Barns v Barns & Ors A69/2002 [2002] HCATrans 381 (12 August 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide Nos A68 and A69 of 2002

B e t w e e n -

KATHRYN FAY BARNS

Appellant

and

MALCOLM PHILLIP BARNS

First Respondent

ALICE ELIZABETH BARNS

Second Respondent

MICHELLE LOUISE FISHER and RHIANNA KATE FISHER by their next friend PETER CHARLES SYMES

Third Respondents

GLEESON CJ

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON MONDAY, 12 AUGUST 2002, AT 2.15 PM

Copyright in the High Court of Australia

________________

MR S.W. TILMOUTH, QC: May it please the Court, I appear with my learned friends, MR D.M. HAINES, QC and MS M.F. CRICHTON, for the appellant in both matters. (instructed by Boltons Lawyers)

MRS M.E. SHAW, QC: May it please the Court, I appear with my learned friend, MR C.S.L. ABBOTT, for the first respondent in his personal capacity. (instructed by von Doussas)

GLEESON CJ: There is a certificate from the Senior Registrar that she has been informed by the solicitor for the first respondent in his capacity as executor of the estate that in that capacity he will submit to any order of the Court save as to costs. She has been informed by the second respondent that she will rely on the oral submissions of counsel for the first respondent in his personal capacity. She has also been informed by the solicitor for the third respondents that the third respondents will submit to any order of the Court save as to costs. Yes, Mr Tilmouth.

MR TILMOUTH: May it please the Court. Your Honours, as I indicated a moment ago, there are two appeals, the second appeal being launched because of a doubt, perhaps, about whether there was an appeal to this Court under section 73 of the Constitution, but, essentially, the matter is being argued upon the basis of the order dismissing the application in the primary proceedings made by Justice Nyland, which appears at page 119 of the appeal book. The reasons why that perhaps slightly unusual course of events arose appears from the transcript on the special leave application on the first occasion, which is in the appeal book.

KIRBY J: Where is the order of Justice Nyland? I could not find it.

MR TILMOUTH: Page 119, I think, your Honour.

KIRBY J: No, that is the special leave in this Court.

MR TILMOUTH: That is the special leave, I beg your pardon. It is at 115. The front page is 114, the actual order is 115.

KIRBY J: I see. Was that, in effect, by consent?

MR TILMOUTH: Yes, it was. It was brought on especially because the question - - -

KIRBY J: That was following the first special leave hearing, was it?

MR TILMOUTH: Quite. The special leave hearing was adjourned to enable that course to be followed. All of that is explained from 107 as follows in the transcript. The original order sought to be appealed from in relation to the Full Court appears at 103, and, of course, that related to the bare question of the deed itself.

KIRBY J: But when the Full Court decision was handed down, you indicated that you had some other matters to argue, but when you saw the reasons of the Full Court, you accepted that those matters had been dealt with by their Honours. Is that - - -

MR TILMOUTH: Yes. Justice Lander said, in effect, when the matter was called back on, that it would seem to follow from their order about the validity of the deed that there was no estate. So either way, in our submission, clearly, the central question is whether there is an estate for the purposes of the Inheritance (Family Provision) Act. It boils down to that, in our respectful submission, in the end result.

GLEESON CJ: That involves two questions. It involves the question as to the validity of the deed and the question as to the effect of the deed, assuming its validity.

MR TILMOUTH: It does. If the Court pleases, our argument was, and still remains, that the deed itself was not invalid as a whole. We sought, at first instance, before Judge Burley, a declaration, in effect, that the deed was ineffective for the purposes of the Act. That is, essentially, the order that we are still seeking in this Court. The form of those words come from a declaration that this Court made in Smith v Smith - slightly different circumstances, of course, but, essentially, that was the basis upon which the order that we are seeking now is made.

GLEESON CJ: Now, an appeal lies to this Court from a decision of a single member of the South Australian Supreme Court.

MR TILMOUTH: Yes, it does, if the Court pleases, and, in fact, your Honours may have noticed that happened in Lieberman. There was a slightly different course of events, but much an analogous situation arose in Lieberman v Morris. In our submission, clearly, of course, there is a discretion whether the Court should hear it, but the alternative was for us to go back to Judge Burley. He would have been bound by the Full Court decision. It would have come back to the Full Court and it would have had to apply its own decision again and then we would have had to seek special leave from that decision, which, with respect, is clearly and plainly a wasteful procedure. For our purposes, your Honours, we rest with the order of dismissal by Justice Nyland, because it avoids any question of the section 73 definition of an appeal to this Court.

Now, if the Court pleases, as I have said, in the end result, the ultimate question is whether or not there is an estate for the purposes of the Act, which, for relevant purposes, in our submission, is in common form throughout Australia. There is an additional variant in New South Wales, which, on our argument, is irrelevant - the notional estate extension. In the end result, the course of my submissions - - -

KIRBY J: Mrs Shaw rather suggests in her submissions that the solution to the problem, a logical problem, that she suggests is legislation. She says see New South Wales, and, I think, the UK. Now, I have not studied recently the Family Provision Act of New South Wales, but does it, in your submission, specifically address by legislation the issue which is now before us?

MR TILMOUTH: No, it does not, if the Court pleases. In the end result, although it extends the definition of an estate, the ultimate issue still remaining here is whether there was an estate as defined by the common law.

GLEESON CJ: The New South Wales legislation addresses a much wider problem than this one. It addresses primarily a person who divests himself or herself of an estate.

MR TILMOUTH: Yes. In our submission, though, although, of course, Parliament could at any time broaden the definition of an estate, it really is beside the point here.

CALLINAN J: But there is an express provision, is there not, in New South Wales that would enable the deed to be set aside? Is that not right?

MR TILMOUTH: Not necessarily.

CALLINAN J: It would enable that though, would it not?

MR TILMOUTH: Well, that would be an arguable point, in our submission. In New South Wales, there is, in effect, a relation-back provision - section 23 of the Act. There is a provision in relation to estates already being distributed - section 24. There are, in section 25, subsequent prescribed transactions. But whether or not the New South Wales Act would catch this particular matter is quite another matter.

CALLINAN J: Well, in the second reading speech, when it was introduced, the Attorney-General said:

The object is to prevent persons before their death from arranging their affairs so as to defeat justifiable claims.

That is in New South Wales, following a Law Reform report in that State.

MR TILMOUTH: That is true, if the Court pleases, but it does not necessarily follow that the facts of this case would be caught by the New South Wales legislation. There is rather a different regime there and, as I said, it rather relates to prescribed transactions entered into three years before death with the intent to deny adequate provision, which in many respects is quite a different question from whether there is an estate, as the common law or the law of equity would understand that term.

KIRBY J: Do we have in our papers the New South Wales statute and that second reading speech and the Law Reform report? We had better have that, given what appears to be the attack of the respondent.

MR TILMOUTH: Yes. No, your Honours do not have it at the moment, but that can be arranged.

KIRBY J: Only Justice Callinan has that.

MR TILMOUTH: Yes. That can be arranged, if the Court pleases, but my submission is it is rather beside the point because the question is what the word "estate" means, which has been long-standing in these rather common form statutes for a long period of time. Now, the essence of our submission, if the Court pleases, and the course of my oral submissions is that it must follow from Birmingham v Renfrew - - -

GUMMOW J: Do we need to look at the Administration Act in South Australia? Does that have any peculiarities about it as to the law of executors?

MR TILMOUTH: No. I will be taking your Honours back to the Inheritance (Family Provision) Act, but otherwise - - -

GUMMOW J: No, I am worried about the law of probate at the moment.

MR TILMOUTH: Not from our point of view, if the Court pleases. There are no surprises or idiosyncrasies which should concern the Court, in our submission.

GUMMOW J: Well, where does the estate vest before grant?

MR TILMOUTH: It vests in the executor.

GUMMOW J: Before grant?

MR TILMOUTH: Before grant?

GUMMOW J: Yes.

MR TILMOUTH: That I cannot - - -

GLEESON CJ: Is there a Public Trustee in South Australia?

MR TILMOUTH: Yes, there is, but, in our submission, it would vest in the executor before grant.

GUMMOW J: Well, that is not what section 45 seems to say.

MR TILMOUTH: If I could consider that matter - - -

GUMMOW J: Section 45 seems like section 61 of the New South Wales Act - I may be wrong about that - vested in the Public Trustee.

MR TILMOUTH: If there is a question, it may well be vested in the Public Trustee. If I could take that on notice, if the Court pleases, but it still begs the question of whether there is an estate within the meaning of - - -

GUMMOW J: It is not a question of whether there is an estate. The question is, what is in the estate and at what stage do you ask the question in the process of administration? Justice Gaudron laboured the point out to you both on the leave application. I hope she laboured successfully.

MR TILMOUTH: If I could consider section 45, but, in our submission, it must follow from the decision of this Court in Birmingham v Renfrew that there is an estate.

GUMMOW J: Now, Birmingham v Renfrew has nothing to do with it, has it?

MR TILMOUTH: No, and - - -

GUMMOW J: Birmingham v Renfrew - one, the problem arose at the time of the death of the survivor, did it not? The question was, what trust, if any, bound the executors of the will - being the second will - made by the survivor, in breach of the arrangement? This is all happening much earlier. This is after the death of the first - - -

MR TILMOUTH: Quite. In fact, if I could take that point one step further, none of the cases, including Schaefer v Schuhmann, or Richardson, the Tasmanian decision, or, indeed, Dillon v Public Trustee, really deal with the point at issue in this case. The point of the reference in Birmingham v Renfrew is that it makes it clear that when there are mutual wills, the survivor who is entitled to deal with the estate as owner of the estate, subject to the covenant which was reflected in the wills and - - -

GUMMOW J: No. The survivor, after grant and after distribution under the first will.

