Collins v Marinovich & Ors [2021] QSC 141 (2021) 8 QR 235

SUPREME COURT OF QUEENSLAND CITATION: Collins v Marinovich & Ors [2021] QSC 141 PARTIES: ANGELIQUE ANNE COLLINS (Plaintiff) v JOSIP MARINOVICH, SUSAN WHITEHAND, THERESA BROOK, CHRISTINE WALKER (AS EXECUTORS AND TRUSTEES OF THE WILL OF PHYLLIS POWER-NEMETH DECEASED) (First Defendants) AND CHRISTINE WALKER (Second Defendant) FILE NO: BS 6150 of 2019 DIVISION: Trial Division PROCEEDING: Amended Application ORIGINATING COURT: Supreme Court of Queensland at Brisbane DELIVERED ON: 14 June 2021 DELIVERED AT: Brisbane HEARING DATE: 15 and 16 March 2021 JUDGE: Ryan J ORDER: I will grant the plaintiff declaratory relief against the second defendant and make the order she seeks against the second defendant. I will hear further from the plaintiff as to whether she seeks declaratory relief against the first defendants. I will hear from the parties as to the wording of the declaration and order, and as to costs. CATCHWORDS: SUCCESSION – MAKING OF A WILL – TESTAMENTARY INSTRUMENTS – TESTAMENTARY CHARACTER – PARTICULAR DOCUMENTS – where plaintiff was mortgagor and deceased was mortgagee – where mortgage included a term which provided that the debt would be forgiven upon the death of the deceased – whether term was testamentary – whether term depended on deceased’s death for its “vigour and effect” – whether term to take effect immediately – whether severable from balance of mortgage terms – whether revocable -- 1 of 44 -- 2 CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – MATTERS NOT GIVING RISE TO BINDING CONTRACTS – STATEMENTS OF INTENTION, NEGOTIATIONS AND INVITATIONS TO TREAT – where agreement said to be “a declaration of a new agreement being negotiated”; “temporary … until the legal one can be drawn up … [and] reviewed”; and subject to the “approval” of the parties’ solicitors – whether binding – Masters v Cameron COUNSEL: D J Morgan for the Plaintiff M K Callanan for the First Defendant J W Peden QC with L Sheptooha for the Second Defendants SOLICITORS: Woods Prince Lawyers for the Plaintiff Moore Lawyers for the First Defendant MBA Lawyers for the Second Defendants Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687, cited Bird v Perpetual Executors and Trustees Association of Australia Limited [1946] 73 CLR 140, applied Cock v Cooke (1866) LR 1 P & D 241, considered Cross (Doe D) v Cross [(1846) 8 QB 714, cited Fletcher v Fletcher (1844) 4 Hare 67, applied GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, considered In re Carlile [1920] VLR 427, applied In re Fenton [1919] VLR 740, considered In the Estate of Beech (deceased) [1923] P 46, considered In the Estate of Knibbs [1962] 2 All ER 829, cited In the Estate of Masters (1994) 33 NSWLR 446, cited In the Goods of Robinson (1867) 1 P & D 384, applied Lennon v Scarlett and Co (1921) 29 CLR 499, considered Masters v Cameron (1954) 91 CLR 353, considered Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60, considered Peacock v Monk (1748) 1 VS 127, considered Re Anziani [1930] 1 Ch 407, applied Re Bubnich; Marian v Bubnich [1965] WAR 138, applied Re Leung Wai Jing [2004] 1 HKC 453, considered Re Stable (deceased) [1919] P 7, considered Re White (1987) 38 DLR (4 th ) 631, applied Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, cited Thorncroft v Lashmar (1862) 10 WR 783, applied Winn v Bull 7 Ch D 29, considered Wolfe v Wolfe [1902] 2 IR 246, applied -- 2 of 44 -- 3 Table of Contents Background .......................................................................................................................... 4 The mortgage ........................................................................................................................ 6 The nature of clauses 6 and 7 ............................................................................................... 8 Second defendant’s submissions ................................................................................................... 8 Plaintiff’s submissions .................................................................................................................. 8 Theobald on Wills and Williams on Wills .................................................................................... 8 Authorities referred to in Theobald on Wills ................................................................................ 9 In the Goods of Robinson.......................................................................................................... 9 Thorncroft v Lashmar.............................................................................................................. 10 Re Bubnich .............................................................................................................................. 10 Doe d Cross ............................................................................................................................. 12 Peacock v Monk ...................................................................................................................... 12 Re Anziani ............................................................................................................................... 13 Authorities referred to in Williams on Wills ............................................................................... 14 Fletcher v Fletcher ................................................................................................................... 14 Cock v Cooke .......................................................................................................................... 15 Wolfe v Wolfe ......................................................................................................................... 15 Re Leung Wai Jing .................................................................................................................. 16 Re White.................................................................................................................................. 16 Other authorities .......................................................................................................................... 17 Re Fenton ................................................................................................................................ 17 In re Carlile.............................................................................................................................. 18 Bird .................................................................................................................................... 18 Paragraph 2.22 from Dal Pont & Mackie’s Law of Succession .............................................. 19 Clauses 6 and 7 are not testamentary ................................................................................. 21 Whether the parties varied the mortgage by the agreement reached in on 20 July 2012 ... 23 Context for the 20 July 2012 agreement ..................................................................................... 23 Plaintiff’s submissions ................................................................................................................ 30 Second defendant’s submissions ................................................................................................. 31 (d) Assuming a binding agreement, whether it was conditional upon the solicitor’s subsequent approval, and if so, whether that approval had been obtained ................. 32 (a) Legal characterisation of agreement............................................................................ 33 (b) Intention to be bound................................................................................................... 33 The 20 July 2012 agreement is not binding........................................................................ 40 Conclusions on primary issues ........................................................................................... 41 The position of the first defendants .................................................................................... 41 Orders ................................................................................................................................. 44 -- 3 of 44 -- 4 [1] This application raised two primary issues – (a) Whether a clause in a registered mortgage, which provided that the debt secured by the mortgage was forgiven upon the death of the mortgagee, was testamentary; and (b) Whether an agreement expressed to be “subject to” a solicitor’s approval was binding. [2] I concluded that the term referred to in (a) was not testamentary and that the agreement referred to in (b) was not binding. [3] My reasons follow. Background [4] Phyllis Power-Nemeth, now deceased, had been a very successful real estate agent since the 1950s – then, a rare achievement for a woman. [5] In 2006/2007, she lent one million dollars to one of her nieces, the plaintiff, Angelique Collins. Ms Collins’ debt to Ms Power-Nemeth was secured by a mortgage over Ms Collins’ property. The mortgage was registered. The terms of the mortgage were to the effect that Ms Collins’ repayments would not reduce the amount of the debt. But the debt, which would “endure” for Ms Power-Nemeth’s natural life, would be forgiven upon Ms Power-Nemeth’s death – leaving Ms Collins with “an inheritance”. [6] Ms Power-Nemeth and Ms Collins fell into dispute over the loan. By 2010, Ms Power-Nemeth wanted her one million dollars back. She asserted that Ms Collins was behind in her repayments and, on 30 August 2010, threatened to exercise her power of sale as mortgagee over Ms Collins’ property. [7] On 22 October 2010, Ms Collins filed an originating application seeking a declaration that she was not in default and an injunction restraining Ms Power-Nemeth from selling the property. She also applied for an interlocutory injunction to prevent Ms Power-Nemeth from selling the property before the resolution of the originating application. [8] The interlocutory application was listed for hearing on 28 October 2010. The originating application was listed for hearing on 22 November 2010. [9] On 28 October 2010, at the hearing of the interlocutory application, the court (Daubney J) received undertakings from Ms Collins (the usual undertaking as to damages) and Ms Power-Nemeth (not to take any steps in the exercise of a power of sale over the mortgaged property) and adjourned the application to 13 December 2010. [10] On 22 November 2010, Martin J adjourned the originating application to a date to be fixed. [11] On 13 December 2010, by consent, the court (Boddice J) ordered that Ms Power- Nemeth be restrained “pending determination of these proceedings at trial or until such further order of this Court” from exercising any right of sale or foreclosure over the mortgaged property. -- 4 of 44 -- 5 [12] Thereafter, Ms Power-Nemeth and Ms Collins engaged in discussions, including via email, about the mortgage and the repayment of the one million dollars. On 20 July 2012, they signed an agreement at a Chinese restaurant. The agreement described itself as “temporary” and stated that it was subject to the approval of Ms Power- Nemeth’s solicitor “and Angeliques” (sic). No solicitors’ “approval” was obtained. [13] On 17 November 2015, Ms Power-Nemeth wrote to Ms Collins, and enclosed an “Amendment to Mortgage” document which she had signed. Her letter said (errors as per original) – Due to the circumstance that have arisen between us I no longer wish to make you a beneficiary in my ‘WILL & TESTAMENT’ therefore in accordance with the Succession Act 1981 the said debt and mortgage given under the Lanas Titles Act 1994 dealing number 709701630 will form part of my estate upon my death. Find enclosed an Amendment to Mortgage Form 13 whereas clauses 6 & 7 shall no longer provide a forgiveness of debt to you as mortgagor. Please have this document signed and witnessed in front of a qualified person and returned in the enclosed registered mail envelope for my purpose of lodging and I will appreciate a return of this no later than 7 days from the date of this letter. [14] Ms Collins did not sign the Amendment to Mortgage document. [15] On 11 March 2016, Ms Power-Nemeth wrote to Ms Collins, requiring an increase in mortgage repayments and again enclosing the Amendment to Mortgage document and asking for its execution and return. Ms Collins did not sign it. [16] On 23 September 2016, Ms Power-Nemeth executed her last will. By it, she left her friend, the second defendant, Christine Walker, “the full benefit and burden” of Ms Collins’ mortgage – I GIVE DEVISE and BEQUEATH to CHRISTINE ALMA WALKER the full benefit and burden of the mortgage between myself as mortgagor (sic) and ANGELIQUE COLLINS as mortgagee (sic) dated 29 August 2007 over the property known as 43 Cairns Street, Loganholme, Queensland 4219 (the Mortgage) including all sums secured by or payable under the terms of the Mortgage and all rights granted by the Mortgage. I Direct that the said ANGELIQUE COLLINS pay to CHRISTINE ALMA WALKER all sums due and payable under the Mortgage and CHRISTINE ALMA WALKER shall have the powers and rights thereunder including the power to give a valid receipt for such sums and to execute a discharge of the said Mortgage. [17] Ms Power-Nemeth died on 13 October 2016. Ms Walker was one of her executors and trustees. [18] On 24 October 2016, Ms Collins’ solicitors wrote to Ms Power-Nemeth’s executors, asserting that – -- 5 of 44 -- 6 • the mortgage debt had been forgiven; • Ms Collins’ obligations under the mortgage had ended; and • Ms Collins was entitled to a release. [19] Ms Walker’s solicitors responded on 14 November 2016. Inter alia they asserted that Ms Walker was the beneficiary of the mortgage under the will; and they threatened a default notice if Ms Collins did not continue with her repayments. [20] The executors and trustees of Ms Power-Nemeth’s will (the first defendants) transferred the mortgage to Ms Walker on 1 May 2019. [21] Ms Collins applied to this court for (a) a declaration that the debt secured by the mortgage was forgiven upon Ms Power-Nemeth’s death; and (b) an order that Ms Walker execute and deliver to Ms Collins’ solicitors a discharge of the mortgage capable of immediate registration in the Land Titles Office. She argued that the original mortgage was not varied by the agreement reached at the Chinese restaurant. [22] Ms Walker argued that the term of the mortgage which extinguished the debt upon Ms Power-Nemeth’s death (clause 6 below) and an associated clause (clause 7) were “testamentary” dispositions; severable from the mortgage; revocable; and overridden by the will. In the alternative, she argued that the mortgage was varied by the agreement made at the Chinese restaurant and that Ms Collins was obliged to pay to her the moneys owing under it. [23] The first issue for me was whether clauses 6 and 7 were “testamentary”. The mortgage [24] The mortgage was executed on 7 June 2006, originally for $300,000. It was lodged with the Titles Office on 11 July 2006. [25] It contained a schedule which included some unorthodox mortgage terms, dictated, it seems, by Ms Power-Nemeth. Clause 2 confuses “mortgagor” and “mortgagee” (as did her will). The schedule read – Term of Loan 1 The debt secured by this Mortgage shall endure for the term of the Mortgagee’s natural life unless earlier repaid. Interest Rate 2 No interest shall be payable by the Mortgagee (sic) to the Mortgagor (sic) on the debt. Repayments 3 The Mortgagor shall make monthly repayments of the debt to the Mortgagee, commencing one month after the date hereof, by way of deposit into a nominated bank account of the Mortgagee. 