New South Wales Supreme Court CITATION : Dingeldei v Leedham [2010] NSWSC 116 HEARING DATE(S) : 19 February 2010 JUDGMENT DATE : 19 February 2010 JUDGMENT OF : Bryson AJ at 1 EX TEMPORE JUDGMENT DATE : 19 February 2010 DECISION : 1. Declare that in the administration of the estate of the testator and the ascertainment of entitlements to distributions the defendants are not entitled to charge against the plaintiff any debt or supposed debt owing by the plaintiff to the deceased in the amount of $155,000 or any like amount. 2. I order that the defendants pay the costs of the plaintiff of these proceedings, and further order that in the ascertainment of entitlements and distribution of the estate the costs payable to the plaintiff and the costs incurred by the defendants in relation to these proceedings shall not be brought into calculation but shall be charged only against the interests of other beneficiaries. CATCHWORDS : WILLS PROBATE AND ADMINISTRATION – Entitlement on distribution where executors claimed to offset debt owed by beneficiary to deceased – Decision on operation of non-standard Deed of Agreement and Loan Agreement entered into by testator with beneficiary – On construction of documents HELD the beneficiary had a contractual right under Deed of Agreement Cl 13 to discharge of debt arising according to terms of Loan Agreement – Decision on documents, no general principle. CATEGORY : Principal judgment Carol DINGELDEI (plaintiff) PARTIES : Robert LEEDHAM (first defendant) Robyn WING (second defendant) Estate of the late Lambert Henry LEEDHAM, deceased. FILE NUMBER(S) : SC 2009/287160 COUNSEL : K J RYAN (plaintiff) E G H COX (defendants) SOLICITORS : RAC Lawyers Pty Ltd (plaintiff) Pritchard Law Group (defendants) - 11 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON AJ FRIDAY, 19 FEBRUARY 2010 2009/00287160 Carol DINGELDEI v Robert LEEDHAM and Another; Estate of the late Lambert Henry LEEDHAM deceased. JUDGMENT 1 HIS HONOUR: These proceedings relate to entitlements in the estate of the late Lambert Henry Leedham, late of Mortdale who died on 27 August 2007. He is usually referred to in the evidence as Harry or Uncle Harry. He was little over ninety years of age when he died in 2007 and the most significant events, for present purposes, happened in 2003. 2 The plaintiff is one of his nieces. The testator appointed the defendants, who are a nephew and a niece, as his executors. They obtained Probate in this court on 29 November 2007. 3 Late in the testator's life his affairs were the subject of a guardianship order and another nephew, Mr Ross Leedham, was appointed guardian with significant responsibilities including responsibilities relating to finances. 4 However there is no indication in the evidence that at the time of making the agreements which gave rise to these proceedings in 2003 Mr Harry Leedham was suffering from dementia or any diminished capacity to consider and decide on his own affairs. There is no element in the pleadings or in the facts of any claim or evidence supporting a claim to have rights otherwise than according to the meaning and effect of the documents. There is no claim for equitable relief or suggestion that Mr Harry Leedham was overborne or treated unfairly or otherwise could have applied to set aside the arrangements or have them rectified. 5 The testator's will gave his part-ownership interest in a property in Weeks Road Riverwood to his sister, Mrs Emily Mary Wright, who is mentioned elsewhere in these reasons, and then provided for the rest of his estate after payment of debts and other expenses to be equally divided among eight people. 6 The executors proceeded to realise his assets, and in the steps they took towards winding up his estate they deducted $155,000 from a distribution made to the plaintiff, Carol Dingeldei, on the footing that that sum was a debt owed by her to the testator and his estate. The result was that she received $5,000 in a distribution which otherwise would have been $160,000. This was not a final distribution of assets. 7 Mr Harry Leedham left a significant estate and the questions in issue are of real value. The conventional or traditional way to decide entitlements on distribution was to require all the accounts of the estate to be presented to the court and then go through them item by item and decide on the correctness of each item. That is not necessary in this case as only one item has given rise to dispute and it can be readily identified. 8 In the Summons and Statement of Claim the plaintiff claimed an order that the distribution should take place on the basis that she is entitled to a further $155,000.00. The Defence set up the loan agreement document under which her obligation to repay a loan of that sum is recorded, and the Reply set out at some length arrangements which, according to the plaintiff's claim, surrounded and preceded the making of the loan agreement and produced a different effect. 