Steiner v Strang

Family Context

1. The Deceased had three children, being Mr Steiner and two daughters, Ms Robyn Webster and Ms Lesley Webster. Without intending any disrespect, I shall refer to them as Robyn and Lesley respectively. The Deceased's husband died in 1982. From that time, Mr Steiner and the Deceased kept in touch regularly. The Deceased would phone Mr Steiner every week or two.
2. In 1996, 1998 and 1999, Mr Steiner, his wife and the Deceased travelled to Townsville to visit Mr Steiner's daughter, son and grandchildren. On those occasions, Mr Steiner and the Deceased, with other members of their family, would walk along The Strand, a seaside foreshore area in Townsville. Residences and apartments on The Strand face towards the beach and there are views out to the port of Townsville and Magnetic Island. A feature of the area is a man-made pool, which everybody calls "the rock pool". Mr Steiner deposed that, on a number of occasions, the Deceased commented to him on the buildings that she liked along The Strand, saying words to the effect of the following: I am thinking of buying a winter unit here for myself to use for a month or two a year, or to retire to.
3. In 2000, Mr Steiner and his wife moved to Townsville to live and he purchased a house situated in Kings Road, Townsville. After they moved, Mr Steiner and his wife began swimming in the rock pool for exercise.
4. The Deceased came to visit Mr Steiner and his wife in 2002 and again in 2004. The Deceased stayed with Mr Steiner at the Kings Road house. On that visit, they saw the building being built in which the Apartment is situated. While the Deceased was visiting Mr Steiner on that occasion, he said, more than once, words about the building to the following effect: I like the look of this new development. Mr Steiner and the Deceased commented on how nice the apartments appeared to be and how close the building was to the rock pool.
5. In about June 2005, the Deceased telephoned Mr Steiner and said words to the following effect: I have signed a will leaving everything equally between you and your two sisters.
6. Although several wills of the Deceased were in evidence, the earliest will was dated 2 June 2008 (the 2008 Will). By the 2008 Will, after legacies to grandchildren, bequests of jewellery to her children, a devise of her half interest in a house at Killara to Mr Steiner and Robyn equally, and a bequest of her interest in a bridal business to Lesley and Lesley's daughter, the Deceased left the residue of her estate to Mr Steiner and Robyn in equal shares. There was no evidence as to whether any earlier will (such as the one in June 2005 referred to by Mr Steiner) was in similar terms.

Purchase of the Apartment

1. Mr Steiner deposed that, in early November 2007, the Deceased telephoned him and they had a conversation to the following effect: The Deceased: I would like to buy you a unit on The Strand as a gift. Mr Steiner: Isn't it unfair to Lesley and Robyn? I do not want to be thought of as a favourite. Is everything still left equal? The Deceased: Yes, everything is equal, just that you have never benefited from shares in [the] Maggie Bridal business and I don't think that is fair. My limit for the unit is $900,000. Mr Steiner: OK, but you have always talked about buying a retirement unit on The Strand for yourself in the winter months. I would like you to think you could always stay with us and we could both go to the rock pool together for exercise. The Deceased: We will talk about it.
2. Mr Steiner and his wife thereafter inspected a number of properties. Eventually they found that an auction for the sale of the Apartment was set for Saturday, 17 November 2007. On 16 November 2007, the Deceased transferred $100,000 to Mr Steiner's bank account. At the auction, Mr Steiner was the successful bidder for the Apartment for a price of $881,500. Mr Steiner paid the deposit as successful bidder from the funds that had been transferred to him by the Deceased.
3. On 20 November 2007, Mr Steiner retained Mr Leslie Ward as his solicitor to act in connection with the purchase of the Apartment. On 22 November 2007, Mr Steiner spoke by telephone to an employee of Mr Ward. The employee made a note that Mr Steiner had rung to make sure that they were "looking after his file". The note records the following: This is a cash contract … please note that the funds are coming from Sydney (his mother) and she is elderly, this may be hard to organise, so please do in enough time.
4. Mr Steiner and the Deceased continued to have regular telephone conversations after the auction. In one of those conversations, Mr Steiner deposed, he said words to the following effect: You can come and stay with me in the unit for holidays if you want to.