4 In the 12 months first succeeding the date hereof, the repayments shall be at the rate of $400 per week. Thereafter, for the balance of -- 6 of 44 -- 7 the term, the repayments shall be at the rate of $500 per week, unless reviewed by the Mortgagee. 5 The Mortgagee may review the monthly repayment once in every 12 month period and may determine to increase the rate upon giving the Mortgagor 90 days written notice. Any increase in the rate of repayment shall not exceed the movement upward in the Consumer Price Index in the period after the commencement of this Mortgage. Balance of Mortgage upon death of Mortgagee 6 In the event of the death of the Mortgagee, the debt shall be forgiven. 7 The Mortgagee hereby directs her trustee and executor to execute and deliver to the Mortgagor, a discharge of this mortgage (to be prepared at the Mortgagor’s cost), as soon as practically permitted by law. Default 8 If the Mortgagor defaults for 90 days in the repayment of the debt, the Mortgagee shall upon giving 60 days written notice be entitled to enter into possession of the Fee Simple and sell same to recover the debt. 9 The Mortgagee shall be entitled out of the proceeds of sale of the Fee Simple to the amount of $300,000, notwithstanding repayments having been made. In the event of any inconsistency between the conditions of this schedule and the standard terms mortgage, the conditions of this schedule shall prevail and be of priority. [26] Clauses 3, 4, 5 and 9 make it plain that there was an interest-only aspect to the loan. Ms Collins’ repayments were not deducted from the principal.1 When those clauses are read with clause 2 (despite its obvious errors), it is reasonable to infer that Ms Power-Nemeth was seeking to avoid paying tax in relation to any “income” generated by the mortgage arrangement by not labelling Ms Collins’ repayments “interest” payments. [27] It is clear from clause 1 that the loan was intended to be for the duration of Ms Power- Nemeth’s life and clear from clause 6 that the intention was that the debt would be forgiven upon her death. [28] The sum borrowed by Ms Collins was increased on or about 26 November 2007 by an additional $700,000, resulting in a total debt secured by the mortgage of $1,000,000. There were no other changes made to the terms of the mortgage at that time. 1 Although Ms Collins understood the loan to be “interest free” and thought her repayments did reduce the principal. -- 7 of 44 -- 8 The nature of clauses 6 and 7 Second defendant’s submissions [29] The second defendant argued that, because clause 6 and 7 “depended upon death for their vigour”, they were testamentary dispositions, which could be severed from the registered mortgage document and overridden by the deceased’s later will. Plaintiff’s submissions [30] The plaintiff referred to appellate decisions about informal wills (including In the Estate of Masters (1994) 33 NSWLR 446 at 455 B and C) which were to the effect that a “testamentary” document must (a) deal with the passing or disposal of the deceased’s property upon his or her death and (b) must not operate to bind the deceased during his or her lifetime. [31] The registered mortgage was an instrument for the purposes of the Land Title Act 1994 (the LTA); its terms operated as a deed under section 176 of the LTA; and the particulars of the registered instrument were conclusive evidence of its terms under section 179 of the LTA. It was therefore a document with immediate operation. And it was not possible for either party to it to unilaterally vary or revoke it. It followed that clauses 6 and 7 were not testamentary. [32] Thus, Ms Power-Nemeth as mortgagee could not go beyond the particulars of the registered documents in this case, which forgave the debt upon her death [33] She could not vary the terms of the registered mortgage by unilaterally executing an unregistered amendment to it or by dealing with it in her will. [34] The parties were free to negotiate the terms of their mortgage agreement but, having done so, they had to abide by its consequences: cf Young J in Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687, in which his Honour said – … if parties do stipulate for unusual restrictions on their rights for good commercial reasons, then they must abide by the consequence of what they have agreed no matter how ludicrous that may seem to them later. Theobald on Wills and Williams on Wills [35] In support of their competing contentions, the plaintiff and the second defendant relied upon statements in well-respected texts including Theobald on Wills2 (plaintiff only) and Williams on Wills3 (plaintiff and second defendant). [36] The plaintiff relied particularly on the first statement in bold in the following extract from Theobald (some footnotes omitted, my emphasis).4 The second statement in bold is, on its face, consistent with the second defendant’s position but, as will emerge, the authorities refine the point – 2 Ross Martyn, J G; Evans Gordon, A; Learmonth, A; Ford, C; & Fletcher, T Theobold on Wills 18th ed Thomson Reuters, 2016. 3 Williams, W J Williams on Wills 10th ed LexisNexis, 2014. 4 Theobold on Wills, Chapter 2 “General Characteristics of Testamentary Instruments” at 2.02. -- 8 of 44 -- 9 Deeds A deed attested by two witnesses and not intended to have any effect till the settlor’s death is testamentary. On the other hand, a voluntary settlement, though reserving to the settlor a life interest and containing a power of revocation, is not testamentary. Similarly, an instrument coming into operation immediately, and of which no part is revocable, more especially if it involves anything in the nature of consideration, cannot take effect as a will. [In the Goods of Robinson (1867) 1 P & D 384; Thorncroft v Lashmar (1862) 10 WR 783; Re Bubnich; Marian v Bubnich [1965] WAR 138 (Supreme Court of W Australia).] But if a deed is severable and in part clearly testamentary, such part may take effect as a will, though other parts are not testamentary. [Doe d Cross v Cross [(1846) 8 QB 714; see Peacock v Monk (1748) 1 VS 127; Belt 82, Re Anziani [1930] 1 Ch 407 of 424).] The distinction between testamentary and non- testamentary instruments is important for two reasons: first, a non- testamentary instrument takes effect from the date of its execution, a testamentary instrument from the date of the testator’s death with the result that subject to certain exceptions, a beneficiary under a will must survive the testator in order to take his benefit; and, secondly, whereas a testamentary instrument is always revocable, a non-testamentary instrument cannot be revoked unless the instrument contains an express power of revocation or all the parties agree to it. [37] The plaintiff submitted that this text made it plain that the focus was on the immediate (or not) effect of the instrument itself – not on the immediacy of the act covenanted under the instrument. Authorities referred to in Theobald on Wills [38] I included in the extract from Theobald above the authorities cited for the statements in bold.5 The parties referred me to some of those decisions. I read them all. I have discussed them below in the order in which they appear in the extract. I have emphasised those parts of the judgments which particularly assisted me in reaching my conclusion on this issue. In the Goods of Robinson [39] In the Goods of Robinson concerned an agreement for a lease, which contained a provision governing the payment of rent upon the lessor’s death before the expiration of the lease. The question was whether the agreement ought to be admitted to probate as a codicil to the deceased’s will. It was held that it was not testamentary: no part of it was revocable and it came into operation immediately upon its execution. [40] It is worth setting out the short judgment of Sir J P Wilde almost in full – The question in this case is whether a certain instrument, or a portion of it, is testamentary and entitled to probate. The instrument is not in testamentary form. It may be shortly described as an agreement between the testator and his grandson for a lease for seven years of 5 Which had been footnotes in the text. -- 9 of 44 -- 10 certain property. But after the common agreement for a tenancy there follows a provision that, if during the seven years the testator should die, then the rent due from the tenant should be paid to … his executors, to be by them deposited into a bank for the benefit of all his grandchildren, and at the termination of the tenancy the property shall be sold by the executors, and the proceeds of the sale, and the dividends, shall be divided equally between his grandchildren. It is that portion of the document which is supposed to be of a testamentary nature. … But is the document in substance testamentary? …There are some tests which are applied in every case when a question is raised as to the testamentary character of a paper. One of these invariable tests is, whether the paper is revocable. Apply that test, and I think this applicant must fail, on the ground that the instrument in question was irrevocable in all its parts, not only as to the tenancy, but also as to the other provisions which were relied on as testamentary. The testator and his grandson entered into an agreement, and a court of law would hold that a portion of the consideration for the payment of the rent by the grandson was the provision as to the application of the rent if the grandfather died. The grandson had an interest in that application, for if the agreement were carried out he would be entitled to get back a part of what he had paid in the shape of rent. He had taken possession of the land and it was impossible for the grandfather to revoke the agreement. On that ground alone I hold that the instrument is not of a testamentary character. Further, the agreement was intended to take effect immediately upon its execution, and its effect was not to be postponed until after the grandfather’s death. It does not require the death of the alleged testator for its consummation; on the contrary, it is a living active instrument, taking effect from the moment when the grandson took possession of the land. For these reasons probate of the document must be refused. Thorncroft v Lashmar [41] The question in Thorncroft v Lashmar was whether a certain document was testamentary. It said, “I hereby offer [George Lashmar] the situation of collector and overseer of my property at a salary of [X] per week, with house-rent to the amount of [Y] a year, and all rates and taxes clear. I hereby further wish that the said George Lashmar shall continue in the aforesaid office, with the same salary as aforesaid after my decease, and same allowances”. It was held that the document was not a testamentary paper because the appointment commenced during the writer’s lifetime, although it continued after his death. Re Bubnich [42] In Re Bubnich, the testator, AB, and his wife Maria, were partners in a business. She was also one of his executors. Clause 17(a) of the partnership deed read, “If either partner shall die during the continuance of this partnership the other partner shall succeed to his or her interest in the capital and assets of the partnership”. AB’s will -- 10 of 44 -- 11 created a trust for sale and conversion of all of his assets, with a life interest to Maria and the remainder to his children. [43] The executors took out an interpretation summons asking the court to decide whether clause 17(a) created a joint tenancy or a tenancy in common between AB and Maria; and for a declaration of the rights of Maria and his children. [44] At first instance, Hale J declared that Maria had succeeded to AB’s share of the partnership. The executors appealed, seeking a declaration that Maria had a life interest. On appeal it was held that Hale J’s declaration was “clearly right”. The words “succeed to” in clause 17(a) imported beneficial as well as legal succession. [45] On appeal it was also argued that clause 17(a) was testamentary in character and, because the partnership agreement was not executed in accordance with the Wills Act, it was of no effect. Wolff CJ found that argument of no substance. His Honour said (at 140) – A will is the declaration in the prescribed manner of the intention of the person making it with regard to matters which he wishes to take effect upon or after his death … It is, therefore, a unilateral direction by a person to take effect upon or after that person’s death. A will is also revocable by any one of the several methods prescribed by the Wills Act. Revocation of a will is also a unilateral action which cancels the dispositions of the will. While the partnership continues the succession provision cannot be revoked by unilateral action. Clause 17 of the partnership agreement is a bilateral provision which is intended to take effect upon the death of either party during the currency of the partnership, and is not meant to take effect upon or after the death of one named party only. The clause is an ancillary provision in a partnership agreement … [46] Negus J made a similar point about the irrevocable nature of the agreement. His Honour also referred to its immediate effect (at 142) – The agreement took effect immediately upon execution. It was not revocable in the sense that a will can be revoked, i.e. made a nullity. Both partners gained benefits immediately and presumably continued to gain benefits every year afterwards. Consideration passed from each partner to the other. The enjoyment of the particular benefits conferred by clause 17(a) was it is true dependent on the death