a family advisor to convey substance;
There is post-restructuring litigation (eg by a liquidator) that materially affects the testator's asset base, making the practical effect of the will uncertain and therefore requiring a higher standard of explanation to the testator.
In those scenarios readers should anticipate rigorous scrutiny of knowledge-and-approval and the possibility of partial probate.
How later courts have treated it
As of this decision date, it is the trial-level exposition by Parker J of the application of Tobin v Ezekiel principles to a trust-and-corporate-heavy estate. Later courts will likely treat Parker J's approach as a careful application of existing principles: (1) recognise capacity where medical and lay evidence support it; (2) apply a displaced-presumption analysis where an interested drafter is involved; and (3) use partial admission to tailor probate to what the evidence safely supports. Any appellate consideration would focus on whether Parker J struck an appropriate balance between respecting the testator's autonomy and protecting the estate against potentially self-serving drafting.
Still-open questions
The limits of "sufficient explanation": Parker J required more than a mere reading of complex clauses. But the judgment leaves open precisely how much and what form of explanation (written summaries, solicitor notes, independent advice) will be required in different kinds of complexity. Future cases will need to calibrate the evidentiary threshold with reference to the testator's education, experience, and the specific legal structure being altered.
Admissibility of instruments prepared by an interested lay drafter: while Parker J excluded clauses where David's drafting role and lack of independent explanation was decisive, the judgement leaves open how courts will treat professionally drafted complex clauses prepared by independent counsel and witnessed by robust solicitor note-taking.
Interplay between commercial litigation outcomes (eg liquidator's awards) and probate: where the estate's asset position fluctuates, courts must decide when a testator must be told enough detail about contingent outcomes to give valid instruction. This case suggests that contingent litigation effects can make explanation necessary, but how much detail is necessary remains granular and fact-specific.
Professional responsibility consequences: Parker J indicated possible referral of Peter’s actions (false attestation procurement) to the Law Society. The eventual disciplinary treatment of such conduct and its consequences for probate and professional sanctions is an area for further judicial and regulatory development.
In sum, Lewis v Lewis is a useful and practical exposition of how modern probate courts apply the displaced-presumption approach to knowledge and approval in cases where family dynamics, corporate transactions and an interested drafter converge. Practitioners should take care to ensure clear, contemporaneous, solicitor-led procedures whenever a vulnerable or partially informed testator is asked to approve complex arrangements, especially where a family member has both drafted and benefits.
Judgment (17 paragraphs)
[1]
Judgment
These are probate proceedings concerning the testamentary dispositions of Pamela Lewis who died in 2017 at the age of 92. For convenience and without disrespect I will refer to the members of the testator's family by their given names. Except where otherwise stated, references to "the Act" are to the Succession Act 2006 (NSW).
The testator was born in 1924. She married Geoffrey Howarth Lewis, who was born in 1922. Together they had four sons: Peter Howarth Lewis, born in 1949; David Grant Lewis, born in 1951; Roger Geoffrey Lewis, born in 1953; and Hugh Barnby Lewis, born in 1956.
The testator's husband, Geoffrey, predeceased her, dying in June 2012. The testator herself died in February 2017.
The testator's last will (or purported will) was dated December 2014. This was followed by two codicils dated May 2015 and July 2015. Two versions of the May codicil were executed. The first contained drafting errors which were corrected in the second.
The testator's 2014 will had been preceded by an earlier will dated June 2011. That will was followed by three codicils, dated March 2012, September 2012, and December 2012. In April 2013 the testator signed a letter prepared by her solicitor which provided, in the event of her death, for a gift of $50,000 in favour of Kate Amanda Lewis, who is Hugh's daughter. Then in November 2013 the testator signed a further codicil, the fourth.
The testator's 2011 will had been preceded by two wills made in 2010. The earlier one was made in May, and the later one in July.
There is a history of conflict and estrangement between different members of the family at different times. A conflict, or a renewed conflict, arose between David and his brothers in or around March 2012. The conflict spilled over into litigation in this Court in which the testator and David were defendants. The surviving members of the family separated into two camps, with the testator and David in one and Peter, Roger and Hugh in the other.
The beginning of the conflict between David and his brothers post-dated the June 2011 will, but pre-dated all of the later testamentary documents in issue in these proceedings. All of those later documents were prepared by, or on the instructions of, David.
The rest of this judgment is organised as follows:
1. at [10] to [17] I identify the parties' claims for determination in the proceedings;
2. at [18] to [124] I set out a chronology of the key events;
3. at [125] to [397] I analyse the evidence on the factual issues which arise;
4. at [398] to [463] I deal with the parties' claims in the light of that analysis;
5. at [464] to [468] I summarise my conclusions and set out my orders.
[2]
Claims for determination
In these proceedings David is the plaintiff and Peter is the defendant. David propounds the December 2014 will and the two codicils to it. Peter actively resists the admission of these documents to probate. He has made a cross-claim in support of the 2011 will. Peter also propounds the second and third codicils to the 2011 will (the first codicil was revoked by the third). Peter does not propound the fourth codicil.
The original of the 2011 will has been lost. Moreover the purported witnesses were not present when it was signed. Peter therefore propounds a copy of the will pursuant to s 8 of the Act. For convenience, I will continue to refer to the instrument as a will.
David accepts that the 2011 will was signed by the testator although it was not properly witnessed. David's position is that if the 2014 will is not admitted to probate, the 2011 will should be, together with all four codicils. In that event David also propounds a letter signed by the testator in April 2013, contending that it was testamentary in nature.
The Court must decide first on the validity of the December 2014 will and the two 2015 codicils. The issues raised by Peter in opposition to the grant of probate are whether the testator had testamentary capacity and whether the testator relevantly knew and approved of the contents of each instrument.
If the 2014 will is not valid, the Court must consider the validity of the 2011 will, four codicils to that will, and the April 2013 letter. The validity of the fourth codicil is contested by Peter on testamentary capacity and knowledge and approval grounds. Peter does not admit that the April 2013 letter was testamentary in nature, but has raised no affirmative case in support of that non-admission.
The parties thus agree that if the 2014 will is invalid, the 2011 will and the second and third codicils should be admitted to probate (nothing turns on the admission of the first codicil, as it was revoked by the third). But although the parties agree, the Court must independently be satisfied of the due execution of these instruments. In the course of the hearing, evidence emerged which raised questions as to whether the requirements of knowledge and approval were satisfied.
In order to meet the possibility that the Court might refuse to admit the 2011 will to probate, both parties amended their claims in the proceedings. Both now seek to have the July 2010 will admitted to probate if the June 2011 and December 2014 wills are invalid.
[3]
Chronology of events
The testator's husband Geoffrey was an accountant. He was one of the principals (and presumably one of the founders) of a firm known as Lewis & Coble, at Chatswood. The testator was a social worker. Before she retired in the early 1970s she worked as such at a local hospital.
Peter qualified as an accountant, and practised as such from 1969 onwards. In 2009 he qualified as a solicitor and now practises (separately) as an accountant and as a solicitor. David also qualified as an accountant. He practised accountancy prior to his estrangement from his brothers in 1994 but he appears not to have been in paid employment since about 2000 (apart from the possible exception of work done for the family investment company up to 2010: see [25] below). Roger obtained qualifications for, and worked in, human resource management. He is now retired. Hugh became an airline pilot. Following his diagnosis with cancer in 2013 (referred to in more detail below) he ceased work but has subsequently returned to work as a pilot on a casual basis.
Peter is married, with no children. David is divorced, with two children. Roger is married, also with two children. Hugh is married, with three children. There are thus seven grandchildren of the marriage between Geoffrey and the testator. All of them are now adults.
In May 1994 David broke off all contact with his three brothers. The estrangement was to last for almost sixteen years. During this period David also seems to have been estranged from his own children. He remained in contact with his parents.
In 2001 Geoffrey and the testator handed over to their sons a total of $1 million. Each son received $250,000. David, who was going through a divorce at the time, received his money as a loan. His brothers all received their money as gifts.
The relevant events for the purposes of this judgment begin in early 2007. At that time, the testator and Geoffrey had two principal assets. One was the family home, a house at Turramurra in Sydney's northern suburbs. The house was owned by Geoffrey.
The couple's other major asset was an investment company called Anne Lewis Pty Limited, to which I will refer as the "Lewis Company". Each of Geoffrey and the testator held half the shares in the Company, and each was a director. As well as significant holdings of cash, the Company owned a portfolio of listed shares in public companies which had been built up by Geoffrey over time. The evidence does not disclose the precise value of the Company's assets in early 2007 but by 2012 it was $9 million. The assets generated interest and dividend income on which Geoffrey and the testator lived.
[4]
Summary and analysis of evidence
In this section of the judgment I deal with the factual aspects of the evidence which require detailed analysis. I first identify the witnesses who gave evidence. I then summarise the evidence on the testamentary instruments executed by the testator over the relevant period, being from the first will prepared by Mr Thompson (May 2010) to the last codicil prepared by Mr Rickard (August 2015). My summary covers both the terms of the instruments and the evidence about their preparation and execution.
I then summarise and analyse the evidence on two further topics. The first covers the general evidence about the testator's health and cognitive function and reliance on others over the relevant period, The second covers the testator's understanding of the "succession plan" and the litigation which resulted from it.
[5]
Witnesses
David was the principal witness in his case. Evidence was also led from Mr Waugh (now Mr Waugh SC) concerning his observations of the testator in the course of the liquidator's action. Shortly before the trial, David's legal representatives obtained an affidavit from Mr Rickard which dealt with his role in preparing the post-2011 testamentary instruments in issue in the case. All three witnesses were cross-examined.
David's case also included formal attesting witness affidavits from Ross Hodgson, a solicitor who had formerly been in practice with Mr Rickard and who witnessed the May 2015 codicil; Margaret Clare Wainwright, an associate of Mr Rickard who witnessed the August 2015 codicil; and (at the very end of the hearing) Mr Thompson, who had witnessed the July 2010 will. None of these witnesses was required for cross-examination.
Peter, Roger and Hugh all gave evidence in support of Peter's case and each of them was cross-examined. Evidence was also called from Hugh's wife, Rhonda, concerning her conversations with the testator, and she was briefly cross-examined. As I will describe in more detail below, the 2011 will was not in fact witnessed by the purported attesting witnesses and no evidence was called from them.
Unfortunately, the conduct of both of the solicitors who gave evidence was open to criticism. Mr Rickard's actions in preparing and having the testator sign the various testamentary instruments for which he was responsible were attacked on the basis that they were, at best, perfunctory. Peter's conduct with respect to the witnessing of the 2011 will was positively discreditable. I refer further to this when analysing the evidence concerning the preparation of the wills in more detail below.
Why Mr Bird participated in implementing the "succession plan" according to David's directions is not explained. Mr Bird was not a defendant to the liquidator's action. He was not called as a witness in these proceedings. Neither party suggested that any inference should be drawn against the other as a result.
I have already referred to the evidence of the approaches made in the testator's name from 2012 onwards to Peter, Roger and Hugh for reconciliation, or at least discussions about reconciliation. There was some cross-examination by counsel for David on the way in which these approaches were rebuffed. Some of Roger's responses, in particular, were brusque to the point of rudeness. However regrettable this may be, I suspect that the responses reflect the belief on the part of Peter and Roger (which was probably correct) that the correspondence they received had been written by David or in accordance with his instructions.
[6]
Wills and further draft will prepared by Mr Thompson (2010-2011)
The first will prepared by Mr Thompson was signed by the testator on 19 May 2010 and replaced the testator's January 2007 will.
The May 2010 will replaced Peter and Mr Bird as the testator's executors with David and Roger. As already mentioned, there was no provision for any life interest in favour of Geoffrey if he survived the testator. Instead the testator's estate was to be divided into five equal shares. Each of her sons was to receive one share. The remaining share was to be divided between her seven grandchildren. The grandchildren were not to receive their shares until they turned 25. Kate's was to be held in trust for her by her brother Anthony.
The will did not mention the $250,000 loan to David from 2001. At the time, Geoffrey still being alive, the loan was a joint asset which the testator was not capable of releasing on her own, and the provision for the loan to be released if the testator survived Geoffrey was not carried forward from the 2007 will. The loan was not referred to again in the testator's testamentary instruments until the December 2014 will (see [236] below).
Some indication of the thinking behind the will is given by a letter from Mr Thompson to the testator on 3 May which enclosed a draft. The letter referred to the fact that the Turramurra property was in Geoffrey's name and the testator's major asset was her half share of the Lewis Company. It stated:
The Will is forwarded as a discussion paper. In reviewing the assets and the family situation, you may decide to either increase or reduce any prospective share. We note that there is a desire to give to the grandchildren a sum of money and the discussions were along the line of using the value of the house.
However, the house is registered in your husband's name and should you predecease him, then value of the house is not available to you to incorporate into your Will. Your assets would then be governed by those assets that are in your name alone. This includes your shareholding in the company.
We also confirm that you are not fully aware of the provisions of your husband's Will and we note that there is some discussion about trying to obtaining copy of it. If, as we presume, you would receive the value of the home then if your husband predeceases you then you have an asset you can deal with separately. It might be appropriate at that time to re-do you Will. We could also re-do your Will on the basis that if you are the proprietor of the home because your husband has predeceased you then you give the whole of the value of the home to the grandchildren and divide the rest reside and remainder of your estate amongst the boys.
As we have now reduced the ideas to writing, we welcome the further opportunity to call on you to go through the Will and your requirements.
[7]
Will prepared by Peter (2011)
The 2011 will prepared by Peter was signed on 22 June. It appointed David, Roger and Mr Bird as the testator's executors. The basic provisions under the will were the same as those in the wills prepared by Mr Thompson, namely that each son was to receive twenty per cent with the other twenty per cent to be shared among the testator's seven grandchildren.
In addition:
1. There were provisions governing the destination of each son's share in the event that he predeceased his mother, in the terms Peter had proposed in his letter of September 2000.
2. The gifts to the testator's grandchildren who had not yet attained the age of 25 were to be held in trust and the grandchild's trustee was given the power to release the amount held in trust for that grandchild provided that funds were used for the purchase of residential or investment real estate, or the retirement of existing mortgage debt.
3. Any early inheritance advance given to any of the testator's sons was to be deducted from that son's share of the estate.
In evidence is a letter from Peter to his mother dated 11 May enclosing a copy of the will he had prepared. The parties agreed that the enclosure was the same as the will signed on 22 June.
Peter's affidavit account of preparing the 2011 will began with a conversation Peter said he had with his mother in 2010. He said that she handed him a draft will prepared by Mr Thompson and asked him to look at it. He said that he did so and pointed out to his mother that the will did not make provision for the spouses of her sons if any of them predeceased her. He offered to prepare a further draft and did so. In cross-examination he said that he based his draft on Mr Thompson's.
Peter in his affidavit next referred to discussions with his brothers Roger, David and Hugh. Peter said that the letter he sent to his mother in September 2010 (see [143] above) incorporated some suggestions from David. Following further discussions, Peter sent the letter of 11 May 2011 enclosing the draft will.
Scrutiny of the documents to which Peter referred shows that his account was incorrect. The draft will prepared by Mr Thompson to which Peter referred was dated 2011, not 2010 (see [136] above). Moreover the draft had already had express provision for the testator's daughters-in-law in the event that their husbands predeceased her, as suggested by Peter in September 2010, incorporated into it.
[8]
Testamentary instruments prepared by Mr Rickard (2012-2015)
Mr Rickard's records concerning the testamentary instruments that he prepared for the testator were produced to the Court on subpoena. These included his file notes. But they were uninformative. They contained no details of the instructions Mr Rickard received, or any advice which he gave. It was clear that it was not Mr Rickard's practice to take such notes.
Mr Rickard's bills for his work on the testamentary instruments were also in evidence. But these too were relatively uninformative. They simply contained the times charged, and a brief description of the work done, on particular dates.
It was clear from the evidence that each of the testamentary instruments prepared by Mr Rickard for the testator was prepared on David's instructions. In cross-examination, David initially went on to accept that the actual wording of those testamentary instruments was his, and Mr Rickard's contribution was limited to formatting, formal parts and occasional wording suggestions.
But David then qualified his evidence in that regard. He said that he had not used email in his dealings with Mr Rickard until after he was released from hospital in June 2014 (this seems to have been a later admission to hospital, distinct from the extended period in hospital and in convalescence following his diabetic seizure in April 2010). He said that the wording of the September and December 2012 codicils came from Mr Rickard, although Mr Rickard discussed orally with him what the wording said. Although there was no direct evidence on this, if the June 2014 date was correct then the same qualification would apply to the March 2012 codicil, the April 2013 letter and the November 2013 codicil (see [184], [206] and [212] below).
Mr Rickard was admitted as solicitor in 1988 and has practised on his own account since 1991. He stated that he had frequently undertaken the preparation of wills and was aware of the capacity issues which could arise particularly with older testators.
Mr Rickard's practice was to assume capacity unless he was aware of conduct by the client which indicated there might be a question about it. In the testator's case, he did not have any concerns.
Mr Rickard was cross-examined about the guidance on this subject published by the Law Society of New South Wales (When a client's capacity is in doubt: A Practical Guide for Solicitors 2009). Counsel asked whether he adopted the practice of reading parts of the will to the testator, and asking her to summarise the effect of what he had said. Mr Rickard said that he did not. As I understood it, Mr Rickard's evidence was that he had "free ranging" discussions with the testator about her testamentary plans and that the practice suggested by counsel was unnecessary. Nor, it appears, did Mr Rickard adopt the other practices referred to by the Law Society, such as inviting the testator at the outset to state in her own words the testamentary plans she wished to make, and asking questions in open ended form, rather than in a leading form.
[9]
Testator's general health and cognitive function
At the time the testator signed the May 2010 will prepared by Mr Thompson, she was almost 86 years old. I have already referred to her macular degeneration. Her lack of vision meant that she was largely housebound. Within these limits her general health seems to have been reasonable for her age.
The testator emerges from the evidence as having been an intelligent woman. She was university-educated (which is where she obtained her social work qualification from). Not only were her husband and two of her sons accountants, but her father had been as well.
Medical examinations: By 2012 the testator was under the care of Dr Eric Wong, a specialist geriatrician. This seems to have begun when she was admitted to hospital in March 2012. Various reports from Dr Wong were in evidence. Three of those reports dealt with the testator's cognitive function. They were tendered without objection and Dr Wong was not required to give evidence.
The first of these reports by Dr Wong followed a consultation on 28 November 2012. It was prepared for the purposes of the Guardianship Tribunal proceedings. As part of the consultation, Dr Wong administered an MMSE (mini-mental state examination) test. He reported:
Cognitive examination reveals an MMSE score of 28/29 with very mild short-term memory deficits, 5-minute recall 2/3 and she lost 1 point not being able to copy a diagram of the interlocking hexagon due to poor eyesight. Mrs Lewis certainly is fully oriented and also on questioning is, abreast of current affairs.
Dr Wong saw the testator about two and a half years later, on 22 July 2015. Apparently this was the result of a suggestion made by Mr Watson in the conference on 1 May (see [279] above). Again, Dr Wong administered an MMSE test. He reported:
On examination, Mrs Lewis presents well and engages well in conversation. She is right-handed and mobilises with the aid of a four-wheel walker. Cognitive examination reveals an MMSE score of 28/29, her poor vision precluding testing of her visuospatial skills. The 5-minute recall is 2/3. She is fully orientated to time and place and on discussion, she has an excellent awareness of recent current affairs. She could tell me the recent GST discussions between the premiers and the Prime Minister on the COAG meetings, tells me the recent shootings in the United States of four soldiers as well as the bomb explosion in Iraq and issues in Syria. Her long-term memory also seems intact and she has no problems telling me her date of birth, the month and year of her wedding as well as the year of the end of Second World War. In fact, she remembered a conversation we had on our last consultation some three years ago relating to my family as well as telling me some of the conversations she had with her haematologist, Dr Hayes.
[10]
Testator's understanding of the "succession plan"
Testator's dealings with Peter and Roger: In his affidavit Peter stated that the testator had never been involved in managing the investments held by the Lewis Company. Her stated attitude was that she wanted everything to be in cash because it was all she understood. Peter agreed with the suggestion by counsel for David that this was something of a mantra on her part.
Concerning the "succession plan" Peter stated in his affidavit:
When I first spoke to my mother about the scheme that David had implemented in March 2012 she did not demonstrate any understanding or insight into the trust or corporate structures. She said to me words to the effect: "I don't understand what has occurred with the cash and the shares of the company but David told me that after your father dies everything belongs to me."
