Section 92 of the Trustees Act 1962

Wills and estates - Questions to be answered on construction of will and distribution of assets

Wills and estates - Question as to asset of estate subject to mortgage - Real property forming part of residuary estate subject to mortgage to secure liability under guarantee and indemnity of liability of a company one of the family businesses - Company in liquidation - Specific legacy of family businesses - Whether liability secured should be borne primarily by real property or by assets of remaining family business

Wills and estates - Question as to conditional gift - First charge on residuary estate if chargee has first transferred interest in certain real property 'to me' pursuant to letter from testator to chargee - Transfer after the testator's death - Whether condition met

Wills and estates - Questions as to payment of costs and expenses of getting in assets and general costs of administration, availability to trustees of proceeds of sale of real property mortgaged to secure liability under guarantee and indemnity, cash as part of the residuary estate and payment of gifts of capital to the life tenant under the will

Administration Act 1903 (WA), s 45

Trustees Act 1962 (WA), s 92

Wills Act 1970 (WA), s 26(1), s 28(1), s 28(2)

First Named Plaintiff : Mr G H Murphy SC & Mr M S Macdonald

1 These are proceedings on an originating summons dated 8 August 2007 seeking directions and orders with respect to certain questions that have arisen in relation to the proper construction of a will and the distribution of the assets of the estate. The application is under Administration Act 1903 (WA) s 45 and Trustees Act 1962 (WA) s 92 and Rules of the Supreme Court 1971 (WA) O 58 r 2.

2 The questions for the court have undergone some change since the originating summons. In order to understand them in their present form, it is necessary to set out the following background. That background first sets out a chronology of events for the most part as they appear from the schedule of agreed facts filed for the purposes of the hearing before me. There were certain clarifications of that schedule accepted by the parties at that hearing which are incorporated into that background. After setting out that chronology, I set out the principal terms of the will so far as they concern me.

3 After setting out the background including those terms, I will list the questions for the court. I will then refer to a preliminary issue, as to the appearance before me of senior counsel for one of the plaintiffs in that plaintiff's capacity as a beneficiary under the will. I then deal with each of the questions.

4 The late Joseph Versteeg (the testator) was married to Caroline Versteeg (Mrs Versteeg) and had five sons. They were the first named first plaintiff (Giuseppe), and the four defendants (respectively, Johanis, Enrico, Umberto and Edward). I should note that Johanis was also known within the family as Hans.

5 The testator operated or controlled two family businesses. One was J Versteeg & Sons, the other was Versteeg Contractors Pty Ltd. J Versteeg & Sons was a plant hire business which the testator owned as a sole proprietor. Versteeg Contractors Pty Ltd was an earth moving contractor of which, as I understand it, the testator had a controlling shareholding interest and was a director.

6 Both businesses operated from property situate at 90 McDowell Street in Welshpool (the McDowell Street property). The McDowell Street property had been acquired in 1977 in the names of the testator, Johanis and Mrs Versteeg, as joint tenants. By a declaration of trust dated 14 March 1978 Johanis declared he held his one-third interest in trust for the testator. On 3 June 1982 the testator, Johanis and Mrs Versteeg ceased to hold the McDowell Street property as joint tenants, and instead became owners of it as tenants in common.

7 In 1984 disputes arose between the testator and Johanis as to the latter's one-third interest in the McDowell Street property as well as monies he was said to have taken from building society accounts of the testator.

8 By a letter dated 3 May 1984 (the 3 May 1984 letter) the testator demanded that Johanis transfer his one-third interest in the McDowell Street property to the testator pursuant to the declaration of trust dated 15 March 1978. In view of its importance to one of the questions before me I set that letter out in full text:

This letter has been prepared for me by my solicitors at my request, but I want you to understand that this is a personal demand from me to you.

I do not propose to go into the matters which have occurred to date in detail however I am sure you know that both your mother and I are extremely disappointed to your conduct.

It is my sincere hope that your severance from the family business can be achieved on a friendly basis and you know that I wish you well in the future. It is my hope that time will heal the wounds and that the family can remain on friendly terms as a family should.

My main reason for writing is in relation to the [McDowell Street property].

As you are aware this property was purchased by myself and registered in your name as to a one third share in common as trustee for me in the context of my Will in the event that I died. As you are aware you evidenced your declaration of trust by letter dated the 15th of March 1978 a copy of which is enclosed.

I have instructed my solicitors to prepare a Transfer of Land to effect a transfer by you of your interest to me and I would request that you execute the Transfer where indicated and return it to me immediately. I shall of course meet all costs in the matter of the Transfer. I would stress however that this is now most urgent and if you do not honour your undertaking to transfer the land back to me then I will have no alternative other than to instruct my solicitors to take action. I sincerely hope this will not be necessary and look forward to your early response.

9 There is some issue as to whether or not Johanis received the 3 May 1984 letter on or about its date. However, it is not in dispute that, by correspondence dated 5 June 1984 solicitors for the testator supplied Johanis with a copy of the 3 May 1984 letter.

10 On 31 May 1984 the testator executed his will (the will). I will return to the principal terms of the will for my purposes. For now it is sufficient to note that, subject to Mrs Versteeg taking a life interest in the estate of the testator, and to a pecuniary and specific legacies to certain of the five sons, the residuary estate was given to all five sons. The testator appointed Enrico and James Halbert Stuart Macdonald (Mr Macdonald) as the executors and trustees of the will.

11 It is not in dispute that at least Johanis was not aware of the terms of the will during the testator's lifetime.

12 In June 1984 further correspondence passed between the solicitors for the testator and the solicitors for Johanis in relation to the disputes that had arisen between Johanis and his father. This correspondence concerned, among other things, a claim that Johanis was indebted to the testator in the sum of $220,000 in addition to the claim that Johanis held his one-third interest in the McDowell Street property in trust for the testator.

13 On 12 September 1984 the testator executed a codicil to his will (the codicil). The codicil removed Enrico as one of the executors and trustees of the will and replaced him with Giuseppe. The codicil made no amendments to the dispositive or other substantive provisions of the will.

14 On 21 December 1984 Versteeg Contractors Pty Ltd was placed in receivership, and on 6 March 1985 this court wound the company up.

15 In or about January 1985 Enrico by himself or through a company of his, Versteeg Plant Hire Pty Ltd, took possession of a number of the chattels of the business of J Versteeg & Sons and converted them to his own use.

16 On 20 July 1985 the testator died. By that date, J Versteeg & Sons had ceased operating various items of plant and equipment of that business, at least some of which had been taken by Enrico.

17 As at the date of the death of the testator, the position of his estate was as follows.

18 Virtually all of his personal assets were represented by his interest in the business J Versteeg & Sons, which then had assets comprising cash at hand of $429,128, debtors of $22,300, the debt owed under the October 1985 deed then estimated at $205,664, a debt of $518,740 owed by Versteeg Contractors, a debt of $87,196 owed by Mrs Versteeg and an amount held by Citicorp as a deposit pending settlement of a dispute in respect of a bulldozer, less current liabilities of $287,903. His shares in Versteeg Contractors had no value. His remaining personalty, being personal effects, was nominally valued at $1,000.