Documents Following the Purchase of the Apartment

1. Mr Steiner deposed that, from the time the Deceased made her offer to buy the Apartment for him, he was "uncomfortable about accepting such a generous offer". He said that he also wanted the Deceased to feel comfortable about coming to Townsville whenever she wanted to.
2. In early December 2007, without prompting from the Deceased, Mr Steiner wrote out a document in his handwriting that he thought was an appropriate arrangement between them. The document (the 6 December Document) was headed "Agreement", was dated "6/12/07" and was in the following terms: RE LOAN TO PURCHASE [the Apartment] IT IS AGREED BETWEEN JOHN R STEINER AND DOROTHY M STEINER THAT: 1 $881,500-00 IS GIVEN TO JOHN R STEINER BY WAY OF A LOAN TO PURCHASE [the Apartment]. 2 THE FULL LOAN IS TO BE FORGIVEN UPON THE DEATH OF DOROTHY M STEINER. The 6 December Document contained provision for signature by the Deceased and Mr Steiner and for a witness of each of their signatures. On 6 December 2007, Mr Steiner sent the 6 December Document to Mr Ward. Mr Steiner did not send a copy to the Deceased or to anyone else.
3. Mr Ward said in an affidavit that, on or about 6 December 2007, his firm received the 6 December Document from Mr Steiner. He said that, following receipt of that document (but without being specific as to the date), he prepared a document headed "Acknowledgement of Loan" (the Acknowledgement). There was no evidence as to whether Mr Ward was, or was not, acting on specific instructions from Mr Steiner to prepare the Acknowledgement. After blanks had been completed in handwriting, the Acknowledgement was in the following terms: ACKNOWLEDGEMENT OF LOAN I, JOHN RAYMOND STEINER, the person named below as the borrower ACKNOWLEDGE- DOROTHY M. STEINER ('my mother') has loaned to me the sum of money particularised below ('the loan'), I will repay the loan to my mother - 2.1 upon demand in writing by her or her lawful attorney, or 2.2 if my mother has not made demand for payment prior to her death, then to her estate upon her death. I, DOROTHY M. STEINER, agree in the event [that] I have not made demand for repayment of the loan prior to my death and the borrower is named in my last Will as a residual beneficiary of my estate, it shall be sufficient that providing the debts owed by me at my death (including testamentary expenses) are paid and discharged without the necessity of my personal representatives having to make demand for the repayment of the loan, the loan can be repaid by the borrower by offsetting the amount of the loan as part of the borrower's entitlement as a residual beneficiary of my estate. 'The borrower' - JOHN RAYMOND STEINER address of the borrower - [XX] Kings Road, Hyde Park, Townsville, Queensland amount of the loan - $881,000-00

EXECUTED this 18th day of December, 2007 At the bottom of the Acknowledgement were the signatures of Mr Steiner and the Deceased, along with the signatures of two witnesses. Clearly, the Acknowledgement makes no mention of the forgiveness of the loan, contrary to the 6 December Document.