MR TILMOUTH: Well, after a distribution, of course.

GUMMOW J: They have to pay debts. No one has ever suggested mutual wills overcome debts.

MR TILMOUTH: No, I accept that. But the point about Birmingham - - -

GUMMOW J: Or specific legacies.

MR TILMOUTH: Well, one view of this is that a legacy would not be prevented under the Act at all, the court making an order which, in effect, had the effect of a legacy. In the end result, our submission is that when one looks at Birmingham v Renfrew and the comments that this Court made about it in Palmer, there must be an estate. None of these cases that have been referred to by the Full Court deal with the situation of mutual wills for the benefit of a third party, which is really what you have in this case.

KIRBY J: Now, you have jumped ahead - - -

MR TILMOUTH: Yes, I have.

KIRBY J: - - - because I am not familiar with them. I know generally, but I am not familiar with the detail of Birmingham v Renfrew. So the starting point would seem to be the statute of South Australia to which effect must be given.

MR TILMOUTH: Indeed.

KIRBY J: It refers to "estate". That is not defined, as I understand it - - -

MR TILMOUTH: No, it is not.

KIRBY J: - - - and therefore it would take on its ordinary meaning according to the common law.

MR TILMOUTH: That is our submission, yes.

KIRBY J: So what is your next step?

MR TILMOUTH: Well, the next step is that - - -

KIRBY J: Is there anything else in the Family Provision Act of South Australia which is relevant to the meaning and content of the word "estate" as it is provided in that Act?

MR TILMOUTH: Only section 10, the codicil provision. It is in your Honours' materials at page 1.

KIRBY J: Well, part of it is. It runs out at section 17 - or is that the full Act, is it?

MR TILMOUTH: I apologise for that. I am sorry, I did not appreciate - - -

KIRBY J: It may be that I have the full Act, but it runs out at 17. I thought I heard a reference to section 45.

MR TILMOUTH: No, that was the New South Wales - - -

KIRBY J: I see.

MR TILMOUTH: - - - Succession Act, as I understood it.

KIRBY J: It has been expressed more economically in South Australia.

MR TILMOUTH: Yes. It is a very short Act, but it is in common form. The key provisions - - -

KIRBY J: What is the history of this legislation? It began in England in the 1890s, did it not?

MR TILMOUTH: New Zealand, I think, it commenced, your Honours.

KIRBY J: New Zealand, that is right.

MR TILMOUTH: Then it was picked up in England and progressively throughout the States.

KIRBY J: That is explained in a decision of this Court, is it not?

MR TILMOUTH: From recollection, not so much this Court. It is explained in Dillon, to a point. It is explained in Schaefer v Schuhmann, as well, to a point. Progressively the legislation was implemented from New Zealand in Australia in common form, and in England, as well.

KIRBY J: If you give me the reference, in due course, to where that history is detailed, I would be grateful.

MR TILMOUTH: I can do that, if the Court pleases. In terms of the Act, the relevant sections commence with the long title:

An Act to assure to the family of a deceased person adequate provision out of his estate.

Those words, "out of his estate", recur throughout the Act. "Estate" is not otherwise defined. The application and persons entitled are dealt with in section 6, and the central provision, which has various equivalents throughout Australia, is section 7. Your Honours will see the heading of that section is:

Spouse and persons entitled may obtain order for maintenance, etc., out of estate of deceased person

7(1) Where -

(a) a person has died domiciled in the State or owning real or personal property in the State -

so that founds the jurisdiction -

(b) by reason of his testamentary dispositions or the operation of the laws of intestacy or both, a person entitled to claim the benefit of this Act is left without adequate provision for his proper maintenance, education or advancement in life,

the Court may in its discretion, upon application by or on behalf of a person so entitled, order that such provision as the Court thinks fit be made out of the estate of the deceased -

et cetera.

KIRBY J: Is there any magic in "testamentary dispositions" as distinct from "by reason of his will or testament"?

MR TILMOUTH: Not in our submission, certainly, for the purposes of this case.

KIRBY J: Does it import a wider referent, that is to say, by reason not only of the will but of anything connected with the will by which testamentary dispositions are made?

MR TILMOUTH: Yes, but it would have to be testamentary in some form to come within the Act, but that is the only restriction, as it were, on the question of jurisdiction.

KIRBY J: My question was designed to indicate that it might have a wider reference than simply to the will.

MR TILMOUTH: If the Court pleases, undoubtedly it does, but, in the end result, the jurisdiction must attach to some kind of testamentary disposition, even though it might necessarily not be through the will. Of course, it covers, in (a), intestacy as well, although that is not relevant here.

Your Honours, can I simply point out a few features of the Act which are in common with other provisions. There is a time limitation provision in section 8, and subsection (5) provides:

Any distribution of any part of the estate made before the application for extension of time shall not be disturbed by reason of that application or any order made thereon.

As the Court knows, very often, in this type of jurisdiction, an injunction can be granted from making distributions where there is notice of a claim under the Act. Section 9 provides for the power of the court once the question of making an order has arisen and under section 9(2) it gives the power for the court to share the burden or distribute the burden amongst various beneficiaries, in effect, as it thinks fit. Section 10 contains a provision which enables the order to act as if it were a codicil made immediately before death. I will not read it, but it is in a familiar form and, in our submission, a form not distinguishable from the form considered by this Court in Easterbrook v Young, which is dealt with in our written submission.

KIRBY J: What is the contested language of the Act then? Is it simply "out of the estate"?

MR TILMOUTH: Yes, it is.

KIRBY J: Is that all, or is it "by reason of"?

MR TILMOUTH: As we understand it, from the written submissions, and in all the arguments in the two courts below, the contested words were "out of the estate", within the meaning of that second to last line of section 7.

KIRBY J: Is it your understanding that no other aspects of the statutory provisions are contested?

MR TILMOUTH: As we understand it, yes.

GUMMOW J: Well, that is not right. Section 10 is crucial to the whole operation, is it not?

MR TILMOUTH: It is - well, it could be for our purpose but - - -

GUMMOW J: That is what Justice Gaudron kept emphasising to you both - obviously, to no effect.

MR TILMOUTH: Yes, I understand that. That is why we have directed a submission to section 10 and the quotation from Easterbrook v Young in the written outline because - - -

GUMMOW J: One way of looking at it, you ask yourself if, immediately before death, there had been the provision which is now sought but made in a codicil - before death, the first person - what would any trust have to do with anything? At most, as her Honour pointed out, there might be an action for damages.

MR TILMOUTH: That is right.

GUMMOW J: Which would be a debt, a judgment debt, to be administered in the course of administration.

MR TILMOUTH: That is so but - - -

GUMMOW J: But there would be an estate. There would undoubtedly be an estate.

MR TILMOUTH: Exactly. Even if the measure of damages was equivalent to the whole of the estate, there would nevertheless remain an estate. All the cases say, if the Court pleases, the remedy is, as your Honour Justice Gummow says, in contract. If one takes section 10 as interpreted in Easterbrook v Young - - -

GUMMOW J: There are cases saying that the value in these actions for damages is the whole value of the estate?

MR TILMOUTH: Not in our submission. What the cases say - and, in our submission, ultimately, they make a distinction between a contract with respect to specified property, as opposed to leaving the residue of the estate, which is what has happened here. Now, the damages may be, in the former case, the value up to the extent of the value of the specific estate - say, the farm, or the house and the contents in Schaefer v Schuhmann - but, in our respectful submission, none of the cases go so far as to say that where you have mutual wills which leave simply the residue that there is anything other than an action in contract, but none of them say that there is no estate, once the first of the makers of the mutual wills dies. There is no authority, in our submission, for that proposition, at all.

Now, your Honours, could I just go back a bit, if I may, just to make that point good on the facts of the case. The wills are in the appeal book. I appreciate, your Honours would have seen these. They appear in the first place - - -

KIRBY J: Can I just ask the logic of the structure of your argument? In a sense, the attack on the effectiveness of the mutual wills deed comes first because if it is not effective, then what it does is irrelevant, and there is certainly an estate. But do I take it that what you are going to do is, first of all, look at it within the parameters of the statute and see whether there is an estate on general principles, in which event, you do not have to worry about the deed. Is that how you are going to attack it or - - -

MR TILMOUTH: Well, the point - - -

KIRBY J: That is how your written submissions do it, but it just occurred to me the other way around is more logical.

MR TILMOUTH: Yes. It could have gone either way, if the Court pleases, and it is a difficult decision to make, which goes first, but the scheme of the argument is the deed leaves no more than the residue. On any view, that left an estate that fell into the hands of Mrs Barns and, therefore, there was an estate upon which an order under the court could operate as a codicil under section 10.

GUMMOW J: Who was the executor of the will?

MR TILMOUTH: The first respondent, and he was also - - -

GUMMOW J: It fell into the executor's hands and, after administration, it might fall into the residuary beneficiary's hands.

MR TILMOUTH: That is right, but in his capacity as the executor, not in his personal capacity. The effect of the Full Court decision must be that not only did it fall into the estate and into his hands as executor, but he was the full legal owner, because they have held, in effect, that the surviving widow had no estate. In our submission, that cannot be right.

Now, your Honours, if I could go back to the deed at appeal book 26, your Honours may see that there is an agreement between the husband and wife and the elder son to make the mutual wills. That appears in recitals, in particular, A, B, C, D and E.

KIRBY J: Just in the chronology, there was an earlier will and that apparently was in evidence. Did that exclude the daughter, or not?

MR TILMOUTH: I cannot remember offhand, but it had no influence in either of the judgments.

KIRBY J: Was that in evidence, or not?

MR TILMOUTH: I cannot remember offhand.

KIRBY J: I think the Master refers to it in his reasons.

MR TILMOUTH: Yes, as I understand it, there were separate wills. This is referred to at page 53 of the appeal book.

