WILSON v DAVIDSON [2017] NZCA 468

WILSON v DAVIDSON [2017] NZCA 468 [18 October 2017]IN THE COURT OF APPEAL OF NEW ZEALANDCA313/2016[2017] NZCA 468BETWEEN CATHERINE VIRGINIA WILSON,PATRICIA ANNE MATHESON,BARBARA ANN SMITH, RACHELELIZABETH WATSON, JOHN GEORGEHEALYAppellantsAND HELEN IRENE DAVIDSONRespondentHearing: 7 September 2017Court: Asher, Courtney and Gendall JJCounsel: R G R Eagles for AppellantsJ C D Guest for RespondentJudgment: 18 October 2017 at 11 amJUDGMENT OF THE COURTA The appeal is dismissed.B We order that the respondent's actual costs be paid out of the estate.____________________________________________________________________REASONS OF THE COURT(Given by Asher J)Introduction[1] This appeal concerns the interpretation of, or correction of, a will that is said to contain an error. On 8 October 2013 the will-maker, Annie Dillon, was residing atthe Chatsford Retirement Village at Mosgiel. On her instructions a will had been prepared by her solicitor. She executed that will on 8 October 2013 (the Will) and in paragraph 3(a) made a bequest of "my house unit at Chatsford to Robert Rutter". Infact Ms Dillon did not own a unit in the Chatsford Retirement Village. Rather, as is common in New Zealand retirement villages, she had an occupation right agreement with Chatsford Management Ltd, and the rights of occupation of the unit were personal to her and could not be transferred. She had no legal ability to transfer her house unit to another. Ms Dillon died on 2 February 2014.[2] On 30 September 2015 the nephew and nieces of Ms Dillon filed an application under the Declaratory Judgments Act 1908, seeking a declaration that the gift of the house unit at Chatsford to Mr Rutter failed, and that any value attaching toMs Dillon's occupational rights to the house unit form part of Ms Dillon's residuaryestate, and therefore were available to them as residuary beneficiaries.Background[3] The agreement between Ms Dillon and Chatsford Management Ltdterminated on Ms Dillon's death, but her estate was then entitled to a terminationpayment which was defined under the agreement. The amount actually paid to the trustee of the estate on the basis of this term of the agreement was $275,985.25,together with an additional $15,150 for improvements installed during Ms Dillon'slifetime. Thus the value of the interest in the unit was $291,135.25 on Ms Dillon'sdeath. Under the Will the residue of her estate after payment of debts was to be divided equally between her nephew and nieces. The nephew and nieces are the appellants in this proceeding.[4] The respondent is the executrix of the will, Ms Davidson. Ms Davidson wasMs Dillon's solicitor. On 19 October 2015 Ms Davidson filed an originatingapplication:For an order under section 31 of the Wills Act 2007 correcting the last Will of ANNIE ANDERSON DILLON late of Dunedin, deceased dated 8 October 2013 by replacing the words "my house unit at Birchleigh" in paragraph 3(a) with the words "my occupation rights in my house unit at Birchleigh including any proceeds therefrom".The references to "Birchleigh" are references to the house unit at Chatsford.[5] The grounds upon which the order was sought were as follows:(a) there is an ambiguity in the words in paragraph 3(a) of the Will;(b) the intention of the testatrix was clear; and(c) any other matters arising in Ms Davidson's affidavit.[6] There was a direction that the two proceedings be tried at the same time,1 and the hearing in the High Court at Dunedin proceeded on 2 June 2016. On 9 June 2016 the decision of Nation J was released.2 Nation J considered that it was clear from the plain words of the Will that Ms Dillon wanted Mr Rutter to have the benefit of her interest in the unit at Chatsford, including her interest in the occupation right agreement relating to that property.3 The Judge declared that:4[P]ursuant to clause 3(a) of the deceased's last will, Mr Rutter was entitled to any value attached to the deceased's occupation right agreement for herhouse unit at Chatsford, including any proceeds from the occupation agreement.[7] He also held, alternatively, that Ms Davidson would have been entitled to have the Will rectified by amending clause 3(a) to read:53. I give:(a) my interest in the occupation right agreement for my house unit at Chatsford, including any proceeds therefrom, to ROBERT RUTTER.The issues[8] It was common ground between Mr Eagles representing the nephew and nieces, and Mr Guest representing Ms Davidson, that Ms Dillon did not own a house unit but had only an occupational right to her unit. She had signed an occupation right agreement which came into effect on 30 April 2010. There were various rights1 Wilson v Davidson HC Dunedin CIV-2015-412-113 and CIV-2015-412-117, 26 February 2016.2 Wilson v Davidson [2016] NZHC 1238.3 At [26].4 At [36].5 At [37].arising under the agreement, including a right to a substantial termination payment. It was submitted by Mr Eagles that it was plain that Ms Dillon was purporting to bequest a residential property to Mr Rutter. Such a bequest could not be transformed into a bequest of a termination payment. The law did not permit such a flexible approach and the bequest was ineffective.