19 The testator's interests in real property included his interest in the McDowell Street property. The McDowell Street property was subject to a mortgage in favour of Citicorp to secure debts of Versteeg Contractors to it with a face value of $650,000, debts which were also secured by a charge on assets of the company. The McDowell Street property was sold with settlement occurring on or about 28 March 1988: Citicorp took no portion of the proceeds.

20 The testator also had interests in or ownership of three other properties.

21 One was Lot 4, Douglas Road in Martin (the Douglas Road property), in which the testator had a half interest as tenant in common with Johanis. On 19 December 1988 the estate of the testator sold the Douglas Road property.

22 Another was Lot 65, Brook Road in Welshpool (the Brook Road property), in which the testator had a quarter interest as tenant in common. On 16 June 1989 the estate of the testator sold the Brook Road property.

23 The third property other than the McDowell Street property in which the testator had an interest at his death was farming property at the corner of Feldt Road and Douglas Road, Martin (the Feldt Road properties). The Feldt Road properties were wholly owned by the testator and valued at $590,000. However, the Feldt Road properties were mortgaged to secure certain liabilities of the testator (and others) to the National Australia Bank (NAB) as guarantors and indemnitors of obligations to NAB of Versteeg Contractors Pty Ltd. The guarantee and indemnity was under a guarantee and indemnity dated 5 October 1984 and thus was dated after the date of the codicil, and showed as guarantors the testator, Enrico, Giuseppe and Umberto, although only the first three executed the document (Exhibit 1) (the NAB guarantee and indemnity).

24 I note that the NAB guarantee and indemnity and liability makes no reference at any point to J Versteeg & Son or any business associated with the testator (or the other guarantors and indemnitors) other than Versteeg Contractors.

25 The guarantee and indemnity extended at crystallisation in part to a liability to NAB of $39,802 on an 'in reduction account' (the 'in reduction account' NAB liability) as well as other liabilities to the bank. The liabilities crystallised at $1,004,620 in all (the final NAB liability).

26 At the date of death of the testator, on 20 July 1985, his liabilities comprised (apart from the liabilities of J Versteeg & Sons) a contingent liability under a bill of sale to Citicorp with a face value of $650,000 given as security on behalf of Versteeg Contractors the liability under which was estimated to be nil; a contingent liability under the NAB guarantee and indemnity; a contingent liability to the State Taxation Department for payroll tax of Versteeg Contractors with a face value of $33,000; and a contingent liability under a guarantee to the Commonwealth Trading Bank for debts of Versteeg Contractors with a face value of $20,000. The contingent liability to Citicorp never fell in, while the estate of the testator met the contingent liability under the NAB guarantee and indemnity and to the State Taxation Department.

27 Following the date of the death of the testator, and by an agreement by deed dated 1 October 1985 (the October 1985 deed), Enrico and his company, Versteeg Plant Hire acknowledged a debt of $314,000 to the estate. Of this amount, it was accepted that 7.9% was in respect of his taking of non-business monies, while the remaining 92.1% was in respect of plant and equipment of J Versteeg & Sons. The October 1985 deed provided for payment of that sum by instalments with interest. By 1988 after a series of payments the principal sum remaining due under the October 1985 deed was $206,000. Following Enrico's declaration of bankruptcy on 20 May 1991, by a deed dated 22 September 1992 his official trustee in bankruptcy and the trustees of the estate of the testator agreed that the estate's claim against Enrico under the October 1985 deed would be set-off against Enrico's entitlements under the will.

28 Over the period October 1985 to January 1986 the trustees of the estate of the testator continued the claim against Johanis for the monies allegedly appropriated from the building society accounts of the testator and for the transfer of the one-third interest in the McDowell Street property.

29 On 8 January 1986 probate of the will was granted to Giuseppe and Mr Macdonald.

30 In January 1986 the trustees of the estate of the testator commenced proceedings in Supreme Court action CIV 1083 of 1986 against Johanis and a related company of his, Hanscon Holdings Pty Ltd, as well as against Enrico and his related companies. Johanis in turn claimed some share of the family business of the testator.

31 By agreement dated 12 February 1986 (the 1986 agreement) the parties to CIV 1083 of 1986 settled that litigation. The terms included that Hanscon would, subject to a condition that was subsequently met, purchase certain plant and equipment of J Versteeg & Sons for $750,000 payable in certain instalments and secured by a charge over the assets of Hanscon and the provision of a guarantee by Johanis and a related company of his, Malavoca Pty Ltd. That company and Versteeg Plant Hire would pay $30,000 for the use of the equipment between the period 1 October 1985 and 31 November 1985. Johanis expressly acknowledged he held his one-third interest in the McDowell Street property in trust for the testator, and he agreed to execute a transfer of that interest to the estate. Johanis agreed to account to the estate for monies had and received or converted by him, in the amount of $220,000, reducible in certain circumstances to $90,000, repayable on demand by the trustees of the estate of the testator following the death of Mrs Versteeg. Johanis as security for all of his obligations under the 1986 agreement charged his entire interest in the estate of the testator and the 'common assets' as defined in the 1986 agreement.

32 On 19 December 1989 the estate of the testator sold the Feldt Street properties for a net sum of $779,456. Those proceeds were applied first in satisfaction of the 'in reduction account' liability to NAB, which then stood at $88,000. The balance of the proceeds were held in escrow to abide the outcome of an action between the liquidator of Versteeg Contractors and NAB (Court v National Australia Bank (Unreported, WASC, Library No 8585, 11 November 1990)). Following judgment in that action, the balance was also paid to NAB, under the NAB guarantee and indemnity, on or about 1 July 1991, in respect of the final NAB liability. At the same time the estate of the testator paid the balance of $214,521.67 of the final NAB liability to NAB. I note in passing that on the figures I have the total of the proceeds of the sale of the Feldt Road properties and the payment of that last amount is somewhat less than the amount of the final NAB liability. However, it was common ground before me that the final NAB liability was satisfied without any other material payment from the estate of the testator.

33 In December 1989 the estate of the testator purchased for $304,803 land and buildings in Cannington, and a further $3,000 was expended on preliminary plans and feasibility studies for the development of residential units on the Cannington land. Over the period 13 May 1995 to December 1995 the Cannington land was developed at a cost of about $1 million, using funds principally if not exclusively realised from the business of J Versteeg & Sons. The development was ultimately sold between January 2007 and April 2007 for a total of $3,110,000.

34 On 23 August 2002 the second named plaintiff was appointed in place of Mr Macdonald as one of the trustees of the will.

36 The net assets of the estate of the testator appear on the materials before me to be worth significantly over $2 million.