KIRBY J: She was the daughter, not the stepdaughter, was she not - your client?

MR TILMOUTH: Strictly, she was the adopted daughter, but at law that makes her the daughter. She was not the stepdaughter in that sense. The previous will, I think, is the one - no, I have to - - -

KIRBY J: I do not want to know anything that is not in the record.

MR TILMOUTH: No. I apologise, I just cannot answer that one offhand, but it formed no part of the reasoning in the court below. The deed of 2 May can be seen at page 26, where there is clearly an intention to execute mutual deeds and to require that they cannot be revoked without consent of all three parties. At page 29 the covenant to make the wills is in 3.1 and 3.2 and the covenant not to revoke the wills is in 3.3 and 3.4. There was no doubt that these were mutual wills in the classic sense with the concurrent covenant not to revoke.

The wills are contained in the appeal book at page 32 and 39, respectively, for Mr and Mrs Barns, respectively. If I could use Mr Barns', the deceased's, will at page 32 - the other will was a complete mirror image of this one. Malcolm Barns, the elder son, who was the ultimate beneficiary, was appointed an executor and trustee - paragraph 2.1. The bequest, at page 33, in each case was contained in clause 4, to give:

the whole of my estate both real and personal -

in this case, to Alice Elizabeth Barns, and in her case, to her husband, Lyle Barns.

Now, in contradistinction, in particular, to Schaefer v Schuhmann, which was the specific house and contents, this is simply, as a starting point, the agreement to execute mutual wills, ultimately, to leave the residue of the estate, after the survivor dies, to the son, but no more - as distinct from particular property. Now, if the Court pleases, those wills arose and the deed arose because of advice previously given by solicitors. This appears at page 44 of the appeal book.

HAYNE J: What is the significance of this advice? What does it matter what was said or why it was said?

MR TILMOUTH: Well, in one sense, it does not matter, but it arises only, in our submission, because of what Lord Cross said in Schaefer v Schuhmann about contracts not with a view to ousting the jurisdiction under the Act, basically. If I could just explain this letter - - -

KIRBY J: There is a bit of a contest in the written submissions between you and Mrs Shaw. It is suggested that the actual purpose or intent was not argued at trial.

MR TILMOUTH: No, that is true, with one proviso - - -

KIRBY J: Does that make or invalidate the Master's conclusion about the intention or purpose of the parties?

MR TILMOUTH: Not in our submission, in the ultimate result, although, of course, he did use the word "purpose" on a number of occasions. The result would be exactly the same if it was the effect of the deed to, as it were, oust the jurisdiction of the court.

KIRBY J: You say for the purpose of any invalidation it does not matter whether they have a subjective intention, the issue is, what is its effect?

MR TILMOUTH: That was the submission, except only for the proviso. We did cite Lord Cross in Schaefer v Schuhmann, who said, as I have just outlined, that the whole of Schaefer v Schuhmann was predicated on contracts not with a view to ousting the jurisdiction of the court. I will take the Court to that case in a moment. The purpose of this letter was to show, before Judge Burley and, indeed, in the Full Court, that three options were presented - ultimately, three options - and they appear on page 45 of the appeal book.

The first option was to make a gift, but, as the Court will see in reading it, the advice was given that a gift would be ineffective to exclude the operation of the Act. See the last line of that paragraph at 805. The second option was a discretionary trust structure, but the detriment in that case was the stamp duty. The Court can see that just before paragraph 3. The third option, which they ultimately instructed documentation to be prepared in accordance with, option 3 - and the Court can see at the bottom of page 45 the advice was given:

The effect of this contract is that the provisions of the Act are avoided as the contractual provisions can be legally enforced in priority to any claim made under the Act.

That is how the deeds came about. Now, your Honours, can I take you to the Full Court, where, we submit, the errors - - -

KIRBY J: Could I just ask you to pause there, because you do not raise this in your submissions, but you will see the advice of the solicitor:

it will not be possible to alter same without Malcolm agreeing to any alteration.

There is certainly law that supports that proposition but that law was written in a time when personal relations are rather different than they are today, when the number of relationships and serial relationships that people have were rather different. You seem to have proceeded on an assumption that the law is not altered by the changed nature of relationships which could give rise in modern circumstances to quite different, larger and more numerous obligations than existed when a lot of that law was written.

MR TILMOUTH: Yes.

KIRBY J: You have not really raised any question of that kind, but I have to tell you it is something that occurs to me that might need to be considered.

CALLINAN J: But are not those different relationships usually the subject of specific legislation? They were in New South Wales under the Family Provision Act there.

MR TILMOUTH: Well, can I answer your Honours in turn. In answer to your Honour Justice Kirby, I was going to pick up something that Lord Simon said in dissent in Schaefer v Schuhmann to make the kind of point that your Honour is referring to, where he talked about the same sorts of considerations. To answer your Honour Justice Callinan, there are minor exceptions, principally in New South Wales, which deal with rather different issues, as I have endeavoured to explain already.

CALLINAN J: I think there are provisions in Queensland too.

MR TILMOUTH: Yes, the Queensland Act is slightly different as well but not anywhere near as wide as the New South Wales Act and, as I understand it, in England - - -

KIRBY J: That could be an argument for courts staying their hand, given that Parliaments are quite active in this area, but the other argument is that if the social base has changed, rules of common law and equity do not stand still, that they adapt to the changing circumstances of society.

MR TILMOUTH: Precisely, as they have in - - -

CALLINAN J: To the extent that they can be identified by judges, absent evidence.

MR TILMOUTH: Well, with respect, both propositions are true but the extent of the adaptability of equity is demonstrated by Fitzgerald v Leonhardt and the orders fashioned in Nelson v Nelson as well and, in our submission - this is further answer to your Honour Justice Kirby - what Lord Simon said in his dissent in Schaefer v Schuhmann was the Act or the Acts which we have under question here were:

concerned with a fundamental institution of society and with basic human rights; the statute had its counterparts in other jurisdictions; and the decision in Dillon v Public Trustee of New Zealand [1941] AC 294 has stood for 30 years.

That is at 593 in Schaefer v Schuhmann.

GUMMOW J: What is more to the point maybe is what Lord Simon said at 598B. He refers to Mr Lee's article on "Contracts to make Wills", which.....I think, then he says, looking at the cases:

so far as principles of distinction can be discerned it is often difficult to grasp either their logic or their justice.

MR TILMOUTH: Indeed.

GUMMOW J: You seem to be approaching this case on the basis that this is all bolted down, boilerplate law. Well, it is not.

MR TILMOUTH: With respect, while we have Schaefer v Schuhmann [1972] AC, could I go one step further whilst we are on the dissenting opinion of Lord Simon and go to page 599. This is in our materials, if the Court pleases, from page 17 and follows. I am looking at the second line where his Lordship said this:

Some of the conflict of authorities before Dillon's case can be resolved by drawing a distinction (however unjustly it works out in particular instances) between a promise to leave by will a specific sum or asset on the one hand, and a share of the residue on the other. But even where a share of the residue is promised, the testator will not be permitted fraudulently (in the sense used in equity) to render his promise nugatory by making substantial gifts inter vivos or by way of specific legacy. In principle, similarly, a testator should not be permitted to render his dependants' statutory rights nugatory by covenants to make bequests by will.

Now, the reason I read that, if the Court pleases, is whatever one thinks of the dissent on its merits in Schaefer v Schuhmann, it is perfectly true, as his Lordship pointed out, that the conflict of the authorities can be resolved by drawing the distinction which his Lordship referred to. This case at Bar is really the first case which points up the precise point in the latter category, namely a share of the residue, as opposed to the former class, a promise to leave by will a specific sum or asset. Of course, Schaefer v Schuhmann was the former type of case entirely.

GLEESON CJ: Does that mean that if a man has assets worth $1 million and he makes a covenant to leave a specific legacy of $999,000, one rule applies, and if he makes a covenant to leave his entire estate, a different rule applies?

MR TILMOUTH: It could be but - - -

GLEESON CJ: What would be the sense of that?

MR TILMOUTH: As all these cases illustrate, sometimes it leads hardship to whatever view one takes about the characterisation of what happens before death. But if the Court pleases, to get back to Lord Simon, it is true that the cases have not grappled with this distinction. The cases which were relied upon by the Full Court were cases, in my submission, of covenants to leave specific sums or assets, to pick up those words, and none of those cases that were relied upon by the Full Court deal with the problem which this Court is dealing with today. None of them extended to the area of mutual wills for the benefit of a third person. The closest case is Richardson which, of course, was only the promise to leave to the housekeeper, more or less similarly to Schaefer v Schuhmann.

GLEESON CJ: Do you embrace that distinction as part of your argument?

MR TILMOUTH: Yes, I do, if the Court pleases.

GLEESON CJ: Does it follow from that that if the terms of the mutual wills involved not a disposition of the residue of the estate to the survivor and then to the son but involved a disposition of the farm to the survivor and then to the son, a different result would follow?

MR TILMOUTH: That could be provided, once again, to pick up Lord Cross in Schaefer v Schuhmann, that disposition was not with a view to ousting the jurisdiction of the court. If the Court pleases, that is ultimately what swayed Judge Burley at first instance in relation to this matter, that particular qualification from Schaefer v Schuhmann.

GUMMOW J: Now, is Sir Laurence Street's decision at first instance in Schaefer reported? It is in Re Seery, is it not?

MR TILMOUTH: Yes. I do not think it is extensively in our list of authorities, if the Court pleases.

GUMMOW J: It is extracted in the last paragraph of Lord Simon's judgment.

MR TILMOUTH: Yes, and to an extent it is, of course, referred to in Schaefer v Schuhmann. But if I could just pick up on that point, if I may, if the Court pleases - - -

GLEESON CJ: He followed Dillon, did he not?