This evidence was not challenged in cross-examination.
In his affidavit Roger referred in general terms to the testator's dependence on David for financial advice. He said she told him once:
David just drones on and on and at the end I tell him just do what you think is best.
Roger also stated that in his discussions with the testator in 2012 she displayed a lack of insight into the effect of the "succession plan". That evidence did not go into detail but it was not objected to. It was supported by Roger's evidence about his discussion with his mother concerning the draft of the codicil she eventually executed in March 2012, which I set out in more detail below. Roger's evidence was not challenged in cross-examination.
As already noted, a copy of the codicil executed by the testator on 6 September 2012 was provided to Roger as one of the testator's executors. That codicil followed the gifts of $350,000 to the testator's grandchildren in July 2012 and made it clear that those gifts were in addition to their entitlements under the testator's will. Roger discussed it with his mother on 12 September. Following the meeting, he prepared a file note for sending to Peter and Hugh. In his affidavit, he gave an account based on the wording of the file note. His evidence was again not disputed.
The note identified a number of "basic outcomes" which included:
Mum does not understand how she now controls all the assets as she has been assured by David that this is not the case.
[11]
December 2014 will and 2015 codicils
As already noted, the December 2014 will and the August 2015 codicil were propounded by David. If the August 2015 codicil were admitted to probate, the May 2015 codicil would be redundant, as it revoked and re-stated the only substantial provision in the May codicil. But if those provisions of the August codicil fail, and the December 2014 will is admitted to probate in whole or part, I assume that David would seek to have the May codicil admitted.
Somewhat surprisingly, undue influence has not been raised on Peter's behalf as an issue. The issues raised for each of the three instruments are whether:
1. the testator had testamentary capacity at the time she executed the instrument; and
2. the testator knew and approved of the particular terms of the instrument.
The parties agree that David bears the onus on these issues.
[12]
Testamentary capacity
Counsel for David accepted that the testator's age, macular degeneration and frailty, combined with a memory, which was, to use a neutral term, imperfect, was enough to raise a question about testamentary capacity. But he submitted that any doubt was dispelled on the evidence.
I have already summarised the evidence concerning the testator's general health and cognitive abilities over the relevant period. My conclusion is that she had a very good cognitive function, with minor short term memory loss.
I think it is significant that, in their correspondence with the testator and among themselves from 2012 onwards, none of Peter, Roger or Hugh evinced any concern that the testator lacked capacity to make financial decisions. What the correspondence reflects is their frustration that the testator would not listen to any criticism of David or take control of her affairs away from him. They were obviously concerned that her judgment had been warped by her trust in David and she was allowing herself to be manipulated by him. But there was no apparent concern that, putting his influence to one side, she lacked the cognitive ability to manage her affairs.
I was not overly impressed by the evidence of Mr Rickard, and his opinion that the testator possessed testamentary capacity is not conclusive. But it was not challenged. More importantly, it accords with the conclusions which flow from the objective evidence.
In my opinion that the testator's memory loss was not sufficiently severe to deprive her of capacity to understand the nature and effect of executing a testamentary instrument, or the nature of her assets, or the claims on her estate (to paraphrase the traditional three-fold test in Banks v Goodfellow (1870) LR 5 QB 549 at 565). Subject to the possible qualification which I will mention in a moment, I am satisfied that at all relevant times the testator possessed testamentary capacity.
The potential qualification concerns the requisite understanding on the part of the testator on the nature of the assets being disposed of. Arguably there is a question about whether the testator had sufficient understanding of those assets following the implementation of the "succession plan" in 2012. On the evidence, however, the testator's lack of understanding appears to have been more a result of disinterest or delegation than incapacity. I therefore propose to address this issue when considering knowledge and approval, to which I now turn.
[13]
Knowledge and approval
The principles governing knowledge and approval are authoritatively stated by the Court of Appeal in Tobin v Ezekiel (2012) 83 NSWLR 757. Meagher JA, who gave the leading judgment, said (at [46], citations omitted):
Upon proof of testamentary capacity and due execution there is also a presumption of knowledge and approval of the contents of the will at the time of execution. That presumption may be displaced by any circumstance which creates a well-grounded suspicion or doubt as to whether the will expresses the mind of the testator. ... Once the presumption is displaced, the proponent must prove affirmatively that the testator knew and approved of the contents of the document.
His Honour continued (at [47], citations omitted):
Evidence that the testator gave instructions for the will or that it was read over by or to the testator is said to be "the most satisfactory evidence" of actual knowledge of the contents of the will. What is sufficient to dispel the relevant doubt or suspicion will vary with the circumstances of the case ... Those circumstances may include the mental acuity and sophistication of the testator, the complexity of the will and the estate being disposed of, the exclusion or non-exclusion of persons naturally having a claim upon the testator, and whether there has been an opportunity in the preparation and execution of the will for reflection and independent advice. Particular vigilance is required where a person who played a part in the preparation of the will takes a substantial benefit under it. In those circumstances it is said that such a person has the onus of showing the righteousness of the transaction. That requires that it be affirmatively established that the testator knew the contents of the will and appreciated the effect of what he or she was doing so that it can be said that the will contains the real intention and reflects the true will of the testator.
In the present case, complexity of the testamentary instruments and complexity of the estate are factors in play because of the provisions concerning the companies and trusts. So too is the testator's sophistication (which I take to include her experience and understanding of such structures).
David played a part (indeed, the leading part) in the preparation of the December 2014 will and the 2015 codicils. However, counsel for David suggested, as I understood him, that this was not a case where "particular vigilance" was required on that account. Counsel pointed out that the will gave David extensive powers but did not directly provide him with additional benefits. The basic structure remained throughout that David and his brothers each received one-fifth of the residue.
[14]
June 2011 will
I have already concluded that the testator had testamentary capacity at the time of the December 2014 will (and the 2015 codicils). This conclusion applies with greater force to the 2011 will, which was executed over three years beforehand. The potential qualification concerning the nature of the testator's assets arose from the "succession plan", which post-dated the 2011 will. I also note in passing that it does not seem to have occurred to Peter when preparing the 2011 will that his mother might have lacked capacity at the time.
There is no direct evidence of the will having been read by, or to, the testator. Nevertheless, I think I can be satisfied that it was understood and approved by her.
The 2011 will in substance was no different from the 2010 wills which were unexceptionable and clearly represented the testator's intentions. I also think that it is very likely that the testator either read the 2011 will, or it was read to her by David, in the month between when it was sent to her and when she executed it. There is no doubt that David was consulted about the terms and approved of them. There is every reason to think that he would have told his mother of that. Thus, in spite of the false attestation, I consider that the 2011 will was validly executed and would have been admissible to probate if it had not been revoked by the December 2014 will.
[15]
July 2010 will
Finally, I record that if I had concluded that the 2014 and 2011 wills were invalid, I would have admitted the July 2010 will to probate. The conclusions I have reached concerning the testator's testamentary capacity at the time she executed the June 2011 will apply with equal or greater force to the July 2010 will. The will was properly proved in accordance with the Rules. Its essential provisions were relatively simple, and rational. There is nothing to displace the presumption of knowledge and approval which results from proof of due execution.
[16]
Conclusions and orders
I have concluded that:
1. clauses 1 to 11 of the December 2014 will and clauses 3, 10 and 11 of the August 2015 codicil should be admitted to probate;
2. neither the other clauses of the 2014 will, nor the other clauses of the August 2015 codicil, nor the May 2015 codicil should be admitted to probate;
3. both the July 2010 will and the June 2011 will satisfy the testamentary capacity and knowledge and approval requirements, but should not be admitted to probate, on the ground that each was revoked by a subsequent valid will;
4. it is unnecessary to consider whether the first three codicils to the June 2011 will, the April 2013 testamentary letter, or the fourth codicil to the June 2011 will satisfy the knowledge and approval requirement, since even if valid they would have been revoked by the December 2014 will.
David's claim propounding the 2014 will and its codicils therefore succeeds, but only in part. Peter's cross-claim propounding the 2011 will fails and must be dismissed.
I will direct David to bring in a minute of order giving effect to my judgment. That minute should also provide for orders for costs between the parties. Should there be any disagreement, or should any party seek an order for payment of costs out of the estate, I will hear further argument.
Finally, I return to my concern about Peter's conduct in connection with the attestation of the 2011 will. On the face of it, that conduct may justify the referral of the papers to the Law Society for consideration of disciplinary action against Peter as a solicitor. I will afford Peter an opportunity make submissions as to whether I should take that course.
The orders of the Court are:
1. Adjourn the proceedings for a period of 14 days, or such other period as may be arranged with my Associate.
2. Direct that the plaintiff consult with the defendant and, not later than 2 working days before the adjourned date, bring in a proposed minute of order giving effect to my judgment, and dealing with costs inter partes.
3. Direct that any party seeking an order for costs out of the estate notify his application not less than 2 working days before the adjourned date.
4. Direct that not less than 2 days before the adjourned date, the defendant file and serve written submissions on whether the Court should refer his conduct in connection with the execution of the testator's will dated 22 June 2011 to the Law Society of New South Wales to consider possible disciplinary action.
[17]
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: 25 September 2020
Admitted to probate: clauses 1 to 11 of the December 2014 will; clauses 3, 10 and 11 of the August 2015 codicil. Excluded from probate: the remaining clauses of the December 2014 will, the other clauses of the August 2015 codicil, and the May 2015 codicil. Findings: testator had testamentary capacity; however knowledge and approval not proved for complex trust/corporate and claw-back provisions. Earlier wills (June 2011 and July 2010) were valid but revoked by the later valid instrument(s). Directions given for minutes to give effect to judgment and for submissions on costs and potential referral of Peter's conduct regarding false attestation to the Law Society.
The 2014 will appointed David as sole executor. David was also one of the executors appointed under the 2011 will, and the fourth codicil left him as sole executor. Peter raised an issue as to whether David is a fit and proper person to act as executor. In the course of these proceedings the parties agreed to a special grant of administration to Jeremy Neil Glass, solicitor, for the purpose of realising the testator's assets and paying her liabilities. The parties have also agreed, despite the terms of the competing wills, that whatever instrument(s) may be admitted to probate will be the subject of a general grant of administration to Mr Glass with the relevant instrument(s) annexed.
It appears that Geoffrey was principally responsible for the administration and record-keeping work associated with the Lewis Company's investments. A room in the Turramurra house was used for this purpose. David was said to have been "employed" by his father to assist with clerical work. But it appears that this was not plain sailing, as there are references in the evidence to David being "sacked" from this work on more than one occasion. The evidence does not reveal whether there was ever a formal employment relationship.
In January 2007 both Geoffrey and the testator made wills. Geoffrey's will appointed as his executors his son, Peter, and Bryan Edmund Bird. Mr Bird was a partner of Lewis & Coble who acted as the family accountant.
Geoffrey's will provided that if he was survived by the testator, she was to have a right to live in the Turramurra house (or some substitute residence), and to receive the income from the rest of Geoffrey's estate (principally his half share in the Lewis Company), for the rest of her life. Upon her death, the estate was to be divided equally between their four sons. The will also recited the $250,000 loan to David, which it described as a joint loan from Geoffrey and the testator, and provided that should Geoffrey survive the testator and become the sole owner of the loan, it was to be released.
The testator's will effectively mirrored Geoffrey's. The executors were also Peter and Mr Bird. If the testator was survived by Geoffrey, he was to receive the income from her estate for life. Otherwise her estate would be divided equally between their four sons. Should the testator survive Geoffrey, the loan to David was to be released.
In around the late 1990s, when the testator was in her seventies, she began to suffer from macular degeneration. By 2007 her eyesight was severely impaired. She obtained a device to help her with reading which she set up in one of the rooms in the Turramurra house. The device could be used to magnify documents and display them on a computer monitor. Among other things, she used the device to read the newspaper and do crosswords. It seems that her use of the device declined over time as the condition gradually worsened; I deal with the evidence about this in more detail below.
Geoffrey's health appears to have declined after 2007. In January 2010 he was admitted to a nursing home. The testator continued to live at the Turramurra house, with the help of a cleaner who visited every week or so. Roger lived nearby at Gordon. He had regularly provided care and assistance to his parents and continued to do so for his mother after his father went into the nursing home.
The testator visited Geoffrey in the nursing home usually once a week and Roger would join her for the visit and bring her home. He would also visit her several times a week, take her to medical appointments, and take her shopping or do her shopping for her. He was the nominated contact on her personal alarm system, known as "Vitalcall".
The other sons were further afield. Peter was carrying on his practices as an accountant and solicitor at Cooma in southern New South Wales, and dividing his time between there and Bermagui on the New South Wales south coast. David (still estranged from his brothers) was living at Leura in the Blue Mountains. Hugh was living in Queensland.
Many years beforehand, Geoffrey had executed a general power of attorney in favour of the testator. This was used by the testator to control his affairs once he went into the nursing home. Peter's evidence in this case was that his father was suffering from dementia by the time of his admission to the nursing home. If this was correct, the power of attorney would have been invalid: it was not an enduring power. No attention, however, appears to have been paid to this by anyone until later.
Although David was living at Leura, he appears to have been visiting the testator regularly, occasionally staying overnight. Following his father's institutionalisation, David took over the paperwork for the Lewis Company and his parents' other business affairs. He also effectively became his mother's advisor on financial matters. I discuss this in more detail below.
It appears that at the time Peter and Hugh were both in regular contact with the testator. Hugh's wife, Rhonda, also spoke regularly with the testator by telephone. The testator also had occasional contact with Hugh and Rhonda's daughter, Kate. Kate had a disability and the testator was particularly concerned for her welfare.
In March 2010, David (who had developed diabetes) suffered a diabetic seizure and almost died. He was in hospital in the Blue Mountains for many months, first spending about two months in intensive care, followed by a long period of rehabilitation. Apparently as a result of this experience, David re-established contact with his brothers, and they visited him in hospital.
In May 2010 the testator made a new will to replace the will she had made in January 2007. The will was prepared for her by a solicitor, David John Thompson. His firm, Collins & Thompson, was at Hornsby. He appears to have been retained, with David's involvement, before David suffered his seizure at the end of March.
The May 2010 will represented a departure from the provisions in the testator's January 2007 will. There was no life interest in favour of Geoffrey if he survived the testator. Instead her estate was to be divided into five equal shares. Each of her sons was to receive one share. The remaining share was to be divided between her seven grandchildren.
At the same time as Mr Thompson prepared the May 2010 will, he apparently prepared a power of attorney from the testator in favour of David and Roger. There is no direct evidence that this power of attorney was signed by the testator and accepted by David or Roger. In his affidavit Roger stated that in "about 2011" he was appointed as his mother's attorney together with his brother, Hugh. The evidence did not take this any further, but Roger's assertion that he was his mother's attorney was not contradicted in cross-examination and I assume that it is correct.
Soon after signing the May 2010 will, the testator gave $500,000 to Peter by way of advance on his entitlement from her estate. Peter signed an acknowledgement to this effect on 6 July. The advance appears to have resulted from a request by Peter, which had been approved by David. A few weeks later, at the end of July, the testator made a further will prepared by Mr Thompson. It was almost the same as the May will.
Peter was not involved in the preparation of the May and July wills. But it appears that he later discussed them with David. In September, at David's request, he reviewed the July will and wrote a letter to the testator suggesting some alterations for her and David to consider.
Peter's alterations were forwarded to Mr Thompson and there was a further conference with him in January 2011 or thereabouts. The conference was attended by the testator, David and Roger. In March Mr Thompson wrote to the testator enclosing a further draft will which took Peter's suggestions, and the discussion at the conference, into account. But Mr Thompson appears not to have received any further instructions from the testator and in July Roger obtained an authority from the testator to collect her papers from him.
Instead of proceeding with Mr Thompson's draft, a fresh will was prepared for the testator by Peter. His correspondence to her (including his letter from the previous year) was written on his solicitor's letterhead, but Peter did not enter into any formal retainer agreement with his mother, nor did he charge her for his work on the will. The testator signed the will in June 2011. Again the basic structure was the same: each of the testator's sons was to receive one fifth of the estate and her grandchildren were to share the other fifth.
In July 2011, the testator made a payment to Roger of $50,000 by way of advance against his ultimate entitlement under her estate. Roger signed a formal acknowledgement to this effect on 22 July.
Peter and David expected that the assets of the Lewis Company would be split up following the deaths of their parents and were concerned to avoid as much tax as possible when that happened. Some of the listed shares owned by the Lewis Company had been acquired prior to September 1985 and therefore any capital gains made on their ultimate realisation would not attract capital gains tax (CGT). But other shares had been acquired since September 1985 and were therefore subject to CGT.
In an attempt to avoid this CGT, a series of transactions was undertaken at David's instigation so as to transfer the listed shares out of the Lewis Company. Litigation ultimately resulted in this Court. The relevant events were analysed by White J (as his Honour then was) in a judgment delivered in July 2015: Thomas v Arthur Hughes Pty Ltd [2015] NSWSC 1027. The parties agreed that I should adopt his Honour's findings of fact for the purposes of this judgment.
White J recorded that Peter and David first decided to retain tax counsel, Mr BR Pape, in July 2011. Mr Pape produced a draft opinion upon which they both commented, and then a second draft opinion. There was a conference between Peter and David and Mr Pape on 11 November. On 22 November, Mr Pape produced a supplementary draft opinion which canvassed a plan for a distribution of the Lewis Company's assets.
Mr Pape's supplementary opinion was only a draft, put forward for discussion, and no final opinion appears to have been produced. But without obtaining the agreement of his brothers (or of his father, who at this time was still alive, although his mental state was not clear on the evidence) David proceeded to implement the proposal, to which he referred as the "succession plan".
The relevant steps began on 12 January 2012. The steps were taken in the names of the testator and Mr Bird (who had been appointed as a director of the Lewis Company shortly beforehand, presumably for the purpose of effecting the transactions). But the plan was David's and both the testator and Mr Bird acted at his direction.
The steps taken to implement the "succession plan" are set out in detail by White J at [11]-[26] and the tax consequences for the year ended 30 June 2012 are set out at [38]. For present purposes, it is sufficient to summarise the transactions in the following way.
Six new companies were incorporated. The first of these was a company called Arthur Hughes Pty Ltd. The other five companies were wholly owned subsidiaries of that company, and all had the word "Hughes" in their names (the testator's mother's maiden name was Hughes). They were called Speakman Hughes Pty Limited, Telfer Hughes Pty Limited, Melvie Hughes Pty Limited, Gypson Hughes Pty Limited and Bathurst Hughes Pty Limited.
I will refer to Arthur Hughes Pty Limited as the "Hughes Parent Company", the five subsidiaries as the "Hughes Subsidiary Companies" and the parent and subsidiaries collectively as the "Hughes Companies". The testator was the sole shareholder of the Hughes Parent Company. The board of directors of each of the Hughes Companies consisted of the testator and Mr Bird.
On or soon after incorporation, the Hughes Parent Company was constituted as the trustee of five separate trusts. I will refer to these trusts as the "Hughes Trusts". The Parent Company's shares in each of the five Hughes Subsidiary Companies were an asset of one of the Trusts. For convenience, I will refer to a dealing involving the Hughes Parent Company as trustee of one or other of the Hughes Trusts as a dealing with that Trust.
Four of the Hughes Trusts were discretionary family trusts. The trust deeds were in virtually the same terms. The trustee (the Hughes Parent Company, which was owned by the testator) had full discretion to appoint income and capital among a defined class of beneficiaries. In each case the testator was nominated as the appointor. The trust deed gave her power as appointor to replace the trustee and to nominate a new appointor by will.
These four Hughes Trusts were apparently intended for the testator's four sons. In each case the class of beneficiaries to whom income and capital could be appointed under the trust deed was customised so as to include that son and members of his family. But the terms of the class were broad enough to include members of the wider family, including the testator herself, and a range of charitable institutions (see White J at [13]).
The fifth trust was intended for the testator's grandchildren. It was a unit trust, not a discretionary trust. A total of 140 units were issued, representing 20 units per grandchild. But rather than the units being issued to the grandchildren themselves, they were issued to the trusts intended for the grandchildren's fathers. David's trust received two-sevenths of the units, Hugh's trust three-sevenths and Roger's trust two-sevenths. The unitholders' entitlements were thus channelled into the discretionary trusts, where they were under the control of the testator.
