Pagano & Ors v Ruello

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1655/98 - FLAVIA PAGANO, FRANCES AMANTE & ORSOLA YOUSSEF -V- BENEDETTA RUELLO JUDGMENT

1 By further amended summons filed on 14 February 2001 the plaintiffs sought certain declarations in relation to the true construction of clause 4 of the will dated 31 January 1994 of the late Salvatore Ruello who died on 7 August 1994 and probate of whose will was granted on 21 December 1994 to Benedetta Ruello, the executrix and trustee, appointed by the said will, being the defendant to the present proceedings. As at the date of his death the testator owned certain property, including a property at 6 Thornley Street Leichhardt. 2 By the said will, the testator, after revoking all former wills and testamentary dispositions, and appointing his daughter, the third defendant, to be executrix and trustee of his will, directed payment of all his just debts, funeral and testamentary expenses. 3 The testator then provided in clause 4 of his will as follows:- I GIVE DEVISE AND BEQUEATH the whole of my property of which I may die possessed both real and personal and of whatsoever nature and wheresoever situate to my Trustee UPON TRUST to divide as follows:- "(a) My house situate at 6 Thornley Street, Leichhardt to my daughters, ORSOLA, FRANCES, FLALVIA and BENEDETTA in equal shares PROVIDED THAT my daughter BENEDETTA shall have the right to reside in the home until such time as she marries, whereupon the property is to be sold and the proceeds to be divided equally between my daughters. Whilst my daughter BENEDETTA resides in the home after my death, then all the Council Rates, Water Rates and maintenance expenses shall be paid by her. In the event BENEDETTA wishes to leave the house and reside at some other address, then the house may be sold at an earlier date as may be agreed amongst my daughters. (b) All my personal estate is to be divided equally amongst my said daughters, ORSOLA, FRANCES, FLALVIA and BENEDETTA" 4 As at the date of the testator's death the defendant was single, having been divorced, and was living at the Leichhardt property with the testator. The plaintiffs were all married and living elsewhere. 5 In relation to clause 4 of the will of the testator, Flavia Pagano, Frances Amante and Orsola Youssef, daughters of the testator, claim against Benedetta Ruello, the defendant, another daughter of the testator, declarations that, on the proper construction of the will of the testator, and in the events which have occurred:- (1) The defendant has left the house (6 Thornley Street, Leichhardt) and resides at some other address (2) "Marries" means and/or includes the assumption of permanent de facto relationship (3) The defendant "married" (4) The life tenancy of the defendant is at an end (5) The right of the defendant granted under the will to reside at 6 Thornley Street Leichhardt was conditional upon her keeping the home in a proper state of repair (6) That the defendant failed to keep the home in a proper state of repair as required by the will. (7) That the right of the defendant to reside at 6 Thornley Street Leichhardt was terminated on the failure of the defendant to keep the house in a proper state of repair (8) That the right of the defendant granted under the will to reside at 6 Thornley Street Leichhardt has been abandoned by the defendant."

The Facts 6 The evidence establishes that the defendant and Mr Pupo registered the name Callala Beach Pizzeria and Restaurant as a business name and commenced to carry on business under that name at Callala Bay as long ago as December 1995. From that time the defendant has lived with Mr Pupo at Callala Bay, firstly for a few months in a flat on top of the restaurant, and thereafter in a house purchased by Mr Pupo, for six days of each week, with the exception of school holidays when she has lived with Mr Pupo at that address for seven nights per week including six weeks over the Christmas period. The defendant pays half of the telephone and electricity accounts for that address. 7 During the time that the defendant has been living at Callala Bay for six nights per week, she and Mr Pupo have spent one night per week at the subject property at Leichhardt where the defendant has certain clothes and toilet requisites in one of the two bedrooms although when visiting Leichhardt she brings a change of clothes with her. 8 The defendant has one Keycard bank account in her name at the Leichhardt Branch of the Commonwealth Bank of Australia, for which her address is at Callala Bay. She also has a cheque account, a passbook account and Streamline account, all at the Nowra branch of the Commonwealth Bank, with her Callala Bay address for the first two of these accounts. 9 She has also, in recent times, obtained a five year driver's licence showing her residence as the Callala Bay address and in connection with her application for that driving licence she procured Mr Pupo to sign a statutory declaration stating that her residential address was the Callala Bay address.