1. Mr Steiner deposed that, on 7 December 2007, which was his birthday, the Deceased telephoned him and they had a conversation to the following effect: The Deceased: Happy birthday. […] I will wire you the remaining balance of the purchase price to your bank account. Consider it as a birthday present. Mr Steiner: Thank you very much. He did not mention the 6 December Document, which he had sent to Mr Ward the previous day. The primary judge concluded that Mr Steiner's evidence about that conversation could be given no weight. On 7 December 2007, the Deceased transferred the sum of $781,000 to Mr Steiner's bank account.
2. On 13 December 2007, the purchase of the Apartment was settled. The balance of the purchase price was paid by Mr Steiner from the funds transferred by his mother on 7 December 2007.
3. [On about 16 December 2007, Mr Steiner had a conversation with the Deceased to the following effect: Mr Steiner: I am still concerned about your gift. I would like to make you feel comfortable and secure about coming to Townsville to stay with us in [the Apartment] for a holiday or for an extended stay or even to retire to as you had always talked about. To this end I have sent off to my lawyer a simple agreement that allows you to ask for the money or [the Apartment] back during your lifetime and if you don't it is forgiven at your death. I will send the document down to you for signing when I get it back. The Deceased: Well OK but I do not require it, nor will I ever ask for the money back. Mr Steiner: It will be a simple agreement for a loan, to be forgiven on your death.] If Mr Steiner's evidence as to that conversation is accepted, then it may be inferred that he was unaware of the existence of the terms of the Acknowledgement as at that date.
4. On 18 December 2007, Mr Steiner attended at Mr Ward's office to collect documents in connection with the purchase of the Apartment to take them to the Land Titles Office for registration. While he was in Mr Ward's office, Mr Ward provided him with the Acknowledgement.
5. [When Mr Steiner first read the Acknowledgement, he said to Mr Ward words to the following effect: There is nothing in it […] mentioning anything about loan forgiveness. Mr Ward said: If your mother asks for the money back during her lifetime, it will be a debt, and if she does not do so, then the loan will be forgiven.] If that evidence is accepted, then Mr Ward's advice was clearly inconsistent with the terms of the Acknowledgement.
6. Mr Steiner signed the Acknowledgement in Mr Ward's presence. The date and the amount in the Acknowledgement had both been handwritten in the Acknowledgement before Mr Steiner signed it. Mr Ward signed the Acknowledgement after Mr Steiner. Mr Ward did not speak to the Deceased or to Mr Ross Strang (the solicitor for the Deceased) about the document. Mr Steiner took the document when he left Mr Ward's office and posted it to the Deceased in Sydney on about 19 December 2007.
7. [After Christmas 2007, the Deceased telephoned Mr Steiner and they had a conversation to the following effect: Mr Steiner: Have you received the document I posted to you? The Deceased: What is all this legal mumbo-jumbo? Mr Steiner: It simply means that if you ask for the money back then it's a loan, otherwise it is forgiven at death. The Deceased: OK, but as I told you it's a gift and I won't ask for the money back.]
8. [Mr Steiner deposed that, in about January 2008, he had a telephone conversation with the Deceased during which she said words to the following effect: I had a call from Ross [Strang] and went down to his office. The streets were very busy. I told Ross the debt was to be forgiven when I die. I told him I wanted that strictly adhered to.
9. The Deceased also said, in the middle of January 2008: I have been to Mr Strang's office and he has witnessed [the Acknowledgement]. I told him it was a "forgiven at death" loan agreement.]
10. Mr Strang swore an affidavit about the signing of the Acknowledgement as follows: In about December 2007 I received a telephone call from the Deceased and she said to me: "I'd like you to witness my signature to a loan document I have." On the same day or shortly afterwards I […] met with the Deceased. The Deceased said to me: "I'd like you to witness my signature on a loan agreement which I have with my son John." I said: "Who prepared the document?" The Deceased replied: "John's solicitor prepared it." I read the document quickly but I did not explain it to the Deceased or give her any advice about it. The Deceased said to me: "I'm happy with the document, it records the agreement between John and me." The Deceased then signed the document in my presence and I signed it as witness. That evidence is consistent with that of Mr Steiner, save for a timing discrepancy of about a month. Mr Steiner's affidavit, which deposed to his conversations with the Deceased concerning her conversations with Mr Strang to the effect that the debt was to be forgiven when she died, was prepared after that of Mr Strang. However, Mr Strang did not prepare a supplementary affidavit denying those conversations, nor was any further evidence elicited from him. He was not cross-examined.
11. Mr Steiner subsequently received the Acknowledgement back from the Deceased by post. He took it to Mr Ward for safekeeping. Mr Steiner did not discuss the Acknowledgement with the Deceased again before she died, and the Deceased did not make any demand on Mr Steiner for repayment.
12. Robyn swore an affidavit in which she said it was a "ritual" that her brother and mother spoke to each other every Sunday over a period of years. She said that it was also a "ritual" that her mother would then speak to her on the telephone after she had spoken with Mr Steiner. Before Christmas 2007, the Deceased said to Robyn, in a telephone conversation, words to the following effect: I have bought John a unit on The Strand. […] It's John's unit.
13. Robyn said that in discussions that she had with the Deceased about the Apartment after it was purchased, the Deceased never made any mention to her that there was any loan or mentioned any papers being signed by Mr Steiner in regard to any loan. Robyn also said that the Deceased said to her on a number of occasions after Christmas 2007 words to the following effect: I believe that the unit has made a big difference in John's life. I did not like the house he had renovated [in Kings Road] … I'm happy I could buy him the unit on The Strand.
14. On 2 June 2008, the Deceased signed the 2008 Will in Mr Strang's presence. Clause 8 of the 2008 Will was in the following terms: I DRAW my Executors' attention to [the] Acknowledgement of Loan between myself and my son JOHN dated 18 December 2007 and request that the provisions of that Acknowledgement be implemented and observed.
15. Mr Strang could not recall any discussion with the Deceased about that clause. That clause appeared in all the later wills in evidence before the primary judge, of 23 July 2009, 5 May 2010, 25 August 2010, 9 November 2010, 28 April 2011 and 7 June 2011.
16. By her last will dated 7 June 2011 (the Last Will), probate of which was granted to the Executors on 14 December 2011, the Deceased appointed the Executors as her executors and trustees. By cl 3 of the Last Will, the Deceased gave pecuniary legacies of $2,000,000 to each of Robyn and Mr Steiner. She also gave legacies to the children of Robyn and Lesley, and to the children of Mr Steiner.
17. By cl 4 of the Last Will, the Deceased bequeathed her jewellery to be divided among Mr Steiner, Robyn and Lesley. By cll 5, 6 and 7 of the Last Will, the Deceased devised and bequeathed various interests to Robyn and Lesley and members of Lesley's family.
18. Clause 9 of the Last Will contained a gift to Mr Steiner and Robyn, in equal shares as tenants in common, of the residue of the Deceased's estate after the payment of all her final expenses, debts and taxes, including monies in bank accounts, other than those that were the subject of specific bequests. Clause 10 of the Will was in the same terms as cl 8 of the 2008 Will.