The next step was that the shares and other securities held by the Lewis Company were transferred to the four Hughes Subsidiary Companies belonging to the sons' trusts. Each Subsidiary Company received one-quarter of the securities. No cash changed hands on the purchases; in each case the purchase was financed by an equivalent loan (unsecured) from the Lewis Company to the Hughes Subsidiary Company. The loan was to be for not longer than seven years, with "interest to be charged on a mutually agreed basis".
The cash assets of the Lewis Company (totalling about $3.6 million) were paid over to Bathurst Hughes, the Hughes Subsidiary Company belonging to the grandchildren's trust. This was recorded as a loan from the Lewis Company to Bathurst Hughes on the same terms as the loans to the Hughes Subsidiary Companies belonging to the sons' trusts.
The cash transferred to Bathurst Hughes represented more than one fifth of the total assets of the Lewis Company. According to evidence given by David, it was intended to adjust the loan accounts between the Lewis Company and the Hughes Subsidiary Companies so that the division of the Lewis Company assets would reflect the testamentary plans of Geoffrey (one quarter to each of the sons) and the testator (one-fifth to each son and the remaining one-fifth to the grandchildren). This would leave Bathurst Hughes with one-tenth of the net value of the Lewis Company's assets (that is, one-fifth of the half share representing the testator's interest in the Lewis Company). The other four Hughes Subsidiary Companies would hold one quarter of the remainder. It is not clear whether this actually happened. In the meantime Bathurst Hughes in effect functioned as the treasury for the Lewis and Hughes Companies.
Nominally the "succession plan" did not have any immediate effect on the asset position of the Lewis Company. The Company's investments were replaced with loans to the Hughes Subsidiary Companies having an equivalent face value. But any capital gain thereafter on the securities would be captured by the Subsidiary Companies belonging to the sons' trusts. And the capital in the Lewis Company could only be unlocked by requiring repayment of the loans, which could only have been met by liquidating the assets of the Hughes Subsidiary Companies to meet their repayment obligations.
As a result of the asset transfer, the Hughes Subsidiary Companies belonging to the Hughes Trusts would also receive the income generated by the securities and the cash. It does not appear to have been intended that the Subsidiary Companies would be paying interest on the loans from the Lewis Company. The flow of dividend income from the Lewis Company would therefore cease.
On 6 March 2012, the testator signed a codicil to the 2011 will. The codicil exercised the testator's power under the trust deeds for the sons' trusts to nominate a new appointor for those trusts by will. The testator nominated each of her sons as the appointor for his trust after her death.
The codicil was prepared by John Rickard, a solicitor practising at Pymble. Mr Rickard had been retained by David, based on a recommendation obtained by Roger from Roger's accountant. Eventually Mr Rickard was to act for the testator, on David's instructions, on a variety of matters. According to Mr Rickard, he actually started acting for the testator in December 2011, but on the evidence it is not clear what, if anything, he did for her prior to preparing the codicil.
The codicil was prepared by Mr Rickard on David's instructions. Following its execution, a signed copy was provided to Roger (who was one of the executors under the 2011 will). Peter also received a copy.
On 17 March the testator was admitted to hospital following a fall at her home. She had been found by Roger in a dehydrated and disoriented state, and had broken her wrist. She was also suffering from an infection and exhibiting delirium. On 11 April she was transferred to a private hospital for rehabilitation. It was not until early May that she was discharged home.
As already noted, David had acted alone in implementing the "succession plan" and it was only after the asset transfers had happened that his brothers became aware that he had actually implemented them. This was on 21 March or thereabouts.
On 24 March there was a meeting between all four brothers about the steps David had taken to implement the "succession plan". The meeting apparently lasted for most of the day, and was heated. Peter, Roger and Hugh were all, to a greater or lesser extent, critical of what David had done. For his part, David saw his brothers as only caring for their future inheritances.
Peter followed up with a letter to David dated 31 March. The letter criticised David for acting alone, contrary to previous understandings between the family members. It referred to possible tax liabilities and breaches of the Corporations Act 2001 (Cth) as a result in the way in which the plan had been carried out. It posed a number of questions to which it sought answers in writing within fourteen days.
The form of the questions indicated other criticisms and concerns. For instance, Peter asked David what professional qualifications he had, and what independent taxation and legal advice he had obtained. He also referred to Mr Bird and Lewis & Coble as having potentially been embroiled in a conflict of interest.
There is no evidence of any response by David to Peter's letter. The meeting appears to have marked a fresh rupture in his relationship with his brothers. In late April, Peter and Roger visited the testator in hospital and tried to persuade her to take action to rein David in. She was not willing to do so.
After the testator was discharged from hospital, David came and lived with her at the Turramurra house, staying for four or five days at a time. Roger continued to visit, but only when David was not there.
On 22 June 2012 Geoffrey died. The family came together for his funeral on 28 June, but his death appears to have caused a rift between the testator and Peter, who, along with Mr Bird, was Geoffrey's executor. There was no further oral communication between the testator and Peter after 28 June.
It is not necessary to analyse in detail the reason for the rift between David and the testator on the one hand and Peter (and later Roger and Hugh) on the other. But part of it involved the Turramurra property. Because the property had been in Geoffrey's name, it became an asset in his estate. All the testator had was a right of residence under the terms of Geoffrey's will. In his evidence, David professed himself to be disgusted by this. He also claimed that the testator also expressed concern about the security of her position. On 10 July Roger forwarded to his brothers text messages from David asking them to agree to transfer the property into the testator's name. They refused.
On 1 August Mr Bird resigned as a director of the Hughes Companies. Two days later, on 3 August, David was appointed as a director of the Hughes Parent Company, Telfer Hughes (the Hughes subsidiary company belonging to David's trust), and Bathurst Hughes (which remained the repository of the Lewis Company's cash). This left David and the testator as the directors of those companies. The testator was sole director of the remaining Hughes subsidiaries, which belonged to Peter's, Roger's and Hugh's trusts.
Mr Bird remained a director of the Lewis Company and, for the moment, one of the testator's named executors. But his involvement in the Hughes Companies and the Hughes Trusts, if any, ceased.
On 6 August, the testator signed cheques for $50,000 each by way of gift to her seven grandchildren. Although the evidence does not directly confirm this, I assume that the cheques were in due course provided to, and cashed by, each of the grandchildren. The $350,000 given to the testator's grandchildren came from Bathurst Hughes and was treated as a loan from Bathurst Hughes to the testator. The gifts and the associated loan were effected by David. His brothers only became aware of the gifts afterwards.
On 6 September, the testator signed a second codicil to the 2011 will, which provided that gifts made to her grandchildren during her lifetime were not to be deducted from. Again the codicil was prepared by Mr Rickard on David's instructions, but a signed copy was provided to Roger and Peter.
Following Geoffrey's death, Peter and Mr Bird, as the appointed executors, took steps to obtain probate of his 2007 will. For this purpose they retained a firm of solicitors called North Coast Legal Services ("NCLS") at Coffs Harbour. Probate of the will was later granted in October.
On 29 August Mr Geoffrey Knight, a solicitor at NCLS, made a telephone call (apparently directly to the testator) asking that Peter be appointed as a director of the Lewis Company in his father's place. Mr Rickard responded on behalf of the testator by letter to Mr Bird (as Peter's co-executor) on 6 September. The request was refused. The reason offered by Mr Rickard was that such an appointment would "dilute [the testator's] voting rights in the company to a minority status" an apparent reference to the fact that at the time the testator and Mr Bird were the only directors. The letter went on to record that Mr Rickard was "instructed" that the failure to appoint Peter did not disadvantage the Company or Geoffrey's estate.
On 12 September, Mr Rickard went on to the front foot. He wrote letters to each of Peter, Roger and Hugh. The letters stated that the testator was "keen to continue the estate planning exercise that was commenced earlier this year", an apparent reference to the "succession plan". It went on to ask each of the recipients a series of questions "in order to assist [the testator] and to ease her concerns".
The letter to Peter asked whether he wanted part of the share portfolio which had been transferred to the Hughes Subsidiary Company which belonged to his trust to be sold back to the Lewis Company, and whether he wanted to remain a beneficiary of his trust. Next Peter was asked whether he objected to the testator distributing $50,000 each to her seven grandchildren, an apparent reference to the gifts which she had already made the previous month. Peter was also asked whether he objected to the testator making early inheritance advances to David, Roger and Hugh, or to the testator making further cash gifts to her grandchildren.
The letters to Roger and Hugh asked them the same questions. They were also asked, in addition, whether the way Peter was acting as executor of his father's estate met with their approval.
These letters, which pointedly asked for a prompt reply to be sent to Mr Rickard, not the testator herself, met with a predictably furious response. Both Peter and Roger wrote back with their own lists of questions about where Mr Rickard's instructions were coming from. The way in which they phrased the questions indicated that they did not accept that Mr Rickard had been validly retained.
At this point, oral communication between the testator and Roger ceased. Their last conversation was on 18 September. Roger stopped visiting the testator, although his son apparently continued to mow the lawns at the Turramurra property for her. Roger's appointment as an attorney formally continued and he remained the nominated contact on her Vitalcall alarm system until August 2013, but neither position resulted in any communication, let alone rapprochement, between him and the testator.
On 19 September, Peter made an application to the Guardianship Tribunal concerning the testator's affairs. Peter's application sought the appointment of a financial manager. The application form identified the testator's disabilities affecting her decision-making capacity as her advanced age and macular degeneration. It did not suggest that she had dementia or any other form of cognitive disability.
The grounds given for the application repeated many of the criticisms which Peter had made of David's conduct. The application stated that the testator had a close relationship with David and he had acted, at best, imprudently in undertaking the restructuring. It also stated that he lacked the professional qualifications needed to protect the testator's interests.
The purpose of the application was to replace David as the testator's source of advice (or at least her exclusive source of advice) on financial matters with someone independent. But the testator treated it as an allegation that she had lost her mental capacity. Mr Rickard was retained to defend the application on her behalf.
Following the making of the application, the fencing provoked by Mr Rickard's letters of 12 September continued. Peter, Roger and Hugh refused to be drawn by Mr Rickard's questions. They declined to answer, on the ground that they lacked sufficient information about what had been done under the "succession plan". Peter and Roger also refused to let the retainer issue die. Each of them made a complaint to the Legal Services Commission. After Mr Rickard wrote a long letter to the Commissioner justifying his position, the complaints were dismissed early in December.
The family had now split clearly into two camps, with David and the testator in one, and Peter, Roger and Hugh (albeit less vehemently) in the other. From time to time thereafter, there were proposals by the testator for reconciliation, or at least discussions. Some of these came in the form of letters from Mr Rickard as the testator's solicitor, and others in the form of typed letters which had been signed by the testator. Feelers continued until after the delivery of judgment in the liquidator's action in the second half of 2015. None of these approaches ultimately led anywhere.
As I will explain below, it is unnecessary for the purposes of this judgment to trace the course of the correspondence or to go into the merits of the parties' positions. It is sufficient to say that Peter, Roger and Hugh believed that the approaches came from David and reflected his objectives. In this I think they were probably correct. Most if not all of the correspondence in the testator's name appears to have been written by David himself.
On 6 December, the testator signed a third codicil to the 2011 will. Again this was prepared by Mr Rickard on David's instructions. The codicil removed Roger as an executor, and he was not provided with a copy of it. Neither he nor his other brothers was aware of it. The same was so for the later testamentary instruments prepared by Mr Rickard for the testator, and I will not refer to them in this chronology.
White J recorded that the loan from Bathurst Hughes in August 2012 to the testator to fund her $350,000 gift to her grandchildren was repaid by her six months later. The judgment refers to an earlier loan of $200,000 by Bathurst Hughes to the testator and to various other payments, loans and dividends involving the Hughes Companies and the Hughes Trusts between 2012 and 2014.
As already noted, the flow of dividend income from the Lewis Company would have ceased with the implementation of the "succession plan". The testator would have needed money to live on. Presumably that came in some way from the income generated by the cash and shares held by the Hughes Subsidiary Companies. The evidence does not reveal how much was involved or the mechanism for payment (that is, whether by way of loan or trust distribution). I suspect that the transactions referred to in White J's judgment do not represent a complete list. The critical thing for present purposes is that the evidence before me does not reveal what liabilities the testator had at the time she made her contested testamentary dispositions from 2012 onwards.
Peter's Guardianship Tribunal application was heard before the Tribunal on 25 January 2013. The testator was represented at the hearing by Mr RS Bell of counsel, instructed by Mr Rickard. The hearing was attended by the testator herself, Peter, Roger and David.
The Tribunal's decision recorded that the testator did not fully understand the "succession plan", but she did understand the motivation for it, being to avoid CGT, and she trusted David completely. The Tribunal observed that making an unwise or unfortunate decision about whom to trust is not the same thing as a lack of capacity to make decisions about one's financial affairs. On balance, the Tribunal was not satisfied that the testator was incapable of managing her financial affairs and dismissed the application.
Mr Rickard later made an application on behalf of the testator for an order that Peter pay her costs of the Guardianship Tribunal proceedings. According to Peter, the amount claimed was $65,000. The application was refused.
In February 2013, Hugh was diagnosed with cancer. He visited the testator in Sydney and asked whether she was prepared to give him a further advance on his inheritance. According to Rhonda, she also said to the testator during one of their regular telephone conversations that if the testator wished to help Hugh financially, now was the time to do so.
The response to these requests seems to have come through David, who spoke to both Hugh and Rhonda at various stages over the next few months. There is a dispute about what was said and when. But some money was paid over. In evidence are two letters to Hugh, prepared by David and signed by the testator, dated 14 March and 5 April and enclosing cheques totalling $75,000 by way of further advance on Hugh's inheritance.
On 24 May Mr Rickard wrote with a proposal to make a further $350,000 available. The letter however was not addressed to Hugh, but to Peter and Mr Bird as executors of Geoffrey's estate.
The letter stated that the testator was unable to assist Hugh "as a result of your [Peter's and Mr Bird's] failure to provide [the testator] with her just entitlements in accordance with the terms" of Geoffrey's will. The testator requested, purportedly on behalf of Hugh, that Peter and Mr Bird as Geoffrey's executors advance Hugh $350,000 on his entitlement as a beneficiary of Geoffrey's estate. This advance would be financed by a loan from Bathurst Hughes to the estate of $350,000, to be secured by a mortgage over the Turramurra property, with the estate to pay interest.
The letter was an unsubtle attempt by David to drive a wedge between his brothers by exploiting Hugh's need for money. When, predictably, the request was declined, David wrote to Hugh and Rhonda on 3 July putting the same proposal to them with the rider that the interest payable by Geoffrey's estate would be paid equally by all four sons. This proposal too was declined.
From this point onwards there was no further communication between Hugh and his mother. The regular telephone contact between Rhonda and the testator, however, continued.
Negotiations also continued between David on the one hand and Hugh and Rhonda on the other about the testator providing further money to Hugh. Eventually David proposed an arrangement whereby sums totalling a further $60,000 would be provided, to come from the Hugh's trust. Eventually and reluctantly Rhonda accepted this on Hugh's behalf in December 2013.
Meanwhile, Peter had turned to litigation in this Court. In May 2013 he commenced proceedings in the Corporations List, naming the Lewis Company as first defendant; the testator as second defendant; and the Hughes Companies as third to eighth defendants; and Mr Bird, his co-executor, as ninth defendant.
Peter's application sought the production of documents concerning the "succession plan". As against the Lewis Company, it was based on the Court's powers under the Corporations Act, s 247A, and relied on Peter's status as a shareholder by virtue of his being an executor of his father's estate. As against the testator and the Hughes Companies, the documents were sought by way of preliminary discovery.
Mr Rickard acted as the solicitor for all of the defendants. On behalf of Mr Bird he filed a submitting appearance. He briefed counsel (Mr DA Lloyd) to act for the other defendants.
On 6 August Peter's application for the production of documents came on for hearing before Bergin CJ in Eq. After the argument had advanced some distance, and her Honour had made some comments, the parties agreed on consent orders. The orders provided for most, but not all, of the documents sought to be produced by the Lewis Company. The further hearing of the application was adjourned.
On 28 November, after the documents had been produced under the consent order, Peter's application came back before Brereton J. Peter did not seek the production of any further documents from the testator or the Hughes Companies. His Honour dismissed the balance of the proceedings and made no order as to costs: In the matter of Anne Lewis Pty Ltd [2013] NSWSC 1192.
In the same month, Peter commenced fresh proceedings in the Corporations List, seeking an order that the Lewis Company be wound up. The grounds for the winding up included the just and equitable ground.
Peter's winding up application came on for hearing on 9 April 2014 before Brereton J. The Lewis Company, which was the only defendant, was represented by counsel instructed by the Sydney law firm, Gadens. The evidence does not reveal where their instructions on behalf of the Lewis Company came from. Mr GR Waugh of counsel appeared, instructed by Mr Rickard, on behalf of the testator as an interested party.
At the outset of the hearing, counsel for the Lewis Company sought an adjournment of the proceedings to permit a mediation to take place. This application was supported by Mr Waugh on behalf of the testator. But his Honour rejected it: In the matter of Anne Lewis Pty Ltd [2014] NSWSC 418. Although this is not recorded in the published judgment, his Honour then went on with the hearing of the winding up application. He made a winding up order and appointed Mr HC Thomas as liquidator.
Shortly afterwards, Mr Thomas commenced an action in the General List, alleging that the transactions between the Lewis Company and the Hughes Companies had been procured by breach of duty on the part of the testator as a director of the Lewis Company. This was the action which ultimately resulted in the judgment of White J to which I have referred.
In the liquidator's action the Hughes Parent Company and the Hughes Subsidiary Companies were named as the first to sixth defendants. The testator was the seventh defendant, David was the eighth defendant and his son, Daniel, was the ninth defendant. Mr Rickard was retained by David to defend the proceedings on the testator's behalf, and he briefed Mr Waugh to act for her. David acted for himself and the other defendants were unrepresented.
The hearing before White J took place on 4 and 5 December. The testator gave evidence before his Honour on 4 December and parts of the transcript of her evidence are in evidence before me. His Honour reserved his judgment.
On 29 July 2015 White J delivered his judgment. Although his Honour accepted that the testator and David had not acted with dishonest intent, he upheld the liquidator's claim that entry into the "succession plan" constituted a breach of duty on behalf of the testator. David was also liable as an accessory for having instigated the transactions.
His Honour set out at the end of his judgment a set of proposed declarations and orders to reflect his decision. Those orders provided for the transactions to be rescinded and the shares and monies transferred to the Hughes Subsidiary Companies to be returned. The Hughes Subsidiary Companies were also required to account to the Lewis Company for any dividends or other income received by them from the shares.
White J concluded, however, that there was no basis for relief against the Hughes Parent Company or David's son, Daniel. They had not received any assets as a result of the "succession plan", and the claims against them should be dismissed.
In his judgment, his Honour indicated that the testator and David would be liable for equitable compensation to the extent that any assets or dividends could not be retrieved from the Hughes Companies, or other losses had been suffered by the Lewis Company. His proposed orders were that the quantum of any equitable contribution would be determined at a later point. His Honour indicated that prima facie the Hughes Subsidiary Companies, the testator and David should pay the costs of the proceedings. He directed the parties to bring in short minutes of order in accordance with his reasons for judgment.
Although there is no direct evidence of this, I assume that orders were made at some point after July 2015 which reflected the orders proposed by White J in his judgment. Although the investments were returned to the Company, not all the dividends were accounted for. The liquidator pursued an application for equitable compensation to cover the shortfall.
The application ultimately came before Black J in November 2016: Thomas v Arthur Hughes Pty Ltd [2016] NSWSC 1861. His Honour recorded that for "practical reasons" the claim was only pursued against the testator, but on her behalf claims for contribution were reserved as against the other defendants, including David. In a separate application by the liquidator in the winding up, his Honour approved the liquidator's proposal that the compensation be set off against the distribution to which the testator was entitled as shareholder: In the matter of Anne Lewis Pty Ltd [2016] NSWSC 1860.
In his judgment on the compensation application, Black J resolved the identified issues of principle on which the parties disagreed. He directed that they bring in short minutes of order calculating the amount of compensation. His Honour foreshadowed making an order that the liquidator's costs be paid out of the company's assets, but that there be no order as between the parties. The final orders do not appear to be in evidence.
