Plaintiff v Applicant

1 Adrian Valmorbida died on 4 August 2016, after being ill with cancer for some time. He left behind a widow, Kairu[2] and two children, his father ('Mariano') and other siblings, and a home-made will ('Will').

2 Prior to his death, Adrian lived with Kairu and their daughters at Unit 281, 299 Queen Street, Melbourne ('Republic apartment'),[3] which was and is owned by Mariano, subject to a mortgage held by Bendigo Bank Ltd ('Bendigo Bank'). Adrian was, with his father, as tenants in common, one of the registered proprietors of a property at 22 Linlithgow Road, Toorak ('Toorak property'), where Mariano lives. The Toorak property is also encumbered by a mortgage held by Bendigo Bank.[4]

3 This proceeding concerns a clause in the Will which refers to both the Republic apartment and the Toorak property. The Will, which was dated 25 May 2015, and otherwise satisfies the formal requirements for a will, is reproduced in full below:

This is the last will and testament of me Adrian John Fulvio Valmorbida of 19 Avoca St South Yarra Victoria. I hereby revoke all prior wills and testamentary dispositions heretofore made by me.

I appoint my wife Kairu Chan executor of this my will and Trustee of my estate.

I give my unencumbered half interest in 22 Linlithgow Rd Toorak to my Trustee on trust until such time as she or my estate is given apartment 281/299 Queen Street Melbourne. If this does not occur within 6 months of the death of my father Mariano then I give my said interest in 22 Linlithgow Rd Toorak to my Trustee absolutely.

I give devise and bequeath the balance of my property of whatsoever nature and wheresoever situate to my said trustee absolutely.

I request my trustee gives my Porsche 356A and my Dino Ferrari 246GTS to my darling girls Xuan and Ruowei when she thinks appropriate.

Re TRUSTS:

1. Adrian Valmorbida Family Trust

Notwithstanding any provisions of the trust deed to the contrary I appoint Kairu Chan the sole appointor of the Adrian Valmorbida Family Trust and sole Director of the Trustee Company Adjoval Pty Ltd. I direct Kairu to administer the trust as she in her absolute discretion deems fit.

2. Admarval Trust

I appoint Ivan Rizio to operate this trust with my father Mariano.

3. Keck Trust and Ferval Trust

Notwithstanding any provisions of the respective trust deeds to the contrary I appoint Luisa Valmorbida and Ivan Rizio as joint appointors of the trusts. I direct them to administer the trusts so that my half interest in them is utilized for the care of my children until they attain the age of 35 (thirty-five) years at which time they shall take equal shares absolutely.

I have set my hand to this my will this 25th day of May 2015 in the presence of the undersigned witnesses

4 The focus of this proceeding is the third paragraph of the Will. Mariano contends that the intention behind this clause was to facilitate Mariano being given Adrian's half interest in the Toorak property, in exchange for the transfer by Mariano of the title to the Republic apartment to Kairu ('property swap'), but the relevant clause may not be effective to give effect to that intention. In response, Kairu contends that it is not possible to ascertain such an intention on Adrian's part from either the language of the relevant clause, or any admissible evidence, such that the relevant clause cannot be construed in the manner contended for by Mariano. Further, Kairu contends that the Court's jurisdiction to order rectification is not enlivened, because the admissible evidence does not establish with any necessary degree of certainty Adrian's intentions with respect to the disposition of the Toorak property.

5 In the current application, the critical issue is whether it is possible to determine Adrian's intention at the time he made the Will, either from the proper construction of the language used in the Will, or, where permissible, from other evidence. If it is not possible to determine the requisite intention, Mariano fails in establishing the construction contended for by him, and, also fails to establish the necessary grounds for rectification.

6 Probate of the Will was granted to Kairu on 7 October 2016. On 15 February 2017, the solicitors for Mariano wrote to Kairu's solicitors stating, among other things:

We refer to the grant of probate of the Will of the late Adrian Valmorbida dated 25 May 2015 ('the Will') to Kairu Chan on 7 October 2016. We understand that you act for Ms Chan in her capacity as executor. Please let us know if this is not the case.

We confirm that we act for Mariano Valmorbida, the father of the late Adrian Valmorbida, in relation to his entitlements under the Will.

We refer to the third paragraph of the Will, which states as follows:

I give my unencumbered half interest in 22 Linlithgow Rd Toorak to my Trustee on trust until such time as she or my estate is given apartment 281/299 Queen Street Melbourne. If this does not occur within 6 months of the death of my father Mariano then I give my said interest in 22 Linlithgow Road Toorak to my Trustee absolutely.

In our view, this clause does not properly carry out or give effect to the testator's intentions. While the intentions of the testator are relatively clear, that is the deceased's unencumbered interest in the property at 22 Linlithgow Road, Toorak is to be transferred to our client on condition that our client transfers his property at 281/299 Queen Street, Melbourne to the Estate (or alternatively the executor directly), the Will states that the Linlithgow Road property is given to your client on trust but it does not expressly specify for whom your client is to hold the property on trust (i.e. held on trust for the absolutely benefit of our client). We understand that the Will was a 'home-made Will', which could explain this oversight by the testator.

We believe it is clear, both from the wording of the Will as a whole and from the surrounding circumstances which existed at the time the Will was drafted, that a clearer wording of the clause, which would still give effect to the intentions of the deceased, would be as follows:

I give my unencumbered half interest in 22 Linlithgow Rd Toorak (Toorak Property) to my Trustee on trust until such time as my father, Mariano Valmorbida, transfers, to my Trustee or my estate, the estate in fee simple in apartment 281/299 Queen Street Melbourne (Queen Street Property), of which he is the registered proprietor. Should my father during his lifetime, or his estate within 6 months following his death, transfer the Queen Street Property to my Trustee or my estate, I direct that my Trustee shall thereupon simultaneously transfer my one half share in the Toorak Property to my father, or his estate, as the case may be. Should my father, or his estate, fail to transfer the Queen Street Property to my Trustee, either during his lifetime or within 6 months of the date of his death (as the case may be), then I give devise and bequeath my said interest in the Toorak Property to my Trustee for her benefit absolutely.