Reasoning of the Primary Judge

1. It was common ground that the amount of $881,000 had not been paid by Mr Steiner to the Deceased or to the Executors. It was also common ground that the Deceased had not made a demand for repayment prior to her death and that Mr Steiner was named as a residuary beneficiary within the meaning of the Acknowledgement. His Honour characterised those two matters as conditions set out in the Acknowledgement that had been satisfied.
2. It was also accepted by Mr Steiner that, apart from the advances of $881,000, some 14 other payments totalling approximately $1,200,000 had been made to him by the Deceased during her lifetime. None of those payments was accompanied by any documentation suggestive of a loan arrangement.
3. The primary judge identified three issues to be determined, as follows: 1. whether a debt is owed to the estate by Mr Steiner, 2. whether, on the proper construction of the Acknowledgement, any debt is payable only from the residuary gift and not from the pecuniary legacy, and 3. whether Mr Steiner is obliged to pay interest.

Issue 1: Whether a Debt Is Owed

1. The primary judge found that Mr Steiner was clearly satisfied that the terms of the Acknowledgement were terms by which he had agreed to be bound. That was because Mr Steiner had executed the Acknowledgement and, more importantly, because he was the one who took the initiative and instructed his solicitor to prepare it. In that regard, his Honour referred to a concession made by counsel for Mr Steiner in the course of the trial that his Honour would have to infer that the Acknowledgement in its ultimate form was as a result of Mr Steiner's instructions to Mr Ward. That concession was made in circumstances where there had been no suggestion of error or a failure to follow instructions on the part of Mr Ward. I shall say something about that concession when dealing with the grounds of appeal.
2. The primary judge held, as one of his Honour's central conclusions, that the Acknowledgement was not intended to be a contract between Mr Steiner and the Deceased, but an acknowledgement of a loan already made. His Honour considered that the Acknowledgement was properly to be regarded as admissible evidence of post-contractual conduct constituting an admission. His Honour therefore rejected a submission advanced on behalf of Mr Steiner that the Acknowledgement was ineffective as a contract because no consideration passed from Mr Steiner to the Deceased for the promises made by it. Since his Honour held that the Acknowledgement should not be regarded as a contract, the question of past consideration did not arise.
3. The primary judge held that the Acknowledgement was a clear indication that a debt was owed to the estate by Mr Steiner, in that, by it, he agreed that, where there was no demand before death, he would repay the loan to his mother's estate on her death. His Honour was not satisfied that the amount of $881,000 was intended to be a gift and could only sensibly be viewed as a loan from the Deceased to Mr Steiner. Therefore, his Honour held, it was a debt owed to the estate. That is to say, his Honour concluded that that part of the Acknowledgement did not preclude the application of the rule in Cherry v Boultbee [1] to both the residuary entitlement and the pecuniary legacy.