Meanwhile, in November 2015 the testator had suffered a stroke. She remained in hospital until mid-January 2016 when she was discharged to her home. Both her physical and mental state had declined as a result of the stroke. Early in March 2016 she went into a nursing home. On 24 February 2017 she died.
Peter gave affidavit evidence in general form of having searched unsuccessfully for the original 2011 will. In particular, he made enquiries of David and of Mr Rickard, neither of whom has it. Mr Rickard apparently worked from a copy which David gave him when Mr Rickard prepared the first codicil to the will in early 2012. According to David, he thought the document he gave Mr Rickard was the original (it requires careful scrutiny to identify it as a copy). Where the original could have gone is not explained, but there is no reason to think it was destroyed with intention to revoke it.
The wind up of Lewis Company has been completed and the company has been deregistered. The Turramurra property has been sold, but I was informed that the administration of Geoffrey's estate is still not complete. No action has yet been taken to pursue David for any contribution to which the testator's estate might be entitled as a result of his co-ordinate liability for the costs of the liquidator's action and for the equitable compensation. This will be a matter for Mr Glass to consider as administrator.
There are some testamentary capacity cases in which the terms of the will are said themselves to bespeak a disturbance of mind so serious as to amount to a "delusion". In such a case, it may be necessary to investigate the prior dealings between the testator and those who have been excluded from the will so as to see whether their conduct could rationally have led the testator to exclude them. But counsel for Peter indicated in the course of the opening that no such case was being made in these proceedings.
It followed that the way in which Peter and Roger responded to the overtures made in the testator's name was of little, if any, relevance to any fact in issue. As I understood counsel for David, the cross-examination was put as being relevant to credit generally.
There were other points at which the evidence of the witnesses diverged on matters of detail. But I have been able to resolve the critical factual issues without the need to undertake a general analysis of credit.
In his affidavit, David stated that his mother had obtained Mr Thompson's name herself and asked him to go along with her to see Mr Thompson to explain the Lewis Company and the investments. He said that his mother told him:
(a) I don't know, with the way property prices are today and going all the time how my grandchildren will ever be able to afford to buy a property.
(b) I want to leave this house to my grandchildren so that after I die they can sell it and divide the proceeds equally amongst themselves and they can then use the money as a deposit to purchase either a house or a home unit.
(c) I am aware the gift of a property can cause a problem with the parents of grandchildren.
(d) The gift of this house will not seriously disadvantage you and your brothers because of you four boys' share of the total value of the investments owned by the company.
(e) It will not disadvantage Peter because he hasn't had the expense of raising children and it will not disadvantage either you, Roger or Hugh because you three will not have the expense of providing your children with a deposit for a property.
Despite the reference to the draft being a "discussion paper", and the invitation for the testator to provide further instructions, there is no evidence of any further discussions at the time. I infer that the draft provided with the letter was in substantially the same form as the will which was signed two weeks later.
The second will prepared by Mr Thompson was signed by the testator on 29 July. The will was in the same terms (or virtually the same terms: I have not conducted a word-by-word comparison), as the May will, except for the addition of a clause providing that any debt due by any of her sons was to be deducted from his share of the estate. Presumably this additional clause was intended to confirm that the $500,000 payment to Peter, made earlier that month, would be treated as an advance on his inheritance, in accordance with his acknowledgement (see [40] above).
Mr Thompson was provided with a copy of Peter's letter of September 2010 which commented on the July 2010 will. Peter's comments concerned secondary issues such as the making of express provisions to govern where the beneficiaries' shares would go if they died before the testator did. In Mr Thompson's letter of March 2011, which followed a meeting with the testator, Roger and David, in about January (see [37] and [42] above), he provided a response to Peter's comments. This appears to have been as far as Mr Thompson's work went.
There was some, but very limited, evidence before me from Roger and David about the conferences between Mr Thompson and the testator. According to Roger, at the conference with Mr Thompson in about January 2011 the testator said she wished to include directions in the will stipulating how her grandchildren should spend the money which they would inherit. Mr Thompson replied that this was impractical and the testator was trying to rule from the grave.
Roger was not asked about the January 2011 conference in cross-examination and David did not address it in his evidence. Mr Thompson's March 2011 letter does not contain any further detail.
Roger also gave evidence about the decision to terminate Mr Thompson's instructions. He stated that he was told by Peter that David did not like Mr Thompson or his advice, thinking that he was too close to the testator's sister (apparently the testator's sister had said something to the testator about her affairs which must have come from Mr Thompson). Neither David nor Peter said anything about this in their evidence.
Peter was thus correct saying in cross-examination that he based his will on Mr Thompson's draft, but it was a 2011 not a 2010 draft. The 2010 conversations described by Peter with his mother and his brothers cannot have taken place; what must have happened is that Peter came to draft the will after March 2011 because his mother ceased to retain Mr Thompson for reasons which Peter does not refer to.
But although Peter had the chronology wrong, there is no reason to doubt that he did prepare the 2011 will in consultation with his brothers. This was specifically confirmed by Roger in his evidence, and was not contradicted by David in his evidence or made the subject of cross-examination. Presumably there would have been discussions with the testator as well, although no account of them is given in the evidence.
Both Peter's September 2010 letter and his May 2011 letter enclosing the will were addressed to his mother at her home address. When asked how he expected his mother would have been able to understand what he said given her macular degeneration, Peter said that she would have had assistance from the magnifier and from David. He acknowledged that at the time of the September 2010 letter, however, David was still in hospital or rehabilitation. Presumably that means his mother must have read the September 2010 letter, at least, using the magnifier. Peter said expressly that she was still using it at this time.
In his main affidavit, which was made in December 2018, Peter went on to give an account of the circumstances in which the testator signed the will. He said that after sending the letter of 11 May, he rang his mother and she told him she had received the will. He said he would drive up to Sydney to arrange for its execution.
According to the affidavit account, Peter drove to Sydney on 22 June, the date the will bears. He stated that he had organised for two of his mother's neighbours, Peter and Juanita Brand, to come over in the evening and execute it. When he arrived, he read the will to his mother and handed it to her, telling her that the Brands would be coming over later to witness her signature. He then went out for a couple of hours. When he returned his mother had gone to bed, leaving the will, signed, on a table in the lounge room.
Peter stated that when the Brands arrived he told them that his mother had already signed the will and gone to bed. He told them:
This is not the right way to witness the will but I will have to deal with it at a later stage. Do you mind signing anyway?
Peter stated that after the Brands signed the will, he put it in an envelope and gave it to his mother the following morning, telling her to talk to David about its safekeeping.
When he came to give evidence at the trial, Peter made a correction to his affidavit account. He said that, by reference to his e-tag account, he had driven from Cooma to Sydney on 21 June, not 22 June. In fact, this correction appears to have been a response to David's affidavit in reply; Peter's car tag records had been produced on subpoena and David had pointed out the disparity.
Peter did not make any other correction to his account, although the result of it was that his visit to Sydney was actually spread over three days, not two. He said that the reading of the will, its signature by his mother and the visit by the Brands had still taken place on the afternoon of 22 June. He did not explain what else he had done between his arrival in Sydney on 21 June and the afternoon of 22 June.
Peter was cross-examined about the way in which he procured the purported witnessing of the will by the Brands. It was put to him, correctly, that he had knowingly procured false attestations from them. Peter did not seem especially troubled by this. He said that he had offered the Brands the choice and they could always have refused.
I found this aspect of Peter's conduct, and his evidence about it, completely unsatisfactory. It is not clear from the evidence whether the Brands realised that Peter was a solicitor, but even if they did not, it was grossly improper of him to ask them to make solemn statements that they had witnessed the testator signing the will when in fact they had not. Nor should Peter have attempted to deflect blame on to the Brands for something he himself asked them to do.
Although, on his account in his affidavit, Peter said something to the Brands about fixing up the situation afterwards, that does not make sense. The only way in which the situation could be fixed up was by getting the testator to re-sign the will in the Brands' presence. I suspect that what really happened is that Peter asked the Brands to sign as witnesses expecting that the falsity of their signatures would never be revealed.
The false witnessing of the will was not the only concern which I had about Peter's evidence on the preparation and execution of the 2011 will. I have already referred to the problems with Peter's affidavit account of the background. I was also troubled by the erroneous reference in the affidavit to Peter driving to Sydney from Cooma on 22 June. The affidavit account did not fit comfortably with a visit which extended over three days rather than two. I was left with the impression that Peter had little real recollection of the relevant events and that the account in his affidavit was a reconstruction.
The whole episode reflects very poorly on Peter's credit. I treat his evidence with extreme caution. Nonetheless, on balance I am satisfied that his description of the sequence of events from 11 May 2011 onwards is correct. It is inherently believable and Peter's evidence was not challenged or contradicted at the hearing. The extent to which I can draw further conclusions about the testator's knowledge and understanding of the contents of the will is addressed when I deal with that issue below.
Counsel also asked whether Mr Rickard adopted the practice with the testator of sending her a letter summarising the effect of the will or codicil before she executed it. Mr Rickard responded that this would be futile because of the testator's macular degeneration. I found this response surprising in the light of Mr Rickard's own evidence that the testator could read using the magnifier. I think it is more likely that Mr Rickard simply did not bother. If he thought about it at all, he would have relied on David to relay that sort of information to the testator.
Counsel also asked Mr Rickard whether it was his practice, when presenting the testator with a codicil, to have the will (and any earlier codicils) being modified available so that they could be described or read to the testator in order for her to understand the nature of the change being made. Mr Rickard said that he could not recall. Mr Rickard said that he could not recall his practice in this regard. But Mr Rickard did not claim to have followed this practice with the testator and I think it is clear enough that, again, this is something that Mr Rickard did not bother with.
In Mr Rickard's affidavit, he gave an account of each occasion on which he obtained the testator's signature on the testamentary instruments which he prepared. But the account was formulaic. Mr Rickard simply recorded that he read the document in question to the testator, and at the end she said "that's correct" or words to that effect.
In cross-examination, Mr Rickard was challenged about his recollection. Counsel made the point that his affidavit had been prepared in May 2020, more than eight years after he began acting for the testator and almost five years before the preparation of the last of the testamentary instruments which is in issue in this case.
In response, Mr Rickard said that at some earlier point he had prepared an affidavit for a barrister in connection with the case, implying that his recollection might have been better then. But the circumstances were not explained and the affidavit was not produced.
I thought it was clear from his evidence that Mr Rickard now has no useful recollection of the occasions on which he took instructions from, and obtained the testator's signature on, the testamentary instruments which are the subject of these proceedings. And without meaningful notes of those occasions, he has nothing to trigger any such recollection.
Counsel for Peter also took up with Mr Rickard his account of merely reading the whole of each document to the testator and obtaining her consent at the end. Mr Rickard said that in fact, as he would read the document, the testator would stop him and ask questions, which he would answer.
Counsel pointed out that this was quite different from what Mr Rickard said in his affidavit, and invited me to disbelieve it. I do not think it is necessary to go as far as that. Even if the testator did sometimes ask for clarification of what was being read to her, there is no way on the evidence to identify which of the provisions in the various documents she asked about, and what she was told.
In his affidavit evidence, David provided an account of the discussions he had with his mother before some, but not all, of the testamentary instruments were drawn up and signed. I set those descriptions out when dealing with the relevant testamentary instruments below.
David was not present for the execution of five of the testamentary instruments prepared by Mr Rickard. He did give evidence about the execution of the other four. But that evidence was as formulaic as Mr Rickard's (see [190], [195] and [201] below).
March 2012 codicil: The first codicil to the 2011 will was signed by the testator on 6 March 2012. The codicil arose out of the testator's entitlement, as appointor under the trust deeds for each of the Hughes Trusts, to nominate a replacement appointor by will. The codicil exercised this power for the four trusts which were intended to hold the four sons' shares, nominating the relevant son as the new appointor on the testator's death. Except in David's case, it provided that should the relevant son predecease the testator, his wife was to be the appointor.
In his affidavit, Roger described a conversation with his mother in February 2012 about a draft version of the codicil. Roger's evidence was not disputed and was supported by a letter he wrote to David on 21 February. The letter stated:
At Mum's request I spoke with her at the weekend re the codicil for her will that has been drafted. I explained to Mum that although the clauses were straight forward I could not explain the reference to cl 52 of the trust deed nor without understanding the context of why the codicil was prepared in the first place could I advise her as to whether the codicil as drafted reflected her instructions. Mum stated that she also did not understand cl 52 and although there had been a detailed discussion with her on the context she could no longer remember the rationale.
Accordingly I do not believe any further action should be taken until we all understand the context and have our opportunity to express our views recognizing that it is Mum who is the final arbiter.
Roger's opinion was ignored. As already stated, the codicil was executed on 6 March and Roger only found out that it had been executed afterwards, as a result of being sent a copy.
As I have described, Mr Rickard did not in his evidence descend in any detail about what was said concerning the codicil at the conference when it was executed on 6 March 2012. But he did give evidence of a discussion on another issue relevant to the testator's testamentary plans.
Mr Rickard stated in his affidavit that an idea was floated to use the testator's power of attorney from Geoffrey to transfer the Turramurra property out of Geoffrey's sole name into the joint names of the testator and Geoffrey. Mr Rickard said that the power of attorney was not an enduring one and could not be used for this purpose. Presumably Mr Rickard reasoned that, not being an enduring one, the power of attorney was no longer valid because of Geoffrey's dementia. According to Mr Rickard, the testator responded that Geoffrey would never have agreed to it anyway.
I infer from Mr Rickard's description that the suggestion did not come from the testator. It must therefore have come from David, and it is consistent with David's own view that the Turramurra property should form part of the testator's estate so that she could dispose of it herself (see [442] below)
In his affidavit, David explained the background to the codicil as follows:
On or about February 2012 I said to my mother 'As part of the plan involving the Hughes companies and the trusts you are the appointor under the trust deeds for the trusts that control Peter, Roger, Hugh and my companies. You will need to appoint Peter, Roger, Hugh and me as replacement appointers so that after you die our companies can be transferred to us. What each of us will then want to do with our respective companies is then a matter for each of us and it should stop any arguments over Anne Lewis'. My mother, after considering my advice, said to me 'Yes I agree'.
David's affidavit evidence about the execution of the codicil was:
I was present when Mr Rickard read this codicil to my mother at his office in Pymble and explained its effect to my mother. My mother said to Mr Rickard 'I understand' before she signed the codicil.
David was not asked about the codicil, or his prior dealings with Roger, in cross-examination.
September 2012 codicil: The second codicil to the 2011 will was signed on 6 September 2012. The codicil provided that any gifts the testator gave to her grandchildren during her lifetime should be in addition to the gifts contained in her will.
The codicil was clearly prompted by the testator's recent gifts, totalling $350,000, to her grandchildren. In his affidavit, David explained the background to the gifts in the following way:
On or about July 2012 I said to my mother 'You want to give this house to your grandchildren. The reorganisation that started in January this year should result in your grandchildren receiving their share of the cash in Bathurst Hughes after the reorganisation is completed in November. However, their share of this cash will be less than the market value of this house. I suggest you give them $50,000 each towards the deposit which will, when added to their share of the cash in Bathurst Hughes, equal approximately their share of the market value of this house'. My mother, after considering my advice, then said to me 'Yes I agree'.
David also gave an account of the background to the codicil:
I said to my mother 'I think Peter will object to you giving the $50,000 to each of your grandchildren and will try to argue after you die that this money should be treated the same as the early inheritance advances you have given to each of us [her four sons]. I suggest you amend your Will so that it is clear that the $50,000 to each grandchild is not an early inheritance advance'. My mother, after considering my advice, said to me 'Yes I agree'.
David was present when the codicil was executed by his mother. His evidence of what happened followed the same formula as he used for the March 2012 codicil.
I have already referred at [83] above to Roger's evidence of his conversation with the testator about the codicil on 12 September, and in particular the testator's reported statement that David changed the amounts of the gifts to the children and only told her afterwards. David did not respond to this evidence.
David was cross-examined on the statement which attributed to his mother a wish to give the house to her grandchildren. Counsel pointed out that the house was in Geoffrey's name, but this overlooked the fact that, on David's account, the gift to the children was intended to be a contribution towards an eventual legacy of the value of the house, which David maintained had been in the testator's mind ever since her dealings with Mr Thompson (see [37] above). I consider the reliability of David's evidence on this point when I deal later with knowledge and approval of the August 2015 codicil.
December 2012 codicil: The third codicil to the 2011 will was signed on 6 December 2012. That was about six weeks before Peter's Guardianship Tribunal application was heard. As already noted, neither this codicil nor any subsequent testamentary instrument was copied by Mr Rickard to Roger, Peter or Hugh.
The codicil removed Roger as an executor and trustee, leaving the "Trustees" as David and Mr Bird. It amended the list of powers in clause 13 of the 2011 will by giving the Trustees the power to "deal with" the testator's shares in the Lewis Company in their "absolute and unfettered discretion". The codicil also revoked the first codicil of 6 March 2012, which had exercised the testator's testamentary power to nominate the appointor of the four discretionary trusts in favour of her sons, leaving the power unexercised.
David's affidavit evidence about the background to the December 2012 codicil was:
On or about October 2012 I said to my mother 'Because of Peter, Roger and Hugh's behaviour including Peter's demands about the company and his attitude to you about your interest in Dad's estate I suggest you amend your Will to try and reduce the arguments by making it clear that your executor has the final say about your shares in Anne Lewis, you remove Roger as an executor because he has aligned himself with Peter and, because Peter, Roger and Hugh are against the Hughes companies and the trusts and they are opposed to finalising the succession plan even though they ultimately benefit from it, you revoke the codicil you signed in March which appointed them replacement appointors of their respective trusts'. My mother, after considering my advice, said to me 'Yes I agree'.
David was present when the codicil was executed by his mother. His evidence of what happened followed the same formula as he used for the March 2012 codicil.
The legal purpose of conferring on the Trustees a discretionary power to "deal with" the deceased's shares in the Lewis Company is unclear. Those shares would be part of the assets of the testator's estate. There was no need for any separate conferral of power on the Trustees to "deal with" those shares as part of administering the estate in accordance with the terms of the will.
What may have been intended was to give the Trustees the right to determine how the proceeds of those shares were to be distributed. This is consistent with David's description of the purpose of his proposal as being to give the Trustees "the final say". If so, because the Lewis Company shares would be by far the most significant asset in the estate, it would, if effective, have allowed the Trustees to defeat all of the other bequests and legacies under the will.
On his own account, David did not explain this to his mother. Nor did he explain the implications of revoking the testamentary nomination of her sons as appointors of their trusts. This meant that control of the trusts, after the testator's death, would follow the ownership of the Hughes Parent Company. Opposition to the "succession plan" was not a logical reason for such a revocation if the trusts were to be for the testator's sons' ultimate benefit. The change affected David as well, but as the only remaining executor and trustee among the brothers he is unlikely to have felt threatened by it.
April 2013 letter: The April 2013 letter was signed by the testator on 10 April. The letter was addressed to David and Mr Bird, the testator's then nominated executors, and was headed "The Kate Lewis Family Trust".
The letter stated that the testator had instructed Mr Rickard to prepare a trust deed for the establishment of a trust for Kate's benefit. The amount to be placed in the trust was $50,000. The letter instructed David and Mr Bird, should the testator die before the trust deed was executed and the funds were made available to the trust, "to do all things necessary to complete the execution of the trust deed and the gifting of funds to the trust from my estate". The letter went on to state that it was intended to be "evidence of my testamentary intention" and added that the gift was in addition to the gifts contained in the testator's 2011 will.
In his affidavit, David stated that the testator had wanted since the previous year to make additional provision for Kate. She proposed the idea to him in about September 2012, asking how much he thought she should give Kate and how she should go about doing it. He suggested that the gift should be $100,000 with $50,000 to go into Kate's superannuation and $50,000 to go into a trust fund to be looked after by Kate's brother, Anthony. The testator agreed but wanted to speak to Hugh and Rhonda first. Soon afterwards, the testator reported that she had spoken to Rhonda who had agreed.
According to David, he then rang Rhonda to discuss paying $50,000 into Kate's superannuation fund. There appear to have been some difficulties with this. In her evidence, Rhonda complained about the way in which David dealt with Kate's superannuation fund. David did not accept the criticism. There is no need to resolve this dispute for the purpose of the present judgment.
