Singer v United Israel Appeal Refugee Relief Fund & Ors

Judgment 1HIS HONOUR: These proceedings raise questions of construction of a will that relate to how liabilities of the estate for debts and testamentary expenses are to be borne as between the beneficiaries. 2A further question concerns the validity of a condition to a gift to the testator's son, the fifth defendant. The condition provides for a gift to the fifth defendant to lapse if he makes any claim on the estate for any entitlement of any kind other than as expressly provided for in the will. 3The plaintiffs are the executors of the will. The testator, Ivan John Gonda, died on 9 February 2011. His last will was made on 21 December 2010. Probate in solemn form of that will was granted on 12 March 2012. 4The estate was initially estimated for probate purposes to have a value of approximately $14.5 million subject to a liability for income tax to be assessed. 5The executors collected moneys totalling $1,588,350, although these moneys included funds held on behalf of a private company. Up to 25 March 2013 the executors made payments totalling $1,312,577.93. These payments were partly of moneys held on behalf of the private company, partly of loans or other debts owed by the deceased, partly of the deceased's income tax liabilities and partly testamentary expenses. 6As at 25 March 2013 the balance of cash held in the general estate account was approximately $275,000. I am told that the current balance of the estate account is approximately $180,000. 7There remain some outstanding taxation liabilities, and testamentary expenses are continuing to be incurred. The executors estimate that the available cash will be insufficient to meet such liabilities and recourse might have to be had to other property of the deceased, including real estate or shares in private companies that were the subject of specific gifts. 8By his will, the testator made a number of pecuniary legacies. He made gifts to 10 legatees of small amounts that together totalled some $22,000. With the consent of the other persons entitled under the will, those legacies have been paid. The deceased left other pecuniary legacies in amounts of $100,000 or more to persons who have been joined as defendants to these proceedings as well as specific gifts of chattels and real estate. He also left a gift of shares to his widow. 9Clause 3 of the will provides: "3. PAYMENT OF DEBTS AND EXPENSES I GIVE, DEVISE and BEQUEATH the whole of my estate both real and personal of whatsoever kind and wheresoever situate to my Executors UPON TRUST to pay thereout all my just debts, funeral and testamentary expenses and other duties, if any, and thereafter and subject thereto the following provisions shall apply." 10Clause 4 is headed "BEQUEST" and included the following gifts: "... (j)my property known as [xxx-xxx xxx xxxxx xxxx xxxx] Double Bay NSW 2023 (being the land comprised in certificate of title folio identifier 10/845345) shall be sold by my Executors (in such manner as they shall so determine) an the net proceeds thereof shall be paid in equal shares unto the following organisations: (i) Unto THE EMMANUEL SCHOOL, Randwick NSW for its General Purposes PROVIDED THAT: A. Such gift shall be applied as a bursary for talented children requiring financial assistance; B. I DECLARE that the receipt of the President, Chief Executive Officer, Treasurer or other Public Officer for the time being of the said charitable organisation shall be an absolute discharge to my Executors; and C. IF the charitable organisation no longer exists at the time of my death, then I DIRECT that such bequests shall be made to such organisation or organisations which are registered as a charity in New South Wales and which have similar objectives to such nominated organisations as my Executors shall in their discretion determine; and (ii) SIR MOSES MONTEFIORE HOME, HUNTERS HILL NSW SYDNEY for its General Purposes PROVIDED THAT: A. I DECLARE that the receipt of the President, Chief Executive Officer, Treasurer or other Public Officer for the time being of the said charitable organisation shall be an absolute discharge to my Executors; and B. IF the charitable organisation no longer exists at the time of my death, then I DIRECT that such bequests shall be made to such organisation or organisations which are registered as a charity in New South Wales and which have similar objectives to such nominated organisations as my Executors shall in their discretion determine. ... (m) Unto my son ROBERT LAWRENCE GONDA of [xx xxxxxx xxxx] Bronte NSW: (i) my property known as [xxxx xx, xxxxxxxx, x-xx] Thornton Street Darling Point NSW 2027 (being the land comprised in