Issue 2: Proper Construction of the Acknowledgement

1. The primary judge considered that, in circumstances where Mr Steiner's share of the residuary estate was not sufficient to cover the amount specified in the Acknowledgement, the balance was money owing by him to the estate. His Honour observed that, despite the 6 December Document, the Acknowledgement contained no mechanism for, or suggestion of, the forgiveness of any loan that may have been made by the Deceased to Mr Steiner by reason of the advances. His Honour held that the Acknowledgement did not have the effect that any indebtedness would be discharged in any circumstances, but only that it would be offset.
2. The primary judge concluded that the Executors were entitled to set off the amount of $881,000 against the $2,000,000 legacy given to Mr Steiner as well as any entitlement of Mr Steiner as residuary beneficiary. His Honour accepted that it may well be that the second part of the Acknowledgement was otiose (because it referred to the loan being repaid by offsetting it as part of Mr Steiner's entitlement only as a residuary beneficiary of the estate), but saw no inconsistency between the insertion of a mechanism by which it was clear that Mr Steiner's entitlement as a residuary beneficiary could be applied in repayment of the amount of any loan, on the one hand, and a right to "offset" the debt from his pecuniary legacy, on the other hand.

Issue 3: Interest

1. The primary judge found that no interest was payable under the terms of the loan to Mr Steiner for any period prior to the death of the Deceased. His Honour concluded that interest should only be calculated on the amount remaining after the "offset" has been calculated. Thus, his Honour considered that Mr Steiner should be ordered to pay interest only on the amount specified after deducting any amount to which he is entitled as a residuary beneficiary. That conclusion is not subject to complaint in the appeal.

Grounds of Appeal

1. The grounds of appeal relied on by Mr Steiner can be summarised as follows: 1. The primary judge wrongly rejected evidence and failed to have regard to evidence that was admitted; 2. The primary judge erred in finding, without consideration of the evidence that was rejected and in circumstances where Mr Steiner was not cross-examined on that question, that there was a contract of loan between Mr Steiner and the Deceased and in failing to find that there was no contract of loan between Mr Steiner and the Deceased before the execution of the Acknowledgement; 3. The primary judge should have concluded that, on the true construction of the Acknowledgement, any indebtedness of Mr Steiner to the Deceased was to be paid only out of the residuary bequest and not the legacy of $2,000,000 and, to the extent that it exceeded the amount of the residuary bequest, it was forgiven.

Ground 1: Rejected Evidence

1. It is unfortunate that the cross-summons was determined without pleadings. In the absence of pleadings, it is unclear quite how the Executors put their case against Mr Steiner. By the cross-summons, the Executors sought a declaration as to whether, on the true construction of the Acknowledgement, Mr Steiner was indebted to the estate of the Deceased. Further, in the course of oral argument before this Court, the Executors asserted that they were suing on the Acknowledgement. However, they did not dissent from the conclusion of the primary judge that the Acknowledgement was no more than an admission or acknowledgement of a pre-existing obligation. That is to say, the Executors do not contend that the Acknowledgement itself gave rise to or created an obligation on the part of Mr Steiner, but merely that it evidenced a pre-existing obligation.
2. For the Executors to succeed in obtaining an order that Mr Steiner pay the sum of $881,000 to the estate of the Deceased, it was incumbent upon them to demonstrate that there was a pre-existing obligation as at the time when the Acknowledgement was signed. However, they accepted that they could provide no particularisation of the circumstances in which any pre-existing obligation was created or came into existence. There was no evidence of any such obligation, save as may be inferred from the 6 December document and the Acknowledgement.
3. In circumstances where the Acknowledgement had no juridical effect in creating or giving rise to an obligation, it could only be admissible as evidence of an admission by Mr Steiner. Therefore, evidence as to the circumstances in which the Acknowledgement was brought into existence and signed was admissible in order to enable an assessment to be made as to the weight that should be attributed to it as an admission or as an acknowledgement. [2] Indeed, even if there were a contract that pre-dated the Acknowledgement, then, on the assumption that such a contract was wholly oral (since there was no evidence of anything in writing), evidence of an admission would be admissible to assist in ascertaining the content of any such agreement. [3]
4. The primary judge erred in rejecting those parts of Mr Steiner's affidavit that were rejected. They were admissible to explain what weight, if any, should be given to the Acknowledgement. It follows that the appeal should be allowed.