MR TILMOUTH: He regarded himself as bound by Dillon, that is so, which of course - - -

GUMMOW J: He thought it was right too, did he not?

MR TILMOUTH: But if the Court pleases, the critical thing about Justice Street's finding in Seery is that he regarded the codicil as evidencing a contractual intention and that the contract came into existence by reason of Mrs Schaefer having discharged the consideration contemplated by the codicil and by forgoing the wages which she was being paid up until that time. Now, that is the finding at trial by Justice Street - and that appears at 584 in Schaefer v Schuhmann - which their Lordships were not prepared to interfere with in that case, the majority treating "the draft codicil as a contractual offer". That appears at 585D. So on that narrow basis Schaefer v Schuhmann can be distinguished anyway on the narrow basis that the codicil was not testamentary in any relevant sense because it was treated primarily as evidence of an antecedent contract and they were the findings of the trial judge. That really is the ratio of Schaefer v Schuhmann.

Apart from that, in our submission, Schaefer v Schuhmann has very little to do with this case at all because of those findings. As I said, if the Court pleases, when it came to the disposition of the appeal in Schaefer v Schuhmann, what Lord Cross said at 592F was:

The question whether contracts made by a testator not with a view to excluding the jurisdiction of the court under the Act but in the normal course of arranging his affairs in his lifetime should be liable to be wholly or partially set aside by the court under legislation of this character is a question of social policy upon which different people may reasonably take different views.

But it is inherent, in our submission, in the ratio of Schaefer v Schuhmann that it was not regarded as a contract with a view to excluding the jurisdiction but, rather, it was taken as a contract meaning to reward the housekeeper in consideration of forgoing wages for the 12 years or - - -

GUMMOW J: What is the importance of the distinction? Is it some notion of illegality, is it?

MR TILMOUTH: Not for this purpose, if the Court pleases.

GUMMOW J: No, but what is Lord Cross saying? I know what the words are. What do they mean?

MR TILMOUTH: It must be a reference to the question of illegality which did not arise in that case because there was no question of it being in any way designed to defeat the Act at all, but it was a reservation, in my submission - - -

GUMMOW J: It is a sort of Yango Pastoral point, is it?

MR TILMOUTH: I do not know, if the Court pleases, but it is simply, in my submission, a reservation, as it were, to make the point clear that the board was not considering at all an arguably different class of cases specifically designed to avoid provision of legislation like this. It is just a passing reference, as it were, to the board dealing with a completely different situation, the situation of contracts with a view to excluding jurisdiction simply not arising in that case. Nor did it, if the Court pleases, arise in Dillon and nor did it arise, of course, in Richardson which was approved in Dillon. Now, if the Court pleases - - -

HAYNE J: Before you part from Schaefer, do you adopt the analysis that Lord Simon makes at page 597G to H about the interests in the property and when interests arose or did not arise?

MR TILMOUTH: If we are driven that far, yes, we do, but the primary - - -

HAYNE J: You say, "If we are driven that far". That rather seems to me that that might be very close to the start of the journey.

MR TILMOUTH: If the Court pleases, as we put it in the written submission - - -

HAYNE J: No, go back a stage, Mr Tilmouth. You have a contract. The contract so far as the parties to it are concerned is performed when the wills are made. There is no intervening breach by revocation of the will. Is that right?

MR TILMOUTH: Yes, that is right.

HAYNE J: Yes. Is it said that the property is somehow impressed with a trust before death? What is happening here? At what point is equity said to intervene? How is it said to intervene?

MR TILMOUTH: That, with respect, is a very interesting question not identified by the Full Court.

GUMMOW J: I know, but you had better identify it.

HAYNE J: I have to know what you are saying. At the moment I am on a chartless sea.

MR TILMOUTH: No. If the Court pleases, equity would intervene, in our submission, if and only if it could be seen that there was a breach of the trust or a breach of the contract by making dispositions contrary to the covenant.

HAYNE J: Given the time at which this has happened, at the death of the first, not yet a breach.

MR TILMOUTH: That is right.

HAYNE J: Where do we go from there?

MR TILMOUTH: What we go there from is that although in one sense there may be a trust, the trust only - - -

HAYNE J: It is no good saying to me, Mr Tilmouth, in one sense there might be a trust. It does not mean anything. What do you say the position is?

MR TILMOUTH: We say, if the Court pleases, the constructive trust arises on the death of the survivor. We say that there is no reason to intervene in the meantime unless there is reason to think there is a breach of the covenant by making dispositions not in accordance with the covenant. We would further submit, following the decision of Palmer in this Court, that the only breaches of the covenant would be dispositions of a testamentary kind and, in our submission, absent any question of breach which would trigger an action in damages solely, there must be an estate.

GLEESON CJ: Mr Tilmouth, was death duty payable?

MR TILMOUTH: I cannot answer that offhand but probably not.

GLEESON CJ: I just wondered how it was assessed.

MR TILMOUTH: There is no evidence before the Court about that. My understanding is there was no death duty in the State.

HAYNE J: I assume the executor put together an inventory. What was the inventory revealing?

MR TILMOUTH: There was an inventory, if the Court pleases. It consisted mostly of real estate and interest in pastoral companies which were holding companies in the order of about $2.2 million, I think, roughly speaking.

GUMMOW J: And were there debts?

MR TILMOUTH: That was after all the debts had been cleared.

GUMMOW J: But there were debts?

MR TILMOUTH: I understand so, but I understand the net estate was in the order of just above $2 million.

GLEESON CJ: Why was there no death duty?

MR TILMOUTH: By legislation, I think. I can check that, if the Court pleases, but there was certainly no evidence about death duty before the court. I know that arose, of course, in the New South Wales case of Coffill.

GLEESON CJ: I just wondered whether the same kind of question might not arise in a different context if there were a question as to the value of the estate for duty purposes.

MR TILMOUTH: Yes, it has arisen in 1920 in the decision of Coffill v Commissioner of Stamp Duties [1920] NSWStRp 27; 20 SR(NSW) 278 in which it was held that the higher duty was applicable, but the circumstances were slightly different, but that question has arisen and I think that case might have been cited in passing in Schaefer v Schuhmann. If the Court pleases, to get back, I think, to your Honour Justice Hayne, back one step further, in our submission, in the end result Schaefer v Schuhmann does not really deal with the question at issue at all and certainly it was not in any way governing the question that was before the Full Court or Judge Burley.

KIRBY J: I am trying to understand the facts of this case. They may be irrelevant to understand, but there was a daughter and a son. The daughter was apparently an adopted daughter. I know nothing about the son. The son lived on the farm and worked the farm. The daughter went off and got married but that broke down in the end. The parents had given $100,000 to the daughter on her marriage and the value of the farm, let us use a neutral expression, after payment of debts is $2.2 million. So the son gets $2.2 million. The daughter is forgiven any indebtedness for the $100,000 which she got and there was some suggestion of the mother, or in this case the adopting mother, that they had intended to give something to the daughter.

MR TILMOUTH: Yes.

KIRBY J: It sounds like a classic case for which the Testator's Family Maintenance Act or other such Act applies, but it is a question of whether it has that consequence, I suppose.

MR TILMOUTH: Indeed, and in the letter - by the way, the claim was also on behalf of the infant children of the daughter as well.

GUMMOW J: Grandchildren can apply, can they not?

MR TILMOUTH: They can.

KIRBY J: And they did. They did, in fact, apply, did they not?

MR TILMOUTH: They did, yes.

KIRBY J: Yes, that is right. You remind me that there were there applications before the primary judge.

MR TILMOUTH: That is right. Exactly. Yes, that is section 6 of the parties that can apply and the section has gradually been widened to include the wider family, as it were. In the letter, if the Court pleases, by the solicitors to the accountant, going back to page 44 of the appeal book, it was recorded that:

The step-daughter has sought monetary assistance from Lyle and Alice who are willing to assist. However, as a result, Lyle and Alice wish to ensure that the step-daughter will not benefit from the estate -

So there was still an ongoing desire to assist her in some form and, as your Honour says, it really was a classic situation, in our submission, for the application of the Act.

KIRBY J: Was there any evidence - it may have been irrelevant; I suppose it was irrelevant - that this was because they needed the son to maintain the farm? That often looms large in country people's motivations.

MR TILMOUTH: There was no direct evidence but it seems evident enough, if the Court pleases, as you might expect, with a rural family that they desire to leave the farm in a working condition, as it were, preserve the family farm for the elder son. I think that is a fair comment to make in relation to the matter.

GLEESON CJ: We do not know anything about the merits of that aspect of the case. We do not know whether the son, for example, had worked a large part of his adult life on the farm. If the court had got into the discretionary consideration as to the merits, all sorts of matters would have required investigation.

MR TILMOUTH: Yes, and we are not, of course, attacking the primary desire to leave the farmlands to the son. What we attack, of course, is something quite different and it relates to the application of the daughter and her two children.

KIRBY J: You want to attack it in due course if you can get past the legal barrier.

MR TILMOUTH: That is right. The legal barrier is getting back to the estate issue. Now, if the Court pleases - - -

KIRBY J: The great families of England were built on this principle of primogeniture of sons and their properties were not dissipated as the properties of European nobility were.

MR TILMOUTH: Some would say the same were true of Australia, at least in the last 150 years, if the Court pleases. Your Honours, can I go briefly to Birmingham v Renfrew [1937] HCA 52; (1936) 57 CLR 666 which, in my submission, supports the proposition that we put. Of course, this was a decision referred to extensively in the courts below and it related, of course, to a mutual will situation where, when the wife died, the husband changed his will, the original intention being to leave his residue to the wife's relatives. This Court held that a constructive trust arose which was enforceable - - -

GUMMOW J: Wait a minute. You have to take it in steps, I think.

