Blanket v Blanket [2007] NSWSC 1439

New South Wales Supreme Court

CITATION : Blanket v Blanket [2007] NSWSC 1439

HEARING DATE(S) : 29 October 2007

JUDGMENT DATE : 29 October 2007

JURISDICTION : Equity Division

JUDGMENT OF : Windeyer J at 1

DECISION : Judgment as to construction of will

CATCHWORDS : WILLS, PROBATE AND ADMINISTRATION - construction of will - provision to make up inequality between gifts to daughters - no fund available to make up difference - whether conditional gift

LEGISLATION CITED : Conveyancing Act 1919

Paul Blanket (Plaintiff) Eva Blanket (First Defendant) PARTIES : Ruzena Costa (Second Defendant) Jordon Blanket (Third Defendant) Nathalie Blanket (Fourth Defendant)

FILE NUMBER(S) : SC 6183/06

Mr Graeme Segal (Plaintiff) COUNSEL : Mr L Ellison SC (First Defendant) Mr P Hallen SC (Second Defendant) Mr M Heath (Third and Fourth Defendants)

Leon M Ratner & Associates (Plaintiff) SOLICITORS : Cropper Parkhill Solicitors (First Defendant) Tress Cox Lawyers (Second Defendant) Lloyd & Lloyd (Third and Fourth Defendants)

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IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ONE DAY LIST HEARING