or one or other of the partners occurring during the continuance of the partnership and was postponed until the date of his or her death, but as at the date of the agreement each partner gained a vested right to those benefits subject only to being divested if the partnership dissolved before the death of the other partner. Stated another way – the right of [Maria] to tile by survivorship vested in her immediately upon the execution of the agreement. The vesting of that right was not dependent upon the death of AB, consequently there was nothing which could properly be called a testamentary disposition. -- 11 of 44 -- 12 Doe d Cross [47] The document in question in Doe d Cross: (a) appointed the deceased’s mother as his attorney, to receive and use rents from his freehold property until he returned to England (he, P, was serving as a soldier in the East Indies); and (b), in the event of his death, assigned and delivered his property to her. It was argued that the document was not a will because it was intended to take effect as a power of attorney during the lifetime of its author. [48] It was held that the document was a will. [49] Lord Denman CJ saw no room for doubt about it. The document disposed of property in the event of P’s death. [50] Patteson J observed (at 1042) that “the main object of the instrument is the will: which is to operate as such upon his death, whether the rest of the instrument continue in force for the meantime or not”. [51] Williams J held that the power of attorney operated in one event and for a certain time (until P returned to England). But it did not follow that the instrument may not take effect as a will upon P’s death. [52] Wightman J said (at 1043), “Mr Keating appears to admit that this instrument would be a will if it contained only the disposing part. But it does not follow, from other provisions being inserted, that such part is not to operate”. [53] I noted that the court in Thorncroft v Lashmar distinguished Doe d Cross on the basis that in Doe the instrument was clearly divisible into two parts, and the latter part was capable of taking effect as a will. Peacock v Monk [54] In Peacock v Monk, Admiral Lestock made two instruments on the one day: a will and a deed of agreement between himself and Monk. In accordance with the deed, £4000 was “put … into the hands” of Monk, to pay the admiral an annuity for life; and afterwards to pay £1000 to each of Peacock and Cockburn; and an annuity of £100 to the admiral’s housekeeper, Knowles, with the residue to Monk. By his will, Monk was the admiral’s executor and residuary legatee. After the admiral’s death, Monk made some payments but discontinued them upon notice of a bond creditor. Peacock and Coburn brought a bill claiming the benefit of the trust arising under the deed. It was held that they were entitled as against Monk; but postponed as to the admiral’s creditors for valuable consideration. In reaching that conclusion, consideration, or lack thereof, was significant. The Lord Chancellor said (at 131ff; punctuation as per original) – … The true question is, whether the property arising under this deed, and benefit of this trust, must be considered as the plaintiffs property or part of Mr Lestock’s personal assets ? … … … I have been willing to give great attention to find foundation to decree this demand for the plaintiffs, as a demand for valuable consideration, without incurring the danger of a precedent against the -- 12 of 44 -- 13 rules of law and of this court particularly. The services were probably very beneficial and deserved a reward; but upon the whole circumstances I cannot be so satisfied as to allow this disposition to prevail; which might chalk out a way, whereby any one, who intended a bounty to a particular creditor, might at the instant of making his will do that, which would amount to a legacy in its nature, by severing part from the rest, and the other creditors go without satisfaction. The observation is right, that this deed is in two respects, being for valuable consideration with respect to Monk the grantor; but not as to the plaintiffs: for I am doubtful, notwithstanding the merits of the services, whether they were such, as would intitle either of the plaintiffs to an action against Mr Lestock. There is only proof of the facts done; but of no promise to recompence; what demand could Knowles have against him? I cannot presume that she was paid no wages, or that he intended to pay her merely by giving her an annuity afterward, if she survived him … [The Lord Chancellor observed that giving the plaintiffs a contingent interest only was a strange way of paying a debt.] … Monk being both executor and contractor in the deed, and both instruments being done at the same instant (as it must be taken, being on the same day) it speaks the whole to be a testamentary act. Then why were they divided but to give the plaintiffs a preference to other legatees or creditors? In several cases the nearness of one act to another makes the court take it as one, so that it is a testamentary act; though not strictly so, because not revocable: yet I have shewn how it might be revoked. And wherever a court of equity finds such a turn given to a transaction to defeat creditors, reserving the benefit of it to the person himself; the court will be very nice to find out a distinction for creditors. It is true indeed, that a man may give money in his life, as he pleases, without creditors calling to an account or having it refunded: but then he must absolutely depart with the benefit of it during his life; otherwise a court of equity will inquire very strictly into it. So here there is no parting with the usufructuary interest; and it shall not prevail against creditors even by simple contract, but against residuary or other legatees they are intitled by their specific lien on it. Re Anziani [55] Re Anziani concerned the effect of a document which stated that it was intended to operate as an assignment inter vivos of certain property and as a will insofar as that property was concerned. [56] Maugham J said (at 424), “It is quite clear that, under English law, an instrument may be executed which is partly testamentary and partly not testamentary … [A] deed that is not intended to have any effect until the testatrix’s death is testamentary, and I doubt very much whether a document not intended to have any effect until her death could be regarded from any point of view as a conveyance inter vivos. On the other hand, it is to be observed in the present case that the appointment and assignment of -- 13 of 44 -- 14 1927 expressly states that the deed is intended to operate not only as a deed of assignment or transfer, but also as the last will and testament of the appointor so far as regards the property thereinafter appointed and assigned … On the whole I have come to the conclusion that this appointment can … have effect as a conveyance inter vivos of the real estate belonging absolutely to the testatrix at the time of her death …” Authorities referred to in Williams on Wills [57] As noted above, the second defendant argued that, even though the mortgage contained clauses which took effect before Ms Power-Nemeth’s death, clauses 6 and 7 could be “severed” from it and treated as testamentary acts. [58] In support of that proposition, she relied upon the first statement in bold below concerning the severance of the “will” portion of a “document” from [1.3] of Williams on Wills, and some of the cases cited therein (my emphasis). The plaintiff relied upon the second statement in bold in this extract – The fact that a document is executed as a will does not make it testamentary and the whole document will not be so if it has any operation before the death of a testator, [Fletcher v Fletcher (1844) 4 Hare 67; Cock v Cooke (1866) LR 1 P & D 241] but a severable part which has no operation until death may be testamentary while the remainder is not. [Doe d Cross v Cross (1846) 8 QB 714; Wolfe v Wolfe [1902] 2 IR 246; Re Anzani, Herbert v Christopherson [1930] 1 Ch 407 at 424. This passage was cited and applied in Re Leung Wai Jing [2004] 1 HKC 453 at 457.] A will must be distinguished from other revocable instruments which may take effect only on the death of the maker, e g … a deed covenanting that something shall be done on or after death [Fletcher v Fletcher … A deed was found to be testamentary in nature in Re White (1987) 38 DLR (4th ) 631. See also Re Watson’s Estate (1986) 43 SASR 15; and Glynn v Glynn [1987] ILRM 589.] … Where a deed is executed, it can, apart from a special reservation of a power of revocation, be revoked only by the agreement of all parties, but a will can be revoked by the testator alone without the concurrence of any other party. [59] The parties referred me to most of the authorities referred to in this extract. I considered all of them except the last two (because of the submissions made about them by the plaintiff’s counsel – see below). Fletcher v Fletcher [60] Fletcher v Fletcher concerned a deed by which the testator covenanted with his trustees that his executors should, within 12 months of his death, pay £60,000 to certain trustees, to be held on trust for his sons A and B (if they survived him and had reached 21). [61] Years later, after revoking all previous testamentary dispositions which he might have made, the testator made a will bequeathing his property on trust for the benefit of his wife, A and B, and his legitimate children. B did not survive the testator. A sued the executors for the payment of £60,000 (plus interest) in addition to any other benefit to which he was entitled under the will. -- 14 of 44 -- 15 [62] One of the objections to the relief sought was that the deed was testamentary. It was held that it was not. The Vice-Chancellor said (my emphasis), “This is not a case where there is a general power of revocation reserved – a general power to dispose by will notwithstanding the execution of the instrument. In the cases referred to there has been a general reservation, or something like a reservation, of the party’s right to deal with the property, notwithstanding the instrument; and the Courts have held that, in such cases the instrument being one which … until the death of the party … was not consummated, until then no conclusive effect could be given to it. If that does not occur the instrument is not to be considered as testamentary. In this case the party clearly was bound, and there is, therefore, no ground for the argument that the interest is testamentary”. It was declared that the deed constituted a debt to be paid to A, with interest, less amounts applied to his maintenance during his minority. Cock v Cooke [63] In Cock v Cooke, the deceased, who was dangerously ill, signed a witnessed document which said, “I wish my sister … to have my … bank-book, for her own use”. The deceased died. She was survived by her brother and sister. The issue was whether the deceased intended her document as a will or whether she intended to make a present gift of her property (her “bank book”) to her sister. It was recognised that the deceased had an “imperfect education”. In all of the circumstances, including a statement by the deceased that her nieces and nephews could make no demand on her for a penny, it was concluded that her intention was that the paper should take effect at her death – an event which she and her sister considered certain and imminent. This was so even though the deceased had attempted to withdraw her money out of her bank account before her death to give to her sister. Sir J P Wilde said, “It is undoubted law that whatever may be the form of a duly executed instrument, if the person executing it intends that it shall not take effect until after his death, and it is dependent upon his death for its vigour and effect, it is testamentary”. Wolfe v Wolfe [64] The testator in Wolfe v Wolfe, by document, “hereby” bequeathed his farm to his grandson, William and gave up the management of the farm “from this date” to his son, James (William’s father). Under the document, James was to pay the testator and his wife £20 per annum during their lives. James was to be responsible for the farm’s rents and taxes and make certain allowances for the testator’s widow (after the testator’s death). Andrews J acknowledged that the deceased had a distinct testamentary intention to leave the farm to his grandson by will but that several of the terms of the document had an immediate operation and were not dependent upon the testator’s death. The question was whether the document was testamentary. It was held that part of it was. Andrews J said (at 250ff; my emphasis) – Now, where there is a disposition of a manifestly testamentary character in a document duly executed as a will [as this document had been] the Court ought, unless there is some decisive reason to the contrary, to admit it to proof as a testamentary act. Does then the fact that the remainder of this document is not of a testamentary character but was manifestly intended to become operative immediately, and not to be dependent on the death of the maker of it, preclude the Court from admitting to proof that portion of the document which is clearly testamentary? In my opinion it does not … -- 15 of 44 -- 16 There is, no doubt, however, that an instrument, or a separate and distinct part of an instrument, which takes effect in praesenti and is not intended by the maker of it as a testamentary act, cannot be admitted to proof as a will … But I see no reason why a distinct part which is clearly testamentary of an instrument should be excluded from proof as such, because the remainder, or another part of it, is not testamentary. Why should a person be unable to make a will on the same sheet of paper on which he entered into any other arrangement respecting his property not amounting to a complete disposition of it? In so far as such an arrangement may bind his property, the testamentary disposition would be subject thereto; and, in the present case, it may be that the bequest to the deceased’s grandson is subject to the provisions in the remainder of the document; but this is not an action in which that question can be determined. Re Leung Wai Jing [65] In anticipation of her death, the deceased in Re Leung Wai Jing drafted certain documents. By clause 3 of “Document A”, she stated that, on the date of its execution, she deposited $50,000 with the Church to be given to her son after her death. The Church accepted the cash from her. The Probate Registry accepted Document A as her valid will except for clause 3. On a non-contentious application for a grant, the High Court held