37 I turn now to the material provisions of the will.

38 The will provided (in cl 2) that the trustees were to call in and dispose of all of the testator's real and personal estate and were directed to pay his just debts and funeral and testamentary expenses. The provision went on in material part that the trustees:

shall stand possessed of the residue of such moneys property or interests as the case may be, PROVIDED ALWAYS that the power hereinbefore vested in my Trustees to sell and convert any item of my real and personal estate shall be expressly subject to the Trusts hereinafter AND where the Trusts hereinafter provide that any specific item of my real or personal estate shall be transferred made over and delivered to any one or more beneficiary then in that event my Trustees shall have no discretion to sell or convert that item of my real or personal estate into money but shall hold the same in situ for delivery to my beneficiary in accordance with the Trusts hereinafter subject only to the capacity of my Trustees do so within the financial circumstances relating to my estate at the time of my death and in the event that financial circumstances shall necessitate the liquidation of any one or more items of my real and personal estate to permit the equitable discharge by my Trustees of the Trusts hereinafter then in that event my Trustees shall have a sole and exclusive discretion in that regard absolutely (hereinafter called 'my residuary estate').

39 The 'trusts' upon which the residuary estate was to be held were first (cl 2(a)) to apply the income of the residuary estate for the benefit of Mrs Versteeg with power in the trustees' 'sole discretion to apply from time to time part of the capital of my residuary estate for the maintenance of [Mrs Versteeg] should the need arise'.

40 Then the trusts upon which the residuary estate was to be held were set out, as follows (cl 2(b)(i) - (iv), excluding a proviso to (iv) which did not in the event obtain):

(i) To make over and deliver to my son [Johanis] the sum of SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($750,000) as a first charge upon my residuary estate to his sole and exclusive benefit absolutely the said bequest to be paid to [Johanis] on that day being two years next following the date of my death or the death of my dear wife [Mrs Versteeg] whichever is the latter PROVIDED my Trustees shall have the sole an exclusive discretion to apply part of the whole of the said bequest to my son [Johanis] prior the due date for delivery of the said bequest PROVIDED this bequest is subject to my said son [Johanis] having first transferred and delivered to me that one third interest in common held by my said son in trust in [the McDowell Street Property] pursuant to my demand in that regard of the 3rd of May 1984.

(ii) To transfer make over and deliver to such of sons [Giuseppe, Enrico] and UMBERO PETERS VERSTEEG as shall survive me and if more than one then as tenants in common in equal shares for their sole and exclusive benefit absolutely all that my interest at death in [the McDowell Street Property] and being the property upon which the family business is conducted (or such further or other property in substitution therefor or in addition thereto as at the date of my death).

(iii) To transfer make over and deliver to such of my sons [Giuseppe, Enrico] and UMBERO PETERS VERSTEEG as shall survive me and if more than one as tenants in common in equal shares all that my interest at death in the family business or businesses including without limitation that business conducted by me as 'J VERSTEEG & SONS' and that company 'VERSTEEG CONTRACTORS PTY LTD' (and or any other or further business or business interest and whether held personally or by shareholding or by beneficial entitlement pursuant to a unit holding in a unit trust or otherwise as the case may be in addition to or in substitution therefor as at the date of my death) for their sole and exclusive use and benefit absolutely AND I HEREBY FORGIVE AND DISCHARGE absolutely all debts standing in the books or records of financial account of the family business or businesses to my credit effective as of the date of my death to the intent and effect that the family business or businesses shall not be deprived of the working capital represented by any debts standing to my credit in the books of accounts of the family business or businesses as at the date of my death.

(iv) To transfer make over and deliver the whole of the balance of my residuary estate of whatsoever kind and wheresoever situate to such of my sons [Giuseppe, Enrico], UMBERO PETERS VERSTEEG, [Edward and Johanis] as shall survive me and if more than one then as tenants in common in equal shares for their sole and exclusive benefit absolutely ...

41 I call the trusts in each of cl 2(b)(i), (ii), (iii) and (iv) respectively 'the cl 2(b)(i) trust', 'the cl 2(b)(ii) trust', 'the cl 2(b)(iii) trust' and 'the cl 2(b)(iv) trust'. As I understand it, in the law of wills and estates, the cl 2(b)(i) trust provides for a general legacy in the nature of a pecuniary legacy, the cl 2(b)(ii) trust provides for a specific devise, the cl 2(b)(iii) trust provides for a specific legacy and the cl 2(b)(iv) trust provides for a residuary gift. See Hutley, Woodman & Wood, Cases and Materials on Succession (2nd ed, 1975) 523 - 524; and Blight v Hartnoll (1883) 23 Ch D 218, 222.

42 It is common ground that in cl 2(b)(ii), (iii) and (iv) 'Umbero Peters Versteeg' is Umberto, the third named defendant.

43 Further, I was told by senior counsel for the plaintiff that 'Caroline Versteeg' (Mrs Versteeg) appeared in some other documents as Carolina Versteeg, while senior counsel for Johanis indicated to me that his name may have been misspelt.

44 It will be noted that the three beneficiaries of the cl 2(b)(ii) trust (for the property on which as has been seen the family businesses of J Versteeg & Sons and Versteeg Contractors were conducted) are also the beneficiaries of the cl 2(b)(iii) trust (for the family business or businesses). It will also be noted that those beneficiaries, with the testator, are the three named guarantors and indemnitors under the NAB guarantee and indemnity.

45 By orders for directions by Acting Master Chapman in chambers of 1 February 2008, the following questions are to be determined, with a refinement in the first question agreed by counsel appearing before me and incorporated into that question:

(a) Whether [the final NAB liability] paid by the Estate should be treated as payable out of the proceeds of the sale of [the Feldts Road Properties], or should it be treated as payable out of the [Testator's] interest in the business of J Versteeg & Sons?

(b) Are the costs of getting in the assets of the estate and the general costs and expenses of the estate to be paid first from the residuary estate, namely [the cl 2(b)(iv) Trust]?

(c) Were any of the proceeds from the sale of [the Feldt Road Properties] ever available to the trustees of the estate?

(d) Save for 7.9% of the cash received from second named defendant [Enrico] or companies controlled by him, did any of the cash at bank at 30 June 1986 belong to the residuary estate?

(e) Are gifts of capital to the life tenant ([Mrs Versteeg]) to be first paid from the residuary estate?

(f) Has the gift to the first named defendant in clause 2(b)(i) of the will of the deceased failed?

46 Before I reach those questions, I should refer to the following aspect of the learned Acting Master's orders, in another provision of them. Although that aspect was not a live issue before me, reference to it enables me to provide an account of the participation of the parties in the hearing before me.

The instruction of senior counsel to represent the interests of Giuseppe and Umberto

47 The trustees of the will arranged for an opinion to be obtained from Mr Graeme Murphy SC in relation to a number of questions on the construction of the will and the distribution of the estate of the testator. His opinion, dated 18 June 2007, addressed a range of questions including but not limited to matters subsumed by the questions above (the Murphy opinion). The Murphy opinion may be seen to favour the interests of Giuseppe, Enrico and Umberto, the beneficiaries of the cl 2(b)(iii) trust, and to be against those of Johanis and Edward, who were not such beneficiaries.

48 Giuseppe and Umberto were represented at the hearing before me by Mr Murphy. The plaintiffs had, on the advice of their solicitors, instructed Mr Murphy to represent the interests of Giuseppe and Umberto pursuant to the leave given by the orders of Acting Master Chapman on 1 February 2008.

49 A memorandum of appearance for Enrico had been entered by solicitors acting for him. However, by a notice of cease acting for him, he has become self-represented in these proceedings. So far as the information I have indicates, he has never taken an active part in them, either through his former solicitors, or by himself.