We are instructed that, subject to formal Court Orders, our client is ready, willing and able to transfer to the Estate (or your client directly) his property at 281/299 Queen Street, Melbourne provided that he is simultaneously transferred the deceased's unencumbered interest in 22 Linlithgow Road, Toorak.

7 No response was received to this letter, and on 6 April 2017 (the day prior to the expiry of the six month period following the grant of probate), Mariano issued this application, being a summons for rectification of the Will, as follows:

1. Pursuant to section 31(1) of the Wills Act 1997, the clause of the last will of the deceased dated 25 May 2015 - admitted to probate by the Supreme Court of Victoria on 7 October 2016 - which reads:

I give my unencumbered half interest in 22 Linlithgow Rd Toorak to my Trustee on trust until such time as she or my estate is given apartment 281/299 Queen Street Melbourne. If this does not occur within 6 months of the death of my father Mariano then I give my said interest in 22 Linlithgow Road Toorak to my Trustee absolutely -

be rectified, so as to carry out the intentions of the testator, to read as follows:

I give my unencumbered half interest in 22 Linlithgow Rd Toorak (Toorak Property) to my Trustee on trust until such time as my father, Mariano Valmorbida, transfers, to my Trustee or my estate, the estate in fee simple in apartment 281/299 Queen Street Melbourne (Queen Street Property), of which he is the registered proprietor. Should my father during his lifetime, or his estate within 6 months following his death, transfer the Queen Street Property to my Trustee or my estate, I direct that my Trustee shall thereupon simultaneously transfer my one half share in the Toorak Property to my father, or his estate, as the case may be. Should my father, or his estate, fail to transfer the Queen Street Property to my Trustee, either during his lifetime or within 6 months of the date of his death (as the case may be), then I give devise and bequeath my said interest in the Toorak Property to my Trustee for her benefit absolutely.

1. An authenticated copy of this order be annexed to the probate of the Will of the Deceased.

1. The plaintiff transfer the deceased's unencumbered right, title and interest in the property at 22 Linlithgow Road, Toorak to the applicant within 14 days of the date of this Order.
2. Subject to the transfer in Order 2, the applicant shall simultaneously transfer to the plaintiff his right, title and interest in 281/299 Queen Street, Melbourne (subject to the current mortgage in favour of the Bendigo Bank).
3. Such further or other orders as this Honourable Court deems just, including an order to give effect to the transfers set out in Orders 3 and 4 above.

8 On 4 May 2017, Mariano issued an amended summons, which, in the alternative, sought that the Court determine the following question:

Whether, on the proper construction of the will of the deceased, the words:

I give my unencumbered half interest in 22 Linlithgow Rd Toorak to my Trustee on trust until such time as she or my estate is given apartment 281/299 Queen Street Melbourne. If this does not occur within 6 months of the death of my father Mariano then I give my said interest in 22 Linlithgow Road Toorak to my Trustee absolutely -

should be construed to mean:

I give my unencumbered half interest in 22 Linlithgow Rd Toorak (Toorak Property) to my Trustee on trust until such time as my father, Mariano Valmorbida, transfers, to my Trustee or my estate, the estate in fee simple in apartment 281/299 Queen Street Melbourne (Queen Street Property), of which he is the registered proprietor. Should my father during his lifetime, or his estate within 6 months following his death, transfer the Queen Street Property to my Trustee or my estate, I direct that my Trustee shall thereupon simultaneously transfer my one half share in the Toorak Property to my father, or his estate, as the case may be. Should my father, or his estate, fail to transfer the Queen Street Property to my Trustee, either during his lifetime or within 6 months of the date of his death (as the case may be), then I give devise and bequeath my said interest in the Toorak Property to my Trustee for her benefit absolutely.

9 Mariano sought to rely upon two affidavits in support of his application, being an affidavit sworn by him, and an affidavit sworn by Mr David Freeman, a solicitor retained by him, albeit not the solicitor on the record for him in this proceeding. At the hearing of the application, senior counsel for Kairu objected to the admissibility of the bulk of the evidence, insofar as it purported to be evidence of Adrian's intentions when executing the Will in May 2015. This evidence was said to be irrelevant, in that the evidence concerned events and discussions which post-dated the execution of the Will. At the hearing, I indicated that I would deal with the question of admissibility in these reasons. The following section of these reasons summarises the evidence sought to be adduced by Mariano in support of his application.

10 In his affidavit sworn on 5 April 2017, Mr Freeman deposed, in summary, as follows:

(a) in early June 2015, Mariano asked him to act as his advisor for estate planning purposes, along with Mariano's solicitor, Mr Andrew Goulopolous, and the accountants for the Valmorbida Group of companies. The Valmorbida Group is a complex group of properties and trusts, which was managed by Adrian, although Mariano was also a director of many of the entities within the Valmorbida Group;

(b) at this time, Adrian was very ill with cancer, and in or around August 2015, Mariano told him that Adrian's prospects of surviving Mariano were slim;

(c) between August 2015 and October 2015 Mr Freeman met with Adrian on approximately four occasions at the Republic apartment, for the purpose of discussing several issues in relation to the Valmorbida Group. He deposed as follows:

Adrian told me, at our first meeting in or around August 2015, that he wished to leave his interest in the Toorak property to Mariano and that he had made a one page Will to that effect. I asked Adrian if I could see his Will and he declined to give me a copy. I did not see Adrian's will until after he passed away. I told Adrian that it would be more practical for the Toorak property to be dealt with outside of Adrian's Will and, to that end, I had prepared a Transfer of Land from tenancy in common to joint tenancy. At that same meeting in or around August 2015 at the Republic Apartment, Mariano signed the transfer of land. I left the transfer with Adrian after explaining to him that, in my opinion, such a Transfer would be the most effective way for Adrian to dispose of his interest in the Toorak property to Mariano. Adrian said words to the effect that he would think about it or that he would speak to his solicitor.

...

In a subsequent meeting between me and Adrian in or about October 2015, at which Mariano was not present, I again raised the issue about the transfer of Adrian's half share in the Toorak property to Mariano. Adrian became quite angry and told me that he would only leave his interest in the Toorak property to Mariano if Mariano transferred the Republic Apartment to Adrian's wife Kairu Chan (Erica). Adrian told me words to the effect that:

I'm not going to do that unless Papa (meaning Mariano) leaves this property (meaning the Republic Apartment) to [Kairu] because I need to leave her something in my Will.