Ground 2: Loan or Gift

1. Of course, if the Acknowledgement were a deed, then an obligation could arise under it notwithstanding the absence of any consideration passing from Mr Steiner to the Deceased. However, it was not suggested by the Executors that it was a deed under the law of New South Wales or Queensland (noting that it was signed in each of these two states). Under s 45(2) of the Property Law Act 1974 (Qld), which is the equivalent of s 38 of the Conveyancing Act 1919 (NSW), an instrument that is expressed to be an indenture or a deed or that is expressed to be sealed is deemed, if it is signed and attested by at least one witness not being a party to the instrument, to be sealed and to have been duly executed. It would then constitute a deed under the general law. The Acknowledgement does not satisfy that requirement since it is not expressed to be a deed and is not sealed or expressed to be sealed.
2. The evidence given by Mr Steiner, Robyn and Mr Ward as to the circumstances in which the Acknowledgement was brought into existence and the evidence as to the communications between Mr Steiner and the Deceased concerning the advances, together with the 6 December Document, should have been weighed against the evidence consisting of the Acknowledgement in order to determine whether an obligation on the part of Mr Steiner had come into existence prior to the Acknowledgement and what the terms of any such obligation were.
3. The primary judge must be taken, at least by implication, to have concluded from the existence of the Acknowledgement and the concession made by counsel for Mr Steiner, that Mr Steiner's evidence should not be accepted, although his Honour made no actual finding as to the credibility of Mr Steiner. After referring to evidence by Mr Steiner about a conversation with the Deceased in which she described the balance of the purchase price of the Apartment as being "a birthday present", his Honour said that no weight could be attached to "such evidence". That may suggest a conclusion that none of Mr Steiner's evidence about a gift from the Deceased should be accepted. His Honour made no other finding that Mr Steiner's evidence should not be believed. His Honour must be taken to have concluded that, by reason of the Acknowledgement, that evidence was to be ignored. His Honour erred in failing to make appropriate findings, apart from the rejection of admissible evidence.
4. As I have said, the primary judge accorded some weight to a concession made by counsel for Mr Steiner. In one sense, of course, the concession is perfectly understandable in that, as I have indicated, Mr Ward's evidence was simply that, following receipt of the 6 December Document, he prepared the Acknowledgement. That is to say, he prepared the Acknowledgement as a result of instructions in the form of the 6 December Document.
5. However, the terms of the Acknowledgement are inconsistent with the 6 December Document, which Mr Steiner sent to Mr Ward, and there was no evidence of any communication between Mr Steiner and Mr Ward concerning the preparation of the Acknowledgement, other than the evidence of Mr Steiner, which his Honour refused to admit, that when he queried the absence of anything about loan forgiveness, Mr Ward said that, if the Deceased did not ask for the money back in her lifetime, the loan would be forgiven. Having regard to the other evidence of Mr Steiner, both admitted and rejected, to the effect that the payments from the Deceased were gifts, it is difficult to see why an inference should be drawn that the Acknowledgement represented specific instructions given to Mr Ward by Mr Steiner.
6. There was minimal cross-examination of Mr Steiner and no cross-examination was directed to the conversations with the Deceased to which he deposed, irrespective of whether or not they were admitted or rejected. It would be unfortunate for the cross-summons to be remitted for a further trial. Nevertheless, that course appears to be unavoidable. It would not be appropriate for this Court to make findings of fact that appear to be inconsistent with the implied findings made by the primary judge. A finding by this Court that Mr Steiner should be believed, in the absence of an opportunity for the Executors to cross-examine him on the rejected evidence, could involve a miscarriage of justice. [4] Equally, a finding that Mr Steiner's evidence should be rejected in favour of the Acknowledgement could also involve a miscarriage of justice. In the circumstances, unfortunate though it will be, there will need to be a new trial of the matters raised by the cross-summons.