50 The plaintiffs in their capacity as trustees were represented at the hearing before me through their solicitors.

51 Johanis was represented by senior counsel, Mr Matthew Zilko QC.

52 Edward has not entered an appearance in these proceedings.

53 The orders of Acting Master Chapman included the following:

1. The plaintiffs have leave to instruct Graeme Murphy SC to represent the interests of the first named plaintiff Giuseppe Vincenzo Versteeg and the third named defendant Umberto Peters Versteeg as beneficiaries under [the Will].

1. Any party has liberty to apply to vary the order in paragraph 1 above should a conflict arise as a consequence thereof.

54 There is, of course, a principle commending the separate representation of trustees from that of beneficiaries to give the court the assistance of separate counsel: Re Burton, Danby v Burton [1901] 1 WN 202; Re Morgan, Brown v Jones (1927) 71 Sol Jo 650, 651 (Clauson J); and Morton v Mitchell Products [ 1996] FCA 828. Here such separate representation was secured.

55 At the same time separate representation should not be at the expense of the creation of a situation of conflict or potential conflict: see Nangus Pty Ltd v Charles Donovan Pty Ltd (in liq) [1989] VicRp 17; [1989] VR 184, 185. I understood this latter to be the principle underling O 3.

56 However, all of those appearing before me confirmed no application had been made pursuant to the liberty to apply in order 3. Therefore I need say no more about the present aspect of the learned Acting Master's orders.

57 It was common ground that the starting point in the consideration of this question is Wills Act 1970 (WA) s 28(1) and (2), which read at all material times as follows:

(1) Where by his will a testator disposes of any property that at the time of his death is charged with the payment of money whether by way of mortgage, charge, lien (including a lien for unpaid purchase money) or otherwise and the testator has not by the will or by a deed or other document signified a contrary or other intention the property so charged is, as between the different persons claiming through the testator, primarily liable for payment of the money secured by the charge, and every part of such property according to its value shall bear a proportionate part of the charge on the whole.

(2) Such contrary or other intention is not deemed to be signified -

(a) by a general direction for the payment of the debts, or of all the debts of the testator out of his personal estate, or out of his residuary real and personal estate, or out of his residuary real estate; or

(b) by a charge of debts on any such estates, unless such intention is further signified by words expressly or by necessary implication referring to all or some part of the charge.

58 These provisions are the counterparts in this state of Locke-King's Act, which changed the common law that mortgage debts were paid out of the testator's personal estate unless the real estate was devised cum onere or the personalty was otherwise exonerated. See Official Assignee v Crooks [1986] NZHC 50; [1986] 2 NZLR 322, 324 - 325 (Henry J). The provisions have had counterparts in New Zealand also, as I will indicate.

59 As I understand the written submissions and oral argument before me, it is common ground that if a contrary or other intention has not been signified by the testator as s 28(1) provides, the answer to question (a) is that the final NAB liability must be borne first from the proceeds of the sale of the Feldt Road properties and to the extent those proceeds are insufficient by the residuary estate.

60 On the assumption indicated the latter part of the answer follows in my view from the proviso to the prefatory words in cl 2 of the will, which removes the 'discretion' to sell or convert 'any item of my real or personal estate into money' (subject to the qualification for financial incapacity, which was not engaged in this case) where 'the Trusts hereinafter provide that [such item] shall be transferred made over and delivered to any one of more beneficiary'. Those last trusts were the specific devise (by the cl 2(b)(ii) trust) and the specific legacy (by the cl 2(b)(iii) trust).

61 Before me it was contended for Johanis that there was a 'contrary or other contention' signified by the will. This signification was to be found in the specific legacy by the cl 2(b)(iii) trust. When the terms of the cl 2(b)(iii) trust were considered with the nature of the obligation secured by the mortgage on the Feldt Road properties, it was evident, it was put, that it was intended the assets of the 'family business or businesses' the subject of that specific legacy, and not the proceeds of the sale of the Feldt Road properties, were to be primarily liable for the payment of the final NAB liability. That is because it was evident the liabilities of the businesses should be borne by their assets.

62 Was there a 'contrary or other intention' signified within Wills Acts s 28(1)?

63 There is a body of authority that to qualify as a 'contrary or other intention' in a provision like Wills Act s 28(1) the signification of that intention should disclose how the debt is to be borne as between the beneficiaries in the will; and the statutory incidence will not be lightly displaced. One such authority that was cited to me is Re Horton (deceased) [1969] NZLR 598. There, the testator had devised a share in certain land free of all duty and his residuary estate after the payment of debts and expenses was to be held on certain trusts. At the date of the death of the testator, the land was subject to a mortgage to secure a debt payable to an insurance company. Prior to the grant of the mortgage the insurance company had issued to the testator an endowment insurance policy payable at a certain date which had not by the date of decision in Horton arrived. Under the terms of the policy the sum assured, which was in the amount of the debt payable to the insurance company, or the surrender value of the policy if the policy had been surrendered, was to be applied in or towards payment of the mortgage moneys.

64 The court held that the policy did not disclose a contrary or other intention for the purposes of Property Law Act 1952 (NZ) s 149 (PL Act 1952), the then counterpart of Locke-King's Act, which as reproduced in the judgment (599) as to s 149(1) and (2) was as follows:

(1) Where a person dies seised of or entitled to any land that is at the time of his death charged with the payment of any sum or sums of money by way of mortgage, and that person has not by his will or by deed or other document signified any contrary or other intention, the devisee or other person to or on whom the land is devised or devolves shall not be entitled to have the mortgage debt discharged or satisfied out of the personal estate or any other real estate of that person, but the land so charged shall, as between the different persons claiming through or under the deceased, be primarily liable to the payment of all mortgage debts with which the same is charged, every part thereof according to its value bearing a proportionate part of the mortgage debts charged on the whole thereof.

(2) A general direction in a will that the debts or that all the debts of the testator be paid out of his personal estate, or out of his residuary real and personal estate, or out of his residuary real estate, shall not be deemed to signify an intention contrary to or other than the rule hereby established, but such an intention must be further signified by words expressly or by necessary implication referring to all or some of the testator's debts charged by way of mortgage on any part of his land.

65 It will be observed that those provisions are very similar to if not identical with Wills Act s 28(1) and (2).

66 The court also noted that there was nothing in the will to signify a contrary or other intention for the purpose of PL Act 1952 s 149(1).

67 The Court considered the English authorities of In re Nicholson [1923] WN 251, Re Wakefield [1943] 2 All ER 29; and In re Birmingham [1959] Ch 523, and said this (601 - 602, Richmond J):

Mr Chilwell, on the other hand, adopted as part of his submissions, and as correctly stating the law, the following editorial note to the case of Re Wakefield (supra):

'A devisee takes property subject to the charges upon it unless the testator has expressed a contrary intention. In order that a contrary intention may be shown, it is not enough that the testator has clearly ear-marked certain money for that payment in his life. That shows no intention how he intended the charge to be borne after his death as between the specific devisee and his residuary estate. The facts which are relied upon as showing a contrary intention must specifically refer to the manner in which the charge has to be borne after his death and as between the parties entitled under his will.'