Construction of the Will 10 As submitted on behalf of the plaintiffs, correctly, the words in a will are to be given their natural and grammatical meaning unless on an examination of the provisions of the will as a whole it appears that the testator used the words in a different sense, or their ordinary meaning does not make sense, or would lead to some inconsistency with the intentions of the testator collected from the whole will, or there is some evidence that the testator was accustomed to using relevant particular words in a sense different from their ordinary meaning. As also submitted on behalf of the plaintiffs, extrinsic evidence of the testator's knowledge of particular matters such as whether beneficiaries are married, which would enable a Court to place itself in the testator's position or "in the testator's armchair", is admissible: cf Harris -v- Ashdown (1985) 3 NSWLR 193; Re Fowler (1963) VR 639. 11 As also submitted on behalf of the plaintiffs a right granted by a will to "reside" on a property is a personal right and is not assignable: Re Hoppe deceased; Hoppe -v- McDavitt (1961) VR 399, 401; and is abandoned by the beneficiary by ceasing personally to reside in the property: Re Potter (1970) VR 352, 354-355. 12 Other cases to which I was referred in the course of argument, or which I had occasion to consult, include the following:- 1 In Perpetual Trustees Executors and Agency Co of Tasmania Ltd -v- Walker (1953) 90 CLR 270 at 279 ff Dixon CJ in the context of that particular case held as follows: "The amount of absence from a man's dwelling which is necessary to rob it of that character and make it no longer his residence may be a matter of degree. But everyone understands that if it is the place to which he returns from temporary absences, from journeys abroad and from peregrinations upon pleasure or business, where he maintains an establishment, and keeps his more permanent personal belongings and household furniture, it is his home and he resides there." 2 In Hurley -v- Hurley (1947) 75 CLR 289 at 291 the testator granted to his niece in relation to a property a right "to live there while unmarried". Rich J at 291.7 stated:- "I think it should be implied that the benefits specified in this will are to continue until the niece abandons her residence in the "dwelling-house" when her rights would cease. This does not mean that she had always to be physically present at this house. It merely means that she must continue to treat it as her usual dwelling place. It is consistent with absence from the place itself, provided that the absences are of a temporary nature, such as characterise absences of an ordinary householder from his place of residence."