Ground 3: Whether Mr Steiner's Liability Is Limited to a Residuary Bequest

1. Mr Steiner contended that, if a debt is owing to the Executors, he is only obliged to repay it to the extent of the residuary gift to him under the Last Will and that, if that is insufficient to repay the sum of $881,000, he will be discharged from any liability to repay the shortfall. He relies on the terms of the Acknowledgement for that contention. The Executors contended that they are entitled to set off the sum of $881,000, if it is owed to the estate by Mr Steiner, against Mr Steiner's entitlement as a beneficiary under the Last Will, whether that entitlement is as a residuary beneficiary or as a legatee. In effect, Mr Steiner relies on the Acknowledgement as constituting an acceptance by the Deceased that, if any part of the "loan" has not been repaid prior to her death, the liability of Mr Steiner to repay the loan was to be limited to his entitlement as a residuary beneficiary under the last Will.
2. However, in the light of the conclusion that the Acknowledgment is no more than an admission and does not create or give rise to any obligation, it is difficult to see any basis upon which Mr Steiner could rely upon it as discharging any part of a pre-existing obligation that he might have had. In any event, the Acknowledgment does not, on its proper construction, say what Mr Steiner contends that it says. In its terms, it does no more than defer the obligation of Mr Steiner to repay the "loan".
3. To repeat the relevant words of the Acknowledgement, with the addition of parentheses for readability, the "agreement" was that: in the event [that] I have not made demand for repayment of the loan prior to my death and the borrower is named in my last Will as a residual beneficiary of my estate, it shall be sufficient that (providing the debts owed by me at my death (including testamentary expenses) are paid and discharged without the necessity of my personal representatives having to make demand for the repayment of the loan), the loan can be repaid by the borrower by offsetting the amount of the loan as part of the borrower's entitlement as a residual beneficiary of my estate.
4. That is to say, its effect is that the Executors will not be entitled to require Mr Steiner to repay the sum of $881,000 unless there are insufficient funds in the estate to enable the Executors to pay the debts owing by the Deceased (including testamentary expenses) at her death. If there are sufficient funds, without making demand for repayment, then the "loan" "can" be repaid by Mr Steiner by setting it off against his entitlement under the Last Will to a share of the residuary estate. Mr Steiner "can" also, of course, repay the "loan" from any other funds to which he is entitled. Further, there is nothing in the language of the Acknowledgement that constitutes a discharge of any part of the "loan", assuming that it is ultimately held that there was an obligation to the Deceased on the part of Mr Steiner at the date of her death to repay the advances. That is to say, the language of the Acknowledgement limits neither Mr Steiner's liability to repay the "loan" nor the range of possible funds from which he might repay it.
5. The primary judge made no error in concluding that, as a matter of construction, the Acknowledgement did not have the effect of discharging Mr Steiner from any obligation that he had. On the other hand, it may be that the Executors were not entitled to judgment against Mr Steiner until such time as the administration of the estate had reached the stage of distribution of the residuary estate and it had become apparent that Mr Steiner's share in the residuary estate was less than $881,000.
6. That would leave the question of whether or not Mr Steiner was entitled to be paid the legacy of $2,000,000 before he paid to the Executors the amount of the "loan". An estate has the right to deduct from an amount owing to a residuary legatee or a pecuniary legatee the amount of a debt owing by that legatee to the estate. [5] Where a person who is entitled to participate in a fund is also bound to make a contribution in aid of that fund, that person cannot be allowed to participate in the fund unless and until the duty to contribute has been fulfilled. [6] Accordingly, the Executors will be entitled to retain from the legacy due to Mr Steiner the amount of any "loan" owing by him to the estate, if it ultimately be held that there is such a liability to the estate.

Conclusion

1. The orders made by the primary judge should be set aside. The matter should be remitted to the Equity Division for retrial. Whether that trial proceeds in conjunction with the application by Mr Steiner for a family provision order will be a matter of case management by the Equity Division. In that regard, there is no reason why the primary judge should not deal with the matter if that is considered convenient.
2. Mr Steiner has been substantially successful. The general rule is that a court will not differentiate between the issues on which a party succeeded and the issues on which a party failed, [7] and I do not consider that the circumstances of this case, in which Ground 3 did not take up a significant part of the appeal, warrant departure from that rule. The Executors should pay Mr Steiner's costs of the appeal. The costs of the first trial would depend upon the outcome of any new trial.
3. LEEMING JA: I agree with Emmett JA.
4. SIMPSON JA: I agree with Emmett JA.

Endnotes

1. (1839) 41 ER 171.
2. See, eg, Lustre Hosiery Ltd v York (1935) 54 CLR 134 at 143-4.
3. Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [143].
4. UCPR, r 51.53(1).
5. Re Taylor [1894] 1 Ch 671; Re Ackerman [1891] 3 Ch 212.
6. Peruvian Railway Construction Co Ltd [1915] 2 Ch 144 at 150.
7. Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 July 2015