[9] Mr Guest, on the other hand, submitted that the intention behind the bequest was plain, and the gift was effective. In particular, he argued that on its plain meaning the bequest enabled Mr Rutter to receive the benefit of the contractualrights relating to Ms Dillon's house unit. If there was any ambiguity it wassubmitted that the Court could apply the approach to interpretation known as "the armchair principle" and construe the words of the Will as applying to the contractualrights relating to the house unit. As a third submission if the other two failed, he submitted that, if the Will could not be interpreted to achieve a meaning consistentwith Ms Dillon's intentions, the Court should make an order rectifying the Will toreflect those intentions by specifying that Ms Dillon was making a bequest of the benefit of the contractual rights in relation to the house unit to Mr Rutter.The law[10] Sections 31 and 32 of the Wills Act 2007 (the Act) now apply when there are interpretation issues with a will or a will does not reflect a will-maker's intentions.The jurisdiction to apply the sections is given to the High Court. These two sections are based on common law jurisprudence as to the interpretation and rectification of wills and earlier similar reforms in Australia and the United Kingdom.6 The legal position in New Zealand prior to the Act was summarised by Fisher J in his often quoted statement in Re Jensen:7The overriding objective is to give effect to the intentions of the testator. Allcanons of construction must be subservient to that end. The testator'sintentions are to be gleaned from an objective appraisal of the testamentary documents viewed as a whole but in cases of doubt the wording is to be interpreted in the context of those facts which must have been in the contemplation of the testator.6 Law Commission Succession Law Wills Reforms (NZLC MP2, 1996) at ch 9; and Law Commission Succession Law: A Succession (Wills) Act (NZLC R 41, 1997) at 4.7 Re Jensen [1992] 2 NZLR 506 (HC) at 510.[11] As this passage indicates, prior to the passing of the Act, there was a willingness to interpret the provisions of a will against the factual context in which the will was drafted and executed. While the words of the will were central, evidence was admissible that could shed light on the view from the will-maker's "armchair".8 Consistent with this, the purpose of the reforms was to give primacy to the will-maker's intentions. This was explained by the Hon Clayton Cosgrove MP inmoving that the Wills Bill 2006 be read for the first time:9Wills are of practical day-to-day significance for all New Zealanders. A willis an instrument that expresses a person's wishes after he or she dies, andenables that person to take care of his or her loved ones and property and assets. The proposed reforms will improve the legal framework for will-making. They will make the law easier for people to understand, and reduce the risk of a will-maker's wishes being defeated by a badly drafted orincorrectly executed will, and will also allow better effect to be given to a will-maker's intentions.[12] Section 32 can be seen as a statutory reflection of the armchair principle.10 It provides:32 External evidence(1) This section applies when words used in a will make the will, or part of it,—(a) meaningless; or(b) ambiguous on its face; or(c) uncertain on its face; or(d) ambiguous in the light of the surrounding circumstances; or(e) uncertain in the light of the surrounding circumstances.(2) The High Court may use external evidence to interpret the words in the will that make the will or part meaningless, ambiguous, or uncertain.(3) External evidence includes evidence of the will-maker'stestamentary intentions.(4) The court may not use the will-maker's testamentary intentions assurrounding circumstances under subsection (1)(d) or (e).8 Perrin v Morgan [1943] AC 399 (PC) at 420; and Re Beckbessinger [1993] 2 NZLR 362 (HC) at 367.9 (10 October 2006) 634 NZPD 5557.10 Law Commission Succession Law Wills Reforms, above n 6, at [235].[13] Prior to the modernising statutes over the last 50 years in the United Kingdom and Australia, there was no statutory power to rectify a will. The traditional position was that a Court could not rectify a will.11 However, that common law position was increasingly doubted and criticised.12 The position was settled when the United Kingdom and Australia enacted sections that gave the courts the power to correct errors in a will.13 Section 31 of the Act now gives the New Zealand High Court this power. It provides:31 Correction(1) This section applies when the High Court is satisfied that a will does not carry out the will-maker's intentions because it—(a) contains a clerical error; or(b) does not give effect to the will-maker's instructions.