certificate of title folio identifier 20/SP4428); (ii) my property known as [xxxx xx, xxxxxxx xxxx, xx] Thornton Street Darling Point NSW 2027 being the land comprised in certificate of title folio identifiers 2/SP3686 (studio apartment and parking space) and 87/SP 3686 (storage facility); (iii) one motor vehicle I own as at the date of my death; (iv) all my personal jewellery; (v) all my personal belongings and photographs (other than those specifically gifted hereunder); and (vi) the contents of my store room (other than any particular items specifically gifted hereunder); PROVIDED THAT such gifts herein shall be subject to and conditional upon the said ROBERT LAWRENCE GONDA not making any claim of any kind upon my estate for any entitlement of any kind other than that expressly provided for in this paragraph and in the event of any such claim by my son (or anyone on his behalf) then the gifts herein shall lapse form [sic] part of my residuary estate accordingly. ... (t) Unto my wife and primary carer DEMILLA GONDA ('Demi') of [xx/x-xx] Thornton Street, Darling Point NSW 2027: (i) all my shares in LA GONDA PROPERTIES PTY LIMITED ACN 001 021 914 and LA GONDA ENTERPRISES PTY LIMITED ACN 000 985 848; (ii) my property known as [x/xx-xxx] McEvoy Street Alexandria NSW 2015 (being the land comprised in certificate of title folio identifier 8/SP33308); (iii) the sum of $10,000 for each and every consecutive 12 month period that Demi remains in the position as my primary carer (noting for the record that she has started as my primary carer on 24 December 2007); [iv] the portrait of my dear mother by Judy Cassab; (v) my computer and printer PROVIDED THAT my Executors may take a backup copy of all and any data thereon; (vi) my porcelain figurine, manufactured by Herend, titled 'Goose boy'; and (vii) my porcelain platter, inscribed with 'Mazal Tov' in Hebrew lettering; AND I GIVE, DEVISE and BEQUEATH the balance of my estate of whatever nature and wherever situate as follows: (v) as to a 2/3rd share - unto THE EMMANUEL SCHOOL, RANDWICK PROVIDED THAT: (i) Such gift shall be applied as a bursary for talented children requiring financial assistance; (ii) I DECLARE that the receipt of the President, Chief Executive Officer, Treasurer or other Public Officer for the time being of the said charitable organisation shall be an absolute discharge to my Executors; and (iii) IF the charitable organisation no longer exists at the time of my death, then I DIRECT that such bequests shall be made to such organisation or organisations which are registered as a charity in New South Wales and which have similar objectives to such nominated organisations as my Executors shall in their discretion determine; and (w) as to a 1/3rd share - unto my wife and primary carer DEMILLA GONDA absolutely." 11By cl 4(n), (o) and (p) the deceased also left general pecuniary legacies to his three grandchildren. 12Clause 6(a) of the will provides: "(a) It would by my fervent wish and desire that my son ROBERT LAWRENCE GONDA does not make any claim on my estate for any entitlement other than that expressly provided for above, given I have adequately provided for him in my lifetime (by way of loans, and gifts) and have bequeathed him the above bequests, and have provided for his children pursuant to the above bequests, to enable him and his family to have sufficient funds for his maintenance and benefit for the rest of his life and that of his family AND I DIRECT THAT in the event of any such claim that my Executors take all steps and such action as they may deem appropriate to defend any such claim and ensure my last wishes are carried out accordingly." 13Substantial pecuniary legacies were also left to the Wolper Hospital and to United Israel Appeal Refugee Relief Fund. They have entered submitting appearances. 14Section 46(1) of the Probate and Administration Act 1898 provides: "46 Property of deceased to be assets which may be sold or mortgaged (1) The real as well as the personal estate of every person dying as aforesaid shall be assets in the hands of the person's executor to whom probate has been granted, or administrator, for the payment of all duties and fees, and for the payment of the person's debts in the ordinary course of administration." 15Section 46C(2) provides: "46C Administration of assets ... (2) Where the estate of a deceased person is solvent the deceased person's real and personal estate shall, subject to the provisions of any Act as to charges on property of the deceased and to the provisions, if any, contained in the deceased person's will, be applicable towards the discharge of the funeral, testamentary, and administrative expenses, debts, and liabilities, payable thereout in the order mentioned in Part 2 of the Third Schedule." 16Part 2 of the Third schedule provides: "Part 2 Order of application of assets where the estate is solvent 1 Assets undisposed of by will, subject to the retention thereout of a fund sufficient to meet any pecuniary legacies. 2 Assets not specifically disposed of by will but included (either by a specific or general description) in a residuary gift, subject to the retention out of such property of a fund sufficient to meet any pecuniary legacies, so far as not provided for as aforesaid. 3 Assets specifically appropriated or disposed of by will (either by a specific or general description) for the payment of debts. 4 Assets charged with or disposed of by will (either by a specific or general description) subject to a charge for the payment of debts. 5 The fund, if any, retained to meet pecuniary legacies. 6 Assets specifically disposed of by will, rateably according to value." 17The first substantive relief sought by the executors in their summons is as follows: "6. A DETERMINATION whether, upon the true construction of the Will dated 21 December 2010 of Ivan John Gonda, late of Darling Point, in the State of New South Wales, Company Director, and in the events that have happened, the terms of clause 3 of the aforesaid Will: (a) operate to displace the provisions of subsection (2) of section 46C of the Probate [and] Administration Act 1898 (the Act) such that the payment of the funeral, testamentary and administration expenses, debts, and liabilities of the aforesaid estate are not payable thereout in the order mentioned in Part II of the Third Schedule to the Act; and (b) if so, whether the payment of the funeral, testamentary and administration expenses, debts, and liabilities of the aforesaid estate are borne rateably by the gifts to the persons and institutions in clause 4 of the aforesaid Will; or (c) if not, how the payment of such funeral, testamentary and administration expenses, debts, and liabilities are to be borne." 18No one has contended that cl 3 of the will operates to displace the provisions of s 46C(2) of the Act. Although cl 3 provides that the gifts in cl 4 apply after the executors have paid the testator's just debts, funeral and testamentary expenses and other duties from his estate, the clause does not go on to say how the burden of such debts, funeral and testamentary expenses and other duties is to be borne between the different beneficiaries. 19The direction in cl 3 for the executors to pay debts, funeral and testamentary expenses and other duties is to be construed as an administrative direction that the executors do what they would in any event be required to do, but does not have the substantive effect of altering the statutory order in Part 2 of the Third schedule (Re Healey Deceased; Ebert v Healey [1968] 2 NSWLR 35 at 37-38; and on appeal Ebert v Healey [1969] 2 NSWR 68, particularly at 73-74). 20In Ebert v Healey, Street J (as his Honour then was) at first instance and the Court of Appeal applied observations of Kitto J in University of Western Australia v WA Trustee Executor and Agency & Co Ltd (1961) 105 CLR 71 at 95 in holding that the statutory order is only to be displaced by a direction in a will for the payment of debts where one can glean both that the testator intended that the order should be displaced and also indicated in what way the burden of debts and liabilities was to be borne or apportioned. 21Accordingly, the question raised by para 6 of the summons should be answered by its being declared that cl 3 of the will does not operate to displace the provisions of s 46C(2) of the Probate Administration Act. 22The next issue is raised by para 7 of the summons. The executors seek the following: "7. A DETERMINATION whether, upon the true construction of sub-clause (j) of clause 4 of the aforesaid Will, the gift therein to the Third and Fourth Defendants (The Emanuel School and Sir Moses Montefiore Home, Hunters Hill NSW) is a 'pecuniary legacy' within the meaning of Class 5 of Part II of the Third Schedule to the said Act or a gift of an asset specifically disposed of by the Will within the meaning of Class 6 of Part II of the Third Schedule to the said Act." 23Counsel for the executors and for the Emmanuel School and Sir Moses Montefiore Home submitted that the gift in cl 4(j) to the Emmanuel School and the Sir Moses Montefiore Home of the net proceeds of sale of the property at New South Head Road, Double Bay, was a specific gift and not a general pecuniary legacy and, hence, fell within Class 6 and not Class 5 of Part 2 of the Third Schedule. 