Shortly after the October 2015 meeting set out above, I told Mariano about the contents of my conversation with Adrian, specifically that Adrian would only agree to transfer his interest in the Toorak Property to Mariano on the basis that Mariano agreed to transfer the Republic Apartment to [Kairu]. Mariano replied 'ok', meaning that Mariano was happy for this to occur.

(d) he exhibited a number of emails between him, Adrian's solicitor Mr Savvas Kyriacou, and Mr Goulopolous, between 1 December 2015 and 22 March 2016. The pertinent sections of the emails are extracted below.

11 On 1 December 2015, Mr Freeman wrote to Messrs Kyriacou and Goulopolous, stating, among other things:

Two urgent matters to be attended (sic):

I propose that the tenancy in common of the Toorak property be converted to joint tenancy. I left a Transfer document with Adrian some months ago. The property will pass automatically to Mariano and I believe there are no CGT implications to Adrian's estate (ITAA Section 138-10). In my view, it is preferred that this property pass by survivorship rather than by Will.

In exchange, Mariano will leave the Republic apartment to Adrian or to his children on attaining 25 years. I do not see the point of transferring the property now, making a capital gain and incurring stamp duty. To ensure the bequest, Mariano can execute a Deed charging his interest in the property with the obligation and Adrian can lodge a caveat.

12 For completeness, while this email was not exhibited to Mr Freeman's affidavit, on 11 December 2015 Mr Kyriacou responded to Mr Freeman's email of 1 December 2015, stating, among other things:

Regarding the changes to the holdings of the Republic and Toorak properties by our respective clients, Adrian instructs that he would prefer to deal with you directly.

13 On 17 February 2016, Mr Freeman wrote to Mr Kyriacou, stating, among other things:

More importantly and URGENT is the need to finalise arrangements to deal with the interests in the Toorak and Republic properties and equalise the loan account imbalance. I have briefed Andrew to discuss with you and come to an arrangement.

I went through it with Adrian and explained that a transfer of the Republic property is not the best option for stamp duty and CGT reasons and he was amenable to the proposal I made last year which Andrew can go over again with you.

I am concerned that Adrian may not have a Will which addresses these issues and I urge you to work with Andrew so that both father and son can be assured that their wishes will be implemented.

14 On 22 March 2016, Mr Goulopolous wrote to Mr Freeman, stating, among other things:

Bearing in mind that you have had at least a number of discussions with Adrian in connection with each of the Toorak Property and the Republic Apartment, how would you suggest that we document the understanding between Mariano and Adrian?

15 In his affidavit sworn on 7 April 2017, Mariano deposed, in summary, as follows:

(a) insofar as Mr Freeman had deposed to matters which related to him, he agreed with Mr Freeman's evidence;

(b) although he attended the first meeting between Mr Freeman and Adrian in or around August 2015, he did not participate in that meeting unless where specifically requested to do so;

(c) he deposed as to what Mr Freeman told him about his dealings with Adrian (which largely reflected the evidence given by Mr Freeman);

(d) he gave evidence that Mr Freeman had prepared a Transfer of Land to provide for the ownership of the Toorak property to be converted from Adrian and Mariano as joint proprietors as tenants in common to joint tenants. He (Mariano) signed the Transfer of Land, and he believed that this document was left with Adrian;

(e) after being informed by Mr Freeman about what transpired at the meeting referred to in paragraph 10(c) above, he agreed to transfer the Republic apartment to Kairu if Adrian transferred his share of the Toorak property to him; and

(f) he deposed as follows:

I remain willing to transfer the Republic Apartment to [Kairu] in exchange for the estate transferring the remaining one‑half interest of the Toorak property to me, as was the understanding which I believe existed with Adrian.

16 Senior counsel objected to the affidavits of Mariano and Mr Freeman being admitted into evidence in their entirety. The objection, in short form, was as follows:

Irrelevant. No evidence of instructions erroneously recorded or not having been given effect to. Not contemporaneous with the making of the will. No evidence of settled intention on the part of the testator.

17 As for Mr Freeman's affidavit, under cover of the global objection set out above, senior counsel raised the following objections:

(a) she objected to the evidence regarding the meeting with Adrian on the grounds of relevance;

(b) she objected to the statement in paragraph 13 of Mr Freeman's affidavit, where he referred to Adrian's statement that he would only transfer his interest in the Toorak property to Mariano if Mariano transferred the Republic apartment to Kairu, and Mariano's agreement to that proposal, on the grounds that it included evidence contrary to a prior inconsistent statement, that it was irrelevant, and contained a conclusionary statement; and

(c) she objected to the following statement on the basis that it was irrelevant, conclusionary, and on the basis that Mr Freeman's state of mind was 'not a material fact'.

... I believe that, based on my conversation with Adrian and based on the instructions which Mariano provided to me and Andrew for the preparation of Mariano's Will,[5] it was Adrian's intention that his interest in the Toorak property should be transferred to Mariano if Mariano transferred his interest in the Republic property to [Kairu]; and his Will expressly makes reference to this arrangement.

18 As for Mariano's affidavit, again under cover of the global objection, senior counsel raised the following objections:

(a) the statement regarding the purpose of the August 2015 meeting was conclusionary;

(b) the statements regarding what Mr Freeman told him concerning his dealings with Adrian were not from Mariano's personal knowledge;

(c) the statement that he agreed to the property swap proposed by Adrian was irrelevant;

(d) his evidence concerning his remaining willing to transfer the Republic apartment to Kairu was irrelevant, and his statement that this was 'as was the understanding which I believed existed with Adrian' was objected to on the basis that this was not a matter of his personal knowledge, and in any event, his state of mind was not a material fact; and

(e) his statement that 'I believe that it was Adrian's intention to transfer to me his interest in the Toorak property in exchange for a transfer from me to his estate of the Republic apartment and I believe that this is the arrangement which is referred to in the Will', is objected to on similar grounds as the objection in paragraph (d) above.