that the Probate Registry was correct (at [11]) – It is well established that a valid will must embody the testamentary intention of the Deceased, meaning that it must be testamentary, ambulatory and revocable and it must not take effect until death. Williams on Wills states: “A will is a document which is of no effect until the testator’s death and until then is a mere declaration of his intention and it at all times until such death subject to revocation or variation. The execution of a will leaves the testator free during his life to dispose of his property as he pleases and operates subject to any such disposition inter vivos.” (Vol 1, para 1.7) “A will subjects the assets of the testator, from the moment of its execution, to a series of dispositions which, unless revoked, will operate at his death; these dispositions will remain inchoate until his death … (Vol 1, para 1.7)” [66] The High Court held that clause 3 did not meet the relevant criteria. It provided for the immediate passing of personal property to the Church as custodian to hold for the deceased’s son until after her death. It resembled a de facto disposition inter vivos to the Church as trustee. Re White [67] With respect to the last three of the authorities referred to in the extract, counsel for the plaintiff said, in oral submissions that – (a) Watson did not seem to be authority for the proposition for which it was cited; and -- 16 of 44 -- 17 (b) He was not going to rely upon the 1987 “Irish decision” because it was “too extreme” to be of helpful guidance. [68] On the strength of those submissions, I considered Re White only. [69] In that case, the deceased (Charlotte White) and her two sisters (Frances Toby and Sarah White) entered into a deed of settlement. The deed had two schedules. The property listed in schedule 1 was held jointly by Charlotte White and Frances Toby. The property listed in schedule 2 was held jointly by Charlotte White and Sarah White. The income from all of the property was payable to Charlotte White and Sarah White during their lives, and on the death of the last of them to survive, the properties were to become the property of Frances Toby. [70] The deed went on – It is hereby further Declared and Agreed that on the decease of the said Charlotte White all property not included in Schedule No. 1 hereto which is jointly owned by the said Charlotte White and Frances Toby shall be sold and out of the proceeds [a certain payment was to be made]. [71] The deed did not list these properties. They could not be identified until the death of Charlotte White and the deed contained no provision dealing with them until her death. It was held that, because the provision in the deed was intended to operate only after the death of Charlotte White, it was a testamentary disposition which could be revoked. Other authorities [72] In addition to the authorities referred to in the textbooks, the second defendant relied upon Re Fenton [1919] VLR 740; In re Carlile [1920] VLR 427 and Bird v Perpetual Executors and Trustees Association of Australia Limited [1946] 73 CLR 140 in support of her argument about the testamentary character of clauses 6 and 7. Re Fenton [73] In Re Fenton, the deceased’s estate was worth, net, 2299l. The deceased had three children. By his will, dated 6 November 1914, he left his son Arthur 50l and the balance to his other two children Zenobia and Russell. On 12 June 1915, he signed a document which acknowledged a debt due to Arthur, payable by his estate, “of such sum as will make him rank equally” with his siblings. The executors asked the court to decide whether the document created a binding debt. Zenobia and Russell argued that the document purported to be a will but it was null and void because it did not comply with the formalities of the Wills Act. [74] The Court held that the document was intended to be testamentary but was invalid. In holding that the document was testamentary, Hood J said (at 744; citations and footnotes omitted; my emphasis) – It is undoubted law that, whatever may be the form of a duly executed instrument, if the person executing it intends that it shall not take effect until after his death, and it is dependent upon his death for its vigour and effect it is testamentary … The intention of the -- 17 of 44 -- 18 testator may be ascertained either from the paper itself or from parol evidence … and an instrument in any form, whether a deed poll or indenture, if the obvious purpose is not to take place until after the death of the person making it, shall operate as a will … [75] His Honour also said – It was argued that the real test was revocability. But this seems only putting the same test in another form. If the document is not to operate till death it is revocable. If it is not revocable either by its terms or from (sic) any other reason then it is not operative only on death, and is not a testamentary paper. [76] There was an issue about whether the document had been executed as a deed (that is, signed, sealed and delivered). But his Honour concluded, whether a deed or not, the document was, in reality, a testamentary disposition. In re Carlile [77] In re Carlile was an appeal from a decision of Hood J. Sometime before August 1916, the testator placed a document in an envelope which read “Only to be opened in the event of my death”. The document itself was under seal and signed by the testator. It acknowledged that he owed the plaintiff 1000l which, in the event of his death, was to be paid to her in 100l instalments over a period of time. The testator handed over the envelope, containing the document, to the plaintiff on 26 August 1916. On 21 January 1919, the testator made a will. He died the next day. The question was whether the plaintiff had a claim for 1000l against the estate. Hood J decided that she did not. On appeal, the plaintiff relied upon certain technical rules to argue that the document operated as a deed and the purported acknowledgment of the debt should be construed as a present promise to pay. Cussen J, reading the judgment of the Full Court, held that the testator’s intention was that the document was not consummated until his death. It was therefore testamentary and could operate only, if at all, as a will. The document could not operate as a will (because it did not comply with the provisions of the Wills Act) and the plaintiff failed. The Court added that giving effect to the document as a deed would be an easy way of defeating the safeguards of the Wills Act and of evading death duties. Bird [78] In Bird, Mrs Bird’s brother-in-law, Parker, wished to repay her for allowing him and his wife to live with her without charge for several years. He executed a document under seal acknowledging that he was indebted to Mrs Bird for his and his wife’s board and residence and directing his trustees, executors and administrator to pay her a certain sum of money upon his death (equivalent to rent plus interest). At first instance, the document was held to be testamentary in character but inoperative because it was not executed in accordance with the Wills Act. [79] On appeal to the High Court, by majority, the decision at first instance was affirmed. The second defendant in this case relied upon statements of Starke and Dixon JJ to the effect that the operation of the document depended upon Parker’s death, giving it its testamentary character. However, I note that Starke J also said, at 145, that, “… a document is not testamentary if it takes effect immediately upon its execution -- 18 of 44 -- 19 although the enjoyment of the benefits conferred thereby be postponed until after the donor’s death …” And Dixon J said, at 146 (my emphasis) – … A covenant for payments to be made by the covenantor’s executors or administrators is perfectly good. If the instrument containing such a covenant is executed so as to take effect as his deed during the covenantor’s lifetime, it is no objection that his death is the event upon which the obligation is to be fulfilled. That does not make it a testamentary instrument … Paragraph 2.22 from Dal Pont & Mackie’s Law of Succession [80] In response to an argument made by the present plaintiff about the fact that the relevant clauses were in a document described as a mortgage – not in a document intended as a will – the second defendant submitted that the authorities made it clear that a testamentary act need not be made under a document that is apparently a will, relying upon a phrase in paragraph 2.22 of Dal Pont & Mackie’s Law of Succession. [81] Also, she argued, relying on In the Estate of Knibbs [1962] 2 All ER 829 (cited heavily in paragraph 2.22), a testamentary act need not be attended by any particular formality: an act may be testamentary even though it was not recognised by the testator to be an actual will but it must be an act which was intended to operate as a disposition of the testator’s “goods” upon his death, or a record of his wishes as to the disposition of his property. [82] Of course, context is important. Paragraph 2.22 of Dal Pont & Mackie falls under the heading “Testamentary Intention” and the sub-heading “Need for animus testandi”. [83] Paragraph 2.21 makes the point that nothing can be admitted to probate that a testator did not intend to be a testamentary act. Paragraph 2.22 states (some footnotes omitted) – Privileged wills feature in this context. For example, in In the Estate of Knibbs an oral statement by a seaman to a fellow seaman whilst at sea that ‘if anything ever happens to me, Iris will get anything I have got’ was construed as ‘the mere exchange of family gossip, opinions and information about family matters’, which could not be regarded as a testamentary act. The result may have been different, Wrangham J opined, had the statement been in the following terms: ‘I want my sister, Iris, to be certain to have everything that I possess after my death. Will you please see to it, and tell the captain? Please make sure that that is all right’. More generally, his Lordship remarked that: … in order to be a testamentary act there must be a statement of the deceased’s wishes for the disposition of his property after his death which is not merely imparted to his audience as a matter of information or interest, but is intended by him to convey to that audience a request, explicit or implicit, to see that his wishes are acted on. His Lordship also made clear, as have others, [See, for example, Re Stable (deceased) [1919] P 7 at 9 per Horridge J. Cf In the Estate of Beech (deceased) [1923] P 46.] that a testamentary act need not be -- 19 of 44 -- 20 made under a document that is apparently a will. [This reflects the notion that, statutory formalities aside, a will need not take a particular form …] Provided that the document is executed and its propounder intended the disposition to take effect on death, the document may be admitted to probate. [84] In Re Stable, it was held that a soldier’s statement to his fiancé, “If I stop a bullet everything of mine will be yours”, constituted a good will. It was not necessary, for his will to be valid, that he knew that he was making a will or had the power to make a will while a minor (he was under 21) or by word of mouth. Horridge J said (at 9) – The statement made by the deceased man must, I think, be meant for a will, only in the sense that he intended deliberately to give expression to his wishes as to what should be done with his property on the event of his death. [85] In Re Beech, the testator owned two estates – Shawe and Brandon. By his will, he appointed and declared that his eldest daughter, Mrs Allen, should have the right to occupy the house known as “The Shawe” on the Shawe Estate during her lifetime, without prejudice to the right of his son, Douglas Beech, as “tenant in tail immediately after my death to receive the rents and profits of Shawe Estate”. He devised and bequeathed the “rest residue and remainder” of his estate unto and to the use of the Public Trustee upon trust for sale and conversion for his three children: one-half to Douglas Beech and a quarter each to his two daughters (including Mrs Allen). While he was on active service in France, the testator wrote to his son Douglas and told him that he had left him the Shawe and Brandon Estates, as well as “the London house”. In another letter to Douglas, he said, “When I told you about Shawe going to you after me I should have also said that Kitty [Mrs Allen] will be able to use the house if she wishes during her lifetime …” [86] After the testator’s death, Douglas wished to rely upon the letters as codicils to his father’s will in support of his argument that the testator clearly intended both estates to go to him and therefore could not have intended the words in the will which included them in the residue. [87] Salter J found that the testator read the terms of his proposed will with due care and knew and approved of its contents. It had been rightly admitted to probate. As to the letters, Douglas relied upon authorities to the effect that it was not “requisite to the validity of a will that it should assume any particular form”. It was sufficient if it disclosed “the intention of the maker respecting the posthumous destination of his property”. Salter J was referred to Horridge J’s statement in Re Stable set out above. However, Salter J said that Horridge J did not say that every statement which disclosed the intention of its maker respecting the posthumous destination of property was necessarily a will. Salter J held that, to form a will, the words used by the testator must have been intended by him to be preserved or remembered so as to form the guide to those who survived him to carry out his wishes. The testator’s letters were not testamentary in character or intention. They were merely an inaccurate statement of the legal effect of an existing will. They did not reveal an intention to revoke the will – rather they intended to approve and affirm it. The letters were not entitled to probate. -- 20 of 44 -- 21 [88] Apart from her reliance on the authorities to support her arguments about the nature of clauses 6 and 7 and the possibility of their severance, the second defendant argued that the fact that clause 7 was directed at third parties to the mortgage made it even clearer that the clauses were testamentary dispositions. Clauses 6 and 7 are not testamentary [89] On my analysis, relevantly, the authorities discussed above differentiated between – (a) Documents in testamentary or purported testamentary form and documents not in testamentary form; and (b) Divisible and indivisible documents. [90] On my analysis, they relevantly