24A specific gift that falls within Class 6 will not be treated as a fund retained to meet pecuniary legacies within Class 5. If the gift would have been adeemed had the testator disposed of the asset during his lifetime, it does not come within Class 5. 25In Woodman, Administration of Assets, 2nd ed at pp 67 and 69, Professor Woodman stated: "... the statutory order of application of assets in New South Wales makes no specific provision for the inclusion of general legacies. The only reasonable conclusion is that, in enacting the provisions of Pt 2 of the Third Schedule to the Wills, Probate and Administration Act 1898 (NSW), the Legislature merely copied the expression 'pecuniary legacies' from the English legislation, so that the expression must be interpreted as having an identical meaning to that given by s 55(1)(ix) of the Administration of Estates Act 1925. Acceptance of this view means that general legacies, and demonstrative legacies to the extent to which they cannot be paid out of the designated fund, come within the meaning of the phrase 'pecuniary legacies' in Class 5, and hence in Classes 1 and 2, of the statutory order." and "... Being specifically disposed of by the will, pecuniary legacies which are specific are not within the meaning of the expression 'pecuniary legacies' as used in Class 5 of the statutory order of application of assets, and the only possible conclusion is that a restricted meaning must be given to the interpretation of 'pecuniary legacies' within the provisions of Class 5." (See also Certoma, The Law of Succession in New South Wales, 4th ed at [15.170], 301-302.) 26Professor Woodman provided a number of examples of gifts of sums of money that are specific gifts (page 78) including "direction to sell land and pay 400 pounds out of proceeds to A: Spurway v Glyn (1804) 9 V 483, 32 ER 689." (See also Theobald on Wills, 17th ed at 17-012.) 27It is clear that the gift under cl 4(j) would have failed had the testator disposed of the property at New South Head Road, Double Bay during his lifetime. 28The gift under that clause does not bear the burden of debts testamentary expenses or other liabilities in accordance with Class 5 of the Third Schedule, but Class 6. 29There should be a declaration accordingly. 30The next question raised by the summons is: "8. A DETERMINATION whether, upon the true construction of paragraph (iii) of sub-clause (t) of clause 4 of the aforesaid Will, to the Tenth Defendant (Demilla Gonda) is a 'pecuniary legacy' within the meaning of Class 5 of Part II of the Third Schedule to the Act." 31There was little argument addressed to this question. The solicitor for Demilla Gonda did not contend that the gift in cl 4(t)(iii) was not a pecuniary legacy. It is hard to see what else it could be. There is no provision for the legacy in 4(t) to be paid out of a specific fund. No issue was raised on the summons as to the quantum of the legacy payable under cl 4(t)(iii). There should be a declaration that the gift in that subclause is a pecuniary legacy within the meaning of Class 5 of Part II of the Third Schedule. 32The remaining question raised by the summons is: "9. A DETERMINATION whether, upon the true construction of the aforesaid Will, the condition attaching to the gift to the Fifth Defendant (Robert Gonda) in sub-clause (m) of clause 4 of the aforesaid Will and the condition contained in clause 6 thereof, are void as being against public policy." 33Counsel for the executors submitted that the condition attached to the gift in cl 4(m) was void as being against public policy as it had as its object and effect the deterrence of the beneficiary from having recourse to the courts on a matter which was in the public interest, namely, the pursuit of a claim for a family provision order pursuant to Part 3.2 of the Succession Act 2006. I am told that an application has been made by the fifth defendant for a family provision order. 34The submission of counsel for the executors was adopted by counsel for the fifth defendant. The parties who would have an interest in upholding the validity of the condition, namely, those who would be entitled to the residue of the estate under cl 4 (v) and (w), The Emmanuel School and Demilla Gonda, made no submission to the contrary. 