In my opinion, the foregoing note does correctly state the law. The cases of In re Nicholson, Re Wakefield, and In re Birmingham (supra) clearly support the proposition that the will or other documents must disclose an intention as to what is to happen after the death of the testator. The other requirement referred to in the note is that the intention thus disclosed must be one which specifically refers to the manner in which the charge has to be borne as between the parties entitled under the will. This second requirement finds support in a passage from the judgment of Russell J. in In re Nicholson (at p 251) wherein the learned Judge referred to a letter written by the testatrix in her lifetime as showing 'no intention of any sort or kind that, as between the specific legatee and the residuary legatee, the debt should be borne by the latter'. This passage was referred to by Lord Greene M R in Re Wakefield (supra) at p 31. Quite apart from authority, however, it is apparent that s 149 of the Property Law Act is concerned with the incidence of a debt as between the different beneficiaries in the estate of the testator. It is not concerned with the responsibility for payment of such debt as between the estate and the secured creditor. It follows that the contrary intention signified by the testator must relate to the incidence of the debt as between the parties entitled under the will.

In the present case, as I have already said, it seems to me that the testator, when he made the arrangements which he did with the life insurance company, must have contemplated that those arrangements could well carry on after his death. The documents show that the testator was providing a fund which, as between himself (or his personal representatives after his death) and the insurance company, was intended to be used in repayment of the mortgage. I can, however, find nothing in these documents to disclose any intention on the part of the testator, one way or the other, as to the manner in which the mortgage debt should be borne as between the devisee and the residuary estate.

Mr Chilwell referred me to In re Campbell [1893] 2 Ch 206, 215 where Kekewich J. spoke of finding 'a tolerably plain indication' by the testator of a contrary intention. He also referred me to Brown v Abbott (1881) 7 VLR 121 (Eq) where Williams J. said: 'The intention must, I think, be signified (which, it will be observed, is the word used in the statute) - 'I do not say by express words, but by something amounting almost to necessary inference or necessary implication' (ibid, 132).

To these authorities may be added the remarks made by Stanton J. in In re Bain [1949] NZLR 726, 730 to the effect that 'a statutory incidence of duty or debt cannot be lightly displaced'. In the present case I am left in a position where I can only conjecture as to the intention if any, of the testator regarding the incidence of the mortgage debt as between the beneficiaries under his will.

68 In respect of Horton I also note Official Assignee v Crooks where Horton was distinguished. In that case, on the successor provision, Administration Act 1969 (NZ) s 34, to the provision considered in Horton, a mortgage over real property jointly owned by a husband and wife also extended over an insurance policy on the life of the husband, and both forms of mortgage collateral were to secure a liability to the mortgagee insurer. The mortgage provided that (326 - 327)

if during the continuance of this security any moneys become payable under any policy subject to this mortgage it shall be lawful for the mortgagee to receive and retain the same ... and to apply such moneys in or towards satisfaction of the moneys owing upon or secured hereby ...

69 The court in Crooks (327) distinguished Horton on the basis that a contrary or other intention was signified by the permissive provision in the mortgage, which necessarily in respect of the life insurance policy operated on the death of the insured, and thus in respect of the estate of the insured signified that if the mortgagee so determined then another source than that represented by the land would bear the burden of the liability.

70 In this case it was not contended that the NAB guarantee and indemnity was a document that signified a contrary or other intention in that way or indeed otherwise, except as it might be read with the will. Nor could any such contention succeed, in my view. The guarantee was not expressed in terms of how, at the death of the testator, as between any property of the testator which was the subject of collateral security given for the obligation guaranteed and his other property, the obligation should be borne. At most as a result of the right of indemnity available to a guarantor or indemnitor there was an implied intention that as between the testator and Versteeg Contractors the latter would bear the burden of that obligation, to which the death of the testator was neither expressly nor impliedly made relevant.

71 There is authority that a contrary intention may be signified by the designation in the will of a special fund for payment of the testator's debts which is not a fund referred to in a provision like Wills Act s 28(2): Re Fegan [1928] Ch 45, 49 (Tomlin J). There is also authority that a contrary intention may be signified where the will states that mortgaged property should be held for the specific devisees of it 'absolutely free and clear of any charge or deduction whatsoever', even if no special fund is created for the payment of debt secured: Haimes v Goode (1932) 33 SR (NSW) 1, 2.

72 Here there was no express designation of a special fund for the payment of the contingent liability secured by the mortgage of the Feldt Road properties, nor was there an express indication that they were to be taken free and clear of the mortgage. However, senior counsel for the defendant contended there was a sufficient signification by the will that the assets of the family business or businesses were primarily to bear all the business liabilities. As the liability secured by the mortgage was a business liability, that represented a signification that there was a special fund (the business assets) that had been recognised in the will to primarily bear that business liability.

73 The signification contended for was by the proviso in the will cl 2, to the power to call in the estate of the testator to pay his debts, more particularly in that proviso's reference to the cl 2(b)(iii) trust. That reference, it was put to me, should be read with the authority that a gift of an interest in an unincorporated business carries with it implicitly a gift of its assets less its liabilities: In re Rhagg (deceased) [1938] Ch 828, 836; Re White [1958] Ch 762, 772 - 774.

74 I was also referred to the words in the cl 2(b)(iii) trust, referring to the deceased's 'interest at death', as signifying a contrary intention. However, I do not consider this adds anything of significance to the preceding point from Rhagg and White.

75 True it was that the contingent liability secured by the mortgage of the Feldt Road properties was not expressly (as I have indicated) a liability of either J Versteeg & Sons or Versteeg Contractors. However, the NAB guarantee and indemnity was one entered into at the request and for the benefit of Versteeg Contractors, as had been held in Versteeg v Court in his Capacity as Liquidator of Versteeg Contractors Pty Ltd (Unreported, WASC, Library No 920370, 17 July 1992) (White J) 13 - 14 where the court recognised the entitlement of the testator to an indemnity from the company in respect of the discharge by the estate of the contingent liability under the NAB guarantee and indemnity. Further, the testator had in the terms of the cl 2(b)(iii) trust forgiven and discharged all debts standing to his credit in the books of financial accounts of the family business or businesses as at the date of his death.

76 It appears to have been put to me I should take from this that the taking of the proceeds of the sale of the Feldt Road properties by NAB for application towards satisfying the final NAB liability should be treated as if it was the taking of assets of the family business or businesses, which, given the insolvent liquidation of Versteeg Contractors, were the assets of the other components of that business or businesses represented by the business of J Versteeg & Sons.

77 It was further put to me that having the burden of discharge of an obligation incurred for the benefit of the components of the family business represented by Versteeg Contractors in respect of its liabilities borne by personal assets of the testator was a capricious outcome inconsistent with the testator's intentions. I will return, in the context of question (e) below, to the principle of construction of a will to avoid capricious outcomes.

78 Senior counsel for Giuseppe and Umberto put to me that a clearer signification of a contrary intention than that was required for the purposes of Wills Act s 28(1) on the terms of s 28(2) and the authorities of Horton, Fegan and Haimes. Only express words or something approaching a necessary implication of the sort referred to in Horton would do.