established the following – (a) In deciding whether a document which is not in testamentary form is testamentary, it is necessary to consider the substance or the main object of the document (In the Goods of Robinson, Doe d Cross); (b) If the provisions of a document not in testamentary form are irrevocable, then the document is not of testamentary character (In the Goods of Robinson); (c) If a document which is not in testamentary form is intended to take effect immediately upon its execution, and does not require for its consummation the death of the alleged testator, then it is not testamentary (In the Goods of Robinson; Fletcher v Fletcher); (d) If a document which is not in testamentary form delivers immediate benefits to both parties to it, then it is not testamentary (re Bubnich); (e) If a document which is not in testamentary form commenced an arrangement immediately, during the testator’s lifetime, and continued that arrangement after the testator’s death, then it is not testamentary (Thorncroft v Lashmar); (f) Whatever the form of an executed document, and even if it were intended to operate as a deed containing a present promise to pay (Re Carlile; Bird), if the person executing it intends that it shall not take effect until after his or her death, and it depends upon his or her death for its vigour and effect, it is testamentary (Cock v Cooke) and may only operate as a valid will if it complies with relevant statutory requirements (Re Carlile; Bird); (g) A succession clause in a partnership agreement which cannot be revoked by unilateral action is not testamentary (Re Bubnich); (h) If, in accordance with a clause of a partnership agreement, the vesting of a right to title by survivorship is not dependent upon the death of one of the partners, then the clause is not testamentary (Re Bubnich); (i) If a document is clearly divisible into two parts – one intended to take effect during the life of its author and the other intended to take effect after his or her death – then the second part of the document may be treated as a will, particularly if the second part concerns the main object of the document (Doe d Cross, Thorncroft v Lashmar) or expressly states that it is intended to operate as a will (Anziani); -- 21 of 44 -- 22 (j) Where a testator has executed a deed dealing with his or her property during life and after death, a provision of the deed which is intended to operate only after death may be treated as a testamentary disposition (Re White); (k) A disposition of a manifestly testamentary character in a document duly executed as a will ought to be admitted to proof as a testamentary act, even if the remainder of the document is not of testamentary character (Wolfe v Wolfe; Leung Wai Jing); (l) Not every statement which discloses the intentions of its author with respect to the destination of his or her property after his or her death is a will. To be a will, the words used must have been intended to guide those who survived him or her to carry out his or her wishes (Knibbs; Stable; Beech). [91] The document which contained clauses 6 and 7 was neither in form nor substance a testamentary document. It was executed as a schedule to the mortgage and was registered with it. Its main object was to set out the terms of the mortgage, overriding, to the extent of any inconsistency, the standard mortgage terms. [92] The schedule to the mortgage was not unilaterally revocable (as, one may infer, Ms Power-Nemeth appreciated – because she asked Ms Collins more than once to execute an Amendment to Mortgage document). Nor was a power of revocation reserved insofar as clause 6 was concerned. [93] The mortgage commenced immediately and the terms of the schedule to it conveyed immediate benefits both ways. To Ms Power-Nemeth, those benefits included an income stream for the rest of her life and the right to the return of the whole of the monies lent upon default, notwithstanding Ms Collins’ repayments. To Ms Collins, those benefits included the use of the moneys lent and the right to forgiveness of the debt upon Ms Power-Nemeth’s death. [94] The schedule to the mortgage is not a divisible document with obviously separate parts or purposes. As a whole document, the schedule deals with essential mortgage terms such as duration, interest and repayments. Clause 6 is part and parcel of those terms and is to be read with clause 1. [95] Further reinforcing its indivisibility from the rest of the terms of the schedule, clause 6 – • could not take effect unless the mortgage persisted until Ms Power-Nemeth’s death; and • could not take effect unless there had been no relevant default.6 [96] Ms Collins’ right to the benefit of clause 6 vested immediately upon the execution of the mortgage/its registration. [97] Clause 7 was ancillary to clause 6. It did not convert clause 6 into a testamentary disposition. [98] In my view, the authorities do not support either the characterisation of the clauses as testamentary or their severance from the schedule. It is one thing to say (as the 6 See clauses 8 and 9. -- 22 of 44 -- 23 authorities did) – in the case of a document intended to be testamentary – that non- testamentary clauses may be severed from it to give it testamentary effect. It is quite another to say – in the case of an indivisible document, with immediate effect, intended to govern a mortgage and registered with it – that clauses of it dealing with the debt after the death of the mortgagee, on certain assumptions about the mortgage, may be severed from it and given testamentary effect. [99] In other words, in my view, clauses 6 and 7 were not testamentary dispositions severable from the mortgage deed. They could not therefore be overridden by Ms Power-Nemeth’s will. Whether the parties varied the mortgage by the agreement reached in on 20 July 2012 [100] The next question for me was whether the mortgage was amended by the agreement signed in the Chinese restaurant in 20 July 2012. Expressed another way, the next question for me was whether the 20 July 2012 agreement was binding or not. [101] To answer that question, it was first necessary for me to place the 20 July 2012 agreement in context. Context for the 20 July 2012 agreement [102] The relationship between Ms Collins and Ms Power-Nemeth had soured by 2010. [103] The dispute between them over the mortgage had last been before the Court on 13 December 2010, at which point Ms Power-Nemeth was restrained from exercising a mortgagee’s power of sale over Ms Collins’ property. Thereafter, Ms Power- Nemeth and Ms Collins discussed and corresponded about an agreement which would settle matters between them out-of-court.7 Ms Walker was aware of, and a party to, their correspondence. [104] Drawing on the objective facts, and the tone and content of the correspondence prior to 20 July 2012,8 I found that the context in which the 20 July 2012 agreement was executed included the fact that, although Ms Power-Nemeth was restrained from selling the mortgaged property, and in that sense, Ms Collins had the “upper hand”, Ms Collins was prepared to vary their mortgage arrangement upon terms which she considered “fair”. However, Ms Collins was wary about: (a) the prospect of Ms Power-Nemeth agreeing to an acceptable compromise and (b) the prospect of Ms Power-Nemeth adhering to such an agreement. [105] I inferred that Ms Collins was concerned to ensure that any agreement they reached was in a legally binding form so as to prevent Ms Power-Nemeth from failing to stick to it. Ms Collins was also concerned to ensure that she had an opportunity to review the terms of a legally binding document before she signed it so as to ensure that it was acceptable to her. I further inferred that Ms Power-Nemeth was concerned to ensure that her solicitor drafted the legally binding agreement, to safeguard against any disadvantage to her. 7 After, it seems, a failed attempt at mediation in 2011. 8 Which reflected their discussions. -- 23 of 44 -- 24 [106] Some examples of the correspondence which gave rise to my findings follow (all emphasis by me) – (a) On 19 July 2011, at 1.22 pm Ms Collins emailed Ms Power-Nemeth, drawing a distinction between their discussions about a new agreement and the need for any new agreement to be in writing – Dear Aunty Phyllis I am touching base with you as some time has now passed since we last spoke. You mentioned wanting to resolve this matter and were going to your solicitors to discuss further, and I had hoped that more realistic terms for a new agreement were then being forwarded in order to finally resolve this matter between us without the need to go to Court. As I have told you from the start, I really do understand that you have changed your mind regarding the terms of the loan to me but you do not seem to understand that you have disrupted my whole life as I have depended and relied upon our agreement. As family, I was prepared to be fair and thought we should be able to resolve this matter between us. I do not want to go to Court, nor did I want this to progress as much as it has with the lawyers and the waste of money already. But I find myself in this position as your unrealistic demands and unfair actions have given me no other choice than to protect myself. My solicitors are informing me that this matter needs to progress. So that we can avoid progressing to Court, could you please forward more fair and realistic terms for a new agreement between us. I am more than happy to discuss with you over the phone or in person, but please understand to move forward new terms do need to be in writing so that we can conclude a legal agreement in final resolution for us both. Hoping to hear from you soon. With love and without prejudice Angelique (b) On Sunday, 22 April 2012 at 13:12 pm, Ms Walker sent to Ms Collins, from Ms Power-Nemeth’s email account, the following email, which referred to preparation of an agreement by Ms Power-Nemeth’s solicitor – Hi Angelique Thank you for talking to me on the phone. I am with Phyllis and have told her what we discussed. I found this email below and agree that as family this needs to be sorted out now before further action proceeds in the court which starts tomorrow. I need to hear back from you with your response today so I can contact the lawyer in the morning to stop the proceedings and make up a new agreement. My email is [ ] … -- 24 of 44 -- 25 I think emailing me is best because Phyllis can’t access her emails. Her agreement is below. Cheers Christine Walker … I Phyllis Power agree to: 1. Make a new agreement together with Angelique Collins. 2. A 4 year term from the signing of the new agreement. 3. No increase in interest for the 4 year term. 4. Full payment of $1,000,000 at the end of the 4 year term (One Million Dollars). 5. If the property is sold on or before the 4 year term is up, full payment of the loan is immediately due. 6. Christine Walker will organise the new agreement with the solicitor this week and then both Phyllis and Angelique will sign the new agreement together by the end of the week. I look forward to us settling this now. With love and without prejudice Aunty Phyllis (c) On Monday, 23 April 2012 at 12:26 pm, Ms Collins emailed Ms Walker and Ms Power-Nemeth, asking to see a draft of the solicitor-prepared agreement before she signed it –9 Dear Aunty Phyllis/Christine Thank you for your correspondence. I am replying as part of my ongoing attempt to avoid this matter needing to proceed to Court. I have always said as family we should be able to work this out without legal action. Without going over everything again, as I see it there are two main issues: My inheritance is being taken away, and You are also wanting to take away the interest free component of our agreement. 9 It seems that Ms Collins did not appreciate that while the loan was said to be “interest free”, it was in fact akin to an “interest only” loan because, in accordance with the mortgage’s terms, Ms Collins’ repayments did not reduce the debt she owed. Her response to the proposal for “Full payment of $1,000,000 at the end of the 4-year term” implies that she understood that her payments to Ms Power- Nemeth reduced the amount she owed. -- 25 of 44 -- 26 I have resolved myself to the fact that sadly I have lost my family connection with you and that you have changed your mind over my inheritance, despite being part of our legal agreement. However, I do not see any fairness in also changing the interest free component of our legal agreement. Referring to your terms below: Make a new agreement together with Angelique Collins – yes agree. A 4 year term from the signing of the new agreement – yes agree (out of understanding and fairness as noted above). No increase in interest for the 4 year term – yes, agree no increase in the payment amount (based on interest free). Full payment of $1,000,000 at the end of the 4 year term ($1,000,000) – no, disagree (full payment due based on amount owing at this time). If the property is sold on or before the 4 year term is up, full payment of the loan is immediately due – yes, agree (full payment due based on amount owing at this time). Christine Walker will organise the new agreement with the solicitor this week and then both Phyllis and Angelique will sign the new agreement together – yes, agree (please send draft) As to the two main issues mentioned above, bottom line Aunty Phyllis, I’ve accepted the first issue you should accept the second. I have shown my willingness to compromise to a certain extent however, if you are serious about resolving this, then you need to look at also meeting in the middle. Look forward to resolving this. With love and without prejudice Angelique (d) On 9 July 2012, Ms Collins emailed Ms Power-Nemeth and Ms Walker, stating again her requirement that she peruse/review the solicitor-prepared agreement before signing it – Below is the latest agreement we discussed, I have filled in beside your comments. Hoping you can see what I am offering is a substantial compromise from my legal position in a final attempt to settle this without the need to continue through the court. This is subject to a formal agreement which will need to be written up for my perusal. Ms Collins’ comments (in capital letters) explicitly reflected her desire to peruse, review and perhaps seek a solicitor’s review of, the final new agreement before signing it – -- 26 of 44 -- 27 7. Christine Walker will organise the new agreement with the solicitor YES, A DRAFT IS TO BE SENT TO ME FOR REVIEW. SOLICITOR COSTS TO DRAFT THE AGREEMENT ARE TO BE AT PHYLLIS’ EXPENSE. SHOULD I CHOOSE TO HAVE A SOLICITOR REVIEW I WILL PAY FOR MY OWN COST. (e) Revised