35In In the Will of Gaynor [1960] VR 640 the testator made a gift of Commonwealth inscribed stock to his daughter and gave the rest of his estate to his son. The will included a clause that if either of the beneficiaries was dissatisfied with any of the provisions of the will and instituted or caused to be instituted any action to sue or proceed to test any of the provisions of the will then such beneficiary would forfeit his or her share and interest in the estate. On an application to determine whether the institution of proceedings by the daughter under Victorian testator and family maintenance legislation would trigger the condition, so as to result in the forfeiture of the gift to the daughter, O'Bryan J held that such proceedings would trigger the condition, but that the condition was void. 36The conclusion that the condition was void was based on two grounds. The first ground is not of present relevance but the second ground was that the condition was void as being contrary to public policy. O'Bryan J applied observations of the High Court in Lieberman v Morris (1944) 69 CLR 69 where a number of the Justices held that the Testator's Family Maintenance and Guardianship of Infants Act 1916 (NSW) served not only a private policy of benefiting individuals entitled to an order for provision for their maintenance or advancement in life, but also public policy; it being a matter of public concern that members of a testator's family should not be left without adequate provision such that they might become a charge on the community. 37Notwithstanding changes to the legislation providing for family provision orders, such legislation continues to implement a public policy of making provision for the maintenance of members of a family who might be found in need of maintenance or advancement in life following the testator's death (Barns v Barns [2003] HCA 9; (2003) 214 CLR 169 at [34]). 38In In the will of Gaynor, O'Bryan J said (at 642): "If it is correct to say that this part of the Act now in question is designed to serve a public purpose as well as to benefit individuals, and that the authority conferred upon the court was so conferred not merely in the interests of the widow, widower or child as the case may be, but of the public, because it is a matter of public concern that they should not be left without adequate provision for their proper maintenance and support, surely a condition whose object and purpose appears from its very language to be to deter such a beneficiary under a will from making such an application is one that is opposed to public policy." 39His Honour went on to deal with a submission of counsel that there was nothing in the condition which prohibited a beneficiary from making an application for a family provision order. In that respect the case was different from Lieberman v Morris where it was found that a provision of a contract that a spouse not make an application for provision was void as contrary to public policy. 40O'Bryan J rejected that argument. His Honour said: "But a condition subsequent never can effectively prohibit a beneficiary from doing what he chooses to do. If he chooses to break the condition, he will work a forfeiture of the gift to which the condition is attached. The vice in this sort of condition is that a testator may leave a beneficiary a legacy or other provision by will which may or may not be adequate for his proper maintenance and support--and if he attaches a condition of forfeiture to that gift should the beneficiary make an application under PtIV, the condition is opposed to public policy because the object and effect of it is to deter the beneficiary from having recourse to the courts in a matter in which it is in the public interest that he should be free to have recourse." 41The decision In the Will of Gaynor has been followed by King J in Re Chester (deceased) (1978) 19 SASR 247 at 262, and by Rath J in Shah v Perpetual Trustee Co (1981) 7 Fam LR 97 at 101. 42A different view has been taken in England (Nathan v Leonard & Ors [2003] 4 All ER 198) where Mr Martin QC sitting as a deputy judge of the High Court declined to follow In the will of Gaynor, taking a different view as to whether the deterrence from making a claim under the legislation was contrary to public policy. 43No one has submitted that I should not follow Re Gaynor, notwithstanding the contrary view expressed in Nathan v Leonard. I should do so, unless satisfied that the decision was clearly wrong, or that there have been such changes to the relevant legislation since that case and the others which follow it were decided that they are no longer authoritative. No party has submitted that I should take such a course. 44Particularly in the absence of contrary argument, I am satisfied that I should follow the decisions in In the will of Gaynor, Re Chester and Shah v Perpetual Trustee Co. I will make the declaration accordingly that the condition attaching to the gift to the fifth defendant is void as being against public policy. 45For these reasons and subject to any submission counsel may have as to the precise form of the declaration to be made, I propose to make the following declarations.