3 In Re Potter Deceased (1970) VR 352 at 355 Menhennitt J held inter alia as follows:- "That the son's right of residence would terminate if he abandons it follows, I think, from the words "as long as he desires". This contemplates a continuance of residence for as long as he desires but no longer. The words used are "as long as" not "whenever". This conclusion is, I think, pointed to by the decisions in Hurley -v- Hurley (1947) 75 CLR 289; (1947) ALR 340; Perpetual Executors -v- Heale (1889) 10 ALD 229, and Re: Gibbons (1919) 2 Ch 99. The decisions in the cases of Re Denton deceased (1956) NZLR 104 and Re Hillier (1939) 39 SL (NSW) 71, might be said to support the view that the son could cease his residence and resume it again at a later date, but in those cases there was given a right to reside during the life or lifetime of the beneficiary. In contrast, the right in the present case is to reside as long as the son desires. In Re Reid (1943) SASR 254, the South Australian Full Court held that the rather detailed provisions there under consideration gave the widow the interest of an equitable tenant for life in possession, but nonetheless the Court held that her right determined on her remarriage or residence elsewhere". 13 In my opinion, clause 4 of the will is to be construed in the context that, both as at the date of the will, and as at the date of death, the defendant was unmarried and was residing in the subject property with the deceased, and that in that context the testator wished to give to the defendant the right to continue to reside in the subject property until she married or wished to leave the house and reside at some other address, in which event the property was to be sold and divided equally amongst all four daughters of the testator. In my further opinion, the testator intended that the defendant's right to continue to reside in the subject property, after the testator's death, was to be conditional upon the defendant paying "all the Council Rates, Water Rates and maintenance expenses" with the intent that if she failed to do so, she would no longer have any right to reside in the subject property. 14 In my further opinion the testator's intention as revealed by the words used was that the right of the defendant to reside in the subject property was also conditional upon her in fact, doing so or continuing to do so, to the intent that if she ceased to reside in the subject property her right to reside would be lost. That this was the testator's intention is, in my opinion, made expressly clear by the provision that "in the event Benedetta wishes to leave the house and reside at some other address, then the house may be sold at an earlier date as may be agreed amongst my daughters." 15 Speaking more generally, it is plain in my opinion, that the structure of clause 4 of the will of the testator is to the effect that the subject property is devised to each of his four daughters in equal shares, subject only to the proviso set out in that clause which is, in my opinion, plainly directed, in the relevant circumstances, to ensure that the defendant should have somewhere to live until such time as she marries or decides to leave the house and reside at some other address. It appears that the testator envisaged that in either of those events it would be the case that the defendant no longer had any need to reside in the subject property.

Right of Residence 16 I am clearly of the view on the facts that, according to the ordinary natural meaning of the word, the defendant has ceased for some time to reside in the subject property, notwithstanding that she has been paying certain outgoings in respect of the property, the accounts for which have been addressed to her at the subject property. 17 The defendant, on the evidence, as early as December 1995 formed a de facto and also a business relationship with Mr Pupo, with whom she lives at Callala Bay, and with whom she conducts the business of a pizzeria and restaurant at Callala Bay, where she lives with Mr Pupo at least six nights per week (and seven nights per week during school holidays), spending only one night per week at the subject property which is substantially occupied by her son Mr Ferretti and his wife. In those circumstances, I am of the opinion, that by no stretch of the imagination could it be said that the defendant resides in the subject property, nor has she for some considerable time. I therefore hold that the defendant has within the meaning of the clause 4 of the will, left the subject property and now resides at "some other address". 18 It is also plain that her son, and his wife, have, since their marriage in 1998 resided in the subject property prima facie for seven days each week paying at least part of certain outgoings and although this fact is not necessarily inconsistent with the defendant also residing in the subject property, in all the circumstances of this particular case in my opinion, that fact of residence in the subject property by the son of the defendant and his wife also lends support to the view that the defendant has ceased to reside in the subject property.

Maintenance of the Property 19 I am also of the opinion that even if it were to be held that the defendant has not ceased to reside in the subject property, she has not paid maintenance expenses in respect of the subject property as required by the will with the result that, in my opinion, she has lost her right to reside in the subject property. 20 In my opinion, on its true construction, clause 4 of the will of the testator requires the defendant to "maintain (pay the maintenance expenses of) the subject property during any period of residence" at least having regard to its condition as at date of death of the testator or possibly according some objective standard. 21 The evidence clearly establishes that apart from some very minor repairs effected by the defendant more or less immediately after the death of the testator, the defendant has not maintained (paid the maintenance expenses of) the subject property, even allowing for its condition at the date of the testator's death, since the date of the testator's death and until February 1999 when certain work was done to the subject property as detailed in the evidence principally in the affidavit of her son Mr Ferretti. 22 Although I accept that the subject property was not necessarily well maintained during the testator's lifetime nor as at the date of his death, it is plain on the evidence that the property must have deteriorated in many respects, including paintwork, between the date of the testator's death and February 1999 and that the items attended to, shortly after the death of the testator, did not result in the subject property being properly maintained thereafter until February 1999 even having regard to its condition at the date of death of the testator. It is clear from the work that was done in February 1999 as well as from the evidence as to the state of the property prior to that work being undertaken in February 1999 as shown in Mr Fletcher's report of 27 October 1998 and affidavit of 7 February 2001, that the property must have deteriorated without intervention of the defendant from the date of the testator's death to February 1999 with the exceptions mentioned. 23 Mr Fletcher a licensed real estate agent, who was not cross examined, stated in his affidavit in respect of his inspection of the subject property on 27 October 1998 as follows:- "From my observations of the rooms of this house I formed the view that all the painting in the said house was in very poor condition and was flaking badly. The house had the appearance of having been neglected and fallen into disrepair. There was no evidence of maintenance having been carried out for a long period of time." 24 The failure of the defendant to maintain the property during this period produced the result that, in my opinion, in accordance with the true construction of clause 4 of the will, that the defendant has for this reason also lost her right to reside in the subject premises.