19 In relation to the contention that the affidavits in their entirety were inadmissible, the question of whether extrinsic evidence is admissible with respect to the construction and/or rectification of a will is governed by traditional common law principles, and the terms of s 36 of the Wills Act 1997 (Vic) ('Act'). In seeking to construe the terms of a document, whether it be a contract, a will, or other instrument:

the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context.[6]

20 Accordingly, evidence which goes to the factual and commercial context in which the Will was made is relevant.

21 Section 36 of the Act also provides for the admissibility of certain evidence to assist in construction of a will, as follows:

36. When is evidence admissible to clarify a will?

(1) In any proceedings to construe a will, if the language used in a will renders the will or any part of the will -

(a) meaningless; or

(b) uncertain or ambiguous on the face of the will; or

(c) uncertain or ambiguous in the light of surrounding circumstances -

evidence may be admitted to assist in the interpretation of that language.

(2) Evidence which may be admitted under sub-section (1)(c) does not include evidence of the testator's intention.

22 In circumstances where it seems to be accepted by both parties that the relevant clause of the Will is, at best, uncertain or ambiguous on its face, evidence of the surrounding circumstances is admissible to construe the terms of the Will.

23 Of course, evidence of the testator's intention is always relevant, indeed, it may be critical to any application for rectification of a will. The primary objection of Kairu to the admissibility of Mr Freeman's evidence, and to a lesser extent Mariano's evidence, is because the evidence concerns communications between Adrian and others after the date of the execution of the Will, and as such, is irrelevant. However, in Rawack v Spicer,[7] Campbell J stated:

While the relevant time for ascertaining the intention of the testatrix, for the purposes of deciding whether rectification of the Will should be granted, is the time of the execution of the Will, it is possible to take into account statements and acts of the testatrix, both before and after execution of the Will, in deciding what her intention was at the actual moment of execution.[8]

24 There is nothing in the authorities, or indeed any reason of principle, to doubt the correctness of this statement. Rather, the fact that the evidence post‑dates the execution of the Will, and could be seen in some respects to contradict the propositions advanced by Mariano upon the hearing of the application, goes to matters of forensic value and weight rather than admissibility.

25 In my view, evidence of the surrounding circumstances which post-dated the execution of the Will is also admissible for the purpose of construing the terms of a Will. Section 34 of the Act provides as follows:

34 When does a will take effect?

(1) A will takes effect, with respect to the property disposed of by the will, as if it had been executed immediately before the death of the testator.

(2) Subsection (1) does not apply if a contrary intention appears (whether in the will or elsewhere).

26 The purpose of s 34 of the Act is to provide that a gift of property (for example 'all of my shares') is to be construed as at the date of death, not as at the date of the execution of a will. However, there is some commentary to the effect that s 34 means that the terms of a will, not just the definition of property, ought be construed as at the date of death. The predecessor section to s 34 of the Act, s 22 of the Wills Act 1958 (Vic), provided as follows:

22 A will to speak from the death of the testator

Every will shall be construed, with reference to the real estate and personal estate comprised in it, to speak and take effect as if it had been executed immediately before the death of the testator, unless a contrary intention shall appear by the will. (emphasis added)

27 It is clear from the second reading speech made by the Attorney‑General when introducing the 1997 bill which became the Act ('1997 bill') that the Act was not intended to effect a wholesale change in the law. The Attorney‑General referred to the 'need for a new Wills Act to simplify and modernise the language of the Wills Act 1958, most of which is identical to the Wills Act 1837 (UK)'.[9]

28 The 1997 bill largely adopted the recommendations of the Victorian Parliament's Law Reform Committee ('Committee').[10] The Committee's report recommended that s 28 of the Queensland Succession Act 1981 be adopted as a model for the replacement of, among other things, s 22 of the Wills Act 1958 (Vic).

29 Section 30 of the Succession Act 2006 (NSW) mirrors, in all material respects, s 34 of the Act. In his Second Reading Speech, the Attorney‑General referred to the Succession Bill as 'largely mirror[ing] the model bill',[11] and 'adopt[ing] some of the adjustments made in other jurisdictions as they have implemented the model bill. Victoria, the Northern Territory, Queensland and Western Australia have implemented the model bill.'[12]

30 The 'model bill' referred to above is referred to in the NSW Law Reform Commission's report (No 85) on The Law of Wills.[13] On the subject of 'when a will takes effect', this report stated as follows (citations omitted):

(a) Basis for the model provision

6.10 The basis for the model provision was clause 21 of the draft Wills Act 1994 (Vic). Clause 21 provides:

(1) A will takes effect, with respect to the property disposed of by the will, as if it had been executed immediately before the death of the testator.

(2) Sub-section (1) does not apply if a contrary intention is shown in the will.

(b) Background

6.11 The substance of this provision is that a will is to be construed, with respect to the property disposed of by it, as if it had been executed immediately before the death of the testator.

6.12 This provision was originally enacted to ensure that, in particular, a devise of land was not construed as at the date of the making of the will. At one time a devise was regarded as a conveyance at law and so incapable of including property not owned by the testator at the date of the making of the conveyance.[14]

31 In Construction of Wills in Australia,[15] the learned author stated that the effect of s 34 of the Act and its interstate equivalents is that: '[i]t is said that a will speaks from the date of death of a testator in respect of property and that it is the effect of legislation.'[16]

The relevant date for interpretation of disputed words in a will is the date of the testator's death. This is so because the provisions of the Wills Act of each state and territory specify that a will speaks from that date. But if the circumstances surrounding a testator at the date of execution of the will are also relevant because those circumstances were present in the mind of a testator when he or she finalised intentions as to the disposition of his or her estate, then both dates become relevant.[17]

33 The position is succinctly put by the authors of Interpretation and Use of Legal Sources: The Laws of Australia as follows:

A will is to be construed with respect to property disposed of as if it had been made immediately before the testator's death.[18]

34 Given the above, while I have not located any authorities directly analogous to the current case, it seems to me that it would be incongruous if evidence of relevant surrounding circumstances which related to events and communications which post‑dated the execution of a will, but pre‑dated the death of a testator, would be excluded on the basis of lack of relevance.

35 However, I accept that certain of the statements made by Mr Freeman and Mariano in their affidavits are inadmissible in that they are conclusionary and/or go to their own states of mind. However, I will not undertake the exercise of formally striking out the offending paragraphs. To the extent that the evidence (including the correspondence exhibited to Mr Freeman's affidavit) goes to the surrounding circumstances at the time Adrian made the Will, I have had regard to that evidence. Given that there appears to have been no material change in the relevant circumstances (being the ownership of the Republic apartment and the Toorak property, and the terminal nature of Adrian's illness) between May 2015 and the correspondence and events referred to in the affidavits of Mariano and Mr Freeman, the fact that this correspondence and these events post-dated the execution of the Will is no barrier to appropriate weight being given to that evidence. In any event, Kairu had the opportunity to adduce evidence to contradict or respond to that evidence, and chose not to do so.