9 The evidence went far beyond material on which the court may act in deciding the meaning and effect of the relevant documents. Each side offered evidence of a number of events in the testator's life and in his dealings and relationships with relatives, including some unfortunate events or conflicts about which there was evidence from one side and the other which would give different pictures of how he was treated late in his life. I do not doubt that these events are important to the parties, and in the long history of a family such matters are treated as important and long remembered, but I am not engaged in making a decision about the overall merits of the arrangements made with respect to the loan of $155,000.00 or about whether, except in legal terms, anyone is deserving or undeserving in the situation. My duty is to identify rights of the parties and give effect to them, not to come to some personal view about what is just and fair, which I will not attempt to do. I will decide on the meaning and effect of the two documents, which I will deal with in detail further. Their meaning and effect is to be decided on an objective view of what is stated in the documents, not according to what evidence shows the parties intended, or believed that they had achieved, or later wished to happen. Evidence of previous exchanges between the parties is admissible to show the subject matter which the parties dealt with. It is also admissible in some circumstances to resolve ambiguities. In my view there is no significant ambiguity in the language of the documents and none is revealed by the factual context. 10 Nor in my opinion is there any occasion to resort to legal doctrine relating to reading ambiguities in documents against the profferor; that is, the person by whom or on whose behalf the document was produced and laid before the other contracting party. As it happens, the evidence seems to indicate that although Mr Kelly, solicitor, acted in the interests according to his and their concept of all four parties of the deed of agreement and the loan agreement, he regarded Mr and Mrs Dingeldei as his clients; this would identify them as profferors. In my view this has no effect on the correct construction of the document. 11 There are some matters of context not open to debate to which I will refer. Mr and Mrs Dingeldei owned the house then standing at Roberts Avenue Mortdale and lived there with their family including children and grandchildren. They still live there. Mrs Emily Mary Wright is the mother of Mrs Dingeldei. When events opened she lived in a villa at Picnic Point and Mr Harry Leedham lived in a house which he had owned and long occupied at Kingsgrove. After he was hospitalised for an operation in about 2001, he ceased to live in the house at Kingsgrove although he continued to own it, and for a time he lived in the villa at Picnic Point with his sister, Mrs Wright. Then after some further time that arrangement did not seem to work well, and consideration was given to a further arrangement in which he and his sister would live with the Dingeldeis in their home at Mortdale, or perhaps in another home which they were to acquire. The Dingeldeis considered possibly buying another house but did not find any suitable property, and then gave attention to a plan to demolish their existing house and rebuild at Roberts Avenue Mortdale. What emerged from this was that they contracted with a builder to remove their existing house, demolish it, and build a further house with larger accommodation suitable for Mrs Wright and Mr Harry Leedham, each to occupy space on the lower floor while the Dingeldeis and their family lived on the upper floor. 12 Informal arrangements to proceed in this way were made and began to be acted on early in January 2003. A builder was engaged in about April 2003 and with Mr Harry Leedham's agreement the Dingeldeis moved into Mr Harry Leedham's house at Kingsgrove and occupied it for some months while building operations at Mortdale took place. 13 All four parties entered into the deed of agreement dated 8 July 2003 which was prepared by Mr Kelly, Solicitor, after consulting with all four; this is, as it is referred to, a deed, and should be treated as such. It contains recitals to the effect that the Dingeldeis are the registered proprietors and that Mrs Wright owned the villa at Picnic Point and lived there with Mr Leedham, her brother. 14 Recital C was "George and Carol, Mrs Wright and Mr Leedham have agreed to reside together in a new home to be built at the property" and the recitals went on to establish that the construction, fit-out and landscaping were to be funded by Mrs Wright and Mr Leedham, and the parties wished to record their agreement in writing. Then in eighteen clauses an agreement generally covering the future arrangements is set out. However, not everything that was to take place is recorded there, and the earlier agreement that they were to reside together in the new home is evidenced by the recital. The clauses of the agreement refer to the arrangement or agreement that a new home would be constructed, the existing home demolished, that the contract price of $310,000 with the builder had been agreed on, that Mrs Wright was to pay fifty percent of the construction, fit-out and landscaping costs and Mr Leedham to pay fifty percent. They were to do so by instalments, and to make progress payments as they fell due. Mr Leedham agreed that the Dingeldeis were to occupy his house at Kingsgrove and that he was to continue to reside at Picnic Point until the new home was ready for occupation. 