David stated that in about March the following year he proposed to his mother that she formalise the arrangement for the other $50,000:
I said to my mother 'Now that the Guardianship Tribunal has dismissed Peter's application I think you should continue with your plan to deposit $50,000 into Kate's superannuation fund but I do not think it is a good idea to pay the $50,000 into Kate's trust until we know what Peter's next legal action is because you will need to ensure you have sufficient money to pay your legal costs. You have already paid a small fortune to John [Rickard] and Richard [Bell of counsel] in the Guardianship Tribunal matter. I suggest John prepares a letter to Bryan [Bird] and myself instructing us as your executors to set up Kate's trust fund and deposit the $50,000 into it'. My mother, after considering my advice, said to me 'Yes I agree'.
David was not present when his mother signed the letter. He did not give any evidence about the process of preparing it, and was not asked about that in cross-examination.
November 2013 codicil: The fourth codicil to the 2011 will was signed on 14 November 2013. This was after consent orders had been made in August for the production of documents in the proceedings brought by Peter for that purpose (see [107] above), but before the proceedings had returned to court for the making of further orders. The codicil extended over two pages. Its provisions can be summarised as falling into four parts.
Clauses 1 and 2 dealt with executorship. Clause 1 removed Mr Bird as executor and trustee. Clause 2 provided that if David (now the sole remaining executor and trustee) were to predecease his mother, or otherwise be unable or unwilling to act, Andrew Lewis (David's son), Alexander Lewis (Roger's son) and Anthony Lewis (Hugh's son) would jointly to be the testator's executors. Confusingly, the codicil continued to refer, as the 2011 will had referred, to the testator's "Trustees" even though in the usual course the functions of the "Trustees" would now be exercised by David alone.
Clause 3 dealt with the $500,000 advance paid to Peter on his inheritance. The clause directed the Trustees to deduct this amount from his entitlement under the will, in accordance with his letter of acknowledgement. The clause did not refer to the advances to Roger ($50,000 in July 2011) and Hugh ($150,000 in March & April 2013). Nor did it refer to any advance which may have been made to David.
Clauses 4 to 7 dealt with distributions from the Hughes Trusts. Clause 4 provided that any distribution from Peter's trust was to be deducted from his share of the testator's estate. As worded, this would apply to distributions to Peter or anyone else. Clauses 5, 6 and 7 made equivalent provision for David, Roger and Hugh.
The fourth part of the codicil consisted of clauses 8 to 12. These clauses had disparate effects which I will set out in more detail in a moment, but the common theme to them was to provide for deductions to be made from the shares of beneficiaries if they engaged in certain conduct, and the redistribution of such deductions to other beneficiaries. I will refer to these provisions collectively as the "claw-back provisions".
Clause 8 provided that if any beneficiary were to challenge the testator's will or any of her codicils then any gift in favour of that beneficiary would be revoked and replaced by a gift of $50,000 only.
Clause 9 was directed at Peter. It provided:
I DIRECT my Trustees to deduct from my gift to my son Peter Howarth Lewis all the legal costs and disbursements incurred as a result of his various legal proceedings since 22 June 2012 against any or all of Anne Lewis Pty limited, Speakman Hughes Pty Ltd, Telfer Hughes Pty Ltd, Melvie Hughes Pty Ltd, Gypson Hughes Pty Ltd, Bathurst Hughes Pty Ltd, Arthur Hughes Pty Ltd, the trusts of which Arthur Hughes Pty Ltd is trustee and me and not reimbursed to any or all of Anne Lewis Pty Limited, Speakman Hughes Pty Ltd, Telfer Hughes Pty Ltd, Melvie Hughes Pty Ltd, Gypson Hughes Pty Ltd, Bathurst Hughes Pty Ltd, Arthur Hughes Pty Ltd, the trusts of which Arthur Hughes Pty Ltd is trustee and me.
Clause 10 was also directed at Peter. It provided:
I DIRECT my Trustees to deduct from my gift to my son Peter Howarth Lewis an amount equal to all the costs incurred by my late husband's estate including legal costs and disbursements, executors fees and any amount that my Trustees claim from my late husband's estate not reimbursed to me or my estate by my late husband's estate, such amount representing liquidated damages for the monetary expense and great emotional distress Peter Howarth Lewis has caused me since 22 June 2012.
Clause 11 applied to all beneficiaries. It provided:
I DIRECT my Trustees to deduct from any gift to any of my beneficiaries any costs including, but not limited to, legal costs, audit and accounting fees that any such beneficiary caused me to incur and not reimbursed to me prior to the date of my death or caused my estate to incur after my death and not reimbursed to my estate which costs in the absolute discretion of my Trustees were unnecessary.
Finally, clause 12 directed that any monies clawed back under any of clauses 8 to 11 were to be distributed equally among beneficiaries other than the beneficiary whose share of the estate was being docked.
Mr Rickard's bill provided some chronological detail. It records an initial 30 minute conference on 10 September 2013 for "taking your instructions for codicil". A first draft was prepared by someone in Mr Rickard's office on 22 October; this took two hours. On 7 November, Mr Rickard wrote to the testator enclosing a version for approval or suggested changes and foreshadowing a visit on 14 November to have the document, if approved, executed. On 13 November, there was a two hour conference between Mr Rickard and David for discussing, amending and finalising it. The execution of the codicil proceeded on 14 November as previously organised.
Also in evidence is a set of handwritten notes of Mr Rickard which summarise the terms of the codicil. The notes are undated but appear to correspond fairly closely with the terms of the codicil as executed.
I am not completely sure that the reference to "your instructions" means that the conference on 10 September was with the testator herself. In cross-examination, Mr Rickard appeared to accept that his notes reflected instructions from David. He was, however, not asked about the 10 September conference or where the instructions came from for the draft prepared by his associate in October. In the end Mr Rickard did not dispute that the substance of the instructions for the will came from David and the wording was based on detailed instructions from him.
In cross-examination, Mr Rickard was asked whether he discussed the quantum of the claw-backs with the testator. Mr Rickard said he did not know, and nor did the testator; that was what the clause was directing the Trustees to find out.
Mr Rickard added that at some point Mr Waugh raised the possibility that the reference to costs in clause 9 might make it void for uncertainty. David however dismissed this, saying he could calculate the amounts very easily. Although Mr Rickard said that this conversation took place at around the same time as the codicil was prepared, in fact Mr Waugh does not seem to have been retained until several months afterwards, in April 2004. There was no suggestion that the testator was party to the discussion.
In his affidavit, David gave evidence only that the discussions which led to the execution of this codicil took place between "on or about December 2012 and on or about November 2013". His evidence of the discussions was conclusory in form and I rejected it. I granted leave to lead evidence in admissible form in chief, but the leave was not taken up.
In his affidavit, David said that he was not present when the codicil was executed. He was not asked anything of substance about the codicil in cross-examination.
The absence of evidence from David and Mr Rickard means that the Court does not even have the benefit of knowing what David now says his intention in formulating the codicil was, let alone how the provisions of the codicil were explained to the testator. In the case of some provisions, such as the removal of Mr Bird, leaving David as sole executor, David's purpose is self-evident. But the wording of some of the other provisions is such that their intended reach is obscure.
This applies in particular to the claw-back provisions. Clearly the idea for those provisions originated with the Guardianship Tribunal proceedings which had resulted (as David would have characterised it) in Peter imposing costs on his mother which had not been recouped. That idea was picked up by clause 9 and extended to other litigation to which the Lewis Company or the Hughes Companies had been made party (at the time the codicil was prepared, the only other existing litigation was Peter's application for the production of documents). Extension of the idea to the Lewis and Hughes Companies, however, failed to take account of the fact that the testator held only a fifty per cent interest in the Lewis Company and the shares in the Hughes Subsidiaries were held on trust so that the testator had no ownership interest in them at all.
Clause 10 then stretched the original idea further by applying it to Geoffrey's estate, or to the testator's entitlements from Geoffrey's estate (both ideas are present in the language used). Incidentally, the reference to "liquidated damages" shows the lack of professionalism in the drafting. The label comes from a completely different area of legal discourse and its use in the will to cover "costs" caused to the estate was totally inapt.
The inapt drafting was not the only problem with clause 10. The substance of the clause was not properly thought out. The testator's only interest in Geoffrey's estate was a right to occupy the Turramurra property and a life interest in the income from Geoffrey's shares in the Lewis Company. Any costs incurred in the administration of the estate and not recouped from third parties would not have come out of the income payable to the testator. It would effectively have been borne by the testator's sons in equal shares.
2014 will: The next testamentary instrument prepared by Mr Rickard for the testator was the fresh will signed on 19 December 2014. Work on it had begun several months before, in August. It was signed two weeks after White J had heard and reserved his decision on the liquidator's action (see [114] above).
Clause 1 of the new will revoked all previous testamentary dispositions by the testator. Clause 2 appointed David as the testator's executor and trustee. If he predeceased her, or was unwilling or unable to act, then his son Andrew (only) was to be the executor and trustee.
Clause 3 dealt with gifts by the testator to her grandchildren during her lifetime. It recited the love for them and provided that any such gifts should be in addition to gifts contained in the will.
Clause 4 made provision for the payment of the testator's debts, funeral and testamentary expenses, and for various specific bequests. These included a gift on trust for the benefit of Hugh's daughter, Kate; gifts of $10,000 each to the wives of Peter, Roger and Hugh; and a release of the 2001 loan made to David.
Clause 5 dealt with the residue of the estate. It was to be divided into five parts, with one part to each of the testator's sons and the remaining part to be divided among her seven grandchildren.
Clause 6 to 9 made provision to cover the possibility that the testator's sons would predecease her, by providing that their shares would be shared between their children (or, in Peter's case, the testator's grandchildren, subject to a further legacy of $50,000 to Peter's wife).
Clauses 10 and 11 dealt with early inheritance advances made by the testator during her lifetime. Clause 10 provided generally that such advances were to be deducted from the relevant son's share of the estate. The gifts to the testator's grandchildren and the forgiveness of David's loan were specifically excluded. Clause 11 made specific provision in the case of the $500,000 advance to Peter in July 2010 for it to be deducted from his share of his estate.
Clauses 12 to 16 dealt with the companies and trusts. The principal clause was clause 12. It began by reciting the incorporation of the Hughes Companies and the creation of the Hughes Trusts in sub-clauses (i) and (ii).
Sub-clause 12(iii) recited that the Hughes Subsidiary Companies "own cash and shares and stapled securities and other assets". It then directed the Trustee "to include in the value of my estate the market value of these cash and shares and stapled securities and other assets".
Sub-clause 12(iv) recited the testator's office as appointor under her sons' discretionary family trusts. It exercised the testator's power under the trust deeds to nominate an appointor of each of those trusts effective on her death. The nomination was in favour of the Trustee.
Sub-clause 12(v) referred to the four sons' trusts. It directed that the Trustee should "have the power to deal with the entitlements of the named beneficiaries of" each trust "at the absolute and unfettered discretion of the Trustee and the decision of the Trustee shall be final and conclusive". Sub-clause 12(vi) concerned the grandchildren's trust and similarly directed that the Trustee should "have the power to deal with" the units in the trust "at the absolute and unfettered discretion of the Trustee and the decision of the Trustee shall be final and conclusive". Sub-clause 12(vii) contained a direction in the same terms for the testator's shares in the Lewis Company.
Clauses 13 to 16 provided that any distribution from the family trust belonging to the testator's sons (whether to that son or anyone else) was to be treated as an early inheritance advance to that son.
Clauses 17 to 21 replaced the claw-back provisions in the November 2013 codicil with a fresh set of provisions. Clause 17 was directed to Peter. It provided:
(i) WHEREAS my son PETER HOWARTH LEWIS has, since 28 June 2012 being the date of my beloved husband Geoffrey Howarth Lewis' funeral, caused me to suffer great emotional distress and suffering and sadness and has shown me no love or compassion, and
(ii) WHEREAS my son PETER HOWARTH LEWIS has, since 28 June 2012 being the date of my beloved husband Geoffrey Howarth Lewis' funeral, caused me to suffer additional expenses or caused my son DAVID GRANT LEWIS to suffer additional expenses or caused Anne Lewis Pty Limited, Speakman Hughes Pty Ltd, Telfer Hughes Pty Ltd, Melvie Hughes Pty Ltd, Gypson Hughes Pty Ltd, Bathurst Hughes Pty Ltd, Arthur Hughes Pty Ltd and the trusts of which Arthur Hughes Pty Ltd is trustee to suffer additional expenses
I DIRECT the Trustee to deduct from my gift to my son PETER HOWARTH LEWIS the quantum of the additional expenses the Trustee decides in the absolute and unfettered discretion of the Trustee were suffered by me or suffered by my son DAVID GRANT LEWIS or suffered by Anne Lewis Pty Limited, Speakman Hughes Pty Ltd, Telfer Hughes Pty Ltd, Melvie Hughes Pty Ltd, Gypson Hughes Pty Ltd, Bathurst Hughes Pty Ltd, Arthur Hughes Pty Ltd and the trusts of which Arthur Hughes Pty Ltd is trustee since 28 June 2012 including but not limited to penalties, pecuniary penalties, liquidator's fees and disbursements, additional income tax, legaI costs and disbursements, specialists advice fees, audit fees and accounting fees and the decision of the Trustee shall be final and conclusive.
Clause 18 was directed at Roger. It contained recitals referring to Roger which were in exactly the same terms as the recitals concerning Peter. It also contained a direction to the Trustee to make a deduction from the gift to Roger. That direction was in the same terms as the direction in clause 17 concerning Peter except that after the list of expenses culminating in audit fees and accounting fees there were inserted the words "and which expenses the Trustee decides in the absolute and unfettered discretion of the Trustee cannot be easily recovered from" Peter.
Clauses 19 and 20 were in general terms. Clause 19 provided:
I DIRECT the Trustee to deduct from my gift to any of my beneficiaries with the exception of my son DAVID GRANT LEWIS the quantum of additional expenses the Trustee decides in the absolute and unfettered discretion of the Trustee were suffered by me or suffered by my son DAVID GRANT LEWIS or suffered by Anne Lewis Pty Limited, Speakman Hughes Pty Ltd, Telfer Hughes Pty Ltd, Melvie Hughes Pty Ltd, Gypson Hughes Pty Ltd, Bathurst Hughes Pty Ltd, Arthur Hughes Pty Ltd and the trusts of which Arthur Hughes Pty Ltd is trustee and the trusts of which [the Hughes Parent Company] is trustee since 28 June 2012 including but not limited to penalties, pecuniary penalties, liquidator's fees and disbursements, additional income tax, legal costs and disbursements, specialists advice fees, audit fees and accounting fees and which additional expenses were in the absolute and unfettered discretion of the Trustee directly or indirectly or explicitly or implicitly due to the action or actions of that beneficiary either acting severally or jointly and the decision of the Trustee shall be final and conclusive.
Clause 20 provided:
I DIRECT the Trustee to deduct from my gift to any of my beneficiaries with the exception of my son DAVID GRANT LEWIS the quantum of any losses or expenses of whatsoever kind the Trustee decides in the absolute and unfettered discretion of the Trustee were suffered by my estate and these losses were in the absolute and unfettered discretion of the Trustee directly or indirectly or explicitly or implicitly due to the action or actions of that beneficiary either acting severally or jointly and the decision of the Trustee shall be final and conclusive.
Clause 21 dealt with the distribution of monies clawed back. It provided that eighty per cent of the monies deducted should be distributed amongst the testator's sons at the "absolute and unfettered discretion of the Trustee" other than the son from whom the deduction was made and added that "and the decision of the Trustee shall be final and conclusive". Subclause (ii) made an equivalent provision concerning twenty per cent of the monies deducted providing that it be distributed among the grandchildren according to the Trustee's discretion.
Many of the provisions of the December 2014 will reflected the provisions of the 2011 will and the various codicils to that will. The fourth codicil to the 2011 will, in particular, had increased the power the Trustee would have over the estate. The December 2014 will aimed to take the process further.
One such area of expansion lay in the powers of the Trustee. Clause 12(vii) reproduced the existing provision giving the Trustee power to "deal with" the testator's shares in the Lewis Company. I have already commented that the power was unnecessary unless it was intended to give the Trustee a broad discretionary entitlement to interfere with the dispositions in the other clauses of the will (assuming that to be permissible). The will contained two further provisions of a similar character, in clauses 12(v) and 12(vi), which applied to "the entitlements of the named beneficiaries" in the sons' discretionary trusts and the grandchildren's trust.
The meaning of the phrase "the entitlements of the named beneficiaries" in its application to the trusts is obscure. If the intention was to refer to the distributions of capital and income from the trusts, then entitlement to those distributions depended upon the terms of the relevant trust deed. If distributions had been made in favour of the testator, then they would form part of her estate without the need for any further action to be taken by the Trustee. If they had been made in favour of other beneficiaries, then there would be nothing the Trustee could do to recall them.
It may be that clauses 12(v) and 12(vi) must be understood in the light of clause 12(iii). That clause purported to treat all of the assets in the Hughes Trusts as being part of the testator's estate. Economically, this overlooked the fact that the testator had only ever been a half shareholder in the Lewis Company from which the assets had been taken. Legally, it simply ignored the distinction between assets belonging to the testator and forming part of the estate, and assets belonging to corporate entities or held in trust.
The problem is particularly clearly shown in the direction which purported to require the Trustee to include the "market value" of the securities in question as assets of the estate. The only asset of the testator's estate was a half share in the proceeds of the Lewis Company (which by then was in liquidation) and in turn, unless the liquidator's actions succeeded, the only relevant assets of the Lewis Company were loans owed to it by the Hughes Companies. Any increase or decrease in the market value of the shares and securities formerly held by the Lewis Company would belong to the Trusts.
It is not clear how clause 12(iii) could function legally. What it does indicate is a lack of understanding on the part of David (and, it would seem, Mr Rickard) of the legal effect of the "succession plan", coupled with a desire (when combined with clauses 12(v), 12(vi) and 12(vii)) to give David as Trustee as much control as possible over the family assets.
This was reinforced by clause 12(iv), nominating the Trustee as the appointor of all four sons' trusts after the testator's death. Under the will, ownership of the Hughes Parent Company, the trustee of the trusts, fell into residue. But this would now make no practical difference: as Trustee, David would be able to exercise his power as appointor to replace the Hughes Parent Company with a trustee of his choosing. David would have practical control over the capital and income of each of his brothers' trusts.
A similar process of expansion in David's power can be seen in the claw-back provisions. But the expansion was accompanied by further conceptual problems.
Clauses 17 to 19 were based on a clause in the November 2013 codicil which applied to "costs incurred as a result of" Peter's legal proceedings against the testator, the Lewis Company, the Hughes Companies and the Hughes Trusts. Clauses 17 to 19 expanded this to "additional expenses … suffered by" the testator, David, the Lewis Company, the Hughes Companies and the Hughes Trusts, as decided by the Trustee in the Trustee's "absolute and unfettered discretion". These "additional expenses" were not further defined, but included, without limitation, additional tax and penalties, liquidator's costs, legal costs, and accounting costs.
Clauses 17 and 18, which were directed against Peter and Roger, ended at this point, without actually identifying any causal connection between them and the "additional expenses" to be clawed back. Presumably the intended connection was that the "additional expenses" were to have been caused in some way by their conduct (see recital (ii) in each clause, quoted at [245] above).
Clause 19, which applied to all beneficiaries except David, did expressly specify that the "additional expenses" should have been caused by the actions of the beneficiary in question. The requirement was that the additional expenses should have been "directly or indirectly or explicitly or implicitly due to the actions of" that beneficiary, in the "absolute and unfettered discretion" of the Trustee which was to be "final and conclusive".
The intention behind the clauses was clearly to allow David to nullify any consequence of the litigation instigated by Peter (which, in David's mind, included the liquidator's action). The reference in clause 19 to the losses being caused "explicitly or implicitly" is another example of unprofessional drafting. That distinction had nothing to do with the causation of loss. All it did was evince a desire to widen David's powers as Trustee as far as language would allow, even if that went beyond the limit of intelligibility.
How would these clauses work in practice? I have already pointed out that losses suffered by the companies and trusts did not necessarily translate into losses in the testator's estate. The widened version only widened the problem. The liquidator's action was brought to recover monies for the Lewis Company from the Hughes Companies. One of the companies in the list would benefit, and the others would suffer a corresponding detriment. The effect on the testator's estate, through the value of her shareholding in the Lewis Company, would overall be beneficial. The drafting shows no appreciation whatever of the interests at stake in the litigation.