79 Further, there could be no reliance on the provision in the terms of the cl 2(b)(iii) trust for the forgiveness of debts owed to the testator, as that provision had no operation in the events that had happened by the date of death. Those events included that Versteeg Contractors had been wound up. The 'intent and effect' referred to in that provision, that the family business or businesses not be deprived of 'the working capital' represented by the debts could thus have no operation, and so the provision did not operate in respect of debts owed by Versteeg Contractors to the testator.

80 As to the first submission, it is not altogether clear to me on Crooks, on which I was not addressed by either counsel, that the standard the implication must reach is so high as not to admit that implication for which senior counsel for Johanis contended.

81 As to the second submission, while I am inclined to agree with it, I do not consider I have to determine the point.

82 That is because there is no indication to which I was taken from any document in this case that the contingent liability secured by the mortgage on the Feldt Road properties was to be regarded as one primarily to be borne by other assets. That contingent liability was of the testator, whose capacity in undertaking it nowhere appears from the NAB guarantee and indemnity as I have indicated.

83 True it is the testator was the sole proprietor of the family business represented by J Versteeg & Sons, which carried on business from the same premises, the McDowell Street property, as the other components of the family business or businesses, represented by Versteeg Contractors. True it is also that, on the evidence of the cl 2(b)(ii) trust and the cl 2(b)(iii) trust all those Versteeg family members involved in the family business or businesses were named as guarantors and indemnitors in the NAB guarantee and indemnity.

84 However, no reference was made in the NAB guarantee and indemnity to the capacity in which they were assuming their obligations under it. Further, the testator was also the owner of the Feldt Road properties, which were not on the evidence before me assets of any family business or businesses, and which was the property mortgaged to secure the contingent liability under the NAB guarantee and indemnity.

85 As to the capricious outcome previously referred to, I do not consider any such is made out. I note the provision in cl 2(b)(iii) for forgiveness of debts standing to the testator's credit in the books of financial accounts of the family business or businesses. Whether or not that provision applied in the events that happened, it seems to me that the testator has thereby indicated a clear intention to support that business or businesses from his personal assets, in certain circumstances. The mortgage of the Feldt Road properties is a similar indication.

86 Thus, it is not clear to me why it should be seen to be capricious for him do this in respect of the Feldt Road properties. Further, any liability of the Feldt Road properties would, of course, be subject to any right to an indemnity under the NAB guarantee and indemnity, as qualified, perhaps, by the provision in the cl 2(b)(iii) trust for forgiveness of debts.

87 There is in my view no clear or indeed other indication in the NAB guarantee and indemnity or the will that the contingent liability of the testator (or any of the other guarantors and indemnitors) was treated by the testator as a liability of the family business considered as a group of enterprises and thus one that should be treated as primarily to be borne by the assets of the family business or businesses. Absent an indication of such treatment, it does not appear to me there is a foundation on which to rest the submissions for Johanis.

88 Further, I note the provision in the will cl 2, opening words, to which senior counsel for Giuseppe and Umberto drew my attention, that qualify the absence of any discretion in the trustees to sell or convert any item of the testator's real or personal property. That qualification, which allows such sale or conversion, is where 'financial circumstances shall necessitate' such a dealing.

89 However, I do not consider this meets the argument for Johanis that the contingent liability under the NAB guarantee and indemnity was intended under the will to be treated as a business liability, not a personal liability, of the testator.

90 At the same time, I would reject that argument for Johanis for the reasons I have set out. It follows in my view that the answer to question (a) is as I first described it above.

91 There were no written or other submissions directed to this question, concerning whether or not the costs of getting in the assets of the estate and the general costs and expenses of the estate were to be paid first from the residuary estate, namely the cl 2(b)(iv) trust, from any of the parties except for Giuseppe and Umberto. For them, their senior counsel directed me to the Murphy opinion.

92 The Murphy opinion is to the effect that the answer to the question is yes. I agree.

93 As the Murphy opinion indicates, the duties of an executor include getting the assets of an estate, and so the costs of administering the estate include those costs: Woodman, Administration of Assets (2nd ed, 1978) 10.

94 As the Murphy opinion also indicates, and as I have indicated, the proviso in cl 2 previously quoted makes the power to get in the assets of the estate for the payment among other things of 'testamentary expenses' subject to the trusts for specific items of property. The cl 2(b)(ii) trust and the cl 2(b)(iii) trust represent those trusts. They qualify the 'residuary estate', the subject of the trust for Mrs Versteeg as life tenant for whom the 'whole of the residuary estate' is to be held, and the cl 2(b)(iv) trust for the 'residuary estate', on which the cl 2(b)(i) trust is a first charge. The effect of the cl 2(b)(ii) trust and the cl 2(b)(iii) trust is that the costs of getting in the assets of the estate as well as the other testamentary expenses referred to in question (b) are to be first paid from the 'residuary estate'.

95 Again, as with question (b), there were no written or other submissions directed to this question, from any of the parties except for Giuseppe and Umberto. Question (c), it will be recalled, was whether or not any of the proceeds from the sale of the Feldt Road properties were ever available to the trustees of the estate.

96 Senior counsel for Giuseppe and Umberto put to me that on the facts of the payment of the proceeds to the NAB the answer to the question is no. I agree. Those proceeds were applied as determined by NAB and were wholly devoted to payment of the final NAB liability.

97 Again, as with questions (b) and (c), there were no written or other submissions directed to this question from any of the parties, except for Giuseppe and Umberto. Question (d), it will be recalled, was whether or not, save for 7.9% of the cash received from second named defendant [Enrico] or companies controlled by him, any of the cash at bank at 30 June 1986 belongs to the residuary estate.

98 It was common ground that as at 30 June 1986 the assets of the residuary estate comprised the Douglas Road property, the Brook Road property and the Feldt Road properties, that portion (7.9%) of the receivable from Enrico under the October 1985 deed representing the non-business portion of the total and the contingent receivable of $220,000 payable by Johanis under the 1986 agreement. It was further common ground that as at 30 June 1986 the only money received by the estate of the testator on account of receivables was Enrico's payment of $48,000 out of the total of $314,000 under the October 1985 deed.

99 It was put to me that it followed that that as at 30 June 1986 the only cash held by the estate of the testator belonging to the residuary estate was 7.9% of the amount of $48,000. I agree that this does follow and is the answer to question (d).

100 Again, as with questions (b), (c) and (d), there were no written or other submissions directed to this question from any of the parties, except for Giuseppe and Umberto. Question (e), it will be recalled, was whether gifts of capital to the life tenant Mrs Versteeg were taken to be first paid from the residuary estate. For the answer to that question, senior counsel for Giuseppe and Umberto directed me to the Murphy opinion. However, the portion of the Murphy opinion to which I was directed did not in fact expressly address this question. Nor could I find any other part of the Murphy opinion that did so.

101 However, it seems to me the wording of the will is quite clear. It will be recalled that cl 2(a) empowers the trustees at their 'sole discretion to apply from time to time part of the capital of my residuary estate for the maintenance and benefit of [Mrs Versteeg] should the need arise'. This language in my view directly answers question (e). Thus the answer to question (e) is yes.

102 This question, it will be recalled, is whether or not the gift to the first named defendant (Johanis) in cl 2(b)(i) of the will of the deceased had failed.

103 A suitable starting point is Wills Act s 26(1)(a) and (b), which are as follows:

Unless the contrary intention appears by the will -

(a) the will is to be construed, with reference to the property comprised in it, to speak and take effect as if it has been executed immediately before the death of the testator;

(b) property that is the subject of a disposition, other than the exercise of a power of appointment, that is void or fails to take effect is to be included in any residuary disposition contained in the will; ...

104 It is not suggested that there was any 'contrary intention' for the purposes of s 26(1)(a). Further, it is accepted that, if the gift to Johanis in cl 2(b)(i) of the will has failed, the residuary estate is not burdened by the first charge referred to in the clause.

105 The answer to the question is then one of construction of the will, in accordance with the principles for construction from the general law, there being no further provisions of the Wills Act to which my attention was drawn, or which appear to me to be relevant.

106 The following principles appear not to be in contest.

107 In construing a will the object of the court is to ascertain the intention of the testator as expressed in the will, from the words used in the will. Prima facie the words used in the will are to be given their ordinary meaning. However, the will must be read as a whole, in the light of the surrounding circumstances, and in relation to those circumstances the 'arm chair principle' is relevant. That principle permits the court to receive evidence of the state of the testator's family, his property, his friends and acquaintances, in order that a court may read the will from the position of the testator, as if sitting in the testator's 'arm chair'. See Hardingham I J, Neave M A and Ford H A J, Wills and Intestacy in Australia and New Zealand (2nd ed, 1989) [1102], [1103].

108 If a will is republished by a codicil, the effect of republication upon construction is to make a gift in the will operate in the same way in which it would have operated if the words of the will had been contained in the codicil, unless the contrary intention appears. A codicil republishes a will if there is to be found in the codicil matter from which the inference can be drawn that when making and executing it the testator 'considered the will as his will' (Re Smith (1890) 45 Ch D 632, 639). See Hardingham et al [712] - [714]. It is not in contest here that the doctrine of republication applied to the codicil.

109 In relation to the general legacy by way of pecuniary legacy in cl 2(b)(i) it was not in contest that the provision is one for a conditional bequest. This was accepted to be the effect of the words in cl 2(b)(i) as follows:

PROVIDED this bequest is subject to my said son [Johanis] having first transferred and delivered to me that one third interest in common held by my said son in trust in [the McDowell Street property] pursuant to my demand in that regard of the 3rd of May 1984.

110 Further, it appears to be common ground this was a condition precedent. Thus, there is no scope for the application of the rule for conditions subsequent that, because they may work a forfeiture, they should be expressed in precise and direct terms: see on that principle Clark J B and Ross Martyn J G, Theobald on Wills (15th ed, 1993) 643.

111 It seems to me that the bequest should be construed as one requiring for its satisfaction that as a matter of urgency and in any event during the lifetime of the testator Johanis transfer the interest in the McDowell Street to the testator. This it seems to me follows on two considerations.

112 One consideration is the ordinary meaning of the words used in cl 2(b)(i). It seems to me that the words 'to me' in their ordinary meaning require the transfer of the interest to the testator during his lifetime.

113 Further, the reference to that transfer occurring 'pursuant to' the 3 May 1984 letter in my view clearly permits recourse to that letter for the purpose of the 'arm chair principle'. That letter shows that the testator was requiring Johanis to transfer the interest on a transfer form which he was to execute and return to the testator 'immediately', and indicating to Johanis that the 'matter was now most urgent'. The letter was on its terms written in the context of Johanis' 'severance from the family business' and the testator had indicated in it that if the demand were not met he would have 'no alternative' but to instruct solicitors to take legal action. The letter in my view indicates the urgency of the matter so far as the testator was concerned.

114 However, senior counsel for Johanis put to me that the construction I have described was inapt for a number of reasons.

115 First, that construction could lead to arbitrary or capricious results. The example was given of the testator's death shortly after the will was executed or shortly after the codicil was executed. There is a principle for the construction of wills that is addressed to the avoidance of capricious results, as I will indicate.

116 Second, the construction did not allow for the fact that Johanis would not necessarily during the testator's lifetime have the opportunity to become aware of the will's terms. Indeed, he had not become aware of those terms until after the testator's death. Thus, he would not (and did not) know of the condition he was (on the construction I have referred to) to meet to qualify for the bequest. As I understand the submission, the testator would have been aware of this, and should not be taken to have intended to establish a condition in such terms.

117 Third, the construction failed to take proper account of the doctrine of republication. That doctrine in this case would have the provisions as to the bequest speak as from a time, 12 September 1984, when the immediacy in the 3 May 1984 letter had ceased to have any meaningful application. Indeed this can be seen even earlier, as at the date of the will, 31 May 1984. Thus, as I understood the submission, the testator should not be taken to have attached any urgency to the meeting of the condition.

118 All three of these matters would be addressed by the construction of the condition in cl 2(b)(i) senior counsel for Johanis submitted was that which should be preferred. The construction advanced was that the transfer of the interest in the McDowell Street property should take place either to the testator before his death or to his personal representatives after his death, but in no event later than the latest date the bequest could fall in. That date was two years after the date of the death of the testator or of Mrs Versteeg, whichever came later. I was particularly referred to the opening words of cl 2(b)(i) providing for the bequest to be made over and delivered to Johanis:

on that day being two years next following the date of my death or the death of my dear wife [Mrs Versteeg].

119 It is not in contest on the construction I first described, the gift to Johanis in the will cl 2(b)(i) failed, but on the construction advanced by his senior counsel that gift did not fail.

120 I deal with each of the submissions of senior counsel for Johanis in turn.

121 There is a principle of construction of wills by which the presumption that the words used in the will are used in their ordinary meaning may be rebutted and a meaning preferred that would avoid capricious results. I was referred to the following, from Theobald on Wills, 205 - 206, referring to Re James's Will Trusts [1962] Ch 226, 234, Bathhurst v Errington (1877) 2 App Cas 698, and Abbott v Middleton [1858] EngR 989; (1858) 7 HLC 68, 69, as follows (footnotes omitted; page numbers and citation inserted):

Ordinary meaning prevails unless rebutted. If the presumption raised by the ordinary meaning rule is not rebutted, the ordinary meaning of a word or phrase prevails even though it may produce results which appear capricious. To quote Buckley J in Re James's Will Trusts [234]:

'... a testator is entitled to be capricious or eccentric in his testamentary dispositions if he chooses ..., and the fact that the terms of his will, when interpreted according to their ordinary and apparent meaning, may produce odd results is not alone a ground for constructing his language in some other sense which it is less apt to bear: nor is the fact that he may have failed to think out how the scheme of his will might operate in all possible or probable circumstances, for to infer from the fact that the language may not appropriately fit all the possible or probable circumstances that the testator used such language in some sense other than its natural meaning assumes that the testator did the very thing which it seems he failed to do, namely, consider the appropriateness of his will to all possible or probable contingencies. One likely explanation may be that he meant his words to bear their normal meaning and failed to appreciate the consequences.'