15 Clauses 8 to 13 are in these words: 8. The parties agree that Loan Agreements will be entered into between Mrs Wright and George and Carol in the first instance and Mr Leedham and George and Carol in the second instance so that their respective contributions to the costs associated with the new home will be payable pursuant to each loan agreement. 9. That Mrs Wright as a result of the loan, will have created a caveatable interest in the property. 10. That Mr Leedham as a result of the loan, will have created a caveatable interest in the property. 11. George and Carol will remake Wills in which they each create a life interest in the property for Mr Leedham. 12. George and Carol will remake Wills in which they each create a life interest in the property for Mrs Wright. 13. Mrs Wright and Mr Leedham acknowledge that this agreement creates no legal interest in the property other than that referred to in clauses 11 and 12 above and that upon either of their deaths no repayment of the loan will be required from George or Carol or the survivor of them. 16 Then the later clauses dealt with relatively formal matters. Clause 17 says: 17. Following completion of the new residence and its subsequent fit-out the parties will take occupation. 17 There was no contractual covenant establishing for how long or in what circumstances or on what terms the rights of occupation of Mrs Wright and Mr Leedham were to continue, but they were to be allowed to take occupation as Clause 17 makes clear. 18 The arrangements forecast by the terms of the agreement were fulfilled; the old house was demolished, the new house was built, the contributions to its construction were made and the parties moved in. The loan agreements with Mrs Wright and separately with Mr Leedham were made. I am not concerned with Mrs Wright's loan agreement only with Mr Leedham's loan agreement. In fact construction of the house cost the Dingeldeis more than $310,000, but it is altogether clearly established that Mr Leedham did pay $155,000 towards its construction by a number of payments. An apparent issue in the terms of the affidavits about the manner in which he did so became superfluous and was not pursued; it was clear he did. 19 On 27 August 2003 Mr and Mrs Dingledei and Mr Harry Leedham entered into the loan agreement. This is not expressed to be a deed. It is plainly recognisable as the contemplated loan agreement referred to in Clause 8 of the earlier document. It contained a number of recitals about requests and agreement for a loan and provisions establishing agreement to lend on the terms stated. These provisions include the following: 3. REPAYMENT OF THE PRINCIPAL 3.1 the borrower shall repay the Principal sum on or before the Repayment Date. 4. INTEREST 4.1 The Borrower will not pay any interest to the Lender on the Principal Sum. 7. MISCELLANEOUS 7.1 Caveatable Interest The Borrower consents to the Lender lodging a caveat on the title of 11 Roberts Avenue Mortdale being Lot 682 DP 555722 and acknowledges that this Agreement creates a caveatable interest for the Lender. 20 There are some other relatively formal provisions. The schedule identified in Item 1 the principal sum of $155,000 and refers to interest and there was to be no interest. Items 3 and 4 are as follows: ITEM 3: TERM The term of the loan commences from the date of this Agreement until the property known as 11 Roberts Avenue Mortdale is sold or the borrowers' interest is otherwise transferred or the survivor of the borrowers dies, or the Lender dies, whichever is the earliest event to occur. ITEM 4: REPAYMENT DATE The end of the term or a date that is mutually agreed by the parties and if not agreed, then within three (3) months of a demand in writing by the Lender to the Borrower. 21 On completion of the house Mr Leedham moved in and occupied the part of the house purpose-built for him for well over two years, but then he began to suffer from disabilities of ageing and moved away, to live first in respite care and then in a nursing home, until he died. 22 Of course, nothing in the documents makes any right of either party conditional upon or subject to his actually continuing to reside in the house. His practical protection was that if he did not wish to stay or if for that matter (to conjure up the worst possible state of facts) the Dingledeis made life impossible for him or excluded him his remedy was to recall the loan, which he had a right to do under Schedule Item 4 by making a three months demand in writing. He did not ever make a demand during his lifetime. The property was, of course, not sold during his lifetime nor was the Dingledeis' interest otherwise transferred. The Dingledeis and Mrs Wright happily are still alive and the only event that is referred to in the loan agreement and has happened upon which the term of the loan would conclude was the death of Mr Harry Leedham. 