MR TILMOUTH: - - - for the benefit of those relatives. But the point we rely on this case for, which does not really deal with this problem - - -

GUMMOW J: You have to start looking at the judgment of Justice Gavan Duffy in the Supreme Court of Victoria [1937] VicLawRp 37; (1937) VLR 180 at 190. In fact the terms of the trust were never spelt out.

MR TILMOUTH: And that is referred to, if the Court pleases, or summarised at the top of 669 in the Commonwealth Law Reports. There is a summary there of the findings of Justice Gavan Duffy in the court below. But, your Honours, the reason why we rely on this decision is for the proposition that even though there may have been mutual wills, it did not prevent the wife in this case before your Honours from dealing during her lifetime with the properties that she received from Lyle Barns. If that be so, it must necessarily follow, in our submission, that there is an estate. Now, your Honours, we rely in the first place on the judgment of Chief Justice Latham at 675, about two-thirds of the way down after the references to the three cases concluding with Harmer v Armstrong.

GUMMOW J: The big debate in Birmingham v Renfrew at one level was whether there was a contract because it was oral. It was called verbal but they mean oral.

MR TILMOUTH: Indeed, that may well be so but - - -

GUMMOW J: And there was a big debate about the statute of frauds.

MR TILMOUTH: That is right, and that of course does not touch this matter, but what was held, in our submission, importantly, is that even though the trust arose, it did not stop the first beneficiary from dealing with the property as owner. The breach arose when there was a testamentary disposition contrary to the original agreement reflected in the mutual wills.

HAYNE J: Which rather invites attention to what trust arose when.

MR TILMOUTH: The cases, with respect, never really spelt that out, at least in detail. Sir Owen Dixon in this case - I will come to the passage in a moment - talks about a floating constructive trust arising on the first death but crystallising on the death of the survivor. But could I read from Chief Justice Latham initially at the bottom of 675.

GUMMOW J: I am sorry to keep interrupting, but we really have to get this straight and we have to work out who is suing who for what. That appears at 668.

MR TILMOUTH: My understanding was it was the original four members of the family who were the beneficiaries under the original wills who were suing and the Court held that was an enforceable constructive trust in their favour but, as we - - -

GUMMOW J: Who did they sue? The executors of the second will, did they not?

MR TILMOUTH: I think that is right, if the Court pleases.

GUMMOW J: The executors of the survivor's second will.

MR TILMOUTH: Yes, because the breach arose - - -

GUMMOW J: So it could not be an action in contract because they were strangers to the contract. Right?

MR TILMOUTH: They were.

GUMMOW J: Okay.

MR TILMOUTH: As was my client in this case, of course. Now, the point about Chief Justice Latham's judgment at the bottom of page 675 is that he says this:

it is conceded by those seeking to enforce the agreement that it does not have the effect of preventing the husband from dealing during his lifetime with property which he received from his wife, so that any trust which was created -

and herein lies the ambiguity in when the trust actually arose -

can only be a kind of floating trust which finally attaches to such property as he leaves upon his death. Prima facie, where property is given by will or otherwise to a person and he can do what he likes with it, a gift by the testator or donor of what that person shall happen to leave at his death does not limit or qualify the absolute gift to him which is the effect of such a disposition.

Our point simply is that in the deed of the mutual will in this case, once Lyle Barns died, Alice Barns could still do what she liked with the property and dispose of it, even though there might have been a trust over the property which crystallised on her death.

In the judgment of Justice Dixon, his Honour said much the same thing. This appears at 683. I will not read it because the passage at 683 from about point 2 to point 5 was cited by both courts below at pages 56 and 88 of the appeal book respectively, but the point of it was at the very foot of that passage. His Honour said:

that the survivor becomes a constructive trustee and the terms of the trust are those of the will which he undertook would be his last will.

GUMMOW J: Yes. Now, the survivor becomes trustee of what? That is what this case is about.

MR TILMOUTH: Yes, exactly. In our submission, is trustee of - well, that is the difficult question, but Alice Barns - - -

GUMMOW J: As Sir Laurence Street would see, is trustee of what is left after the statutory inroads provided by the Testator's Family Maintenance Act.

MR TILMOUTH: Quite so, your Honour, and we would say not only trustee - - -

HAYNE J: Probative duty or by the Probate Duty Act or by the Income Tax Act or by the like.

MR TILMOUTH: Yes, and we would add, in our submission, and she is also only trustee not only after those things have occurred, including an order under the Act, but she is trustee over only what is left in her estate once she dies because she is free to dispose of the assets which she has inherited from Mr Barns in this case - - -

GUMMOW J: There is debate about that, is there not?

MR TILMOUTH: That is why I read the wills and the covenant, if the Court pleases.

GUMMOW J: She is not meant to have too much champagne and caviar.

MR TILMOUTH: Maybe not and maybe if there was gross wasting of the estate a court might grant an injunction, subject to what the Court said in Palmer, but in the ultimate result she is trustee only over what she herself is able to leave under the will at her death.

GLEESON CJ: The argument against you depends upon the proposition, does it not, that the deceased became a trustee before death? Otherwise, how could the deceased's estate not include the subject property?

MR TILMOUTH: Well, that must be so, but all he promised to do was to leave to his wife what he had left upon his death and for her part, of course, she only promised to leave to the son what she had left on her death, which is quite different from Schaefer v Schuhmann where there was a promise to leave the house, quite different from Dillon where there was a promise to leave to the son and the two daughters the farmlands and, indeed, quite different from Dillon which was also, in effect, a housekeeper situation similar or akin to that in Schaefer v Schuhmann.

GLEESON CJ: Ms Shaw might wish to depart from this but, as I understand the case against you, it amounts to the proposition that if a man has a son and a daughter and he desires to exclude the daughter's claim under the Testator's Family Maintenance legislation and he enters into a contract with his son saying that in consideration of $1 he will leave his whole estate to his son, that defeats the daughter's claim.

MR TILMOUTH: That may be the argument, if the Court pleases, but, in my submission, no case supports the fact that that would be lawful and no case supports the fact either - - -

GLEESON CJ: When you say "lawful", effective is the question.

MR TILMOUTH: Effective, quite - effective or lawful. No case says that in that event the father, in effect the first person to die, has left no estate.

GLEESON CJ: But mutual wills are just a more complicated way of entering into a transaction essentially the same as that that I mentioned, are they not?

MR TILMOUTH: They are, indeed, but the question is what their effect is.

CALLINAN J: Why does not the second respondent become the owner in equity of all of the testator's estate, subject perhaps to rights of the widow to make some expenditures from it? Why has not all of the equitable estate passed to the second respondent on the making of the deed?

MR TILMOUTH: Because the covenant, with respect, did not go that far. That is the decision, in effect, of this Court in Palmer v Bank of New South Wales. If it is desired to have that effect, the covenant would not only be, in effect, one to leave your estate if you survive me, to the son, but it would be also one to preserve the estate that you inherit from me intact. So that, in effect, the corpus would be identifiable at the time of the death of the first will-maker.

CALLINAN J: No, subject to, for argument's sake, reasonable expenditures on the part of another person with an equitable interest, the widow.

MR TILMOUTH: The question would arise at a practical level what reasonable expenditures would be but, in our submission, that is quite inconsistent with the bequest in the first place, the primary bequest, leaving my estate to Alice Barns in this case.

GLEESON CJ: It is even more complicated than that, is it not? The people who were potential beneficiaries under this will were, first of all, the survivor, the widow, depending on whether she survived, and then the son, but then the children of the son under clause 6 of the will, because the son's entitlement under the will depended upon him surviving his parents.

MR TILMOUTH: That is true, but the events, at least to this point of time, of course, has been Mr Barns senior has died but - - -

GLEESON CJ: They died in the order in which - well, they presumably died with the oldest one first and the youngest one last, but it is not inevitable and I am simply making the point that it is not as simple as being the case that the only potential beneficiary under the mutual wills is the son.

MR TILMOUTH: I accept that but it is inescapable, in my submission, that ultimately the bequest was simply to leave my estate both real and personal as it exists at the moment I die.

CALLINAN J: Getting back to the first respondent's position, what about the principle that if she takes the benefit she has to accept the burden as well, the burden being to leave her estate to the son and his children?

MR TILMOUTH: There is no doubt that the reason why equity intervenes is to prevent a fraud in the equitable sense of that word, but that drives us back to the original agreement. An equity has enforced the contract.

GLEESON CJ: I should have thought the reason equity intervenes is to keep the conscience of the survivor.

MR TILMOUTH: It is. That is another way of putting it. But the conscience of the survivor in this case was not to preserve the corpus intact of her inheritance from her husband for the benefit entirely of the son. Her undertaking which equity will enforce was merely to leave what was left in her estate once she died.

GUMMOW J: Well, she has not not done so.

MR TILMOUTH: No, quite. So in that sense - - -

GUMMOW J: And in a way it is premature to - she is not delinquent yet.

MR TILMOUTH: Exactly. So there is no breach of contract, nor is there any trust or, more particularly, a breach of trust arising which needs to be enforced.

KIRBY J: I wondered that. You brought the proceedings though Mrs Alice is still alive.

MR TILMOUTH: Yes.

KIRBY J: Would it be normal in a claim under the Testator's Family Maintenance Act or its equivalents to have an entitlement at that stage simply because the will of the husband, who in the first instance left the entire estate to his widow, did not provide for the daughter, as distinct from contingently for the son? I mean, would a court disturb the estate during the life of the widow?

MR TILMOUTH: In my submission, there is no reason why it could not provided the antecedent question of whether the husband had an estate is answered in the affirmative. The appellant was compelled to bring the application for herself and her two children because of the problem of not only the time limitation in section 8 but also because of the problem of distribution. So there was no practical alternative other than to bring the application rather than wait till Mrs Barns died.