WINDEYER J

MONDAY 29 OCTOBER 2007

6183/06 - PAUL BLANKET v EVA BLANKET & ORS

JUDGMENT

1 HIS HONOUR: This action concerns questions which arise under the will dated 18 December 2001 of Charlotte Davis, who died on 15 February 2005, a widow. Under her will she appointed the plaintiff, Mr Paul Blanket, who was her son-in-law, executor. She gave pecuniary legacies of $350,000 to Nick Roth and $20,000 to Martin Csokas, and then went on to provide in clause 4 of her will as follows: 4. a. I GIVE to my daughter RUZENA COSTI (also known as Rosie Costi) my properties at 205-207 Marrickville Road, Marrickville and 567 The Kingsway Miranda absolutely. b. I GIVE to my daughter EVA BLANKET my properties at 144-146 Edgecliff Road, Woollahra and my share of 361 Hume Highway, Bankstown absolutely. It is my intention that these bequests shall result in an approximate equal gift to each of my daughters and accordingly I DIRECT my Executors to have the properties referred to in paragraphs (a) and (b) hereof valued by a Licensed Valuer selected by my Executors and approved in writing by my said daughters. a. IN THE EVENT either or both of them do not approve of such Valuer then the Valuer shall be determined by the President for the time being of the Real Estate Institute of Valuers IN THE EVENT that such Valuer shall determine that there is an inequality between the bequests herein provided then the same be made up in cash from the balance of my estate to the daughter whose share should be less. IN THE EVENT either of my said daughters shall die in my lifetime leaving a child or children living at my death then such child or children shall take by substitution and if more than one as tenants in common equally the bequest which his/her or their parent or parents would otherwise have taken AND IN THE EVENT that no such child or children shall take the same shall fall into my residuary estate. 2 It is this clause 4 which gives rise to the substantial questions in this case. In paragraph 5 of her will the deceased gave her home, 4 Northland Road, Bellevue Hill, to her grandchildren, Jordan Blanket and Natalie Blanket, as tenants in common in equal shares. In clause 6 she gave "the rest and residue of my estate" equally to her daughters, Mrs Costi and Mrs Blanket. There were gifts over in the event of one of the daughters pre-deceasing the testatrix, being the normal clauses for substitution of grandchildren, which do not arise in this case. 3 The assets of the deceased at the date of her death, apart from those properties given to her daughters under clause 4, were the following: Property at 4 Northland Road, Bellevue Hill, estimated value, $2.5 million, money in an ANZ Cheque Account of $73,830, money in an ANZ savings account of $57,955, personal effects worth $50,000, and proceeds out of a Local Court judgment of $14,500. It is accepted that the moneys in the bank have been collected and that an amount of approximately $130,000 was collected as the proceeds of those two accounts. 4 There is no evidence as to what has happened to the contents of the home. There is no evidence as to what has happened about the judgment debt. I was told from the bar table that the personal effects are still as they were at death, and that the judgment moneys have not been received, but there is no evidence as to that. What amount will eventually be received from the proceeds of sale of the contents of the home, or from the judgment debt, is a matter of speculation. 5 The properties mentioned in clause 4 of the will were valued as follows at the date of death: The properties going to Mrs Costi, namely 205-207 Marrickville Road, Marrickville and 567 The Kingsway Miranda, were valued at $720,000 and $1,450,000 respectively, totalling $2,170,000. The properties going to Mrs Blanket, namely 144-146 Edgecliff Road, Woollahra, and the one half share in 361 Hume Highway, Bankstown, were valued at $1.5 million and $267,500 respectively, totalling $1,767,500. There is a difference between the value of the two gifts of $402,500. In respect of the Bankstown property, the valuation figure of $267,500 is $2,500 more than the estimate at the date of death, but it is that figure which is relevant here. 6 The unsecured liabilities at the date of death were an amount of $3,987.60 due to ANZ Bank on a Visa Card, and an income tax debt of $91,000, that is total unsecured debts of approximately $95,000. The secured debts were the sum of $87,000 owing to the ANZ Banking Group Limited secured on the Northland Road property, together with the sum of $56,056 owing to the Office of State Revenue for land tax for the years ended 31 December 2000 to 31 December 2004. Those amounts are charged on the real estate properties apart from the Northland Road property which was the residence of the deceased. That debt for land tax should, therefore, be applied rateably across the four properties in accordance with their unimproved capital value. 7 Leaving aside whatever might be the proceeds of the Local Court judgment and the contents of the home, the difference between the assets, other than the real estate assets, namely $130,000, and the unsecured liabilities, namely $95,000, is the sum of $35,000. It is accepted that the whole of that amount will in due course be required for payment of the testamentary expenses which, I imagine, would include the funeral expenses of the deceased. Those testamentary expenses would, of course, include the costs of the application for probate and whatever costs are payable out of the estate as a result of these proceedings. It seems to be accepted by the parties that if there are additional moneys collected as a result of the realisation of the contents of the home and the judgment debt, those moneys also will be required for payment of testamentary expenses - whether that is so or not, I am not deciding at this stage. 8 It is now possible to come to the questions asked by the amended summons. The first of those questions is whether the devises to Mrs Costi and Mrs Blanket under clause 4 of the will fail, and therefore those properties fall into residue. The argument which is put forward in support of this question, which is an argument put forward by counsel for the executor only, is that the gifts were conditional gifts and that, therefore, if the condition cannot be satisfied, then those gifts fail and fall in residue. In other words, what is said is that it was a condition of the gift that the discrepancy or any inequality between the values of the properties given to Mrs Costi and those given to Mrs Blanket should be made up out of the balance of the estate, and that if that cannot be done, then those gifts fail. In my view it could not be held that the proper interpretation of the gifts is that they are conditional. They clearly give separate properties to each daughter. It was certainly the intention that any inequality be made good. It was not, however, the intention that if any inequality was not able to be made good as intended, then the gifts would fail. 9 It is really not necessary to go into the cases which show that the court is not disposed to regard gifts as conditional unless that is clearly the case. In my view that could not be said to be the case under the language of clause 4 of this will. Question 1(a) should be answered "No". 10 Question 1(b) asks for a determination as to whether the inequality should be equalised by payment to the devisee receiving the lesser benefit, namely Mrs Blanket, out of any particular fund forming part of the estate of the deceased. Leaving aside the Northland Road question, if there is a surplus in residue, in which I do not include Northland Road, then that surplus is available to go towards making up the inequality. If there is no such surplus, then obviously, it is not available. That surplus if it did exist would be required to make up the inequality prior to being applied towards payment of the pecuniary legacies. 11 The summons, on its face, would require an answer to the question of whether or not an inequality is to be made up from 4 Northland Road Bellevue Hill. Mrs Blanket, who would be the beneficiary under any such order, has disclaimed any such entitlement. It is therefore not necessary to take that matter further but that disclaimer is to be taken into account in determining the remaining questions that arise in the summons. 12 The next question is whether or not Mrs Costi, as the daughter receiving the greater benefit under clause 4, is required to make up the inequality out of the benefits which she takes under the will. In other words, should her properties be charged with one half of the difference in value, namely the sum $201,250, in favour of her sister, Mrs Blanket? That is an argument put forward by counsel for the first defendant, but in my view that argument cannot succeed. Under clause 4 each daughter was given specific properties. The inequality, if it could be made up, was to be made up in cash from the balance of the estate. It was not to be made up from the benefits flowing otherwise from clause 4. 13 It is not necessary to decide what the position would be had Northland Road been an asset out of which any inequality could be made up. If it were necessary, I would have found that on the proper construction of the will "balance" did not include that asset, but it is not necessary to so decide. 14 The other question which arises under clause 2 of the summons is whether the sums secured on the real estate properties go against the property the subject of the charge, or whether those debts are payable out of residue. Under section 145 of the Conveyancing Act 1919, property which at the date of death is charged with payment of money is primarily liable for the payment of the money the subject of the charge, unless there is a contrary intention signified by the will, deed or other document. In this case it is accepted that there is no deed or other document. The will itself does not suggest any contrary intention. The fact, if it be the fact, that the mortgage up to the date of death of the deceased on Northland Road was kept down from income from other properties of the deceased would not indicate any contrary intention; neither, of course, would that fact amount to a deed, will, or other document. It follows from this that the properties the subject of a charge at the date of death remain subject to that charge and that, therefore, those persons who take those properties are responsible for the discharge or keeping down of that charge. 15 There was a question asked about council rates, water rates, and the like. There is no evidence that there were any council rates owing at the date of death. If there were, they may have been secured against the properties, but there is no such evidence. As to the outgoings on the properties which have accrued since the date of death, the person entitled to such properties, being entitled as from the grant of probate to be treated as taking from the date of death, is entitled to income from those properties and is required to pay the liabilities arising in connection with the ownership of those properties. 16 The answers to the questions in the amended summons are as follows: