Supreme Court New South Wales Medium Neutral Citation: Application by Paul Andrew Brown as executor of the estate of the late Joseph Kosytorz (No 2) [2018] NSWSC 334 Hearing dates: On the papers Decision date: 19 March 2018 Jurisdiction: Equity Before: Ward CJ in Eq Decision: (1) Declare that on 18 November 2015, Erika Cristina de Andrade and Andrew Cahill exercised the election granted to them in clause 8 of the will of the late Joseph Kosytorz made 12 August 2014 by way of an email transmitted from Andrew Cahill on behalf of himself and Erika Cristina de Andrade to the plaintiff and Taryn Ho. (2) Declare that, upon a proper construction of the will of the late Joseph Kosytorz made 12 August 2014 that the date as at which the valuations are to be obtained by the plaintiff as executor in accordance with clause 8 of the will is the date of the exercise of the said election or as soon as reasonably practicable thereafter and that the property is to be valued as at the date of the said election. (3) Order that the executor's costs of the proceedings after 11 December 2017 be paid out of the estate of the late Joseph Kosytorz on the indemnity basis. Catchwords: SUCCESSION – declaration that right of election to purchase estate property has been exercised by beneficiaries – construction of valuation clause in will Legislation Cited: Probate and Administration Act 1893 (NSW), s 84A Succession Act 2006 (NSW), s 45 Trustee Act 1925 (NSW), s 63 Cases Cited: Application by Paul Andrew Brown as executor of the estate of the late Joseph Kosytorz [2017] NSWSC 1774 Category: Principal judgment Parties: Application by Paul Andrew Brown as executor of the estate of the late Joseph Kosytorz (Plaintiff) Andrew Domaradzki (First Defendant) Maria Fatima Costa (Second Defendant) Representation: Counsel: RW Tregenza (Plaintiff) Solicitors: Paul A Brown & Co (Plaintiff) File Number(s): 2017/00356596 Publication restriction: Nil Judgment 1. HER HONOUR: On 11 December 2017, I published reasons on an application for judicial advice brought by the executor and trustee of the estate of the late Joseph Kosytorz (Mr Paul Andrew Brown) (see Application by Paul Andrew Brown as executor of the estate of the late Joseph Kosytorz [2017] NSWSC 1774). 2. Pursuant to s 63 of the Trustee Act 1925 (NSW) I gave the plaintiff, as executor and trustee of the estate of the late Mr Kosytorz, judicial advice to the following effect: 1. that he would be justified in entering into the proposed settlement of proceedings commenced in this Court by Ms Teresa Domaradzka (proceeding no. 2016/109977), including the making of the family provision order contemplated by that proposed settlement and including an interest component at the rate specified in s 84A of the Probate and Administration Act 1893 (NSW) if the settlement amount is not paid within three months; and 2. that he would be justified in amending the summons in these proceedings to join as defendants each of Maria Costa and Andrew Domaradzki in order to have the Court determine as a matter of construction whether or not Erika and Andrew Cahill have validly exercised the option in cl 8 of the will of the deceased made on 2 August 2014 (2014 Will) by way of their email dated 18 November 2015 (incorrectly referred to at [45] and [50] of my earlier reasons as an email of 8 November 2015) and, if so, to determine the date upon which the valuations of the Bondi Junction property (the subject of cl 8 of the 2014 Will) should be made for the purposes of that clause. 1. I gave leave for the filing and service of an amended summons in accordance with that advice and directed that the defendants so joined to the proceedings file and serve any written submissions on the two issues by 22 February 2018 and that they notify the plaintiff if they sought to be heard on those submissions, indicating that otherwise the issues of construction would be dealt with on the papers. The amended summons was filed on 22 December 2017 and served on each of Ms Costa and Mr Domaradzki on 22 January 2018. 2. No appearance has been entered on behalf of the defendants and no submissions were received from either of them. However, when the matter came before me for directions on 1 March 2018, Counsel for the plaintiff handed up a copy of a handwritten letter dated 29 January 2018 signed "Andrew Domaradzki", acknowledging receipt of the documents which were served on him on 22 January 2018 and stating: I WILL BE TAKING LEGAL ADVISE RE: ANY SUBMISSIONS AS SOON AS I CAN, BEING AWARE DUE DATE IS 22-02-18. IT IS REGRETFULL THAT I HAD SO LITTLE TIME TO PRE-PAIRE. 1. In those circumstances I made a further direction for the service of any submissions on the construction issues by the defendants (extending the time to 15 March 2018 for that purpose) and directing the plaintiff to notify Mr Domaradzki of this and that the matter would be determined on the papers as filed by that date. There is in evidence an affidavit of service by post of correspondence which notified each defendant of those directions. No written submissions have since been received from Mr Domaradzki nor is there any indication that he is now proposing to take any step in these proceedings. Accordingly, being satisfied that both he and Ms Costa are on notice of the application and that the issues will be determined on the papers filed as at 15 March 2018, I have considered the submissions made by the executor afresh and now publish my reasons for the conclusions I have reached on both issues. Background 1. The background to the matter is summarised in my earlier judgment and will not here be repeated. Issues 1. There are two issues arising in relation to the provisions of the deceased's 2014 Will: first, as to whether an email that was sent on 18 November 2015 by Andrew Cahill on behalf of himself and his wife Erika (both being beneficiaries under the 2014 Will) amounts to an election under cl 8 of the 2014 Will; and, second, if so, as to the date at which the Bondi Junction property is to be valued having regard to that election. The