KIRBY J: As well as that, I suppose, there was a practical problem which may have well enlivened entitlements if you can get over your legal hurdle, that is that she had divorced her husband; he was bankrupt; she had, I think, two children of her own who are also claimants; she had received 100,000 some time back and she may well be destitute or short of the means of putting marmalade on the table, as the cases rather coldly express it.

MR TILMOUTH: Yes, that was precisely her case, but the only time a trust arises which can be activated is if Mrs Barns makes a testamentary disposition, and that has not happened yet. That, according to Palmer, in our submission, is when the question would arise of enforcing whatever trust there was. Otherwise the point is made, if the Court pleases, in a bequest such as this, she is the full owner of the property she received from Mr Barns subject to the trust and she can do what she likes with it.

CALLINAN J: Was there any consideration passing from the second respondent to the deceased or to the first respondent for the giving of the promises, in effect, in his favour?

MR TILMOUTH: That was not really gone into but one would think it was the - - -

CALLINAN J: It is not apparent from the deed that there was any. Is that right?

MR TILMOUTH: No, that is true, except that one might garner from it the fact that he was farming the lands.

KIRBY J: Well, as the Chief Justice pointed out, you have not got to the merits issues because you did not get over the legal hurdle.

MR TILMOUTH: No, we did not.

KIRBY J: So really we cannot go into those.

MR TILMOUTH: No, and, of course, perhaps that is why there was a deed, to put any question of consideration beyond doubt, whereas in those other cases, that trilogy of cases which was relied in the courts below, there is a separate identifiable consideration.

KIRBY J: There is a reference to an unreported decision of Justice Santow in the Supreme Court of New South Wales in the Master's decision. Do we have access to that? He is said to have analysed the mutual wills cases.

MR TILMOUTH: He has and that is on my learned friend's list of authorities as authority to be read.

KIRBY J: Does his Honour go into the issue that I raised at the outset, that is to say whether we are not just picking up and assuming that all that law remains the same despite the changing social base?

MR TILMOUTH: As I understand it, no, if the Court pleases.

KIRBY J: Well, that is always the problem with lawyers and it is the duty of this Court, I think, to keep the law alive. Is that a reported decision now, Justice Santow's, or not?

MR TILMOUTH: Not as I understand it, if the Court pleases. I am not even sure if that was a Testator's Family Maintenance Act case. I may be wrong. As I understand it, that is merely a mutual wills case. The problems we have here did not arise.

GUMMOW J: There is a judgment of Justice McPherson's referred to, [1990] QR. Do you have that?

MR TILMOUTH: Is that the case of Bigg, may it please, your Honour? I think it is Bigg - yes, it is page 40 of my learned friend's materials.

GUMMOW J: Thank you.

MR TILMOUTH: That related to another situation again altogether which does not arise in this case which was simply a case of a change of will. There were mutual wills. It related to a change of will during the lifetime of the husband and the court made - - -

GUMMOW J: During the lifetime of both of them?

MR TILMOUTH: Yes, which is a variation on the Birmingham v Renfrew factual situation.

KIRBY J: Justice Santow, like President Wilson, has 14 points.

MR TILMOUTH: He does.

KIRBY J: Do you accept the 14 points?

MR TILMOUTH: As a question of general principle, I think, yes.

GLEESON CJ: Point 10 seems to be the critical one, does it not? He says the law gives effect to the intention by means of what has been called a floating trust which becomes irrevocable following the death of the first testator and crystallises on the death of the second. The converse of that is that it has not crystallised following the death of the first testator.

MR TILMOUTH: That is right, and the words used in paragraph 10 are a paraphrase entirely of what Justice Dixon in particular said in Birmingham v Renfrew.

GLEESON CJ: That case of In Re Goodchild of 1997, have you looked at that?

MR TILMOUTH: I have, if the Court pleases.

KIRBY J: That is in the respondent's bundle.

MR TILMOUTH: Yes, it was.

KIRBY J: I still ask the question whether this absolute rule stated by Justice Dixon in 1937 is the modern principle of equity. Whatever the circumstances, whatever the moral and ethical and family obligations of the parties, whatever the new circumstances, unpredictable at the time of the mutual wills, whatever the new obligations to dependants or - it seems a very absolute rule and I really question whether it is the law. You do not seem to be questioning it.

MR TILMOUTH: We do not question it in the sense that - - -

KIRBY J: Maybe you do not need to for your case.

MR TILMOUTH: That is right.

KIRBY J: But I just find it hard to accept that that rule which was written for relationships as they existed at the time it was stated, 1937, is still what equity would today require in the circumstance where many people go through life with a series of relationships and a series of obligations and moral duties to people.

MR TILMOUTH: Quite so, but, in our submission, we do not get to the point of needing to doubt what Birmingham v Renfrew talks about.

KIRBY J: Yes, but I am just saying judges pick up the 14 points and pick up things that are said and do not even tarry to ask, "Is this still apt for today's society?"

MR TILMOUTH: Quite. Indeed, this case was decided in 1937 and on, in our submission, quite a different factual base than this case before the Court. Your Honours, could I take you, if I may, back to Birmingham v Renfrew at page 689 because it leads to the submission about Palmer v Bank of New South Wales. What Justice Dixon said in the fresh paragraph at 689 in Birmingham v Renfrew 57 CLR is this:

There is a third element which appears to me to be inherent in the nature of such a contract or agreement, although I do not think it has been expressly considered. The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying.

Which is precisely our point.

That is to say, the object of the transaction is to - - -

GUMMOW J: The expression "passing under the will" has to be read, you say, subject to the statutory codicil imposed under the Inheritance Act.

MR TILMOUTH: That is right, and all that passed under the will was the whole of my estate, both real and personal.

That is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is to bequeath what is left in the manner agreed upon.

That is precisely our point. The manner agreed upon was simply to leave what is left over when Alice dies.

It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor can descend upon the assets at his death and crystallize into a trust.

Now, if the Court pleases, I am now reading from parts relied upon by the Full Court at page 89 of the appeal book but the first part of what I read about the first three sentences was not quoted. Justice Dixon then went on to say:

No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivos, is, therefore, not unqualified.

GLEESON CJ: Before you press on with that, what about gifts and settlements inter vivos by the first deceased?

MR TILMOUTH: They would be quite acceptable as well. There would be no difficulty with that provided they were not seen for the purpose of defeating the contract or the deed itself. The same applies equally with Alice.

KIRBY J: As the accountant or the lawyer pointed out though, there would be stamp duty inhibitions on that.

MR TILMOUTH: Indeed. To put it into the factual context of this case, there would be nothing to stop Mrs Barns from giving to her daughter a house, as at one time may have been promised, or an amount of money to assist her, all of which if we got to the discretionary exercise could be taken into account. That would not be in breach of her covenant in the deed and would not be in breach of the covenant in the mutual wills.

KIRBY J: She might feel it is in breach of her understanding with her late husband.

MR TILMOUTH: She might, but it would not be as a matter of law at all. Could I just read the next three lines:

But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor's own benefit and advantage upon condition that at his death the residue shall pass as arranged.

Now, that is our point entirely, if the Court pleases. The only time, for relevant purposes, what has been said there has been considered by this Court is in Palmer, which I have referred to a number of times in passing.

GUMMOW J: Well, have you referred us to Justice Hutley's judgment in the Court of Appeal in Palmer?

MR TILMOUTH: In Palmer - no, I have not, if the Court pleases.

GUMMOW J: He was deeply knowledgeable in these matters. He did not like mutual wills either.

MR TILMOUTH: Palmer, of course, was really a different factual situation yet again. Although there were mutual wills, this involved a joint bank account with another person altogether. Your Honours, the reason for going to Palmer is to show the way it has been interpreted and what Justice Dixon said in Birmingham v Renfrew has been interpreted by this Court.

Your Honours, the relevant passage to begin with is at page 159 in the judgment of Chief Justice Barwick, with whom Justices Gibbs, Stephen and Mason, as their Honours then were, agreed. Justice Menzies sat in this case but died before judgment was delivered. At 159, right at the top, his Honour said this:

It is necessary at the outset to emphasize that the promise which has been found was no more at best than a promise to leave the appellants by will the deceased's estate at death. It is well established that such a promise does not involve an obligation not to part with any property during life: and, in any case, the primary judge did not find that a promise had been made to keep until death the assets owned at the time of the exhibition of the will, or at least any particular assets.

That, of course, includes the joint bank account with the third person.

But such a promise to leave by will does mean that no property will be disposed of in lifetime by a transaction which in substance, if not in form, is testamentary; that is to say, such a promise means that the only testamentary disposition of the property of the promisor shall be by will.

Now, in our submission, that is important because it shows, consistent with Birmingham v Renfrew, that the survivor is entitled to dispose of the property, in this case, as her own. However, could I take your Honours to page 161 where Chief Justice Barwick comes to consider comments by Lord Simon in his dissenting opinion in Schaefer v Schuhmann at about point 4, to the effect that:

"the testator will not be permitted fraudulently (in the sense used in equity) to render the promise nugatory by making substantial gifts inter vivos or by way of specific legacy".

That is a quote from 599 in Schaefer v Schuhmann. Now, what his Honour said about that is this - I skip the four lines in the middle and commence at about point 7:

It was that nature of the transaction which constituted the breach of the promise -

ie, the testamentary nature, and this is my point, if the Court pleases, Lyle before he died and Alice now can deal with the property without being in breach of the covenant provided the dealing is not testamentary.

Nowhere in these cases is the mere intention to reduce the value of the estate which will pass by will said to be a breach of such a promise: and, in principle, as I have said, that which is not a breach of the promise can scarce be said to be a fraud on the promise.

If I could go to the bottom of the page:

If a promisee desires to prevent such a disposition, the promise itself must be larger than simply a promise to leave by will. If Lord Simon of Glaisdale meant to treat a promise to leave by will as if it involves a promise not to dispose of assets inter vivos so as to deplete the estate at death, that would be to accept a proposition that the cases since Gregor v Kemp have uniformly denied.