36 While there is a considerable overlap in the evidence before the Court and the submissions of the parties in relation to both the rectification issue and the construction issue, it is necessary to first determine the proper construction of the Will prior to considering any application for the rectification of the Will. As noted by Pagone J in ANZ Trustees Ltd v Hamlet:[19]

... it is a condition precedent to the exercise of the power in s 31 that the Court be satisfied that the Will does not carry out the testator's intentions and that this satisfaction be based on one of two specified reasons namely, either that a clerical error was made or that the Will does not give effect to the testator's instructions. The existence of the second of these conditions requires the Will to be construed and to be found upon its proper construction not to give effect to the instructions of the testator.[20]

37 The above statement has been referred to with approval by Gray J in the Estate of Josef Bernhard Nies (Deceased) ('Nies')[21] and Hallen AsJ in Lockrey v Ferris.[22] In Nies, Gray J also referred to a number of matters relevant to the task of a court when construing a will, in summary, as follows:

(a) the task is to discover the intention of the testator;

(b) referring to Re Allsop;[23]

A word or phrase in a will is generally given its usual or ordinary grammatical meaning. However, the usual or ordinary meaning of a word may be displaced if, in the context of the will as a whole, and in the light of the surrounding circumstances, it appears that the ordinary meaning of a word or phrase does not make sense, but a secondary meaning would make sense, in which case the court will adopt the latter meaning. The court avoids giving words a literal interpretation where that would lead to a capricious result and where it is considered that this cannot have been the intention of the testator.[24]

(c) referring to King v Perpetual Trustee Co Ltd[25] and Allgood v Blake,[26] the Court places itself in the place of the testator, having regard to the material facts and circumstances which were known to the testator, and were, or ought to have been in the mind of the testator when the will was made;[27] and

(d) his Honour referred to the following summary of the 'modern approach to interpretation' adopted by the Supreme Court of the United Kingdom in Marley v Rawlings:[28]

When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions.[29]

38 While recent authorities suggest that the task of construing the terms of a will is essentially akin to the approach to be adopted in construing the terms of a contract, counsel for Mariano drew my attention to some longstanding principles of construction peculiar to the task of construing the terms of a will. In his written outline of submissions, counsel for Mariano submitted as follows (omitting citations):[30]

In addition to section 36 [of the Act] - which illustrates the breadth of the powers of the Court in its construction jurisdiction - [it is] important to note:

(a) A court of construction has the power and may determine from the terms of a will the appropriate destination for gifts even if the will does not specifically state as much.

(b) A court of construction has jurisdiction to ignore or change words and to read in words which do not appear in the will depending on the intention of the testator.

(c) If a testator intends to create an interest in favour of a beneficiary but omits accidentally to employ words in order to effectuate such a disposition, a court may supply words in order to effectuate this intention.

In construing a will, the following common law presumptions are sometimes made to assist in the task:

(a) There is a presumption against intestacy. That is, the court will lean towards a construction which preserves rather than destroys the gifts under a will. This is often referred to as the 'Golden Rule' of construction.

(b) There is a presumption of gift and disposal of all property.

(c) There is a presumption of rationality.

(d) There is a presumption against disinheritance.

(e) It is better for a thing to have effect than to be nullified. This is similar in effect to the 'Golden Rule'.

39 Further, greater latitude is permissible in construing the language of a home-made will.[31]

40 In Re Melbourne; Wall v Walter[32] McMillan J stated as follows (citations omitted):

If, in the context of the will read as a whole and the surrounding circumstances, the ordinary meaning of the words in the will does not make sense, extrinsic evidence is admissible in a court of construction under the 'armchair principle'. This principle allows the court to place itself in the position of the testator at the time of executing the will and take into account all of the circumstances actually known to the testator when the will was made.

This approach was succinctly stated by Fullagar J in ANZ Executors & Trustee Co Ltd v McNab:[33]

The search for testamentary intention must be a search for intention disclosed by the words used, and in this search words must prima facie be given their ordinary meanings and, if the law has consistently given a particular meaning to some word or phrase, that is the meaning which the word or phrase must prima facie be given. Nevertheless, the intention is to be gathered from a study of the will as a whole, and in the light of any relevant and admissible evidence of surrounding circumstances.

41 It is significant that a court will lean towards preserving and effectuating gifts in a will. As stated in Halsbury's Laws of Australia:[34]

the court of construction will construe testamentary instruments in a manner which preserves rather than destroys the gifts and dispositions contained in them. This principle is an extension of the presumption that the testator intended his or her will to be effective. Where a liberal construction of a will would be effective and meaningful, and a strict literal construction would destroy a gift or disposition, the court will apply the principle so as to favour that liberal construction. The principle enables a court to supply words to a will which have been omitted so that it will read in a way intended by the testator.

42 Both parties filed comprehensive written submissions in advance of the hearing of the application. Counsel for Mariano submitted, in relation to the construction issue, in summary, as follows:

(a) the Court can have regard to extrinsic evidence to assist in the construction of a will;

(b) some meaning must be attributed to the relevant clause of the Will;

(c) the common law presumptions applicable to the task of construction all support the construction contended for by Mariano: in particular, the presumption of gift, the presumption of rationality, and the presumption that a construction that favours the preservation rather than the destruction of a gift is to be preferred;

(d) the relevant clause of the Will fails to properly carry out or give effect to Adrian's intentions. Adrian's intentions are relatively clear: that is, his interest in the Toorak property is to be transferred to Mariano on the condition that Mariano transfer the Republic apartment to Kairu or his estate. However, the relevant clause of the Will states that the Toorak property is given to Kairu on trust, but does not specify for whom Kairu is to hold the property on trust;

(e) Adrian's oversight in this regard may be explained by the fact that the Will was a home-made will; and

(f) the existence of the encumbrance over the Republic apartment is irrelevant to the issues in this proceeding: the Court's task is not to look at the fairness of the Will, but rather the testator's intention. The fact that the value of a gift under a will is diminished by an encumbrance does not alter the fact that the gift was intended to be made.