Defendant Not Married 25 It was submitted on behalf of the plaintiffs that the defendant had lost the right to reside in the subject property because she had "married" within the meaning of clause 4 of the will, notwithstanding that she was only in a de facto relationship with Mr Pupo. It was submitted on behalf of the plaintiffs that having regard to changes in community attitudes and in the law to de facto relationships, the testator should be deemed to have intended "marries", as used in clause 4 of the will, to comprehend also the forming of a de facto relationship. 26 In my opinion, however, the plain ordinary natural meaning of the word "marries" did not at the date of the will, nor at the date of death, comprehend a de facto relationship. Nor is there any specific evidence, or indeed any evidence, to the effect that the testator used and understood the word "marries" in the special sense of including de facto relationships. In those circumstances, I consider that the Court must give effect to the ordinary natural meaning of the word "marries" as not including de facto relationships and I therefore hold that the defendant has not lost the right to reside in the subject property by reason of the fact that she has "married" within the meaning of clause 4 of the will.

Necessity for Unanimous Agreement to Sell 27 The final matter for determination is the effect of the concluding words of clause 4 (a) which are as follows:- "IN THE EVENT BENEDETTA wishes to leave the house and reside at some other address, then the house may be sold at an earlier date as may be agreed amongst my daughters." 28 It was submitted on behalf of the plaintiffs that the agreement referred to should be construed as meaning agreement by a majority of the testator's daughters. In my opinion, the words used by the testator are clear and unambiguous and do not permit of such a construction. In my opinion, according to their ordinary and natural meaning, the agreement referred to must be construed, in effect, as meaning unanimous agreement, since otherwise it cannot be said that the "earlier date" for sale had been agreed "amongst my daughters". 29 I am, however, of the further opinion that if unanimous agreement cannot be obtained as to the date for sale for the subject property, the result will be that the testator has directed that, in the relevant events, the house should be sold without specifying any particular date for sale in which event in my opinion on the true construction of the relevant words, the property is required to be sold within a reasonable time from the date of the failure of the parties to reach unanimous agreement.

Conveyancing Act: Section 66G 30 In the event that it were to be held that this construction of the relevant words is incorrect, then I am of the opinion that the four sisters are the beneficial and legal co-owners of the subject property within the meaning of section 66G of the Conveyancing Act and that if, as is the case, application were made to the Court to appoint trustees for sale pursuant to that section, the Court would make orders accordingly. 31 I will, however, refrain for a short period from appointing such trustees for sale, in order to give the parties the opportunity to agree on some other arrangements for sale of the subject property, which might avoid the expense and possible delay of the appointment of trustees for sale under section 66G. Costs 32 As the matters in issue between the parties to the present proceedings arose in my opinion because of the ambiguity, in the particular circumstances of the case, of the words used by the testator in his will and further as, in my opinion, the defendant had reasonable grounds to defend those issues, I am of the opinion that the costs of all parties should be paid out of the estate of the testator.

Short Minutes of Order 33 I direct the plaintiffs to bring in short minutes of order giving effect to these reasons for judgment.

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