Two other alterations illustrate the intent of the changes. First, unlike its predecessor, the general provision in clause 19 specifically excluded David from its effect. So did clause 20, which applied generally to losses suffered by the testator's estate. This was a rich irony. On an objective view, it is arguable that David, more than anyone else, was responsible for the additional costs suffered by his mother, first by implementing the "succession plan" without agreement from other family members, and then by unreasonably resisting the litigation which resulted from it.
The other change concerned the distribution of monies clawed back from beneficiaries. In the November 2013 codicil those monies were to be distributed according to a formula. But in the December 2014 will, clause 21 made the distribution of monies clawed back another matter for the absolute discretion of David as the Trustee, apart from the 80/20 split between the sons and the grandchildren.
Mr Rickard's bill and the correspondence produced from his file show the way in which the will was prepared (the drafts themselves do not appear to be in evidence). The process began with an email from David to Mr Rickard on 13 August 2014 which recounted that his mother had for some months been considering changes to her will and had now decided to make a new codicil "with respect to Peter Lewis and Roger Lewis and the consequent effects of this change on myself, Hugh Lewis and her seven grandchildren".
David's email asked for copies of the existing will and the existing codicils and letter of instruction with respect to Kate. These were sent the following day. On 18 August David emailed Mr Rickard again:
My mother wants to make the following changes to her will:
- the costs to be recouped from Peter Lewis may need to be broadened in view of his action in successfully applying to have Anne Lewis Pty Limited liquidated; my suggestion is you should start with Dolman Bateman & Co's report [presumably a quantum report from the liquidator's action] and work from there.
- Roger Lewis is to be responsible for any costs which cannot be recouped by the Executors and Trustees of her will from Peter Lewis.
Any such amounts recovered from Roger Lewis are to be shared equally amongst myself, Hugh Lewis and my mother's seven grandchildren. I would appreciate you drafting a codicil to this effect and then forwarding it to me no later than 25 August 2014.
Mr Rickard does not appear to have complied with the request to draft a codicil. Instead, on 16 September, David requested soft copies of the codicils prepared by Mr Rickard.
On 6 October David emailed Mr Rickard again. The email attached a new document which had been assembled from the soft copies provided to David by Mr Rickard and to which fresh clauses had been added. David explained that, rather than producing a codicil, he had produced a fresh will as Mr Rickard had previously recommended. Mr Rickard spent two hours amending David's draft on 17 October and after some further telephone calls and emails Mr Rickard sent him a completed draft on 6 November.
Nothing happened for about a month. Then on 9 December (after the hearing before White J which took place on 4 and 5 December), David wrote to Mr Rickard with an amended version. Mr Rickard visited the testator at Turramurra on 16 December and read the document to her.
Two days later, on 18 December, Mr Rickard's bill records a telephone attendance on David, perusal of a further draft of the testator's will, and research on the question of voiding a gift if the will was contested. On 19 December, the bill records a further email from David including a further draft, followed by an attendance on the testator to read the will and have it executed.
According to David, he was not present when the will was executed on 19 December. Again, his evidence of the discussions between himself and his mother which resulted in the preparation of the will was in inadmissible form. I rejected that evidence and it was not supplemented in David's evidence in chief.
In cross-examination, David initially denied that the will had been prepared as a result of events at the hearing before White J and in anticipation of an unfavourable judgment. David attributed the preparation of the will to his mother's wish to consolidate her testamentary instruments. He also said (correctly) that the process had started in about August. But in the end it was clear that there was further re-drafting work in response to the way in which the hearing panned out. David also accepted that the wording of the will as executed was his, although he insisted that it followed discussions with his mother.
David was asked about the claw-back provisions. He said that they were directed against Peter and Roger. Counsel put to him that clause 19 applied to all the beneficiaries, and would therefore cover Hugh and the grandchildren. David said that his mother did not blame Hugh for what had happened and had not contemplated that Hugh would have part of his inheritance clawed back. Still less had she contemplated that this would happen with the grandchildren. When pressed about the purpose of clause 19, David said that he included the clause because the course of events in the future was unknown.
David was asked about the quantum of the claw-back from Peter (or Roger). The questioning included references to the later judgment of Black J. The amount, inclusive of costs, was said to be $1.9 million. David could not have known of this particular figure at the time, but there was no suggestion that it was outside his contemplation.
David accepted that at the time he considered it possible that the effect of the claw-back mechanism would be to deprive Peter of the whole of the inheritance from his mother's estate. He conceded the same was so for Roger. He accepted that he never expressly told his mother that. He also acknowledged the inconsistency between that outcome and his mother's instructions that she did not wish to cut any of her sons out of her will completely (see [426] below).
In cross-examination, Mr Rickard accepted that the wording of the December 2014 will came from David. The cross-examination did not focus on the December 2014 will but rather on the August 2015 codicil. Nevertheless some of his evidence should be referred to at this point because it applies equally to the December 2014 will.
Mr Rickard accepted that he did not sit down with the testator and go through the corporate structure. He asserted that she already knew it. Mr Rickard also knew at the time that the effect of the will was to give David a wide discretion which he could exercise against his brothers. He acknowledged that based on what he heard in the witness box before White J he knew that the testator's recollection of financial transactions was less than perfect.
Again, the lack of evidence from David and Mr Rickard means that there is no account of the intention behind the drafting of the December 2014 will, apart from that which emerged in cross-examination. Nor is there any evidence, reliable or not, about what the testator was told.
May 2015 codicils: After the hearing before White J had been completed and while judgment was still reserved, Mr Rickard retained Mr GM Watson SC as counsel in the liquidator's action. A conference took place with Mr Watson on 1 May, which was attended by David and Mr Rickard. On 4 May, for reasons which are not addressed in the evidence, David instructed that Mr Watson's brief be withdrawn.
On the same day as the conference with Mr Watson, the testator executed a codicil to her December 2014 will. The codicil amended the list of specific gifts in clause 4 of the December 2014 will by adding a gift to David of the testator's share in the Hughes Parent Company.
The effect of the codicil was that David would get control of all of the Hughes Companies and thus, subject to the terms of the trust deeds, of the Hughes Trusts. This however would make little practical difference so far as the four sons' discretionary trusts were concerned, given that David was already to be the appointor for those trusts.
Mr Rickard's fee note records that he prepared the 1 May codicil urgently "on Geoffrey Watson's advice". According to a contemporaneous email from David (see [285] below), Mr Watson also suggested that Peter, Roger and Hugh be removed as beneficiaries under the testator's will. According to Mr Rickard, Mr Watson also advised that a report on the testator's mental capacity be obtained from Dr Wong.
David's affidavit account of the genesis of the 1 May codicil was:
I said to my mother 'Geoffrey Watson has recommended that you give either me, John [Rickard] or the parish priest your one share in Arthur Hughes Pty Ltd which is the trustee of the trusts that control the Hughes companies to remove any further arguments by Peter, Roger and Hugh about the Hughes companies and the trusts. The share is only worth $1'. My mother then said to me 'I think it would be sensible for you to have my share'.
David was present when the 1 May codicil was executed. He gave his usual formulaic description of it being read to his mother by Mr Rickard and her agreeing to it.
On 4 May, the following email exchange took place between David and Mr Rickard:
David Lewis 2:50 pm: I would appreciate you advising me your thoughts concerning Geoffrey Watson's suggestion that Peter Lewis, Roger Lewis and Hugh Lewis be excluded from my mother's will.
Mr Rickard 5:27 pm: I'm not sure I should be advising someone who to benefit or not to benefit from their will but I might say Geoffrey Watson wasn't the only barrister who advised that she change her will. I think Greg Waugh, Brendan Hull and David Lloyd did too.
David Lewis 6:42 pm: I have discussed this matter with my mother. My mother does not want to change her will to exclude Peter Lewis, Roger Lewis and/or Hugh Lewis.
The 1 May codicil contained some typographical and referencing errors. The errors were corrected by Mr Rickard on 5 May and the corrected version was executed by the testator on the same day.
According to his affidavit David was not present when the correcting codicil was executed. He did not in his affidavit go into the reasons for the amendment, or discuss the intervening email correspondence.
David was not asked about the codicil, or the conference with Mr Watson, in cross-examination. Nor was Mr Rickard.
August 2015 codicil: The second codicil to the December 2014 will, which proved to be the testator's final testamentary instrument, was signed on 6 August 2015. This was one week after White J delivered his judgment in the liquidator's action on 29 July.
Clause 1 of the codicil revoked the May codicil but then clause 2 amended the will by adding back the gift to David of the testator's share in the Hughes Parent Company in the same terms as the codicil which had just been revoked. The purpose of this exercise is unclear and there was no evidence about it.
Clause 3 of the codicil amended clause 2 of the will by deleting it and replacing it with a fresh clause dealing with the identity of the Trustee. As in the will, David received the appointment. But if he predeceased his mother or was unable or unwilling to act then the NSW Trustee & Guardian was to receive the appointment rather than his son Andrew.
Clause 4 of the codicil added a further specific gift to clause 4 of the will. This was a gift in favour of the testator's grandchildren (in equal shares) of an amount equal to the gross market value of the Turramurra property as at the date of the testator's death.
Clauses 5 and 6 of the codicil then made consequential (and unnecessary) amendments to clause 10 of the will so as to provide that the new gifts in the codicil were not to be treated as advances against the relevant beneficiaries' shares of the residue.
Clauses 7 to 9 of the codicil amended the claw-back provisions. Clauses 17, 18 and 19 were removed and replaced by redrafted versions of those clauses. The new clause 17 is shown in mark-up against the corresponding provision of the December 2014 will below:
(i) WHEREAS my son PETER HOWARTH LEWIS has since 28 June 2012, being the date of my beloved husband Geoffrey Howarth Lewis' funeral, has caused me to suffer great emotional distress and suffering and sadness and has shown me no love or compassion, and
(ii) WHEREAS my son PETER HOWARTH LEWIS has, since 28 June 2012, being the date of my beloved husband Geoffrey Howarth Lewis' funeral, has caused me to suffer additional expenses or incur liabilities or caused my son DAVID GRANT LEWIS to suffer additional expenses or incur liabilities or caused Anne Lewis Pty Limited, to suffer expenses or incur liabilities or caused Speakman Hughes Pty Ltd, to suffer expenses or incur liabilities or caused Telfer Hughes Pty Ltd, to suffer expenses or incur liabilities or caused Melvie Hughes Pty Ltd to suffer expenses or incur liabilities or caused Gypson Hughes Pty Ltd, to suffer expenses or incur liabilities or caused Bathurst Hughes Pty Ltd, to suffer expenses or incur liabilities or caused Arthur Hughes Pty Ltd to suffer expenses or incur liabilities or caused Arthur Hughes Pty Ltd and as trustee for the trusts of whichHowarth Family Trust to suffer expenses or incur liabilities or caused Arthur Hughes Pty Ltd is trustee to suffer additional expenses as trustee for the Grant Family Trust to suffer expenses or incur liabilities or caused Arthur Hughes Pty Ltd as trustee for the Geoffrey Family Trust to suffer expenses or incur liabilities or caused Arthur Hughes Pty Ltd as trustee for the Bamby Family Trust to suffer expenses or incur liabilities or caused Arthur Hughes Pty Ltd as trustee for the Grand Family Unit Trust to suffer expenses or incur liabilities
I DIRECT the Trustee to deduct from my gift to my son PETER HOWARTH LEWIS the quantum of the additional expenses and liabilities the Trustee decides in the absolute and unfettered discretion of the Trustee were suffered by me or suffered by my son DAVID GRANT LEWIS or suffered by Anne Lewis Pty Limited, or suffered by Speakman Hughes Pty Ltd, or suffered by Telfer Hughes Pty Ltd, or suffered by Melvie Hughes Pty Ltd, or suffered by Gypson Hughes Pty Ltd, or suffered by Bathurst Hughes Pty Ltd, or suffered by Arthur Hughes Pty Ltd and the trusts of which or suffered by Arthur Hughes Pty Ltd is as trustee for the Howarth Family Trust or suffered by Arthur Hughes Pty Ltd as trustee for the Grant Family Trust or suffered by Arthur Hughes Pty Ltd as trustee for the Geoffrey Family Trust or suffered by Arthur Hughes Pty Ltd as trustee for the Barnby Family Trust or suffered by Arthur Hughes Pty Ltd as trustee for the Grand Family Unit Trust since 28 June 2012 including but not limited to interest, equitable compensation, equitable contribution, penalties, pecuniary penalties, liquidator's fees and disbursements, additional income tax, legal costs and disbursements, specialists advice fees, audit fees and accounting fees and the decision of the Trustee shall be final and conclusive.
Equivalent changes were made to clause 18 (which was directed against Roger) and clause 19 (which applied to all beneficiaries).
Clauses 10 and 11 of the codicil were mechanical. Clause 10 set out the ACNs for the Lewis Company and the Hughes Companies referred to in the will and the codicil. Clause 11 otherwise confirmed the will.
Clause 4 was a significant departure. An amount representing the value of the Turramurra property was transferred out of residue (where 80% of it would go to the testator's sons) to the grandchildren. There is no evidence of what the value of the Turramurra property was at the time, but it eventually fetched $2.55 million when sold in May 2017. The new gift was in addition to the $350,000 gifted by the testator in July 2012. The grandchildren's one-fifth share of the residue also remained, albeit reduced in value by the new gift.
The other major change was the further revision of the claw-back provisions. The purpose was evidently to ensure that the Trustee's claw-back powers would extend to any money judgment against any of the defendant parties as a result of White J's judgment. This was probably already covered by the existing claw-back provisions, so that the change did nothing more than make the document even more convoluted and difficult to understand. The drafting shows no sign of coming to grips with the conceptual problems with the claw-back provisions which I have already identified.
Mr Rickard's email records that the initial draft of the codicil was prepared by David and sent to Mr Rickard on 30 July. On 5 August David sent a further amended draft. Mr Rickard made some changes and sent the draft back. David sent a further version of the draft at 11:27 am, and the codicil was executed that afternoon.
Again, Mr Rickard accepted in cross-examination that the wording of the second codicil came from David. In particular, the amendments to the claw-back provisions appear to have come from David. The marked up version of the new clause 17 of the will was put to Mr Rickard and he acknowledged that the effect of the way in which he dealt with the testator (that is, by reading it to her without bringing the December will along) was that he expected her to do the comparison task in her head.
Mr Rickard accepted the suggestion from counsel that David had power to control the whole estate. This meant that Peter, in particular, might get nothing. Mr Rickard said he did not recall whether he pointed this out to the testator, but I am certainly not satisfied that he did.
The effect of the judgment of White J was that the assets in the Hughes Trusts would be returned to the Lewis Company, resulting in a half share of those assets being distributed to the testator from the liquidation. Unless there was a successful appeal, it was not completely correct to say that the will would give David a complete and general power to control the estate (unless the effect of the power to "deal with" the testator's shares in the Lewis Company would allow him to distribute the proceeds of those shares without regard to the bequests in the will). But Mr Rickard did not take this point. I think it is clear that, while the will may not have been effective to give David complete power over the whole estate, that was what David intended and that was what Mr Rickard thought its effect would be.
David was not present when the codicil was executed by the testator. He stated in his affidavit that following the handing down of White J's judgment, he reported to his mother on the outcome. He told her that the judgment was in her favour in that the claims against the Hughes Parent Company and David's son, Daniel, had been dismissed, but that otherwise the judgment was unfavourable because the Court had ruled against the "succession plan". He continued:
I then said to my mother 'I suggest you amend your will to take account of the
adverse Judgement to ensure the judgement does not adversely affect your grandchildren's share of your estate. The amendment you make to your Will should also ensure that your Will is worded as precisely as possible to minimise the inevitable arguments by Peter and Roger about the adverse effect of the clauses in your Will on their share of your estate and the inevitable arguments about your gifts to your grandchildren. You originally wanted to leave this house to your grandchildren. I suggest you insert a clause in your Will to provide that your grandchildren get a gift equal to the gross market value of this house in addition to their 20% share of your estate. That way your grandchildren's share of your estate is quarantined from the losses Peter, Roger and Hugh have caused and your grandchildren get what you always intended they should have. I also suggest that you change the formula for distributing the money from Peter and Roger's share of your estate to take account of the change to the way you are now gifting money to your grandchildren, from an equal distribution between myself, Hugh and your grandchildren to 80% to be distributed equally between myself and Hugh and 20% to be distributed equally between your grandchildren'. My mother, after considering my advice said to me said 'Yes I agree'.
David's account again attributes to the testator an intent to give the grandchildren a cash gift representing the value of the property. I will address the credibility of this when I consider knowledge and approval of clause 4 below. In the meantime, I note two further features of the account. First, David purportedly explained a change to the distribution of the claw-back monies which did not actually appear in the codicil: the provision in question was actually introduced in the December 2014 will (clause 21) and was left unaffected by the codicil. Second, David did not explain the changes which were made in the codicil to the other claw-back provisions.
In cross-examination, David acknowledged that the wording of the will came from him, but said the drafting followed discussions with his mother. The cross-examination continued:
Q. As always, discussions with your mother. But she would not have the detail in her head that you have put in this will, correct, or is that something you just say you don't know because it's in her head?
A. She, she would know about the gift of, of the money to the grandchildren, equal to the gross market value of the property.
David was taken to the wording of the claw-back provisions in the codicil. He agreed that his intention was to give himself as Trustee as much flexibility as possible to identify adverse financial consequences of White J's judgment and claw them back from his brothers' inheritances (or at least from Peter's and Roger's inheritances). He confirmed his understanding that, as a result, Peter and Roger might get nothing.
David was cross-examined on the changes to the claw-back provisions made between the December 2014 will and the codicil. He agreed with counsel's suggestion that it would not have been possible to understand the effect of the clauses without understanding the clauses which they replaced.
David accepted that the wording of the claw-back provisions was lengthy. He did say that the reference to "great emotional distress" (which was already there) was his mother's language. Otherwise he accepted that the wording was his and not his mother's. In particular, the reference to "interest, equitable compensation and equitable contribution" was wording which he introduced because of the judgment of White J.
General comments: As already mentioned, David was Mr Rickard's source of instructions for all of the testamentary instruments which he prepared. For the December 2014 will onwards, the actual drafting work was almost entirely done by David as well (albeit that such drafting was based on the wording of earlier testamentary instruments to which Mr Rickard may have contributed more). In their expression, the instruments in question represent what David wanted. There is no evidence that the testator made any contribution of substance to the wording (I am not even satisfied that the reference to Peter inflicting "great emotional distress" on the testator came from her, as David claimed).
The testamentary instruments prepared by Mr Rickard were David's in another, more fundamental, sense. As I have already pointed out, David attributed the consolidation of the then statutory instruments into a single will in December 2014 as having been the testator's idea. In fact the correspondence shows that it was Mr Rickard's. There is no independent evidence that the idea of preparing the will or any of the codicils came from the testator. Indeed on David's own account he was the one who suggested the August 2015 codicil.
David's account of the origin of the April 2013 letter for the benefit of Kate stands out from the other instruments. On that account, the idea originated with the testator and the testator was the one who consulted Rhonda and decided to proceed. The testator's special relationship with Kate makes it clear that this instrument came from her heart.
This exception underlines the point. Otherwise, in timing as well as in content, I think it is clear that the testamentary instruments prepared by Mr Rickard originated from David not the testator.
So far as the substance of the testator's wishes are concerned, the Court has only David's affidavit account of the "advice" he gave his mother - and then only for some of the instruments in question. Of its nature this evidence is self-serving. Nor does its form inspire confidence.
In each case, David's account represents the discussion as a single conversation with David outlining a detailed proposal, to which the testator, after "considering" the "advice", agreed. There is no hint in any of the reported conversations that in some cases the process of drafting took months from beginning to end and involved several different versions of the instrument ultimately executed.
The evidence of Peter, Roger and Hugh raised significant questions concerning the testator's understanding of the "succession plan" and its financial consequences. These questions included ones which were specific to the September 2012 codicil to the 2011 will (see [369] below) and to the August 2015 codicil to the December 2014 will (see [438] below). David did not respond to any of this in his evidence.
For these reasons, I consider that David's affidavit account is of little weight. To the extent that David could recollect any of his discussions with his mother at all, he appears to have telescoped those recollections together. The passages in David's affidavit give every indication of having been a reconstruction.
Moreover, even if David's explanations are accepted, they were in important respects oversimplified if not misleading. And even if the testator had properly understood David's proposals at the time, given her difficulties with short term memory, it is possible that she may have forgotten them by the time she came to execute the will or codicil in question.