(2) The court may make an order correcting the will to carry out the will-maker's intentions.Plain meaning[14] Nation J, applying the English decision of Re Glassington,14 held:[26] I consider the provision in clause 3(a) of Annie Dillon's will is to beinterpreted in accordance with what was clearly her intention. On the actual wording in the will, without having to resort to the further evidence from Ms Davidson, it is clear that she intended Mr Rutter to have the benefit of her interest in that unit. That interest was her interest in the occupation agreement which relates to the same property. It is not significantly different in the way an interest in a farm was different from ownership of 75 per cent of the shares in a company which owned that farm.[15] In Nation J's view the plain meaning of the words was that the bequest toMr Rutter was of the bundle of rights associated with the occupation right agreement including the right to a termination payment.15 Nation J considered that it was "not11 See for example Re Reynette-James [1976] 1 WLR 161 (Ch).12 See Re Jensen, above n 7, at 511 and 512, in which Fisher J stated that the courts should and do have the power to rectify a will.13 For the United Kingdom see Administration of Justice Act 1982 (UK), s 20. For Australia see Wills Act 1968 (ACT), s 12A; Succession Act 2006 (NSW), s 27; Wills Act 2000 (NT), s 27; Succession Act 1981 (Qld), s 33; Wills Act 1936 (SA), s 25AA; Wills Act 2008 (Tas), s 42; Wills Act 1997 (Vic), ss 31; and Wills Act 1970 (WA), s 50.14 Re Glassington [1906] 2 Ch 305 (Ch).15 Wilson v Davidson, above n 2, at [18].necessary to resort to extrinsic evidence" in order to reach that conclusion, and thats 32 was not relevant.16[16] We do not consider that the result reached by the Judge was available without regard to the extrinsic evidence. Indeed, in his reasoning the Judge took into account more than the words in the Will and its internal context. He expressly referred to the background circumstance of the occupation right agreement, which was not referred to at all in the Will. We also note that, in the case he relied on, Re Glassington, Joyce J did not decide the case on the plain meaning of the words.17 In that case the issue was whether a devise of all real estate could be read as referring to a share under a trust of real estate. Joyce J decided, relying explicitly on extrinsic evidence,that the devise was of the testatrix's beneficial interest in the trust.18 In this respectwe do not agree with the Judge's interpretation of the case law and his reasoning.[17] It follows we do not accept Mr Guest's first submission that the plain meaning of the Will is that Ms Dillon's contractual rights in relation to her house unitwere to be transferred to Mr Rutter. The plain words of the Will do not refer directlyor by implication to Ms Dillon's contractual rights. While, as will become clear, weaccept the Judge's conclusion in construing the Will, we do not agree with hisreasoning that this conclusion can be reached on the plain meaning of the words.19 It is necessary to refer to extrinsic evidence to give meaning to the words in the Will.Section 32Approach[18] Section 32 imposes rules as to the admissibility of extrinsic evidence when construing wills. The armchair principle, now expressed in s 32, has been recognised as involving the same approach as that which applies when construing a contract.20 Under s 32 external evidence of background circumstances can be used to interpret words in the will that make the will or part of it meaningless, ambiguous16 At [35].17 Re Glassington, above n 14.18 At 315.19 Wilson v Davidson, above n 2, at [35].20 Marley v Rawlings [2014] UKSC 2 at [20].or uncertain. But s 32 goes further than the rules applying to the interpretation of contracts. The ordinary principles of contractual construction prohibit the admissionof evidence as to a contracting party's actual intentions,21 and prior to the Act, this was also the approach to wills.22 Section 32(3) explicitly goes further in permitting evidence of the will-maker's testamentary intentions to be considered. However, evidence of a will-maker's wish to benefit a person is not evidence of surroundingcircumstances for the purposes of identifying uncertainty or ambiguity under s 32(1)(d) and (e).23 It is admissible, rather, as evidence to assist in interpreting a will already found to be uncertain or ambiguous.Applying the extrinsic evidence to the bequest[19] In applying s 32 the first step is to decide which of the various criteria in s 32(1)(a)–(e), if any, applies.[20] In terms of s 32(1)(a) the Will is not meaningless. The words transferring the house unit have a plain and obvious meaning. Nor is it ambiguous on its face or uncertain on its face under s 32(1)(b) and (c). The words are clear. The unit is to be transferred to Mr Rutter. The ambiguity and uncertainty only arises from surrounding circumstances under s 32(1)(d) and (e). In particular, it is the surrounding circumstance of Ms Dillon's limited interest arising from the occupationrights agreement that creates the uncertainty. Ms Dillon did not own a unit. But she did own a contract relating to the unit which had value for the estate. Given her friendship with Mr Rutter, Mr Guest argues that the extrinsic evidence shows that her intention was that he should have the full benefit of the unit including benefits arising from the contract.