But the position is different if the presumption raised by the ordinary meaning rule is not applicable and the court is faced with a choice between two or more possible meanings. This may occur because a word or phrase has more than one ordinary meaning or (alternatively) more than one secondary meaning, the ordinary meaning not being applicable because it does not make sense. In deciding between possible meanings the court may properly prefer the meaning which does not produce capricious results. [Bathurst v Errington (1877) 2 App Cas 698, 709 - 711]. In Abbott v Middleton [69] Lord Cranworth expressed the rule thus:

'Where by acting on one interpretation of the words used we are driven to the conclusion, that the person using them is acting capriciously, without any intelligible motive, contrary to the ordinary mode in which men in general act in similar cases, there, if the language admits of two constructions, we may reasonably and properly adopt that which avoids these anomalies, even though the construction adopted is not the most obvious, or the most grammatically accurate. But if the words used are unambiguous, they cannot be departed from merely because they lead to consequences which we consider capricious, or even harsh and unreasonable.'

122 I leave aside for the moment the question whether or not there is a 'secondary meaning' to which resort may be had as senior counsel for Johanis contends.

123 In assessing whether or not a result is capricious, or arbitrary, it seems to me to be necessary to consider the circumstances. They may indicate that what at first sight might appear to be arbitrary or capricious is not so.

124 Those circumstances include a demand in the 3 May 1984 letter which had been communicated to Johanis, if not necessarily on then about its date, and which had never been withdrawn.

125 Further, I note the reference in the 3 May 1984 letter to the McDowell Street property as 'business property'.

126 In the context represented by those two elements, in my view it would not be capricious for the bequest to Johanis to be one dependent on urgent resolution during the testator's lifetime, by transfer to him of that interest, of the matter of Johanis' interest in the McDowell Street property. This would be so that the matter would have been resolved by the testator's death, for the benefit of his trustees.

127 The importance to the testator of the business or businesses conducted on the McDowell Street property may be seen in the NAB guarantee and indemnity dated 5 October 1984, as well as in the provisions for the McDowell Street property and for the family business or businesses in the cl 2(b)(ii) trust and the cl 2(b)(iii) trust, respectively. I note, as senior counsel for Johanis reminded me, that those two legacies did not require resolution of the matter before the later of the death of the testator and Mrs Versteeg. However, I also note that there is not the two year period provided for in relation to those legacies falling in as is a part of the construction contended for by senior counsel.

128 Senior counsel for the plaintiff put to me that resolution of the matter by the death of the testator might also be have been seen by him to be significant for the purposes of the life interest for Mrs Versteeg. On the construction that I first referred to, the matter would be resolved by the time that life interest fell in.

129 I consider that that consideration adds some weight to the view that the result to which the senior counsel for Johanis drew my attention was not capricious. However, assessing the weight of that consideration is difficult in the absence of evidence as to what the testator knew of the condition of the business or businesses conducted from the McDowell Street property at the date of republication of the will by the codicil. I was not directed to any such evidence, and I could find none. However, that the consideration has some weight is to be seen in the provisions in the will for the McDowell Street property and the family business or businesses as I have indicated. I have previously referred to the provision in the cl 2(b)(iii) trust indicating the testator's expectation that the business or businesses would require working capital.

130 True it is that the McDowell Street property was sold by the trustees under the will less than three years after the date of the testator's death, and during the lifetime of Mrs Versteeg. However, in my view that does not have any significant bearing on the matter as it would have presented itself to the testator on 12 September 1984, the date of the codicil. This is given the provisions of the will republished then having to do with the McDowell Street property and the family business or business that I have referred to, and the lack of evidence that at that time there was no question of the family business or businesses not continuing to operate from the McDowell Street properties.

131 It follows I do not consider that there is a reason to apply the principle of construction of wills to avoid capricious results to which I have referred.

132 However, I should add that I am not convinced that there is a secondary meaning of the words as contended for by senior counsel for Johanis. It will be recalled that the principle does not apply if no such secondary meaning is to be seen. In my view the words 'to me' are clear and have no secondary meaning, as is confirmed by their use in the 3 May 1984 letter, which itself was not of course a testamentary instrument.

133 Therefore I do not consider there is scope for the application of the principle, to which I was referred by senior counsel of Johanis, that 'if the words of the will clearly confer an interest upon a beneficiary, subsequent ambiguous words contained in the same or a later clause ... will not cut down that interest': Hardingham et al [1119]; see also Re Freeman; Hope v Freeman [1910] 1 Ch 681, 691 (Buckley LJ).

134 Further, the extended time period allowed for meeting the condition under the meaning contended for by senior counsel for Johanis is both difficult to extract from the terms of the cl 2(b)(i) trust, and in my view impossible to square with the language there of 'pursuant to' the 3 May 1984 letter.

135 The consideration that from the testator's viewpoint Johanis would not necessarily have become aware of the terms of the cl 2(b)(i) trust is in my view met by the provision to him, if not on its date, of the 3 May 1984 letter.

136 This takes me to the final consideration put against the construction to which I first referred, that based upon the doctrine of republication. At the date of the codicil, 12 September 1984, it is impossible to see how the literal terms of the 3 May 1984 letter, which called for execution and delivery of the transfer 'immediately', could be complied with. This might be taken to indicate that such delivery could take place without regard to those terms, at least in that respect.

137 In my view, the submission does not meet the use of the words 'to me' in both the cl 2(b)(i) trust and the 3 May 1984 letter.

138 Further, it seems to me that the difficulty referred to does not entail that the tone of urgency in the 3 May 1984 letter should be ignored, and in particular it should be ignored in favour of the construction put forward for Johanis.

139 I note there is authority that where at the date of republication of a will the testator was aware that a condition in it could not be strictly complied with the will should be construed to allow for that. I particularly note from Hardingham et al [719] Re Jackson; Jackson v Duncan (1964) 82 WN (NSW) 62.

140 In Jackson a testator had by his will made in 1949 given his son, Bruce Stear Jackson, the right, after the death of the testator's wife, to purchase a property on giving a notice within one year of her death. The wife died in 1956, and in 1957 the testator made a codicil by which he revoked the appointments of the executors in the will and made a further appointment of an alternative executor.

141 In Jackson 64 (McLelland CJ in Eq) the following appears:

The gift of the right to purchase remained and the testator must have intended that it should be a benefit to Bruce Stear Jackson. When he made the codicil the testator knew that his wife had died many years [sic] before and could not have intended that the right to purchase could only have been exercised at a time long since past.

I am of opinion that, upon the true construction of the will and codicil, the right to purchase could be exercised within a reasonable time after the death of the testator.

142 In my view Jackson supports the conclusion that 'immediately' in the 3 May 1984 letter could not be part of the condition. However, it also seems to me that allowing for that as well as the terms of the letter the construction I first indicated is to be preferred.

143 It follows that the answer to question (f) is yes.

144 I will hear from the parties as to the orders to be made to give effect to these reasons, including orders as to costs.