What this means is that all the Court is left with in the end to establish that the instruments in question represented what the testator intended is the fact that they were read over to the testator before she executed them. As I have already pointed out, even if the testator did interrupt and seek clarification as that happened, we do not know what that clarification was. The Court simply has to be able to infer from the reading of the text alone that the testator had the requisite understanding of its effect.
In considering the testator's understanding, it unfortunately becomes necessary to consider how well Mr Rickard discharged his obligations as the testator's solicitor. Two points, in particular, stand out. First, the wills and codicils in question contain some lamentably poor drafting. I have already pointed these out above. The claw-back provisions were particularly problematical. They display a lack of clear understanding of the legal effect of the "succession plan" or a lack of clear thinking as to what the provisions were designed to achieve, or both.
The significance of this is that, even if I could be satisfied that the testator had asked questions about the purpose and intended effect of the provisions, I could not be satisfied she would have received sensible answers. Indeed I suspect that the true author of the language, David, probably did not have a clear idea in his own mind of the legal effect he intended to achieve.
The second point is a more general reflection of the first one. Mr Rickard seems to have seen his function as being simply to translate David's wishes into written form. On the evidence he made little if any attempt to divine from the testator what her intentions were. Mr Rickard did block David's idea of using the power of attorney to transfer the Turramurra property out of Geoffrey's sole name (see [188] above), although the wider question about the validity of the "succession plan", which had also depended on the use of the power of attorney, apparently went unexplored. But if there is any other occasion on which Mr Rickard stood up to David, the evidence does not reveal it.
Dr Wong concluded:
Thus, Mrs Lewis at worst, has a mild cognitive impairment but her mini-mental examination score is 28/29, no different from her score some three years ago.
Dr Wong's third report followed a review consultation with the testator on 1 June 2016. This was after she had been admitted to the nursing home. Dr Wong again administered an MMSE test. In his report he stated:
… She tells me she has been mobilising to the dining room [of the nursing home] with a four-wheel walker but clearly, cognitively as well as overall, Mrs Lewis has significantly deteriorated. … She certainly seemed to have some facts confused and perhaps even a degree of confabulation. She gave me the wrong information in relation to her living arrangements in the nursing home and in fact, she was sharing a room with another resident but did quite rightly point out that the roommate was somewhat confused with some calling out, apparently.
Examination today revealed a weight of 42kg, an almost 10kg reduction since July 2015. … She scored 20/27 in her MMSE examination, which was a significant deterioration compared to previously and five-minute recall was now 1/3. She seemed to have also developed significant eyesight problems and could not really read or in fact see my face well.
…
Thus, Mrs Lewis has significantly deteriorated both cognitively and overall. … I suspect her significant cognitive deterioration probably postdated the stroke in November 2015, where there were changes suggestive of cardioembolic phenomenon in a multilobar distribution.
Witness evidence: In his affidavit, Roger emphasised that, out of all of the testator's sons, he spent most time with her in the period leading up to 2012. He said that she drank to excess, "at least" until she was admitted to hospital in March 2012. Usually she drank beer but after Geoffrey went into the nursing home it was whisky. Roger said he was aware of this because he bought the whisky for her.
According to Roger, the testator sustained numerous falls over the years leading up to 2012. These were more common in the afternoons after she had been drinking.
Roger also stated that the state of the house and the testator's personal hygiene declined. After she was admitted to hospital in March 2012, Roger arranged to have the house cleaned up. It was in a squalid state and soiled clothes of the testator were lying around.
In response to David's evidence that the testator stopped drinking once she was admitted to hospital in March 2012 (see [345] below), Roger stated that this was not correct. The testator continued to drink after she returned from rehabilitation in May 2012. But Roger acknowledged that after September 2012, when he ceased contact with the testator, he was not able to say anything about her drinking habits.
Roger said that in his experience the testator found the magnifier frustrating and difficult to use. When the testator did use it, she did not do so for reading correspondence. She would leave that to David. None of this evidence from Roger was challenged in cross-examination.
Peter's affidavit evidence ran along similar lines. He visited his mother regularly between David's hospitalisation in 2010 and her own hospitalisation in March 2012. He stated that both his mother and father drank to excess and often when he rang her in the afternoons her speech would be slurred. He also described a lack of personal hygiene on her part.
According to Peter, his mother did not use the magnifying device when he was visiting her between 2010 and 2012. In fact she did not open business mail, leaving that to David, Peter and Roger.
Peter's affidavit evidence on these points was qualified by cross-examination. He agreed that his mother's drinking reduced significantly after his father was admitted to the nursing home. She stopped drinking beer and only occasionally had a glass of spirits. Peter accepted that he could not comment on the extent, if any, of her drinking after they became estranged in mid-2012.
Peter also accepted in cross-examination that although his mother stopped using the magnifier for reading the newspaper after 2010, she continued to use it for other documents such as letters. It also seems from the evidence Peter gave about the will he prepared for the testator in 2011 (see [147] above) that he was expecting her to use the magnifier, or at least was contemplating that she might use it, to read correspondence he was sending her.
In his affidavit, Hugh also referred to his mother drinking to excess and even, on occasion, being incapacitated by alcohol. But when asked in cross-examination when this was, he could say only it was towards the end of her life, probably in the five years prior to Geoffrey's death. He said that she was not drinking when he visited her in February 2013 following his cancer diagnosis (see [97] above).
Hugh stated in 2011 he was speaking to his mother by telephone at least twice a week. He did not refer to anything untoward in any of their conversations before contact between them ceased in July 2013 (see [102] above).
Hugh's wife Rhonda stated in her affidavit that she spoke to the testator on average every month or so by telephone. This continued after contact with Hugh ceased in 2013. Rhonda reported that she noticed short term memory loss in the testator in "about 2012 and 2013". This became more apparent in 2014. Rhonda stated that the testator's responses on the phone became disjointed and confused. She regularly confused David with Geoffrey. She did not know where Hugh and Rhonda lived and would forget her grandchildren's names and whose children they were.
In cross-examination, Rhonda agreed that the problems she noticed in 2012 and 2013 were minor. It was suggested to her that the major problems came only with the testator's stroke in November 2015, but Rhonda did not agree, although she did accept that there was a marked deterioration after the stroke. She said that she was familiar with dementia because her own mother had the condition and she thought the testator was developing dementia at the time. She accepted, however, that although the testator was confused about the details of her grandchildren, she was still taking an active interest in their lives.
David's affidavit did not expressly state how much time he spent with his mother over the period from 2010 to 2015. As already stated, he was hospitalised with his diabetic seizure and then with his rehabilitation from April 2010 onwards. The evidence does not identify precisely when he became able to visit her again. As already noted, there was a period of time after the testator was discharged from hospital in May 2012 when David was living with his mother for most of the week. Dr Wong reported in November 2012 that he was living about half the time at Leura and half the time with her. In July 2015 Dr Wong reported that the testator was seeing David about twice a month.
In his affidavit, David stated that his mother was "articulate and engaged" in all of the discussions he had with her about her testamentary intentions from 2010 onwards. He said she would ask him for further information and discuss it before making any decision.
David stated that his mother regularly used the magnifier up until she was admitted to hospital following her stroke in November 2015. This was for, among other things, reading correspondence, including documents connected with the Lewis Company, and reading and signing cheques. He said that after June 2011, her practice was to go through the mail and open any mail with a handwritten address. The documents with a printed address (which included financial correspondence and statements) she would leave for him but he would discuss it with her before decisions were made.
David said that his mother abstained from alcohol from the time of her hospitalisation in March 2012 onwards and maintained a high standard of personal hygiene and dress at all times. David was not asked in cross-examination about any of this evidence.
Mr Rickard gave evidence in his affidavit of his general dealings with the testator. Attached to his affidavit was an estimate of the time that he spent with her on testamentary issues between 2012 and 2015. It totalled fourteen hours. Mr Rickard also annexed an estimate of time spent on other matters, principally the litigation, which I have not added up but would be considerably longer.
Mr Rickard generally visited the testator at her home to confer with her or have her sign documents. He said that when he did so he saw her use the magnifier. He confirmed this evidence under cross-examination. Mr Rickard also said in his affidavit that he always found the testator well groomed. His evidence in this regard was not contested in cross-examination.
Mr Rickard stated in his affidavit that in general, when dealing with the testator, he found her lucid and mentally agile "for her age". She was articulate and responsive in conversation, seeking clarification where necessary and otherwise appearing to understand what he said. Mr Rickard stated that he noticed some short term memory loss and difficulty with instant recall but that was all.
Mr Rickard did not, in his affidavit, identify any specific instances of loss of memory. In cross-examination, he agreed that the testator exhibited a loss of memory both at the hearing of the Guardianship Tribunal proceedings in January 2013 and during the hearing before White J of the liquidator's action in December 2014. He was not asked to descend into any further detail.
Mr Waugh was instructed to act for the testator in the liquidator's action from the commencement of those proceedings in April 2014 onwards. He had four conferences with the testator: two in April, one in July and one in November. All except the July conference took place at the testator's home. David was not present. The total time that Mr Waugh spent with the testator was more than six hours.
In his affidavit, Mr Waugh described the testator as mentally very alert. She appeared to pay close attention to the discussion and to understand what was said. She showed no hesitation or difficulty in giving instructions, was courteous and to the point. Mr Waugh stated that he had no concerns about her capacity.
In cross-examination, Mr Waugh acknowledged that he was first asked to recollect his dealings with the testator in February 2018, more than three years afterwards. He said that he did not discuss her testamentary intentions with her; all the conferences concerned the liquidator's action. Mr Waugh was asked about the testator's memory during her cross-examination before White J, but had no recollection going beyond the transcript.
Evidence from testator: In July 2015, Dr Wong reported (presumably based on what he was told by the testator) that she "never drank alcohol to any excess" and had now stopped drinking entirely. Previously she "might have had one to two whiskies per night".
In her evidence before White J in December 2014, the testator was asked about her reading ability. She described having the magnifier at home that she could "put things under to read, if I absolutely have to". She agreed with counsel for the liquidator that she found this difficult.
Counsel for Peter referred me to passages in the transcript of the hearing before White J which, he submitted, illustrated the testator's short term memory problems. Counsel for the liquidator sought to question the testator both about the affidavit she had sworn on 25 November, about two weeks before the trial, and about the defence she had verified for the purpose of the proceedings. The testator appeared unable to recall the affidavit, asking twice to be reminded about it. Concerning the defence she gave the following evidence:
Q. Do you remember filing a document in these proceedings called a
defence?
A. No. Where would I have filed it?
Q. You would have signed a document in front of Mr Rickard?
A. Yes, and where would it have gone?
Q. Mr Rickard would have sent it to the Court?
A. To a court like this?
Q. Yes, saying what you say in defence of these proceedings?
A. I'm sorry I can't remember, too long ago.
Conclusions: Contrary to what she told Dr Wong, the evidence clearly established that the testator had at times drunk to excess. But it also established that her drinking reduced after Geoffrey went to the nursing home in January 2010. The degree of reduction is a matter of debate. But only Roger suggested that the testator drank excessively after she was hospitalised in March 2012. His evidence only covered the period up to September of that year. There is no evidence whatever of drinking after that point (including from Hugh and Rhonda, who remained in contact with her). Nor is there anything to contradict the testator's statement to Dr Wong that she had entirely ceased to drink by July 2015.
On balance, I am not satisfied that the testator was drinking heavily after March 2012. In any event, any excessive drinking over the relevant period was occasional and there was no suggestion that the testator was affected on any of the specific occasions on which she executed testamentary instruments over that period.
The evidence also establishes a lack of concern for personal hygiene and care for her surroundings on the testator's part in the period prior to her hospitalisation in March 2012. But there is no evidence of this after she was discharged from hospital in May. In any event, it is of little, if any, significance. It is notable that Mr Rickard reported that the testator was always well-turned out when she executed the wills which he prepared for her and he was not challenged on this.
Despite the evidence from Roger, I am satisfied that the testator used the magnifier for reading purposes up to, and beyond, 2012. Roger was not cross-examined, but his evidence was contradicted by Peter (in cross-examination), David, and Mr Rickard. It is notable that Roger himself considered it worthwhile responding by letter to the letters which he received from (or at least signed by) his mother after they became estranged. I see no reason not to accept the testator's own testimony before White J in December 2014 that she was capable of using the magnifier to read if she had to.
Again the testator's capacity to read documents is of limited significance: the later wills were read to her, and she also had David available to assist with reading if she needed it. The bigger question is whether the testator had sufficient interest in business documents to use the magnifier to read them, or to take them in if they were read to her. I will deal with that question in due course.
The evidence the testator gave before White J when she was asked about her recently sworn affidavit and the defence does suggest some confusion and loss of memory. As Mr Waugh pointed out when cross-examined about this topic, however, allowance must be made for the fact that the testator's unfamiliarity with the processes of litigation. I also assume that, because of her difficulty in reading, the testator may not have prepared herself for the hearing in the way which would otherwise have been expected.
The evidence clearly shows that by 2012 the testator was suffering from some short term memory loss. But taken as a whole, the lay witness evidence suggests that the memory loss was minor and the testator otherwise had very good cognitive function.
There is Rhonda's evidence that the testator exhibited a degree of confusion in conversations in 2014 and 2015, even before her stroke in November 2015. But confusion of identity between children, or grandchildren, or even between family members of different generations, at least if it is temporary, it is not unusual. Similar observations apply to the mistaken belief recorded in Hugh's email of 30 July 2015 that her husband Geoffrey had been dead at the time of the "succession plan". This error, which was not explored in the evidence, may only have been a product of temporary confusion about the sequence of events in the past. It does not of itself bespeak a serious and permanent impairment.
Most importantly, the Court has the report from Dr Wong from July 2015, which represents an independent assessment of the testator's cognitive function at the end of the relevant period. This report confirms the general picture presented in the lay witness evidence of generally very good cognitive function with limited short term memory loss.
The note also referred to the codicil:
I asked about the recent codicil I had received and why she had decided to provide her grandchildren with an unfettered gift - not sure thinks it was because of tax - can't remember being told - sometimes David does things such as amounts of money to be given but doesn't tell her or may tell her and she forgets for example the grant to the grandchildren was initially only $30k David went ahead and changed it to $50k without telling her until after the event.
Testator's dealings with David, Mr Rickard and Mr Waugh: Neither David nor Mr Rickard gave any evidence of discussions with the testator which went into the details of the "succession plan". Mr Rickard asserted at one point in cross-examination that the testator understood the post-plan structure, but his evidence went no further than this assertion.
Mr Waugh was cross-examined about the understanding the testator exhibited about the effect of the "succession plan" when he was dealing with her in 2014. He said she had a "basic understanding". Mr Waugh described this as "putting money into various companies to benefit her children and grandchildren". The details she left to David. It was clear to Mr Waugh that the scheme had been David's and the testator had gone along with it.
Testator's testimony before White J: At the hearing, counsel for the liquidator asked the testator about her knowledge of the family assets. The testator said she was aware that the Turramurra property was in her husband's name, and the share and cash investments were held in the Lewis Company. She said that she used to keep an eye on the bank accounts of the Company but that at some time she passed that responsibility on to David. She was unable to say when this occurred. But she said that in any event she would have been aware of whatever monies were held on term deposit.
Counsel also asked the testator about her knowledge of the implementation of the "succession plan". She gave the following evidence about the transfer of the cash:
Q. … You agreed with what he [David] was doing which was taking the money out of Anne Lewis and putting it somewhere?
A. Yes.
Q. Do you know where it was going?
A. Yes, he was turning it into trust accounts in the name of the family.
Q. And you agreed with that, did you?
A. Yes.
Q. Why did you want to do that?
A. Because when my husband died, or even before he died, he had a very big taxation bill and he was trying to minimise it.
Counsel then asked about the transfer of the shares out of the Lewis Company:
Q. You're aware that all these shares that were listed on the stock exchange in the name of Anne Lewis were transferred out of Anne Lewis?
A. If I did know, I don't remember it.
Q. You don't know where they were transferred to?
A. Yes, they were transferred, the money was transferred into the trust
accounts that David had set up in the family's name.
Q. I'm not talking about the money, I'm talking about the shares?
A. That, I don't know.
Counsel then returned to the testator's objectives:
Q. You trusted David because you wanted to be able to give some money to your grandchildren, that's one of the reasons?
A. Amongst other things, yes.
Q. But Anne Lewis owned shares that paid dividends?
A. Yes.
Q. You could have, as a director of Anne Lewis, declared a dividend and been paid that way, could you?
A. I suppose I could have, but I wasn't aware of it.
Q. What you really wanted isn't it, is to allow yourself to have the free use of the moneys that were formerly in Anne Lewis; is that right?
A. No, I wanted enough money to be able to live comfortably.
Counsel then asked about the letter written by Mr Rickard to Peter and Mr Bird as executors of Geoffrey's estate in May 2013, in response to Hugh's request to the testator for an advance on his inheritance (see [97] above). In particular, counsel asked why the letter required that the $350,000 be provided to the estate by way of loan from Bathurst Hughes. The testator said counsel would have to "ask somebody who is more au fait with it than I am".
Counsel then referred to the effect of the scheme on the administration of her husband's estate:
Q. If the assets of Anne Lewis had remained in Anne Lewis, then the executors of the estate would have been entitled to administer the estate, the actual funds of the estate; do you understand that?
A. I think so, I don't know. Don't really know.
Finally, counsel asked about the loans from the Lewis Company to the Hughes Subsidiary Companies:
Q. Do you say to this Court that the moneys taken out of Anne Lewis were loaned to Bathurst Hughes; is that what you say?
A. I wouldn't know.
Q. Who would know?
A. Well whoever - I suppose if I had to say somebody, a name, it would probably be David knew it, and he'd probably have told me.
Q. Why would David know?
A. Because David set the scheme up.
Q. Do you know that according to your defence or documents you've filed in these proceedings, all these trusts owe a debt to Anne Lewis?
A. No I don't know that.
Q. Do you know that the liquidator, in one of his claims, is asking that that debt be repaid?
A. No, I haven't heard a lot about that I'm afraid.
Q. Would it surprise you if there's a debt?
A. There probably is because there seemed to be plenty of money.
Q. If there's a debt, would you have any problem repaying it? When I say
"you", I mean wherever the moneys are held?
A. I can't tell you that.
Conversation with Hugh on 30 July 2015: On the afternoon of 30 July 2015, the day after the delivery of White J's judgment, Hugh called his mother by telephone. The purpose of his call was to make it clear to his mother that she and David had lost the litigation and to try and arrange a meeting to resolve the dispute. Afterwards Hugh sent two emails to Peter summarising the conversation, which he described as having been "fairly disjointed".
Hugh recorded in his first email that he read certain paragraphs of the judgment to his mother over the telephone. One of those paragraphs was [55] which followed on from White J's conclusion that neither David nor his mother nor Mr Bird had acted dishonestly. The paragraph stated:
Nonetheless, Mrs Lewis breached her fiduciary and statutory duties as a director. She entered into transactions that were not for the benefit of the Company and where she had a conflict between her duty to the Company and her personal interest. The transactions were not for the benefit of her husband. The effect of the transactions was to transfer all of the Company's assets to five other companies which she controlled. She obtained for herself the power to appoint both capital and income, including to herself to the exclusion of any of her children. Unless she had the informed consent of her husband, which was not alleged, Mrs Lewis breached her fiduciary duty by arranging for the transfers.
Hugh also referred to the conduct of the litigation:
[The deceased:] John Rickard is a hell of a nice guy. I told her he was a sycophant and that considering the result in the case that she should be very angry with him. She was not. Greg Waugh is a nice guy but very diffident. I advised her that Waugh's advice was to settle but she said that David didn't like that advice. I in turn advised her that that was typical of David, he would continue to seek legal advice from anyone who was sympathetic to his belief. [The deceased:] I was wrong.
In the conclusion to the first email, Hugh stated:
Basically, she knows they lost. She says David is disappointed but not surprised. He has worked on this day and night for years. She has not read or had read to her, the judgment. David is going over there this weekend [1 and 2 August] to discuss it.
In his second email, Hugh added:
She consoles herself with the theory that in estate matters there are always arguments over money and that we are not unique.
She fell over in the lounge room the other day and brought the television down on herself.
We are all dictatorial.