[21] Ms Dillon signed some 12 wills between 2003 and 2013, all with the help of Ms Davidson. Ms Davidson set out the background to the bequest in question. The last will closely followed the former will made the previous year. The first specified bequest in both wills was of her house unit at Chatsford to Mr Rutter. Ms Davidson deposed that she knew from her discussions with Ms Dillon that she had become a21 Fletcher Aluminium Ltd v O'Sullivan [2001] 2 NZLR 731 (CA) at [34].22 Re Glassington, above n 14, at 313.23 Wills Act 2007, s 32(4).friend of Mr Rutter, who was very kind to her, and she wanted to leave him her unit at Chatsford. Ms Davidson was cross-examined in a more detailed way when she was called to give evidence before Nation J.[22] Ms Davidson elaborated on Ms Dillon's friendship with Mr Rutter. Ms Dillon had a lifelong friend who had become very ill, and Mr Rutter would take him to appointments with medical specialists and to other places. Mr Rutter had worked as a volunteer for the Cancer Society and it appears he took both Ms Dillon and her friend to their separate appointments in his vehicle or in her vehicle. After Ms Dillon's friend died, Mr Rutter remained a staunch friend of Ms Dillon and everyFriday would come to her unit in Chatsford to take her shopping in his vehicle.[23] Ms Davidson deposed that Ms Dillon had rung up her and said "I know who's good to me now. I know who's good to me. I knows who deserves, is deserving I want to give my unit to Mr Rutter". She had considered the position of her nephew and nieces and was very firm in her wish that, despite her relationshipshe had with them, she wished the unit "to go to Mr Rutter".[24] The following objective facts show that Ms Dillon's intention must have beento give Mr Rutter all the benefit of the occupation right agreement:(a) Ms Dillon did not own the unit, but had an occupation right and a right to termination payments.(b) She knew of her legal rights and in particular she knew that on her death she could not transfer the unit. But she knew her estate would recover a substantial sum of money, although not the full amount she had paid, when she died.(c) She provided in the Will for the unit to go to Mr Rutter.[25] Looking at these facts objectively, the bequest can be given a different meaning than that indicated on the face of the bequest. The intention must have been to give, not the unit itself, but all benefits relating to the unit to Mr Rutter.Accordingly Ms Davidson as executor is entitled to a declaration that this is the meaning of the words.[26] Mr Eagles was critical of the finding of the Judge that Ms Dillon knew, on termination of the agreement, she would be entitled to a refund of what she had paid for it but with a discount of an amount set by the agreement. He submitted that it was not clear that Ms Dillon knew at the time she made the Will that she would be entitled to a payment upon termination because the evidence of her knowledge of the effect of the agreement related to when she purchased the unit. We do not accept that submission. The Judge asked questions of Ms Davidson at the end of her evidence. The answers that he obtained from her were not time-specific, and it was open to the Judge to see them as indicating that she had the same knowledge of the effect of the agreement when she signed the Will as she did three years earlier when she signed the agreement.[27] Mr Eagles submitted that the case was indistinguishable from Re Lewis's WillTrusts, an often cited decision of Scott J where the Court refused to intervene.24 The will-maker had owned three quarters of the issued shares of a family company,which owned a farm. The bequest in question was of his "freehold farm" to his son.It was held that the will-maker was under a misapprehension as to what he owned and the Court could not alter the language of the will so as to make it apply to the shares.[28] That case was decided prior to the coming into effect of the new wills legislation in England.25 It was not referred to in the recent review of the case law on the rectification of wills in Marley v Rawlings.26 In Re Lewis's Will Trusts the will-maker was purporting to give a bequest of an asset that he neither owned or controlled. He only had 75 per cent of the shares in the company that owned the land. The evidence suggested that, at the time the bequest was made, the will-maker intended to dispose of, and thought he was disposing of, the farm. He did not have24 Re Lewis's Will Trusts [1984] 3 All ER 930 (Ch).25 The deceased having died before 1 January 1983: Administration of Justice Act, ss 73(6) and 76(11).26 Marley v Rawlings, above n 20.the shares of the family company in mind. Scott J declined to interpret or rectify the will to enable the shares to pass to the son on the basis that:27[O]therwise the process of construction would merge into a process under which the court itself would be making a will for the testator on the basis of evidence as to what the testator would have done had he had in mind the true position which he did not have in mind when he made his will. That, as it seems to me, is a process which, as a matter of principle, the courts ought not to undertake.