43 Counsel for Kairu submitted, in summary, as follows:

(a) the Court has limited power to insert words to reflect the true construction of a will;

(b) the Will does not state the beneficiary of the trust in the Will.

(c) they submitted:

The Court has to be able to ascertain the testator's intention. It cannot speculate about the meaning. It cannot make the gift the testator might reasonably have made, but it must be the one the Court is satisfied the testator intended to make.

(d) the presumption against intestacy is not relevant here, for if the gift fails, the interest in the Toorak property will fall into residue, that is, Adrian's half share of the Toorak property will pass to Kairu;

(e) there is little in the language of the Will to assist in determining the ultimate destination of the interest in the Toorak property;

(f) the construction contended for by Mariano stretches the language of the Will beyond what can be achieved by construction or rectification, and is contrary to the terms of the Will;

(g) the evidence relied upon by Mariano, limited as it is, does not support, to the required degree of satisfaction, the conclusion that Adrian intended the Toorak property to pass to Mariano. That negotiations were under way after the execution of the Will for an inter vivos transfer of the Toorak property to Mariano is not evidence of Adrian's testamentary intention;

(h) the proposed construction implies a sense of compulsion, in that it compels Kairu to transfer the Toorak property to Mariano provided that certain conditions are fulfilled. However, the Will itself contemplates that there may be no transfer; and

(i) the proposed construction, in effect, compels Kairu to take the gift of the Republic apartment regardless of what encumbrances come with it. They submitted as follows:

The requirement is that the Queen Street apartment be 'given'. It is not that the Queen Street apartment 'subject to any charges or encumbrances' be transferred to the trustee or to the estate, or that she or the estate be invited to assume the obligations of any encumbrance over Queen Street. The fact that the gift may be made either to the executor personally, or to the estate, illustrates the absurdity of requiring that an encumbrance be taken on - taken on by whom? And how can a new liability of uncertain extent be forcibly imposed on the trustee or the estate? Like any other conveyancing transaction, in order for the property to be given, at the very least, encumbrances need to be discharged first. However, the applicant, who will reap a benefit under the construction he proposes, proposes that the Queen Street property be transferred subject to any charges ... .

If it is possible to construe the will, in light of the surrounding circumstances, with an intention to provide a home for the testator's widow, it is stretching that construction too far to construe that property as carrying with it an encumbrance, no matter how large, that must be assumed by the widow.

44 Turning now to the principles governing the circumstances in which the Court will rectify a will (in the event that the terms of the Will cannot be construed in such a way as to give effect to the intention of Adrian, as ascertained by the Court), the starting point is s 31(1) of the Act, which provides as follows:

(1) The Court may make an order to rectify a will to carry out the intentions of the testator, if the Court is satisfied that the will does not carry out the testator's intentions because -

(a) a clerical error was made; or

(b) the will does not give effect to the testator's instructions.

45 In Re Estate of Prevost (dec'd),[35] Whelan J identified the legal principles applicable to an application for rectification of a will (omitting citations):

Before the power of rectification can be exercised the Court must be satisfied that the will was so expressed that it failed to carry out the testatrix's intentions, and also what it was that the testatrix did intend concerning the part of the will which is to be rectified.

What must be shown is what the testatrix's actual intention as, not what her intention probably would have been had she thought about the matter.

Although the standard of proof is on the balance of probabilities, clear and convincing proof is required.

It is not sufficient for rectification to establish that the testatrix would not have wished for an intestacy, or would not have wanted her property to go in a way that, in the events which have happened a particular clause results in the property going.

If there is no evidence to show what the testatrix's intention was in the event of certain things happening, the Court cannot rectify the will.[36]

46 In Lockrey v Ferris,[37] Hallen AsJ noted that the testator's intention must be examined as at the date of the will, not the date of death. He referred to the decision of the Court of Appeal in Mortenson v New South Wales[38] where Sheller JA stated that, in respect of the New South Wales equivalent of s 31 the Act:

is available for mistakes, not for a lack of vision or perception or knowledge. It is a section directed at mistakes in expressing the testator's intentions.[39]

Thus, the three questions posed by the section are, first, what were the testator's actual intentions with regard to dispositions in respect of which rectification is sought; second, is the will expressed so that it fails to carry out those intentions; and, third, is the will expressed as it is in consequence of either a clerical error, or a failure on the part of someone to whom the testator gave instructions in connection with the will, to comply with those instructions?[40]

48 Further, while the authorities do recognise the fact that s 31 of the Act is beneficial legislation, and thus ought to be given a 'fair, large, and liberal interpretation',[41] the authorities also caution that, in exercising its jurisdiction to order rectification, a court should recognise the gravity of the task before it, and its consequences. In Rawack v Spicer,[42] Campbell J stated as follows:

Each of the items listed in section 140(2) is relevant to a claim for rectification of a will. The nature of the cause of action or defence, namely a claim to rectify the will of the deceased person, involves a situation closely analogous to that involving a claim against a deceased estate. Hence the factors which will lead a Court to take great care in evaluating the evidence concerning a claim against a deceased estate (referred to in Nagle v Lavender [2002] NSWSC 611 at [24]- [27]) likewise apply to a claim for rectification. That granting rectification involves the Court in altering a document which will irrevocably change the destination of a deceased person's property after death, when the deceased has gone to the trouble of executing in a particularly formal fashion an instrument, often after receiving legal advice that the testator has paid for, is a serious subject matter. To allege that a testator, particularly when a will has been made in a formal fashion and with legal advice, has incorrectly stated, or unclearly stated, his or her intentions in that Will, is to allege a fairly grave matter - not as far advanced, in the spectrum of gravity of allegations, as an allegation of fraud, but still fairly grave. These considerations underlie some of the judicial statements about the standard of proof required before rectification of a will is granted.[43]

49 Counsel for Mariano submitted that, if the construction of the Will asserted by Mariano is not adopted by the Court, nevertheless, the evidence relied upon by Mariano makes it sufficiently clear that, provided certain conditions were fulfilled, it was Adrian's intention that the Toorak property pass to Mariano. The authorities make it clear that the relevant 'clerical error' can be the error of the testator. The rectification jurisdiction conferred upon the Court by s 31 of the Act ought to be exercised beneficially to give full effect to Adrian's intention.

50 Counsel for Kairu submitted, in summary, as follows:

(a) the Court's rectification jurisdiction is not enlivened, as there was no apparent 'clerical' or 'typographical' error, and the Court cannot identify any instructions which failed to be recorded or were erroneously recorded;

(b) the rectification power is only enlivened where a testator gives instructions to another. There is no contemporaneous evidence of any 'instructions' or 'intention'. The relevant time is at the time the will is made, and the testator's intentions must be established by 'clear and convincing proof';

(c) the affidavit evidence, if admissible, does not assist the Court. There is no evidence that the testator intended to create the trust in favour of Mariano and not someone else;

(d) the only person who can give probative evidence of Adrian's intentions is Adrian himself, and he is deceased. That there has been no contrary evidence brought before the Court does not mean there is no such evidence; and

(e) a will cannot be rewritten to identify the beneficiaries of the trust created by the will.

51 In my view, the Will should be construed so as to give effect to the property swap. It is open to the Court, in construing a will, to insert missing words which are clearly necessary to give effect to the testator's intention.[44] Here, the missing words are 'for my father Mariano', such that the third paragraph should read:

I give my unencumbered half interest in 22 Linlithgow Road Toorak to my Trustee on trust for my father Mariano until such time as she or my estate is given apartment 281/299 Queen Street Melbourne.

52 I do not, contrary to the submissions advanced on behalf of Mariano, need to add anything further to give effect to Adrian's intentions. As the beneficiary of the trust created by the Will, Mariano, being of full age and capacity, is entitled to compel the trustee (in this case Kairu) to transfer the estate's half share of the Toorak property to Mariano,[45] provided that he tenders to her a signed transfer of land with respect to the Republic apartment within a period which ends six months after Mariano's death. Once he has done so, he would have done everything within his power to give effect to the gift contemplated by the Will, and the gift would be complete in equity.[46]

53 The submissions to the effect that it is not possible to determine whether the relevant clause of the Will is 'active' or 'protective', or whether Kairu can be compelled to receive a gift are, with respect, a distraction. With the insertion of the words which sufficiently describe the beneficiary of the trust created by the Will, the intention and the effect of this clause of the Will is clear: Adrian intended the property swap to occur, but to protect Kairu, he imposed a deadline within which Mariano must give effect to his side of the bargain. If he did not, he had no absolute entitlement to the Toorak property. However, if he did all within his power to give the Republic apartment to Kairu, which, in the current case, means tendering to her a signed transfer of land form, he would become absolutely entitled to the Toorak property, with all of the rights of an absolutely entitled beneficiary of trust property to compel transfer of legal title to the trust property.

54 In my view, this is the only sensible construction of the Will, from the perspective of Adrian's armchair, whether viewed at the time he made the Will, or viewed at the date of his death. Having regard to the principle that a court of construction should strive to give effect to a gift, it is a construction which should be adopted. The last sentence of the relevant clause refers expressly to Mariano. Further, the evidence of the relevant background circumstances is important. First, while, somewhat remarkably for a man with Adrian's resources (noting that the evidence is that the Valmorbida Group owed Adrian $9 million as at 1 December 2015) and with his responsibilities, Adrian made a homemade will, it is apparent from reading the Will as a whole (which the authorities require), that Adrian was aware of his assets and financial interests. He made specific, albeit deferred bequests of luxury motor vehicles to his daughters. He identified four trusts in which he had an interest. He appointed Kairu as the appointer of one trust, his father and Mr Ivan Rizio to administer another trust, and another family member with Mr Rizio as appointers of two other trusts. In the latter case, he directed the appointers to deal with his interests in the trusts in a certain way for the benefit of his children.

55 Whether these appointments and directions were valid and effective is not a question for resolution in this proceeding. The point to be made is that Adrian clearly took some care in considering the dispositions he wished to make in the Will. He was seriously ill, and had a young family. He knew that he held a half share in the property his father lived in, and I can safely infer that he knew that his father owned the property in which he and his family lived. It is inconceivable that he intended to create a trust over the Toorak property in favour of any beneficiary other than Mariano, or for any other purpose than to give effect to the property swap. As observed by counsel for Mariano in his submissions, there is no other sensible construction of this clause of the Will.

56 Theoretically, of course, there are other possible recipients of the gift of Adrian's half share of the property. However, it cannot be Kairu, because she was directed to hold the Toorak property on trust, and was only to become entitled to the Toorak property in the event that she was not given the Republic apartment. It makes no sense that either his daughters or any other family member(s) were the intended beneficiaries of the trust, for why would Mariano hand over a valuable property if he was not to receive the outstanding half share of the property he lives in? The fact that there are in theory other words which could be inserted into the Will to give effect to the trust that Adrian intended to create doesn't detract from my comfortable satisfaction that the words he intended to use were "for my father Mariano".

57 Contrary to the submissions advanced on behalf of Kairu, this case is not on all fours with the difficulties facing the Court in Butlin v Butlin.[47] In that case, the testator had omitted to make gifts he ought to have turned his mind to address in his will. Further, in that case, Barwick CJ and Menzies J held that there were a number of different options as to how the gap in the relevant will could reasonably be filled.[48]

58 Here, there is no gap in the Will, but a gap in the words to give effect to the intention discernible from the scheme and the language of the Will, and the surrounding circumstances. The difference is significant. Apart from the motor vehicles and the instructions concerning the trusts, Adrian left the balance of his estate to Kairu. Thus, if the Will was silent as to the Toorak property, his half interest in the Toorak property would automatically pass to her. But the Will is not silent as to the Toorak property. He intended to make a gift of the property to someone other than Kairu, in certain circumstances. As noted above, the only realistic candidate is Mariano, as the Toorak property is his home, and because he is the only person who can fulfil the condition imposed for the making of the gift of the Toorak property.

59 I do not consider that there is any blanket prohibition upon inserting words into a will to give effect to the intentions of the testator, merely because the words to be inserted identify the beneficiary of trust property, as contended for on behalf of Kairu. Further, given the nature of the inquiry involved in cases concerning the construction of wills, it is unwise to take too much from other authorities beyond broad statements of principle.