Also, in the matter of consulting with Dad re the transfer of the assets, well, "how could we consult with him, he had already died!" I straightened her out.
She also admitted that in matters pertaining to directorships she didn't really understand it.
In cross-examination Hugh was asked about the admission he referred to in the last sentence of this passage which I have quoted. He said that all he could remember was that it was to do with the setting-up of the Hughes Trusts. Hugh was not asked about the testator's apparent belief that her husband was dead at the time of the transfer, or what he said to straighten her out on this topic.
Conclusions: The testator's evidence before White J confirms her lack of interest in investments in any other form than cash deposits. But her lack of understanding was more fundamental than this.
Before implementation of the "succession plan", the testator's financial position was relatively straightforward. Her assets essentially consisted of her shareholding in the Lewis Company. Through that she had an indirect interest in the cash and securities held by the Company.
This shareholding gave the testator a half share in a stream of dividend income from the Lewis Company. Upon Geoffrey's death, she would also receive his half share of that income stream.
The release of capital was more problematical. That would require winding up or some other agreement requiring shareholder assent. Once Geoffrey succumbed to dementia, agreement could not be obtained from him; and when he died his rights passed to his executors, Peter and Mr Bird. Once the liquidator was appointed to the company in April 2014, the liquidator had an obligation to proceed with the winding up whether the testator liked it or not.
The implementation of the "succession plan" made all of this far more complicated. The Lewis Company's assets were moved to the Hughes Trusts. The testator did not have any direct or indirect ownership of them. She had control but that was because of her ownership of the trustee company, backed up by her position as appointor under the trust deed. At her death these rights would cease. Immediate control would pass with the ownership of the trustee company, but the testator had the opportunity to divert that control elsewhere by nominating someone else as appointor to the trust in her will.
Thus, while the testator acquired through the "succession plan" practical control over the assets of the Lewis Company, that was only temporary. The assets could not be bequeathed and all the testator could do was to pass on control of them through the mechanisms which I have mentioned.
There is no evidence that the testator ever understood this. Certainly there is no evidence that it was ever explained to her in these terms by David or by Mr Rickard. All there is in the evidence is the testator's description of the Lewis Company investments being "turned into trust accounts in the name of the family".
The reference to "trust accounts in the name of the family" was, of course, a hopelessly inadequate description of the discretionary trust structure established by the "succession plan". But the problem was more fundamental even than this. The testator seems to have subscribed to the popular superstition that by putting assets or income into a trust, tax liabilities can be made to disappear. There is no evidence that she had any understanding of trusts, or how they actually work.
The transfer of the Lewis Company's assets to the Hughes Trusts was not wholly irrevocable. Its financial effect could be unwound, at least in part, if the Lewis Company were to demand repayment of the loans which it had made to the Hughes Companies to finance the transfers. But there is nothing to suggest that the testator had the slightest inkling about that.
Nor is there any evidence that the testator ever really understood what the effect of the scheme had been on the Lewis Company. There is no sign that she appreciated, even after Hugh read parts of White J's judgment to her, why it had been wrong for her, as David's instrument, to appropriate the assets of the Lewis Company to trusts which she controlled. Nor does she seem to have confronted the fact that this involved defeating or impairing the interests of her husband, Geoffrey, and the intent of his will.
It follows that the testator could never have properly understood the nature of the liquidator's action against her, David and the Hughes Companies. In particular she could not have understood that the action involved an assertion of the Lewis Company's rights, ultimately in the interests of its shareholders (including those of the testator herself), in response to David's unlawful scheme. The testator was therefore in no position to appreciate the justice of what Hugh said to her on 30 July 2015 about the futile attempt to defend the proceedings (see [381] above).
In my view this argument is not realistic. The December 2014 will conferred on David immunity from the claw-back provisions, which no other beneficiary had. Of itself I think this was a "substantial benefit".
Furthermore it was clearly contemplated that David would be the Trustee. In that capacity there were conferred on him broad discretionary powers which were intended to allow him to make substantial reductions to (and possibly even defeat entirely) the legacies to other beneficiaries. He could also exercise the power to distribute to himself up to 80% of any monies clawed back. And, if the clauses purporting to allow the Trustee to "deal with" the shares in the Lewis Company and the beneficiaries' interests in the Hughes Trusts were valid, he could exercise those powers in his own favour as well. In my view the conferral of such powers should also be seen as a "substantial benefit" for relevant purposes.
In the end, the point may not matter very much. Counsel for David accepted that the onus lay on him to demonstrate the "righteousness of the transaction".
Counsel for David conceded that the claw-back provisions in the August codicil (clauses 7 to 9) should not be admitted to probate. Counsel accepted that they were too complex to be understood when the testator was not given the existing claw-back provisions to compare them against (see [175] above). Counsel submitted however that the Court could exclude the clauses from probate but admit the rest of the codicil (which counsel submitted was unexceptionable), as in Hobhouse v Macarthur-Onslow [2016] NSWSC 1831 at [539].
Counsel made no equivalent concession concerning the claw-back provisions in the December 2014 will. Those provisions appeared in a free-standing will and, according to counsel, no question of comparing them with earlier provisions arose. If the Court was nevertheless against the admission of those provisions to probate, counsel's fall-back position was again that the rest of the will could, and should, be admitted to probate.
December 2014 will: Considered on their own, clauses 1 to 11 of the December 2014 will present no difficulty. No further comment is required concerning clauses 1 and 2, which deal with revocation of previous testamentary instruments and the appointment of David (or in his absence, his son) as Trustee. However unwise this may have been, its effect would have been plain to, and understood by, the testator.
The substance of the bequests in the will is contained in clauses 4 and 5. The specific bequests in clause 4 raise no concern. The bequest in favour of Kate follows the earlier informal provision in April 2013, and was clearly something close to the testator's heart. The bequests in favour of the testator's daughters-in-law are relatively modest and perfectly understandable. The division of residue in clause 5 follows the pattern established by the earlier wills in 2010 and 2011.
Clauses 6 to 9, which make alternative provision in the event that the principal beneficiaries die before the testator, likewise raise no questions. Clauses 10 and 11, which deal with the treatment of gifts and early inheritance advances, are mechanical.
Clauses 12 to 16 give rise to different considerations. They all involve, in one way or another, the disposition of interests in, or the exercise of rights over, the Lewis Company, the Hughes Companies or the Hughes Trusts. I have concluded at [387]-[397] above that the testator lacked a general understanding of the company and trust structures established as a result of the implementation of the "succession plan" in 2012. At a minimum, it would have been necessary to ensure that the testator had the key features of those structures in mind when she was being asked to approve the clauses in question.
In the circumstances, I think this would have required an explanation sufficient to convey to the testator that: the cash and securities formerly held by the Lewis Company had been transferred to the four sons' trusts and the grandchildrens' trust, and the testator no longer had any direct or indirect interest in those assets; the assets were held under the terms of the relevant trust deeds, which could not be altered by the testator or anyone else; the sons' trusts (which included the unit-holdings in the grandchildren's trust, and thus the beneficial interest in that trust as well) were held on terms which allowed the trustee to distribute both capital or income to any of the defined class of beneficiaries, which was not confined to the relevant son and his family; effective control of the trust lay with the trustee (the and thus with ownership of the Hughes Parent Company); but this was subject to the appointor's power to nominate a new trustee, or to nominate a new appointor by will.
Most importantly, the testator would have needed to understand that by nominating the Trustee as the appointor the testator would be conferring on the Trustee (who would probably be David) virtually complete control over all of the former investment assets of the Lewis Company; the only substantial asset in the estate would be the dividend received by the testator from the liquidation of the Lewis Company; and that dividend would depend upon the liquidator successfully unwinding the "succession plan", if the liquidator's action succeeded, or, if the liquidator's action failed, upon the liquidator requiring repayment of the loans made by the Lewis Company to the Trusts.
At [309] to [321] above I have summarised the evidentiary difficulties in the way of proving that a full and proper explanation was given to the testator of the testamentary instruments prepared by Mr Rickard. Those difficulties are particularly acute so far as clauses 12 to 16 are concerned.
Clause 12(vii), which purported to confer on the Trustee the power to "deal with" the testator's shares in the Lewis Company, reflected a provision first introduced in the December 2012 codicil to the 2011 will. I have explained at [313] to [317] above the deficiencies in the explanation David claims he gave his mother at that time about the purpose of the provision. Even on his own account, David did not bring out the potential for the provision (if valid) to be used to defeat the testator's other bequests.
There was no evidence of any further explanation of the provision when the December 2014 will was prepared. And there was no evidence of any explanation of any of the other provisions at all. In particular, there was no evidence of what the testator was told about clause 12(iv), which nominated the Trustee as the appointor of the sons' trusts. Arguably this is the most far-reaching and important single provision in clauses 12 to 16.
Furthermore, for the reasons given in [319] to [321] above, some of the provisions (in particular, clauses 12(iii), 12(v), 12(vi) and 12(vii)) are framed in such a way as to suggest that the features of the will which I have just summarised were not even properly understood by David (or Mr Rickard). Had the testator asked questions about where the boundary lay between the assets of her estate and the assets of the Hughes Trusts, it is at best doubtful whether David (or Mr Rickard) could have given her an accurate answer.
Such evidence as there is of the testator's intentions only raises further questions about whether she fully understood the terms of the clauses in question. Five months later, in May 2015, the testator made it clear, in the instruction which David relayed to Mr Rickard, that despite everything she did not wish to cut Peter or Roger out of her will. It seems she never even contemplated the possibility of Hugh or the grandchildren being cut out. It is difficult to reconcile this with the provisions in clauses 12 to 16 which purported to allow David to assume complete control of the family assets, including those in his brothers' trusts.
Hugh's note of 30 July 2015 about the testator consoling herself with the thought that all families have disputes about estates (see [385] above) also suggests that she did not appreciate the extent to which her will allowed for the rights in favour of her sons to be defeated. It is clear that, in spite of everything her other sons had said, the testator was determined to allow David to do what he wanted. But she does not appear to have appreciated that this went beyond relatively minor adjustments to her other beneficiaries' entitlements, and potentially extended so far as to potentially eliminate Peter's or Roger's gifts entirely.
Underlying all of this is the testator's apparent lack of interest in the structure and workings of the family investments, and her willingness to leave such matters to David. It is all too easy to imagine the testator having clauses 12 to 16 read to her and treating them as the auditory equivalent of David "droning on and on" (see [373] above). On balance I am not satisfied that the testator had sufficient knowledge and paid sufficient attention to satisfy the knowledge and approval requirement.
Clauses 17 to 21, the claw-back provisions, are even further along the scale. Understanding the verbiage as it was read to her, just as a matter of English, is unlikely to have been easy for the testator. But that is only the beginning of the problem.
As noted at [365] to [397] above, the testator's lack of understanding of the company and trust structures following the implementation of the "succession plan" in 2012 meant that she could not have had a proper appreciation of the objectives or likely effect of the litigation challenging that plan. Yet such an understanding and appreciation was critical to a proper understanding of the claw-back powers conferred on the Trustee (in effect, David) under the will.
In my view it is too simple to say that because the December 2014 will was a stand-alone testamentary instrument, the previous provisions were irrelevant to the testator's knowledge and understanding of the claw-back provisions of that will. They formed part of the context in which the testator would, or at least may, have considered those provisions.
Whatever the deficiencies in the drafting of the claw-back provisions in the November 2013 codicil, they were confined to the legal costs of proceedings brought against the testator, or the companies and trusts. To impose the unrecovered costs of those proceedings on Peter by deducting such unrecovered costs from his share of the estate, even if it was punitive, and may well have been unreasonable having regard to the merits of the litigation, was a relatively simple idea. It might well have stuck in the testator's mind.
As appears from [257] to [262] above, in the December 2014 will the scope of the claw-back provisions extended far beyond the unrecovered costs of the proceedings brought by Peter. In my view, the requirement of knowledge and approval meant that it was necessary to bring home to the testator the full scope and implications of the extended claw-back powers. Otherwise there would have been a risk of the testator treating the new provisions as mechanical ones with a relatively confined effect, and being of a type she had already approved.
In these circumstances, I think that knowledge and approval would have required explaining to the testator that the claw-back provisions purported to allow David, as Trustee, a broad and uncontrolled power to identify "additional expenses" in some way associated with the implementation of the succession plan or the subsequent litigation. These "additional expenses" would not be confined to legal costs but might extend to tax liabilities and accounting or other professional fees. David would then be entitled to impose liability for these "expenses" on any beneficiary who he considered, again in the exercise of the broadest possible discretion, had in some way been responsible. As ar result, Peter or Roger, at least, could be deprived of his inheritance, which could then be re-distributed according to David's discretion.
The observations I have made about clauses 12 to 16 apply with still greater force to the claw-back provisions in clauses 17 to 21. I am not satisfied that the knowledge and approval requirement is satisfied.
As appears below, counsel for Peter did not contest the applicability of Hobhouse v Macarthur-Onslow. For these reasons, I will admit clauses 1 to 11 of the December 2014 will to probate but exclude the other clauses.
May 2015 codicil: The sole effective provision of the May 2015 codicil is the gift to David of the entire shareholding in the Hughes Parent Company. That might have been comprehensible to the testator as a disposition of property. The problem is that the gift of the shareholding carried with it the potential to control the sons' trusts (at least in the absence of the exercise of the testamentary power to select a fresh appointor). Essentially the same considerations apply as for clauses 12 to 16 of the December 2014 will. In my view the May 2015 codicil should not be admitted to probate.
August 2015 codicil: I have already noted that counsel for David abandoned any attempt to propound the claw-back provisions (clauses 7 to 9) in the August 2015 codicil. Clause 3 deals with the alternative executor if David is unable or unwilling to act. It raises no issue of knowledge and approval. Clauses 5 and 6 are consequential on clauses 2 and 4, but make no difference to the operation of the codicil anyway. Clauses 10 and 11 are mechanical.
Clause 2 is in substance the same provision as was introduced by the May 2015 codicil, which I have rejected. It should not be admitted to probate. The principal issue concerns clause 4, which provides for a gift in favour of the grandchildren of an amount equal to the value of the Turramurra property.
In form, the gift in clause 4 is not tainted by the complexities concerning the companies and trusts, or the claw-back provisions. The concept of increasing a gift, with a consequent reduction on the value of the residue, is easily understood.
The problem is with the overall effect of the gift on the testator's estate. The gift would on any view make a substantial difference to the value of the residuary legacies to the testator's sons. The question is whether the testator really intended that.
It is clear from his evidence that David resented the fact that the Turramurra property fell into his father's estate and his mother received no share of it. Given the amount which he and his brothers were to receive from their father's estate, it was understandable that David considered that the benefit to the grandchildren should be increased.
In his affidavit evidence David attributed the same view to the testator. This was most clearly set out in David's account of the conversation with his mother before her visit to Mr Thompson in 2010 (see [140] above). The difficulty is that, while I have no doubt that the statements attributed to the testator in that alleged conversation represent David's view, I only have David's word for saying that they represented the testator's view.
The objective evidence is far less impressive. Mr Thompson's letter says only that the testator wished to give her grandchildren "a sum of money" and "using the value of the house" was discussed. If the testator had truly wanted to leave her grandchildren a sum of money equal to the value of the house, there was nothing to stop such a gift from being written into the will. But it was not, and I think the context suggests that what may have been discussed was an inter vivos gift financed in some way from the house, which was rejected as impracticable.
The objective evidence surrounding the $350,000 gift the testator made to her grandchildren in July 2012 does not assist David's case. Again, I only have David's word that gift was intended as an instalment towards a gift of the full value of the property. If that had been so, it would have been logical to deduct the $350,000 when the full gift was made in the second codicil. Instead, by clause 5, the codicil went out of its way to provide that the $350,000 was to be in addition to the gift made in the codicil.
There is also the evidence from Roger to the effect that the $350,000 gift represented a unilateral increase by David in the amount which had been intended by the testator (see [369] above). As I have already pointed out, that evidence was not contested by David.
Counsel referred me to Hoff v Atherton [2004] All ER (D) 314, where Chadwick LJ said (at [64]):
… it may well be that where there is evidence of a failing mind - and, a fortiori, where evidence of a failing mind is coupled with the fact that the beneficiary has been concerned in the instructions for the will - the court will require more than proof that the testator knew the contents of the document which he signed. If the court is to be satisfied that the testator did know and approve the contents of his will - that is to say, that he did understand what he was doing and its effect - it may require evidence that the effect of the document was explained, that the testator did know the extent of his property and that he did comprehend and appreciate the claims on his bounty to which he ought to give effect. But that is not because the court has doubts as to the testator's capacity to make a will. It is because the court accepts that the testator was able to understand what he was doing and its effect at the time when he signed the document, but needs to be satisfied that he did, in fact, know and approve the contents - in the wider sense to which I have referred.
In Estate of Stanley William Church [2012] NSWSC 1489 White J commented (at [66]):
In other words, the will-maker may have testamentary capacity, but it may be found that he or she did not know and approve of the contents of the will, notwithstanding that he or she understood its contents, if the person did not exercise his or her capacity to comprehend and appreciate the claims to which he or she should give effect. If there are suspicious circumstances, evidence will be required that the deceased not only knew the contents of the will, but approved them, and proof of approval may require evidence that the deceased not only was capable of weighing the claims to which he or she might be expected to give effect, but did so.
His Honour went on to say that it was not necessary in the case before him to determine whether this view of the law is correct. He made similar observations in Estate of George Aeneas McDonald; Howard v The Sydney Children's Hospital Network (Randwick & Westmead) [2015] NSWSC 1610.
Determining the actual financial impact of the gift in clause 4 of the codicil is not easy. There is no evidence of what the house was worth at the time, let alone what the testator may have thought it was worth. The ultimate sale price in 2017 ($2.55 million) can only give the roughest indication.
Furthermore the value of the residue, overall, was unclear. The testator's half share of the Lewis Company's investment portfolio had been worth about $4.5 million in 2012. Under White J's judgment (assuming there was no appeal) the portfolio would be recovered by the liquidator, but the amount the testator would have to pay by way of compensation and costs, and the quantum of the eventual distribution, would have been quite uncertain. There is of course no evidence that this question was ever considered by David or Mr Rickard. Clearly the testator would not have done so.
If the "wider view" expressed by Chadwick LJ is correct, it is difficult to see how clause 4 could be sustained. But I think that it is not necessary to adopt that wider view to resolve the issue in this case.
David's account of the rationale of the $350,000 gift, while not reliable as evidence of his mother's actual wishes, is some indication of his thinking at the time and raises an arguable inconsistency with the absolute gift in clause 4. Furthermore, as a result of the judgment of White J, the value of the testator's assets and the extent of her liabilities were both in a state of flux. As I have already explained, it is unclear whether the testator even understood the factors which bore on what her residuary estate would ultimately be worth. Nor is it clear that her previous gift of $350,000 would have been present to her mind.
I have no confidence that David's account of the testator's wishes is correct. I have no evidence of any explanation of clause 4 to her. What I am left with is the bare fact of due execution of the codicil. I think it is insufficient to dispel the doubts. I am not satisfied that the knowledge and approval requirement was satisfied for clause 4.
In Hobhouse Robb J considered that only parts of two clauses in a large and complex will should not be admitted to probate. The present case is the opposite. I have concluded that none of the provisions should be admitted to probate except clause 3 (concerning the alternative Trustee) and the mechanical provisions in clauses 10 and 11.
Counsel submitted that if I decided that clauses 7 to 9 should be rejected, then the codicil should be rejected in whole. But I did not understand counsel to be arguing that the Hobhouse decision was distinguishable on the ground that the invalid provision is represented only a minor part of the will in question.
It appeared to me that counsel was trying to have the Court reject clause 4 along with clauses 7 to 9, even if that clause standing on its own would otherwise have been accepted. As I have found that, even standing on its own, clause 4 should not be admitted to probate, I do not propose to take the issue any further.
I have therefore concluded that clauses 3, 10 and 11 (only) of the August 2015 codicil should be admitted to probate.
Further issues: Even if the June 2011 will, the codicils to that will, and the April 2013 letter, had been validly executed, they were revoked by the December 2014 will, which I have found to be valid (even if only in part). The same applies to the July 2010 will: that will was revoked by the June 2011 will, if valid, or was otherwise revoked by the December 2014 will. Nevertheless I intend for completeness to give my conclusions on the validity of the June 2011 and July 2010 wills. I do not however propose to deal with the validity of the codicils to the June 2011 will or with the April 2013 letter.