That is my answer to your Honour Justice Callinan when you put the proposition to me earlier. It is that kind of additional covenant which would be required to bind Alice Barns in this case not to deal with the corpus of what she was left by her husband. Can I read on - I realise it is a long passage but, in our submission, it is quite important - - -

HAYNE J: Just before you do, what are you getting out of it, Mr Tilmouth, that has anything to do with this case? What is the proposition you are advancing?

MR TILMOUTH: The proposition I advance is if there was no estate which fell into the hands of Alice Barns or her executor, the terms of the deed would have to have been one, in effect, not only making a mutual will to leave the residue, but making a will to leave whatever she held in her own right and on bequest from her husband to her son. In other words, the trust would then crystallise if there was a trust at the moment that Mr Barns senior died. That is the submission I make in relation to this and I would adopt without reading in the middle of page 162 the comments by Justice Hutley to the effect that there would have to be an express contract to that effect before that kind of situation could arise.

Now, the final point I wish to make about - that is a comment on Schaefer v Schuhmann, but Chief Justice Barwick went on to comment about what Justice Dixon had said in the passage I read from Birmingham v Renfrew at 689. What his Honour said is this - and it is quite important for a different reason:

It was conceded in Birmingham v Renfrew that the making of an agreement for mutual wills did not preclude the alienation of property during the lifetime of the promisors. When in that case Dixon J spoke of "gifts and settlements, inter vivos . . . calculated to defeat the intention of the compact" he no doubt had in mind gifts and settlements which were either testamentary in nature or which were in contravention of the terms of the particular contract, spelled out of the expressions actually used, bearing in mind the circumstances in which it was made.

That is quite an important qualification, in my submission, on Birmingham v Renfrew and what it means in this case is that for there to be a breach of the trust Alice Barns would have to make a testamentary disposition to somebody else other than Malcolm Barns. Anything short of that would not constitute a breach of the trust at all.

The submission I make then is that the error of the Full Court may be identified in the end result in the appeal book towards the end of the judgment at page 95. Your Honours, at paragraph 122 the court concluded that:

Agreements to make mutual wills have the effect of disentitling any other person who is not provided for in the will from making a claim under the Act.

My submission is simply that no authority supports that proposition at all, certainly not one so wide. At 123, also on page 95 of the appeal book, the court went on to find that:

The Deed has exactly the effect for which all parties contended, that is it prevents the plaintiff and the claimants, in this case, bringing a claim under the Act. A contractual promise to make mutual wills operates as a debt due by the estate of each of the parties. It is not testamentary. That has been recognised by a number of commentators.

GLEESON CJ: That proposition in paragraph 122, on any view of the matter, cannot be accurate, can it? Even if the argument against you were completely correct, agreements to make mutual wills would only have that effect if the agreements embraced the entire estate of the contracting parties.

MR TILMOUTH: Quite so. Of course, as the Court knows, my argument is that it fell far short of that and I have already made the argument about it being a covenant to leave the residue. But we have in this case a far cry from that situation and we had in Schaefer v Schuhmann and we had in Richardson, the Tasmanian decision, quite a different factual situation as well. None of those cases would support the proposition, on any view of 123 - at 123, the paragraph of that part of the judgment.

Now, the final matter, your Honours, is the question of public policy and the court in the final paragraph at 124 held - this is still at page 95 of the appeal book:

The agreements are not void -

and presumably the court meant the deed and the wills -

in my opinion, as being contrary to public policy for the reasons identified by the majority in Schaefer v Schuhmann.

Now, that could only mean, in my submission, that the court did not address the wider public policy issue identified by this Court in Lieberman v Morris, for example. It simply resolved, wrongly, in our submission, that because of Schaefer v Schuhmann the deed in this case should be construed as an antecedent contract and which was permissible because it was operated as a debt on the estate - paragraph 123 - and the wider public policy which is enshrined in the Act simply did not arise for consideration.

GLEESON CJ: I think we need to get straight what your argument is and this brings us back to the matter of purpose that you talked about earlier. What exactly is the public policy involved and what is either a sufficient or a necessary condition of offence to the public policy?

MR TILMOUTH: The public policy involved is the one initially identified in the Act itself:

An Act to assure to the family of a deceased person adequate provision out of his estate.

KIRBY J: Yes, but those words are still there. It is a sort of a circular question, out of the estate.

MR TILMOUTH: It is.

KIRBY J: I mean, it has never been the law that you can get it out of the estate before the debts have been paid, so that it is not, as it were, out of the estate at large in some theoretical concept of it. It has to be the, I suppose, disposable estate after all the debts and obligations are discharged.

MR TILMOUTH: That is very true and I acknowledge that that begs the central question, but I have already made by submissions about that. Your Honours, in the end result the public policy considerations recognised by this Court are those identified in paragraph 10 of our reply - this is the most convenient way to deal with it. It is page 3 and 4 of our reply, your Honours. It begins with the scope and policy of the statute, Lieberman v Morris, and on page 4, paragraph 11, it was recognised in Dillon and approved by at least two Judges of this Court in Lieberman v Morris that the public policy was the question of adequate provision for the family, as the Act defined.

There is some suggestion, your Honours - and this is paragraph 12 of our reply - that there may be a further consideration of allowing persons not given an adequate benefit under a will to become a charge on the community.

GLEESON CJ: Am I right in thinking that in South Australia, even today, if you are prepared to give the whole of your estate away before you die and pay whatever taxes might be involved in that, you can thereby defeat the operation of the Act?

MR TILMOUTH: That could well be the case.

GLEESON CJ: This is bread and butter stuff, Mr Tilmouth. Either it is the case or it is not the case.

MR TILMOUTH: Yes. Your Honour, it only begs that question again of this ambiguous statement by Lord Cross in Schaefer v Schuhmann of transactions "not with a view to" defeating "the jurisdiction of the court".

GLEESON CJ: Is a transaction of gift, subject to that qualification, effective to defeat the operation of the Act and if it - - -

MR TILMOUTH: A bona fide gift, no.

KIRBY J: I am sorry, what was your answer?

MR TILMOUTH: A bona fide gift, no. A bona fide gift would be accepted.

KIRBY J: Well, say it is a deathbed gift of somebody who is at their deathbed and it is proved that solicitors are wheeled in and that they explain that unless you give it now, it can be set aside and the person picks up the - and signs. Now, would you have a basis of attacking that on public policy grounds?

MR TILMOUTH: Probably not.

GLEESON CJ: This is a pretty slippery policy. Suppose a person says, "I would rather the whole of my estate go to charity than that it should go to my daughter", and the person then gives the whole of his or of her estate to charity. Is that defeating the operation of this legislation within the meaning you give to that expression?

MR TILMOUTH: My short answer would be yes, but I acknowledge it begs the question, of course, whether that was a contractual arrangement as opposed to a - - -

GLEESON CJ: No, it is a gift. It is a gift.

MR TILMOUTH: Then it is contractual. As the law currently stands, provided, once again, it is a bona fide gift, it would not attract the operation of the Act.

KIRBY J: You add those words "bona fide" you see. What if on the death bed the testator finds that the daughter has changed religion and then says, "Well, there is no way I am going to give my daughter anything because she has become a dah, dah"? Now, is that something that could defeat the statute and defeat the grandchildren?

MR TILMOUTH: Yes. Might I add, your Honour, the reason I use "bona fide" is because it was used by Lord Cross in Schaefer v Schuhmann at least twice.

KIRBY J: But we are entitled to press you on your public policy.

MR TILMOUTH: Quite so.

KIRBY J: You see, they are wild horses, public policy, and we are entitled to know exactly how you define it.

MR TILMOUTH: I can only rely on what this Court has adopted and they appear in - - -

KIRBY J: That, in turn, is 50 years ago.

MR TILMOUTH: That is true. The most recent acceptance of Lieberman v Morris was in 1986 in Smith v Smith which is on our list - - -

GLEESON CJ: What is the reference?

MR TILMOUTH: Yes, it is [1986] HCA 36; (1986) 161 CLR 217. The relevant passage is at 249. I will not read it, your Honours, because it is short, but the submission is made that Justices Mason, Brennan and Deane, as their Honours then were, approved the policy considerations arising earlier from this Court's decision in Lieberman v Morris - in Smith v Smith. That is the most recent statement. It is a very short reference, I acknowledge, but it is a reference, in my submission, with approval.

KIRBY J: What about in New Zealand where this body of law originally came from? Is there anything there about it or - - -

MR TILMOUTH: The highest point, once again, appears to be Dillon v Public Trustee - - -

KIRBY J: That is a Privy Council case. That is the English.

MR TILMOUTH: That is true.

KIRBY J: I am asking for the New Zealanders whose society is a little bit more like ours.

MR TILMOUTH: My understanding is the policy is regarded as the same as reflected in Lieberman v Morris. While you have Smith v Smith open, can I take your Honours to the conclusion of that judgment. Although the question under consideration in Smith was quite different, it was a question of an agreement sanctioned by the Family Court being operative as against the Family Provision Act - and, of course, this Court held that it was not, but - - -

GLEESON CJ: Was this an agreement not to make an application under the Family Provision Act?

MR TILMOUTH: I think it was an agreement to accept an agreed maintenance regime. I would just need to check that, if your Honours please.

GLEESON CJ: Look, Mr Tilmouth, I do not have a difficulty with the idea that a promise not to make an application under a statute might be said to defeat the purpose of the statute. My difficulty is with the idea that divesting yourself of assets defeats the application of a statute which only applies to your assets. If it is inherent in the structure of the Testator's Family Maintenance Act or the South Australian legislation that it only works upon your estate, then the concept that you are defeating the operation of the Act by disposing of an asset, with the result that it does not form part of your estate, is one that I do not find easy to come to grips with.