23 Clause 3.1 and the obligation to repay the principal sum must be taken in the context of the whole of the loan agreement including the provisions in the Schedule about term and repayment date. Clause 3.1 did not create an obligation to make a repayment earlier than the mechanism in the Schedule brought about that obligation. The clause created an opportunity for the Dingledeis had they so wished to repay the principal sum, but that did not happen. The machinery was there for either side to break up the arrangement during Mr Harry Leedham's lifetime. The Dingledeis could have given him the money and told him to go, and he could have left and taken his money, but neither of those happened. 24 The matter in debate in this litigation is the interaction between the provision of Clause 13 of the deed of agreement "upon either of their deaths ..." and the provisions of the loan agreement which did not refer to Clause 13 in any way but on their face conferred a right on Mr Harry Leedham, and those conducting his affairs after his death, to repayment on his death. 25 Shortly after Mr Harry Leedham's death, within a few days (and I interpose before grant of probate) the persons appointed executors of his will made a demand for repayment in a way which may have relied on either Item 3 or Item 4 of the Schedule. Since then they have conducted affairs in the estate, notwithstanding dispute by the plaintiff, on the basis that the plaintiff is liable to make repayment. If attention is confined to the loan agreement, which is later in date, it could not be doubted that they were entitled to do so and to make the distribution with the deduction as they have. However, when the two documents are taken together there is, in my view, nothing in the loan agreement which deals with the deed of agreement or does anything to modify the contractual arrangement made in the latter part of Clause 13; the plaintiff with her husband had under that clause a contractual entitlement that upon Mr Leedham's death no repayment of the loan would be required. I do not see these provisions as inconsistent; the deed of agreement creates an overriding entitlement which may still be given effect when the loan agreement, which its terms contemplate, is entered into. It was contemplated in Clause 8 that there would be a later loan agreement, and as a loan agreement it must contain express or implied liability to repay, but there was an overriding arrangement which governed repayment in one of the clearly foreseeable contingencies, that is Mr Harry Leedham's death. It can be said by a Black Letter lawyer that the debt exists and is payable in accordance with the loan agreement, but when all the relevant rights of the parties are given effect, including Clause 13, the plaintiff has an entitlement that no repayment of the loan will be required, and that entitlement ought to be given effect in the distribution of the estate. 26 I do not accept contentions by the defendants' counsel to the effect that the later provisions of Clause 13 relate only to obligations expressly referred to elsewhere in the deed of agreement caught up by the earlier words in Clause 13 "this agreement ...". The text of Clause 13 does not support this reading. 27 There was some incidental reference and discussion of the nature of the rights created in favour of Mr Leedham by the documents and what was meant by the references to a caveatable interest. It might be difficult to say whether he ever did acquire an equitable interest in the Mortdale property itself, but it is not necessary to answer that question as no part of my decision turns on it. There has never been a dispute about a caveat or whatever effect a caveat might have produced. The Dingledeis did indeed make wills in accordance with Clauses 11 and 12 which had they died would have created a life interest in the property for Mr Leedham, but that outcome did not occur. 28 I do not accept the submission that the reading which in my view is correct on the operation of the deed of agreement involves rewriting the second agreement or treating it as a sham. It is correct, as defendant's counsel observed, that in the ordinary natural meaning of the loan agreement the loan is repayable, but that is not a whole statement of the contractual provisions governing the rights of the parties. It would, I think, be an error simply to decide on the basis of the order of dates of the documents; the first document clearly contemplates some such document as the second document and makes a binding provision about the rights to arise under the loan and the second document, in one of a number of circumstances in which the second document was contemplated to operate. There is no basis upon which the reading which I think is correct treats the second document as a sham. 29 For these reasons the plaintiff is, in my opinion, entitled to succeed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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