preliminary views I expressed on those questions (subject to any submissions to the contrary that might change those views) in my reasons on the giving of the judicial advice were that: the email did constitute an election for the purposes of cl 8 of the 2014 Will and that the property is to be valued at the earliest as at the date of exercise of the election (which was on 18 November 2015). (i) Exercise of the election 1. Clause 8 of the 2014 Will provided that: It is my further express wish and desire that if Erika and Andrew elect to purchase from my estate the 20% of the property which forms part of my Residuary Estate then I direct my Executor and Trustee shall obtain two valuations of the property from registered valuers and the mean value of those valuations shall be the agreed and accepted value of the property to enable the transfer and sale by my estate to Erika and Andrew of that remaining 20% of the property. 1. On 18 November 2015, Andrew Cahill sent the following email: Hi Paul/Taryn. After my conversation with Taryn today. I am writing to confirm that Erika and myself will be purchasing the remaining 20% of the estate, and will take all appropriate steps to do so. Also would it be possible to arrange a meeting with you both discuss all issues in regards to the will and any claims against it. For peace of mind. Thank you. Andrew and Erika 1. Although the email refers to the purchase of the remaining 20% of the estate (not to the Bondi Junction property), it is clear in my opinion that the reference to "20% of the estate" should be read as a reference to the 20% interest in the Bondi Junction property. The email was sent to the executor, indicating that it was intended to have some formal effect; the reference to 20% correlates to the proportion of the Bondi Junction property that Erika and Andrew were entitled to acquire from the estate if they so elected, under the terms of the 2014 Will; and, other than moneys deposited with financial institutions, there were no other assets forming part of the estate for them to purchase and they were not granted the option to purchase anything other than the Bondi Junction property. 2. In circumstances where the only other asset in the estate was cash in a bank account and there was no right of election given in relation to anything other than the Bondi Junction property, the email cannot be read meaningfully as directed to anything other than the right of election provided for under cl 8. 3. I therefore remain of the view that the appropriate construction to be given to the email is that it amounted to an election for the purposes of cl 8 of the 2014 Will by Erika and Andrew to purchase the remaining 20% interest in the Bondi Junction property. (ii) Date of valuation 1. The 2014 Will requires the executor and trustee, if (as I find there has been) there is an election by Andrew and Erika to purchase 20% of the Bondi Junction property which forms part of his residuary estate (the other 80% being already left to them), to obtain two valuations of property from registered valuers. 2. Section 45 of the Succession Act 2006 provides to the effect that such a valuation is to be undertaken as at the date of death unless there is a contrary intention. The executor submitted, and I accept, that cl 8 of the 2014 Will provides such a contrary intention. It contemplates that the valuation of the property was to take place after such time as any election had been made and that the mean value of the valuations was to be the agreed and accepted value of the property "to enable" the transfer and sale of the property. That speaks to a valuation (for the purposes of a sale of the 20% interest) taking place at a time after the relevant election to acquire the property has occurred in order to enable the sale to take place. In my opinion that points to the valuations being required to be obtained upon (or as soon as reasonably practicable after) the election has taken place and points to the valuations being carried out as at the date of the election. In other words, the will is requiring valuations for a purpose other than determining the estate as at the date of death. It is requiring valuations to enable a sale to take place after there has been an election to purchase the property (and only requires such valuations if there has been such an election). 3. The earliest time that the property is required to be valued for the purposes of this clause is as at the date of the exercise of the election. That was on 18 November 2015. I have concluded that that is the relevant date as at which the property is to be valued. (It was because this would have an impact, albeit relatively minor, on the amount that the remaining residuary beneficiaries will receive out of the estate that I considered the proceedings should be reconstituted as a construction suit and that Ms Costa and Mr Domaradzki should be joined as parties to the proceedings, as explained in my earlier reasons.) No submissions have been made to the contrary of that construction of the will. Orders 1. For the above reasons I now make the following orders: 1. Declare that on 18 November 2015, Erika Cristina de Andrade and Andrew Cahill exercised the election granted to them in clause 8 of the will of the late Joseph Kosytorz made 12 August 2014 by way of an email transmitted from Andrew Cahill on behalf of himself and Erika Cristina de Andrade to the plaintiff and Taryn Ho. 2. Declare that, upon a proper construction of the will of the late Joseph Kosytorz made 12 August 2014 that the date as at which the valuations are to be obtained by the plaintiff as executor in accordance with clause 8 of the will is the date of the exercise of the said election or as soon as reasonably practicable thereafter and that the property is to be valued as at the date of the said election. 3. Order that the executor's costs of the proceedings after 11 December 2017 be paid out of the estate of the late Joseph Kosytorz on the indemnity basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 March 2018