[29] In this case Ms Dillon had entire control of her interest in the occupation right agreement, and was aware of that. Further, Re Lewis's Will Trusts may have been decided differently if s 32 had applied. We do not agree that this case assists the appellants.[30] Interpreting the Will taking into account the external circumstances, we construe the provision for the transfer of all Ms Dillon's rights relating to her houseunit at Chatsford to Mr Rutter as including her interest in the occupation right agreement for that unit, and the right to the termination payment.[31] Having reached that conclusion as a matter of interpretation, it is not strictly necessary to consider the application of s 31. However, we do so for the sake of completeness.Section 31[32] There has been a traditional distinction between applying the rules of construction to cure uncertainty or ambiguity in a will, and rectifying a will. This is reflected in the separation of ss 31 and 32 of the Act. The dividing line between curing a conflict by applying principles of interpretation and curing a contract by rectification can be difficult to delineate. This case is a demonstration of this. Nation J determined the case by interpreting the words of the Will, but went on to consider the correction of the Will under s 31 in case he was wrong on his interpretation. Generally s 31 applies when the words of the Will, even applying s 32, cannot effect a remedy that reflects the will-maker's intentions.27 Re Lewis's Will Trusts, above n 24, at 934.[33] There is an overlap in s 31(1)(a) and (b) of the Act. A clerical error that a party seeks to correct will generally, as well as being an error, not give effect to the will-maker's intentions, and thus the correction of clerical errors will generally beavailable on the grounds set out in both s 31(1)(a) and (b). However not every failure to give effect to the will-maker's instructions will be a clerical error in thesense of a mistake made in copying or writing out a document.28 This Will did not contain such an error. It was phrased deliberately and there was no mistake made in the choice of words or numbers. The error was that the solicitor who drafted theWill failed to adequately describe Ms Dillon's interest. Therefore, if s 31 is to apply,the relevant subsection is s 31(1)(b). Does the clause give effect to the will-maker'sinstructions?[34] For the reasons that we have already set out, it does not, but the words that were used are sufficiently broad to accommodate the interpretation advanced by Ms Davidson. Had the words been incapable of bearing that meaning, we would have rectified the Will under s 31 in light of the clear evidence as to Ms Dillon'sintention. While we have no evidence on the precise words that she used when she gave instructions to Ms Davidson, Ms Davidson's evidence makes it clear thatMs Dillon's general instructions were that Mr Rutter should have the benefit of her interest in the unit at Chatsford Retirement Village. Because of a failure to draft this provision in the Will with the legal limits of the occupation right agreement in mind, the Will does not adequately reflect Ms Dillon's intentions. To make it reflect herintentions the wording can be amended in the way proposed by Ms Davidson in her statement of claim and ordered by Nation J in his judgment:3. I give:(a) my interest in the occupation right agreement for my house unit at Chatsford, including any proceeds therefrom, to ROBERT RUTTER.[35] Therefore we agree with Nation J that s 31 was available to correct the error.28 A "clerical error" is "an error made in copying or writing out": Tony Deverson and GraemeKennedy (eds) The Oxford English Dictionary (Oxford University Press, Oxford, 2008) at 205.Conclusion[36] While we have not agreed with Nation J as to the strict meaning of the words of the bequest, and have interpreted the Will ourselves applying s 32, we agree with his end conclusion as to how the Will should be construed. Indeed, as we have recorded, Nation J did in fact consider the extrinsic evidence, and we agree with his analysis of it. We agree also with his decision that rectification was available in the alternative under s 31. It follows that we uphold the end decision that he reached.29Result[37] The appeal is dismissed.Costs[38] The position as to costs was agreed between the parties. If the respondent succeeded, her costs were to be paid by the estate. We therefore order that the respondent's actual costs be paid out of the estate.Solicitors:Eagles Eagles & Redpath, Invercargill for AppellantsDownie Stewart, Dunedin for Respondent29 Wilson v Davidson, above n 2, at [37].