60 I do not consider the fact that the terms of the Will, properly construed, "compels" Kairu to accept the Republic apartment prevents the Court adopting my preferred construction of the Will. True it is that if Mariano does all he can to effect the transfer of the Republic apartment to Kairu, he would be able to compel the transfer of the Toorak property to him. But that puts him in no different position to any other beneficiary of trust property. By appointing Kairu as the trustee of the Toorak property, Adrian deprived her of the capacity to assume beneficial ownership of the property, unless Mariano failed to comply with the condition imposed by the Will within an ascertainable period of time.

61 The encumbrance over the Republic apartment is no barrier to adopting my preferred construction of the terms of the Will. Indeed, the Toorak property is similarly encumbered, and I understand the situation to be that the mortgages over the properties do not secure specific loan advances (such as home loans), but rather, are part of a pool of securities for funds advanced by Bendigo Bank to the Valmorbida Group and its related entities. I note that in Mr Freeman's email to Mr Kyriacou of 1 December 2015, Mr Freeman states:

Both properties need to be released from the security pool held by Bendigo Bank.

62 While I have not heard any argument about this issue, and there may be other evidence concerning this issue which is not currently before the Court, it seems to me to at least be arguable that such a statement might be held to have promissory force given that Mr Freeman was Mariano's agent. But that may be a debate for another occasion.

63 Given my findings regarding the proper construction of the terms of the Will, then strictly speaking, it is not necessary for me to deal with the application for rectification. However, I will do so, briefly. In the event that the construction of the Will contended for by Mariano (and as abridged by me) was not open to have been found, I would have found, for substantially the same reasons advanced in relation to the construction question, that Mariano would be entitled to an order for rectification to insert the missing words "for my father Mariano". I agree that it is possible for a clerical error to be made with respect to a home-made will, notwithstanding that the maker of the Will was also the writer of the will. The clerical error was the failure to write out the words necessary to identify the intended beneficiary of the trust created by the Will.

64 Adrian's intention is discernible not only from the words and the scheme of the Will, but also from the evidence of the surrounding circumstances, including his terminal illness, the residence of him and his family in the Republic apartment, the residence of Mariano in the Toorak property, and the evidence that Adrian told Mr Freeman that he was not prepared to surrender his half share of the Toorak property without there being something given to Kairu. At the time of this discussion he had already made a Will (he believed) that gave effect to the property swap. This conversation took place in the context of there being a range of mechanisms to give effect to the property swap, including an inter vivos transfer, such that it was understandable that Adrian would not agree to any transaction in his lifetime which did not reflect what he believed to be the arrangements made in the Will. Contrary to the submissions advanced on behalf of Kairu, this evidence supports, rather than detracts from, my conclusion that Adrian intended that the property swap occur.

65 I shall hear further from counsel regarding the appropriate form of orders, and the question of costs.

[1] On 16 November 2017 the Court received a request that delivery of these reasons be delayed to enable the parties to engage in discussions with respect to the disputes between them in this and other proceedings in this Court. On 12 March 2019 the Court received notice that the parties sought that judgment be delivered.

[2] For ease of reading, I have used the parties' first names. No disrespect is intended.

[3] The affidavit evidence suggested that Adrian used the Republic apartment as his office and for entertaining, while he and his family lived in the apartment next door. However, it was confirmed during the course of the trial that Erica and her children live there. Little seems to turn upon this issue.

[4] After the delivery of these reasons, the solicitors for Mariano confirmed that Adrian's former solicitor held a Discharge of Mortgage form with respect to the Toorak property, which had not been lodged with the Registrar of Titles.

[5] These 'instructions' were not the subject of any evidence.

[6] Marley v Rawlings and anor [2014] UKSC 2; [2015] AC 129, 144. This statement was referred to with apparent approval by Gray J in Re Josef Bernhard Nies (Deceased) [2014] SASC 93, [14].

[7] [2002] NSWSC 849.

[9] Victoria, Parliamentary Debates, Legislative Assembly, 9 October 1997, 433 (Ms Jan Wade, Attorney‑General).

[10] Law Reform Committee, Parliament of Victoria, Reforming the Law of Wills: Report on an inquiry into the 1991 Draft Wills Bill (May 1997), page 126.

[11] New South Wales, Parliamentary Debates, Legislative Assembly, 19 September 2006, 433 (Mr Bob Delous, Attorney‑General).

[13] New South Wales Law Reform Commission, The Law of Wills (Report No 85, April 1998).

[15] David M Haines, Construction of Wills in Australia (LexisNexis Butterworths, 2007).

[18] P Herzfeld, T Prince and S Tully Interpretation and Use of Legal Sources: The Laws of Australia (Thomson Reuters, 2013).

[19] [2010] VSC 207.

[21] [2014] SASC 93.

[22] [2011] NSWSC 179 [38].

[23] [1968] 1 Ch 39.

[25] [1955] HCA 70; (1955) 94 CLR 70, 78.

[26] (1873) LR 8 Ex 160, 162.

[27] This is commonly described as the "armchair principle".

[28] [2014] UKSC 2; [2015] AC 129.

[30] Applicant's submissions, [17]-[18].

[31] Lewis v O'Loughlin [1971] HCA 53; (1971) 125 CLR 320, 330.

[32] [2016] VSC 514 [21]-[22].

[33] [1999] 3 VR 666, 667.

[34] LexisNexis, Halsbury's Laws of Australia [395 - 965].

[35] [2004] VSC 537.

[37] [2011] NSWSC 179.

[38] [1991] NSWCA 207.

[40] [2011] NSWSC 179 [73].

[41] Nies [2014] SASC 93 [31]-[34]; see also In re the Will and Estate of McComb [1999] VSC 311 [23].

[42] [2002] NSWSC 849.

[44] Fell v Fell [1922] HCA 55; (1922) 31 CLR 268, 274; Butlin v Butlin [1966] HCA 4; (1966) 113 CLR 353, 357.

[45] Saunders v Vautier [1841] EngR 629; (1841) 4 Beav. 115.

[46] Corrin v Patton (1990) 169 CLR 540, 559.

[47] [1966] HCA 4; (1966) 113 CLR 353.

[48] Ibid, 358 (Barwick CJ), 363 (Menzies J).