draft terms, sent by Ms Collins to Ms Walker on 11 July 2012 included clause 7 and Ms Collins’ comments, as above; and concluded with the following – I look forward to settling this now. With love and without prejudice, and subject to a suitably drafted legal agreement Angelique (f) On 16 July 2012, Ms Walker told Ms Collins that “it” – presumably a version of the revised draft terms – had been forwarded to Ms Power-Nemeth’s solicitor (David Landsdowne) to “make up the agreement”. On 17 July 2012, Ms Walker told Ms Collins that Mr Landsdowne was away until 13 August 2012 and that they would have to wait “until then to do the agreement”. Ms Collins conveyed, in an email in reply, the importance to her of seeing the solicitor-prepared agreement before signing it – Ms Walker’s email said – Hi Angelique Spoke to Phyllis..her solicitor is away now until the 13th August so we will have to wait til then to do the agreement…She is so happy this is getting sorted out…She would love to have dinner with you on Friday night though … chinese at the casino..how does that sound?.. Cheers..Christine. Ms Collins reply said that she was – a little reluctant to do this as I am yet to see our agreement set in stone (or I’ve at least seen the agreement coming back from Landsdown in the terms we have discussed). Aunty Phyllis has changed her mind too many times in the past for me to feel comfortable until I now see it on paper. How about we all sign the agreement as temporary until then? (see below) I know legally it is not worth the paper its written on but it will at least show how she can just change her mind whenever she feels, if need be. (g) The terms of the “temporary” agreement followed. They included paragraph 7, which said, “This is a temporary agreement until the legal one can be drawn up by Mr David Landsdown/reviewed accordingly by Angelique and signed by both party’s”. [107] It is worth noting that, as at 11 July 2012, the parties had not agreed about the term of the “new” mortgage. Ms Power-Nemeth contended for a term of four years, from -- 27 of 44 -- 28 the signing of the new agreement. Ms Collins contended for “NO TIME REQUIREMENT. THE SALE OF THE PROPERTY IS THE TERM”. On 12 July 2012, Ms Power-Nemeth, by email, agreed to Ms Collins’ term. [108] That term was re-framed in the draft of the “temporary” agreement sent to Ms Power- Nemeth by Ms Collins on 18 July 2012 as – “NO TIME REQUIREMENT. THE SALE OF THE PROPERTY 943 – 45 cairns street Loganholme QLD 4129) IS THE TERM”. [109] The term was essentially the same in the signed agreement, although the second sentence was repeated and it included a reference to a “transfer” as well as a sale. [110] Ms Collins, Ms Power-Nemeth and Ms Walker met at the Chinese restaurant on 20 July 2012. Ms Collins and Ms Power-Nemeth signed the agreement (exhibit 32) which is reproduced in these reasons (see the following page). [111] I noted that, in addition to the terms of the draft (requiring the preparation of a “legal” agreement and Ms Collins’ review of it), the agreement itself stated that it was to be “subject to the approval of” Ms Power-Nemeth’s solicitor and “Angeliques” (sic). -- 28 of 44 -- 29 -- 29 of 44 -- 30 [112] In her affidavit, Ms Walker said that dinner at the Chinese restaurant lasted for about one and a half hours. During it, there was little conversation about the agreement “and more about moving forward as a family”. She recalled that Ms Collins and Ms Power-Nemeth were “extremely pleased to have reached an agreement”. [113] In my view, the terms of the 20 July 2012 agreement, particularly when viewed in context, revealed– • the importance to Ms Power-Nemeth of obtaining her solicitor’s approval to the proposed changes to the mortgage; providing her with an opportunity to back out of the arrangement if approval were not forthcoming; • the importance to Ms Collins of ensuring that she had an equal, if not final, say in their agreement (inferred from the inclusion of “and Angeliques”); • the importance to Ms Collins of a legally drafted written agreement; • the importance to Ms Power-Nemeth of having her solicitor draft their “legal” agreement; and • the importance to Ms Collins of the ability to withdraw from the agreement as set out in the “legal” document if it did not meet with her satisfaction. Plaintiff’s submissions [114] The plaintiff submitted that the 20 July 2012 agreement simply meant what it said. It was not binding. It was subject to contract and review. She referred me to Lennon v Scarlett and Co (1921) 29 CLR 499 in which the High Court contrasted the approach to the construction of a written agreement which was expressed to be subject to a formal contract, and one which was not. In the case of the former, the words were to be taken to mean what they said. [115] In Lennon v Scarlett, the plaintiff sent to the defendant a telegram containing an offer to supply a quantity of maize at a certain price on certain delivery terms. The defendant’s telegram in reply was, by its terms, an unconditional acceptance of that -- 30 of 44 -- 31 offer, which ended with the words “please forward contract”. The defendant argued that the effect of those words, in the light of subsequent correspondence between the parties, was that the execution of a formal contract was a condition precent to the existence of a binding agreement. The High Court rejected that argument. It applied the following “rule” in Winn v Bull 7 Ch D 29 at 32, per Jessel MR (my emphasis) – … where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail. [116] The Court felt no doubt that a binding agreement was concluded between the parties upon their exchange of telegrams. The Court emphasised the natural meaning of the words “please forward contract” and the context for the making of the agreement in reaching that conclusion – In construing the letters relied on the Court ought to construe them in the light of the rest of the correspondence between the parties. On this question of construction it is to be noticed that all the essential terms of the contract are stated in the two first telegrams- parties, price, subject matter, and mode and date of performance. The words “please forward contract” are not in themselves apt to express a condition. Their natural meaning is “please forward a form of document embodying the terms on which we have agreed”. Turning to the subsequent correspondence, we find it is clear that the plaintiff understood them in this sense … And that the defendant understood them in the same sense … Second defendant’s submissions [117] The second defendant framed this issue in these terms: whether the agreement signed on 20 July 2012 “effected a variation of the release covenant or an agreement to vary the release covenant”. She submitted that the resolution of the issue turned on the following matters – (a) The legal characterisation of the 20 July 2012 document as an agreement; (b) Whether the parties intended to be bound to the variation; (c) Whether there was consideration for the variation; (d) Assuming a binding agreement, whether it was conditional upon the solicitor’s subsequent approval, and if so, whether that approval had been obtained; (e) Whether lack of a further agreement was fatal; and (f) Whether the failure to register the amendment to the mortgage was relevant. -- 31 of 44 -- 32 [118] It is convenient to start with (d). (d) Assuming a binding agreement, whether it was conditional upon the solicitor’s subsequent approval, and if so, whether that approval had been obtained [119] The second defendant submitted that the issue raised by the “subject to approval” paragraph was whether it was to be construed as a condition which had to be satisfied before the parties were bound or whether it was to be construed “as a term in relation to the form of wording to be employed in the subsequent document which would give effect to the parties’ agreement as formed”. [120] The second defendant argued that I ought to find that the role of solicitors was “simply to document the deal as agreed” and that the case fell within “the 1 st , 2nd or 4th categories of Masters v Cameron”10 and was therefore binding. [121] To make that argument, she relied upon authorities which drew a distinction between a solicitor’s role in the “commercial” and the “conveyancing” aspects of a transaction. She also relied upon the evidence of Mr Ingwersen, the principal of the firm of solicitors retained by Ms Power-Nemeth, that his firm’s role was to document the 20 July 2012 deal and not to advise about the commerciality of it. [122] I was concerned about the reliability of Mr Ingwersen’s evidence because he had only second-hand knowledge of Ms Power-Nemeth’s instructions about the 20 July 2012 agreement. Regardless, the interpretation of the 20 July 2012 document was a matter for me. [123] The 20 July 2012 agreement provided for – • first, Ms Power-Nemeth’s (and Ms Collins’)11 solicitor’s approval of its terms; • secondly, assuming approval, the reduction of those terms to a “legal” document prepared by Ms Power-Nemeth’s solicitor; and • thirdly, Ms Collins’ review of the legal document. [124] In the circumstances set out below, I found that the “approval” sought was approval in the sense of a lawyer’s advice that the terms of the agreement were satisfactory in a commercial or financial sense. [125] That Ms Power-Nemeth intended that the terms of any binding agreement were to be first approved, in that sense, by her solicitor (Ms Neal), before being drawn up is unsurprising. It is consistent with the caution with which the parties treated one another and the fact that the original mortgage, as drafted, without the advice of solicitors, had not worked to Ms Power-Nemeth’s advantage. It is also consistent with the fact that the resolution of the dispute about the new mortgage “term” was a late development in their negotiations. 10 As is well known, Masters v Cameron (see below) is High Court authority on the circumstances in which an agreement expressed to be “subject to contract” (or similar) is binding. 11 I acknowledge that, on the basis of her evidence at the hearing, Ms Collins did not appear to appreciate the effect of the inclusion of “and Angeliques” in the final paragraph of the 20 July 2012 agreement. However, I inferred that her intention at the time was to ensure that she had the same rights as Ms Power-Nemeth had when it came to approval or review of any agreement between them – whatever those rights may have been. -- 32 of 44 -- 33 [126] The correspondence reveals that the original plan was that Ms Power-Nemeth’s solicitor would draw up an agreement to vary the mortgage, to be signed by Ms Collins. It is reasonable to infer that, on that basis, Ms Power-Nemeth was comfortable that she would not be disadvantaged by its terms. But Ms Power- Nemeth’s solicitor was away until 13 August 2012. Ms Power-Nemeth was prepared to wait until then. But Ms Collins, anxious to hold Ms Power-Nemeth to something, pushed for the “temporary” agreement. [127] It is reasonable to infer that Ms Power-Nemeth was keen to keep Ms Collins happy (including, probably, so that she would sign an affidavit for Ms Power-Nemeth to use in other unrelated litigation) by signing the temporary agreement, but also keen to ensure that she (Ms Power-Nemeth) was not disadvantaged by its terms. She therefore added to the terms proposed by Ms Collins the term which built in her solicitor’s approval of those terms before they might be reduced to writing – thereby giving her an out if necessary. [128] Thus, the 20 July 2012 agreement was not only subject to the preparation of a “legal” agreement by Ms Power-Nemeth’s solicitor and Ms Collins’ review of that legal agreement. Its content was itself subject to Ms Power-Nemeth’s solicitor’s approval. [129] In my view, no binding agreement was reached on 20 July 2012. The parties to it were not even at the “subject to contract” stage. There was therefore no need for me to go on to consider Masters v Cameron. The second defendant could take her arguments no further and the plaintiff would succeed. [130] Notwithstanding my confidence in that conclusion, I considered other of the second defendant’s arguments, including her Masters v Cameron argument. On that basis also, as explained below, I found that the 20 July 2012 agreement was not binding. (a) Legal characterisation of agreement [131] The second defendant referred me to authority in support of an argument that the parties intended to replace the existing mortgage with an entirely new agreement (in the terms of the 20 July 2012 agreement) rather than to vary it. I did not think that difference mattered to the issue for me and I did not consider it further. (b) Intention to be bound [132] At the heart of this issue was the discernment of the parties’ intention. The plaintiff said that the parties to the 20 July 2012 agreement did not intend to be bound by it. The second defendant said that they did. The plaintiff and the second defendant referred me to Masters v Cameron (1954) 91 CLR 353 in support of their competing contentions. [133] Masters v Cameron concerned an agreement to purchase property which set out the terms and conditions of the purchase but was expressed to be “made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions” (my emphasis). [134] At 360ff the High Court discussed three classes of agreements which were “subject to contract”: each class dependent upon the intention of the parties (footnotes omitted, my emphasis) – -- 33 of 44 -- 34 Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join … in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: “… as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed” … [The Court then gave an example of cases of the second class in which the signing of the contract was held not to be a condition of the agreement.] Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own … The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document… or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document it signed. These possibilities were both referred to in Rossiter v Miller. Lord O’Hagan said: “Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed …And Lord Blackburn said: “parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and -- 34 of 44 -- 35 then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it might represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think the parties ought not to be held bound till they have executed the formal agreement” … in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape … Nor is any formula, such as “subject to contract”, so intractable as always and necessarily to produce that result … [135] The High Court discussed the impact of the use of phrases like “subject to contract” at page 363 ff and referred to the case upon which the plaintiff relied, Winn v Bull – … it has been recognized throughout the cases on the topic that such words [as “subject to contract” or “subject to the preparation of a formal contract”] prima facie create an overriding condition so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract … The effect of the early cases on the subject was stated by Sir George Jessel MR in Winn v Bull when he said in a passage which has become well- known, “It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is depended upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail. The subsequent cases on the point have been numerous and it will suffice to refer to two only … A case very like the present is Santa Fe Land Co Ltd v Forestal Land etc Ltd in which an offer was made “subject to a formal contract to be approved by your solicitors and ourselves on acceptance of the offer, when any minor details can be settled”. The acceptance of this offer was held by Neville J not to constitute a concluded contract. The learned judge, following Winn v Bull said: “Now it is important … that the parties should be able to protect themselves by some suitable words from being bound by the negotiation they are conducting. In the present case I think the words in question do impose the condition that if the offer is accepted a more formal contract is to be prepared by the solicitors which is to embody all the details”. The other case is Spottiswoode Ballantyne & Co Ltd v Doreen Appliances Ltd. The Court of Appeal there had to consider an agreement for the letting of premises, expressed to be “subject to -- 35 of 44 -- 36 the terms of a formal agreement to be prepared by their (the owners’) solicitors”. The court construed this phrase as meaning that the formal agreement had to be not only prepared by the solicitors but executed by the parties. Lord Greene concluded that the language used was equivalent to the common and more concise phrase “subject to contract”, and added that “it is well settled that that phrase makes it clear that the intention of the parties is that neither of them is to be contractually bound until a contract is signed in the usual way. Goddard LJ repeated the observation of Bankes LJ in Keppel v Wheeler “I pause here to state plainly what is now well established, that where a person accepts an offer subject to contract, it means that the matter remains in negotiation until a formal contract is settled and the formal contracts are exchanged. [136] The High Court applied those authorities in Masters v Cameron at 364 – In the present case the context provides no reason for holding that the case is outside the application of these authorities. The formal contract, it is true, is to be “on the above terms and conditions”, but it is to be acceptable to the vendor’s solicitors, and the meaning is sufficiently evident that the contract shall contain, not only the stated terms and conditions expressed in a form satisfactory to the solicitors, but also whatever else the solicitors may fairly consider appropriate to the case. Accordingly … no binding contract for the sale and purchase of the property … was made … [137] The second defendant referred to a fourth Masters v Cameron class of case – that is, one in which the parties may intend to be immediately bound, even if they contemplated the subsequent negotiation of further terms, citing GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 and Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60. She suggested that the 20 July 2012 agreement fell into that class (as well as the first and second classes above). [138] In G R Securities, the question was whether three letters, passing between the Hospital (as purchaser) and GR Securities (as vendor), constituted a contract for the sale of a hospital. The first letter contained the Hospital’s offer to buy a hospital for $4.3 million. The letter stated that, upon acceptance of it, the Hospital “would expect that it would constitute a legally binding acceptance until such time as it is superceded (sic) by a formally binding agreement”. The response, which contained an acceptance of the offer, stated that the acceptance was subject to the Hospital’s acceptance of certain conditions and further stated, “On receipt of such written acceptance, [GR Securities] would consider there to be a legally binding agreement in principle between yourself and it, until such time as formal Contracts were exchanged as aforesaid”. The Hospital by letter accepted the terms and conditions. [139] As to whether the letters constituted a contract, the Court of Appeal of New South Wales (McHugh JA, with whom Kirby P and Glass JA agreed) said (at 364, some citations omitted, my emphasis) – …[T]he decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances … If the -- 36 of 44 -- 37 terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction. Even when a document recording the terms of the parties’ agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that “the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms”: Sinclair, Scott & Co Ltd v Naughton … [140] The Court relied upon the express words of the contract to confirm the decision at first instance that a binding contract had been created, even though the making of a further agreement would supersede the agreement in the correspondence. [141] The Queensland Court of Appeal has endorsed the G R Securities approach: see Moffatt at [23]. [142] The question in Moffatt was whether a letter signed by a vendor and purchaser constituted a binding agreement for the sale of certain land to the purchaser. The vendor did not wish to proceed. At first instance, the purchaser obtained a declaration that the letter constituted a valid and binding agreement. The vendor appealed. [143] The letter contemplated the making of an “unconditional” contract , upon the vendor’s acceptance of the purchaser’s “unconditional” offer to purchase. It concluded on the footing that, if the vendor signed the “letter of offer as accepted”, the purchaser would instruct its lawyers to prepare contract documentation. [144] In dismissing the appeal, Keane JA, with whom McMurdo P and Atkinson J agreed, considered it important that there was no suggestion in the correspondence that terms were “still to be the subject of negotiation and agreement rather than prepared by Moffatt’s lawyer”. It was held (at [26]) that the “fatal difficulty” with the argument that the letter did not constitute a binding contract was that, by its terms, the unqualified acceptance of the unconditional offer gave rise to an agreement which was explicitly unconditional. Also, evidence that the parties were concerned to reach a commitment; and the objective importance to each of them to bring negotiations to a close, was significant. The evidence did not suggest that further negotiation was regarded by the parties as essential. Nor did the evidence support a suggestion that the parties would be willing to countenance one or the other shifting ground on the “big ticket” items after the letter was signed. [145] I noted that, at [37] – the paragraph upon which the second defendant relied – Keane JA cautioned against a restrictive view of the Masters v Cameron classes of documents. His Honour said (my emphasis) – It is also suggested on behalf of [the vendor] that the putative agreement does not fit neatly within the second category in Masters v Cameron. It may be said that this suggestion involves an unduly restrictive view of that category. It may also be said that the putative agreement in this case belongs, like that in G R Securities, to a fourth category. In my respectful opinion, however, there is little purpose to -- 37 of 44 -- 38 be served in seeking to resolve the issue of classification. A concern as to classification should not be allowed to obscure or distract from the real task of the court which is to ascertain and give effect to the intention of the parties. As Sir Anthony Mason said recently: “…[T]he categories (or classifications of Masters v Cameron …) be they three or four, are no more than exemplifications of the general principle that, in the case of written documents, the intention of the parties is to be resolved objectively and as a matter of construction of the relevant documents. The categories are necessarily subject to the general principle.” [Sir Anthony Mason “Opening Address [to the Journal of Contract Law 20th Anniversary Conference]” (2009) 25 Journal of Contract Law 1,6.] [146] Thus, whether the 20 July 2012 agreement was binding was to be determined by reference to the parties’ intentions, objectively ascertained, as a matter of construction of the document in the light of the surrounding circumstances or context in which the agreement was made. I was not to be distracted from my real task – to ascertain and give effect to the intention of the parties – by a concern as to which “Masters v Cameron classification” the agreement might be said to fall. [147] In my view, it was plain from the terms of the 20 July 2012 agreement that both Ms Collins and Ms Power-Nemeth were proceeding cautiously. The signed document stated that – (a) It was signed “only as a declaration of a new agreement being negotiated and a new mortgage being drawn up”. (b) “They [Ms Collins and Ms Power-Nemeth] both agree that: A new agreement and new mortgage … is to be drawn up by David Landsdowne”. (c) “This is a temporary agreement until the legal one can be drawn up by David Landsdowne/reviewed accordingly by Angelique and signed by both party’s”. (d) “This agreement is subject to Phyllis’s solicitor approval on her return on the 13 th of August 2012 and Angeliques”. [148] The language of the agreement was prima facie consistent with its being a non- binding agreement to agree. [149] The plaintiff submitted that it was clearly within the third category of Masters v Cameron. It was expressly “subject to contract” and subject to review or approval by lawyers for both sides before a binding contract came into force. [150] The second defendant submitted that, notwithstanding the wording of the agreement, it was in fact binding. She submitted that the correspondence between the parties in the lead up to its signing revealed that the parties were in fact agreed as to all of the terms of the agreement by the time of the 20 July 2012 meeting in support of its argument that the solicitors’ role was merely to document the binding terms and conditions. [151] Broadly, that may be so, but the terms discussed before 20 July 2012 and expressly included, if not amplified, in the agreement of 20 July 2012, included (by April 2012) -- 38 of 44 -- 39 terms involving Ms Power-Nemeth’s solicitor in the drafting of any new agreement; Ms Collins’ review of that draft; and (by 20 July 2012) solicitor’s “approval” of the 20 July 2012 terms. [152] I did not consider that the lay parties to this agreement intended, by reference to the notion of a “temporary” agreement binding them until another agreement was drafted, to be bound in the same way as the parties in Sinclair, Scott & Co Ltd v Naughton intended to be bound – particularly in the light of their previous correspondence. [153] Indeed, in my view, as expressed above, at Ms Power-Nemeth’s instigation, on 20 July 2012 the parties got no further than an agreement to agree subject to the approval of (at least) Ms Power-Nemeth’s solicitor of the agreement to agree itself. [154] I inferred from the circumstances around, history to, and context of, the 20 July 2012 agreement, that Ms Collins and Ms Power-Nemeth were each keen to ensure that they would not be outmanoeuvred by the other. They were each keen to ensure that they had the right to withdraw from any arrangement reached on 20 July 2012 before they were bound to it. Ms Power-Nemeth wished to retain the right to withdraw even before a final agreement was prepared by her solicitor. Ms Collins wished to ensure that, if she was dissatisfied with anything included in the solicitor-drafted agreement, she was not bound by it. [155] The second defendant discounted the significance of the statements in the 20 July 2012 agreement which conveyed that it was conditional upon a solicitor’s approval on the basis that Ms Power-Nemeth’s solicitors had (previously) merely documented her deals and provided no commercial advice. [156] I found that argument undermined by the fact that Ms Power-Nemeth herself required the condition that the terms of the agreement be subject to her solicitor’s approval. I inferred that Ms Power-Nemeth wished to proceed even more cautiously than Ms Collins. She wished to build in, as a condition precedent to a binding agreement, her solicitor’s approval of the terms of the 20 July 2012 agreement. She was not content simply with a “subject to contract” condition. [157] Further, as a matter of common sense, even if in the past Ms Power-Nemeth’s solicitors had merely documented her deals, it did not follow that she would not seek their legal input into her 20 July 2012 agreement with Ms Collins. Indeed, it is reasonable to infer that – finding herself unable to simply “undo” the loan/mortgage arrangement; and restrained from exercising power of sale over the mortgaged property – Ms Power-Nemeth was concerned to ensure that she was not disadvantaged by any new arrangement which she and Ms Collins came up with. [158] The second defendant relied upon the fact that Ms Collins did not seek any legal input into the terms of the 20 July 2012 agreement in further support of her submission that the parties did not intend that a solicitor would provide advice about the commerciality or suitability of its terms before it bound them. The second defendant also relied on Ms Collins’ insistence, by letter dated 4 December 2012, that the 20 July 2012 agreement was binding. [159] It is true that Ms Collins did not seek a solicitor’s advice about the terms of the 20 July 2012 agreement. If it were necessary for me to make a finding as to why that was so, I would find that she did not understand the import of the term. Her evidence at the -- 39 of 44 -- 40 hearing revealed that she seemed to think that it reinforced her opportunity to review the terms of the “legal” document. I infer that she inserted “and Angeliques” to “keep up” with Ms Power-Nemeth. But such a finding is not necessary for the resolution of this issue. At the least, the terms of the agreement were subject to Ms Power- Nemeth’s solicitor’s approval. [160] It is also true that – obviously when it suited her – Ms Collins insisted that the document was binding. And there is some irony in the fact that she has taken the opposite position here. However, I noted that Ms Collins’ December 2012 letter was in response to a letter from Ms Power-Nemeth’s solicitors which conveyed that the 20 July 2012 agreement was not binding and that Ms Power-Nemeth was intending to pursue Ms Collins for the debt and “ask the Court for relief due to [Ms Collins’] misleading and deceptive conduct”. [161] Ms Collins said in her letter (as per original) – … Following formal mediation and after lengthy personal discussions back and forth of a period of months, I was relieved that we finally reached an agreement on 20 July 2012, signed in “good faith” by both myself and Phyllis in the presence of Phyllis’ close friend Ms Christine Walker. This agreement was purely on the basis that the terms by applied in their entirety. It was also agreed, at my specific suggestion, that Phyllis return to using the services of your firm to put the agreement reached into a legally drafted document. With the history of your firm acting on behalf of Phyllis as mortgagee in the preparation of the current mortgage, I believed your involvement would assist in finalising this matter for us both in an efficient manner. I was shell shocked to say the least to receive correspondence from you that contained no reference to the agreement reached, which as mentioned above, reflects Phyllis yet again changing her mind, or even more concerning to me, that I was simply manipulated and taken advantage of in order to obtain my assistance in separate legal proceedings. [162] While the second defendant urged me to treat the plaintiff’s statements about the binding nature of the agreement reached on 20 July 2012 as, in effect, admissions from which she could not now resile, she argued that I could not treat evidence of Ms Power-Nemeth’s position (that the 20 July 2012 agreement was not binding), revealed by her solicitor’s correspondence, in the same way. [163] She argued that Ms Power-Nemeth was “notorious for changing her mind” and that the fact that she did so, after the 20 July 2012 agreement was signed, did not mean that that 20 July 2012 did not bind her. [164] I treated the evidence of the correspondence between Ms Power-Nemeth’s solicitors and Ms Collins after 20 July 2012 simply as evidence of negotiations between them about the terms of the mortgage post the signing of the 20 July 2012 agreement – and not determinative either way of Ms Power-Nemeth’s view of its binding or non- binding nature. I took Ms Collins’ statements in December 2012 into account, but did not treat them as determinative of the parties’ intention in July 2012. The 20 July 2012 agreement is not binding [165] I formed the view that the 20 July 2012 agreement was not binding. -- 40 of 44 -- 41 [166] It was expressly subject to a solicitor’s approval of its terms and a solicitor-prepared “legal” contract. It was further subject to Ms Collins’ favourable review of the terms of the solicitor-prepared document. On its face, the parties did not intend the 20 July 2012 agreement to have any binding effect of its own. That prima facie conclusion was consistent with the parties’ intention at the time, as objectively ascertained by me. [167] The need for fulfilment of the above conditions prior to the 20 July 2012 agreement binding the parties to it was consistent with the circumstances in which the agreement was made and the relationship between the parties at the time. By including a condition that the “legal” agreement was, in effect, subject to her review, Ms Collins intended to preserve for herself the right to refuse to proceed further if the “legal” terms were not to her satisfaction. That approach was consistent with her wariness around Ms Power-Nemeth. Ms Power-Nemeth had her reservations too and wanted to ensure that she was not disadvantaged by the terms proposed by Ms Collins. As at 20 July 2012, she too wished to reserve to herself the right to withdraw from the agreement at any time before the solicitor-prepared agreement was drafted. That was achieved by the inclusion of the paragraph subjecting the 20 July 2012 agreement itself to her solicitor’s approval. [168] Having reached that conclusion, it was not necessary for me to consider any other aspect of the second defendant’s arguments (about consideration, the lack of the formal agreement or the failure to register the agreement). However, I wish to state that the second defendant’s contention that the 20 July 2012 agreement “did not state anywhere that any agreement is subject to any further, let alone a formal, document or agreement being signed” was based on an unduly literal and unreasonable approach to the construction of the agreement. It may reasonably be inferred that references in the 20 July 2012 agreement to the “declaration of a new agreement being negotiated”; a “new mortgage being drawn up”; and a “legal” agreement to be reviewed by Ms Collins and “signed by both party’s” were understood by the parties as references to a formal agreement, in legally effective terms, to be prepared by Ms Power- Nemeth’s solicitor for execution by the parties. Conclusions on primary issues [169] Clauses 6 and 7 of the mortgage are not testamentary dispositions. The 20 July 2012 agreement is not binding. In broad terms, the plaintiff has succeeded, and the declaration sought in paragraph 1 and the order sought in paragraph 5 of the amended application filed on 12 July 2019 ought to be made. However, the position of the first defendants must also be considered. The position of the first defendants [170] Last year, the first defendants applied to be removed as a party to these proceedings by way of an application to strike out the plaintiff’s statement of claim insofar as it concerned them. Their application was not successful. On 17 August 2020, Brown J dismissed it ([2020] QSC 250). In her reasons for doing so, her Honour said (footnotes omitted) – [60] The Executors’ arguments fail to recognise that facts have been pleaded in relation to a dispute between Ms Collins and the Executors and Ms Walker in relation to whether the debt -- 41 of 44 -- 42 secured by the Mortgage was forgiven or not upon Ms Power- Nemeth’s death, giving a basis for the declaration sought against both parties in circumstances where the declaration cannot be regarded as inutile against the estate. [61] It may well be that there is, in fact, no legal redress against the Executors in relation to the transfer of the Mortgage to Ms Walker and by the estate against Ms Collins, however the possibility that it may be pursued by a non-party to the present proceedings cannot be dismissed … Conclusion [62] While the Executors’ counsel presents compelling arguments as to why there could be no action successfully brought against the Executors arising out of the transfer of the Mortgage to Ms Walker, there is a proper basis for the Executors, as representatives of the estate, to be a party to these proceedings. There is an arguable basis, in the circumstances, for Ms Collins to seek a declaration that the debt was forgiven upon Ms Power- Nemeth’s death not only against Ms Walker but against the estate through the Executors. Whether or not the debt was ever part of the estate of Ms Power-Nemeth is a matter which directly affects the rights and obligations of the Executors and Trustees of Ms Power-Nemeth’s estate and for such a declaration to be sought, the Executors must be a party as representatives of the estate. [63] While the Executors have sought to bring the application in order to minimise costs and finalise the estate, it is still open to the Executors to take steps so that the Executors do not have to take any active part in these proceedings and abide by the order of the court if they consider that is the appropriate course. The Executors may also, if necessary, seek the advice of the court under s 96 of the Trusts Act in that regard. [171] Although at one point in time, the first defendants disputed that the debt was forgiven upon Ms Power-Nemeth’s death, they took a neutral position before Brown J. They took a neutral position before me also and made no submissions about the mortgage. However, they went into evidence at the hearing. [172] In opening their evidence, counsel for the first defendants described the “predicament” his clients found themselves in. He explained that, insofar as the first defendants were concerned, the definition of “secured monies” in the mortgage’s standard terms raised the prospect of the mortgage securing something other than the advances of $300,000 and $700,000. [173] Also, the first defendants consulted clause 7.2 of the standard terms which stated that the mortgagor was only entitled to a release when: (a) All of the secured monies have been paid or satisfied; and (b) The mortgagee is satisfied there are no debts or liabilities which could foreseeably fall within the description of the secured monies. -- 42 of 44 -- 43 [174] After Ms Power-Nemeth’s death, the plaintiff asserted that the legal right to redeem provided for in clause 7.2 had accrued to her with the consequence that the executors were required to do as clause 7 of the schedule directed. Ms Collins asked the executors to “discharge” the mortgage. At the same time, Ms Walker asked the executors not to. [175] As the first defendants saw it, although the mortgage referred to the extinguishment of the debt upon the death of Ms Power-Nemeth, clause 7.2 indicated that the mortgage could secure amounts that were the subject of other documents. And, as they saw it, Ms Walker was “waving around one such document contextualising why the will in respect of which probate was granted indicate[d] that the mortgage does secure something”. [176] The first defendants asserted that the will required the estate to transmit the mortgage to Ms Walker. Whether Ms Collins was obliged to make payments to Ms Walker or Ms Walker was obliged to give effect to Ms Collins’ legal right to redeem was a matter for them – not for the executors. [177] The first defendants suggested that I might wonder what they were said to have done wrong and why they were “really here”. Counsel for the first defendants elaborated – Now, the executors plead that they neither consent to nor oppose the relief sought by the plaintiff, leaving aside the issue of costs that is, and will abide the order of the Court. Notwithstanding that – and given that the executors attempt to be removed from the proceedings was unsuccessful, at the interlocutory stage – they go into evidence to say what they can about these issues as a means of assisting the Court and, in turn, the plaintiff. So that if she beats Ms Walker, she can point to her evidence in the case – and that of a contradictor, being the estate – and say what she – and say what she will about why the law, in those circumstances, would sanction the grant of a bare declaration as against the estate. That is, the infrequent situation where a declaration is made without the giving of relief consequential to the declaration and if the law sanctions it so that she may have that relief. [178] The first defendants’ evidence was limited to the affidavit evidence of one of the executors, Theresa Brook, who gave a little evidence in chief but was not cross- examined. Her affidavit dealt with the progress of the administration of Ms Power- Nemeth’s estate, which will be completed upon the resolution of the proceedings before me. [179] Of the decision to transmit the mortgage to Ms Walker, Ms Brook said – Because of the way that clause 8(g)(q) is drafted, the executors (in the fourth week of April 2019) became resolute in their satisfaction that it was a gift left to Ms Walker, even if Ms Collins’ contentions about the mortgage securing nothing, were correct. That is to say, the benefit and burden of the mortgage were left to Ms Walker (in her personal capacity) and that it was not for the executors to give effect to Ms Collins side of the dispute by releasing the mortgage, but rather, by preserving the status quo by transferring the mortgage (and any accompanying benefit or burden whatever it may be) to Ms Walker so that if it secured a debt (i.e. a benefit), she could take steps to address -- 43 of 44 -- 44 that, and so that if it did not, the burden of it, being an obligation to release the mortgage, would also be Ms Walker’s (which burden Ms Collins could enforce if Ms Walker did not do so voluntarily). [180] The first defendants’ written closing submissions included submissions noting that no cause of action had been pleaded against them in the plaintiff’s statement of claim and that the substance of Ms Collins’ claim concerned a mortgagor’s legal right to redeem, to be carried into legal effect by a mandatory injunction requiring the mortgagee to comply with clause 7.2 of the standard terms of the mortgage. [181] The first defendants’ submissions contained the reasons why they said it was appropriate to give the gift of the mortgage to Ms Walker, reflecting the evidence of Ms Brook above. They submitted that, as a matter of straightforward construction of the will, the mortgage passed to the beneficiary, along with its rights and obligations, past and future. The submissions continued, “If it be the case that the mortgage is, as a gift, valueless because it secures nothing, it is still property that ought to pass, and, it having been gifted to the beneficiary, any obligation to redeem it upon request is an obligation of the beneficiary, not the executors”. Also, the mortgage was a specific legacy, further justifying its transfer. [182] The first defendants also made the point that the allegation in paragraph 17 of the statement of claim, that they transferred the mortgage without notice to Ms Collins, is factually wrong. Her solicitor was so informed on 11 February 2019. [183] Having said all of that, the first defendants acknowledged that I had the power to grant the declaratory relief sought against them but submitted that I ought to act judiciously in doing so. [184] I will need to hear further from the plaintiff on this issue. She did not address it in her written or oral submissions. Orders [185] In the circumstances, my formal orders are – 1. I will grant declaratory relief to the plaintiff against the second defendant and make the order she seeks against the second defendant. 2. I will hear further from the plaintiff as to whether she seeks declaratory relief against the first defendants. 3. I will hear from the parties as to the wording of the declaration and order, and as to costs. -- 44 of 44 --