MR TILMOUTH: May it please the Court, I understand that. The difficultly is, of course, deciding where the line is drawn, but our primary case, of course, is there was no disposition of the assets by Mr Barns - - -

GLEESON CJ: We understand that, but you are now on an argument that in some way, if this deed would otherwise have been effective, it is deprived of any legal effect, as I understand it, because in some way it is inconsistent with the policy of the South Australian legislation. Is that the argument?

MR TILMOUTH: I can only put it as high as Lord Cross put it in Schaefer v Schuhmann. That is the highest I can take that. I have already referred to that on a number of occasions. That is, contracts not with a view to defeating the Act, in effect.

KIRBY J: There must have been some principles that have been expressed by this Court or other final courts in cases where, say, contracts have been made to defeat workers compensation legislation or other beneficial legislation where some better principle has been formulated. I mean, one would think that there is so much so-called beneficial legislation nowadays that there must be many cases where parties have tried by their agreements to get out of it.

Now, you are advancing an argument of public policy. It is an unruly set of horses and we are entitled to say, "Well, exactly what is it?" You only want to win this case, but we have to formulate principles that deal with the general problem. So you say, "Do not worry your heads about questions of gifts of the estate because this is not what happened." But we have to formulate a principle that will work when somebody next week comes along and says, "Well, this was a deathbed gift and we say that this is also contrary to public policy."

MR TILMOUTH: Could I answer both your Honour the Chief Justice and your Honour Justice Kirby this way. In the first place public policy has clearly recognised and struck down agreements, in effect, to try to oust the jurisdiction. Now, in my submission, it would be a curious result in this case, say, if the appellant had been a party to an earlier agreement not to make a claim under the Act by, say, accepting a small house or $100,000, and she could still come to court and say, "Well, that is not enough", whereas, if she is kept in the dark and not told about an agreement between the other members of the family having the effect of precluding her claim, she is in a worse position.

GLEESON CJ: The next thing you are going to be telling us is you cannot do indirectly what you cannot do directly, which is just wrong. There are many things in life that you can do indirectly that you cannot do directly. That is what lawyers are for.

MR TILMOUTH: Your Honour, I acknowledge, of course, that the difficulty is always that, say, 20 years before death there might be a gift of a substantial part of the estate.

HAYNE J: That is not the difficulty, Mr Tilmouth. The difficulty is, what does the executor do? How does the executor get back this gift? What is the action the executor brings? That really does tax legal ingenuity. Now, talk about public policy as much as you like, Mr Tilmouth, you have to come down to taws. A gift is made before death. What does the executor do to get it back in as part of the estate?

MR TILMOUTH: If it is a bona fide gift, he cannot do anything. If it is a gift with a view to defeating the Act or ousting the jurisdiction, he can. One can think of many factual situations in the middle which will cause a problem, but that is not the situation in this case, in my submission. It is quite different. There clearly was an estate and - - -

CALLINAN J: You were talking about reasons for the policy. I think you referred to one - indeed, one of their Lordships said it, the undesirability of having somebody as a charge upon the State. Do you remember that?

MR TILMOUTH: Yes, that was - - -

CALLINAN J: In section 7(3) of the Act says that people can be disqualified on the ground of character. That is an old provision. It has been in a lot of the TFM Acts that your bad character can disqualify you from getting a benefit. An infamous character might be very likely to be a charge on the State.

MR TILMOUTH: May it please, your Honour, that deals with another issue, but, with respect, it really does not show much light on this case.

CALLINAN J: But it might tend to eliminate one of the justifications to which one of their Lordships referred, anyway.

MR TILMOUTH: It might reflect the ability of the court, even though it thinks somebody has not been adequately allowed for, if they have adopted a lifestyle, for example, which the testator, had he or she known was being adopted, might have led to that person being precluded from the will.

CALLINAN J: It says "character or conduct".

MR TILMOUTH: That is right. So, if it turned out that the applicant was a spendthrift, for example, the court might well not exercise its discretion. One can see a policy underlying that because, for example, it might be thought that the testator, had he known that the beneficiary was going to turn out this way, would never have dreamed of leaving a bequest to that person.

CALLINAN J: One problem for you is the problem that the Full Court identified. I do not say that it is necessarily an insuperable problem, but other legislatures have enacted provisions. Indeed, I think the New South Wales notional estate provisions can attach to any transaction during the testator's lifetime. It certainly can go back a long, long time. The earlier English provision is also very far reaching, but South Australia has not done that.

MR TILMOUTH: Hardly anybody else has, except with that question mark over the Queensland - - -

CALLINAN J: There has been a Law Reform report on it, decisions have touched upon the matter over the years, but still the South Australian legislature has not acted.

KIRBY J: That is why Mrs Shaw said, "Stick to the statute. It talks of the estate. If it is in the estate, you can dispose of it. If you have given it away and it is not in the estate, the court cannot dispose of it. That is a simple rule. You look at the word in the statute. You look at what is in the estate. End of problem for courts, unless Parliament gives them a larger power." Now, what is wrong with that?

MR TILMOUTH: It is our submission, in the end result, that - - -

KIRBY J: Yes, but it knocks on the head - - -

GLEESON CJ: You say they have not given it away and that is why they adopted the mutual wills device. Anybody can "defeat" in a practical sense the operation of the Act if he or she is prepared to give it away.

GUMMOW J: That is what Justice Hutley used to teach us. He always said people were not brave enough to do that.

MR TILMOUTH: Yes.

KIRBY J: Or they did not want to pay the stamp duty or they thought things might go wrong. But that is the first step. We are now at your second step and we are dealing with it on the assumption that in some way they did give it away or that it is not in the estate and you say, "Don't worry. It is still contrary to public policy." Now, I am trying to answer Mrs Shaw's argument, "Don't worry about public policy because statutes can, and in some places do, provide for ways of bringing in the notional estate, enlarging the notional estate." So, why is that not an answer to the public policy argument?

MR TILMOUTH: It may well be. It drives us back, if the Court pleases, to the central question and that is whether there was an estate. In a sense, public policy cannot assist that issue very much because - - -

GLEESON CJ: Tell me, leaving aside the decision at first instance in this case, is there any decision in any jurisdiction that treats a contract as void, as contrary to public policy, because it defeats the operation of the Act other than a contract which involves a promise not to make an application under the Act?

MR TILMOUTH: No, we cannot point to such an authority. That is why the submission was made in the courts below that the deed may well be valid simpliciter but it was ineffective for the purposes of - - -

KIRBY J: That is your first argument.

MR TILMOUTH: That is right.

KIRBY J: You are on your second argument now, and that is the one you won on before the Master.

MR TILMOUTH: That is right.

KIRBY J: So, so far, you have only notched up one point and it was on this point and you do not seem to have found very much authority to support the point or principle.

MR TILMOUTH: No, but it has to be accepted - by the way, I should have answered your Honour Justice Kirby earlier, the cases in relation to public policy in this and akin areas are in paragraphs 36 to 39 of our principal submission and they are in the familiar areas of maintenance and so on. It is true that they appear to be in the area of contracts out or settlements agreeing not to bring a claim, that is true, but one has to ask, what is the public policy question which drives that result?

Now, as I have put in this case already, it would seem odd that if we were a party to an agreement to settle, we would still have a claim, whereas, if we were kept in the dark, we would not, but in the end - - -

KIRBY J: You say that that is too narrow a principle. Smith is dealing with its case but it is too narrow a principle.

MR TILMOUTH: Yes, that is right.

KIRBY J: What is the deeper principle? That is what we are trying to get out of you. It is like drawing teeth.

MR TILMOUTH: I am sorry, if the Court pleases. What I was trying to put to the Court was the wider public policy issue should not be limited to simply cases involving contracts out.

KIRBY J: We know that is what you say but where do you say the line is to be drawn if you go beyond the particular case of Smith?

MR TILMOUTH: To contracts with a view to defeating the Act.

GLEESON CJ: Subjectively.

MR TILMOUTH: No. I have to accept that it must have the effect of defeating the Act.

GLEESON CJ: But not any contract with an effect - I guess it gets back to what you mean by "defeating the Act".

MR TILMOUTH: Yes.

GLEESON CJ: Not any contract that has the effect of taking out of your estate something that but for the contract would be in your estate defeats the operation of the Act, does it?

MR TILMOUTH: No, that is true. The pure gift is the - - -

GLEESON CJ: What about just a bad deal?

HAYNE J: I mean, you have to grapple with at least four kinds of cases: the person who bets the farm on Hayburner in the third and loses; the person who gives it away to the lost dogs home before death; the person who gives it to the son because, "He is a good boy who visits me"; or the person who gives it to the son saying, "I am not giving it to any daughter of mine". Now, in the end, you can make all sorts of moral judgments about that but, legally, what is the distinction between any of them with the application of public policy in mind?

MR TILMOUTH: Where to draw the line, of course, is self-evidently difficult. Where we would draw the line in this case, of course, is - putting aside the subjective intention - is that we know from the letter why the advice was given and as I put it to the Master in the end result in the court below, relying on Lord Cross in Schaefer v Schuhmann, that it was a contract of the very kind which public policy should strike down. That, in the end result, is what Judge Burley accepted at page 62. He cited the very passage which I have often referred to at paragraph 43 on page 62.

KIRBY J: I suppose you could formulate something like, if by reason of the timing, the way the contract arose, any extrinsic evidence that indicates what was going through the minds of the contracting parties or other circumstances, one can draw an inference that its purpose was to prevent the application of the jurisdiction of the court, then a court will not permit the parties, as between themselves, to defeat a high policy of the legislature which is designed to ensure that testamentary capacity is cut down to the extent of the needs of dependants.

MR TILMOUTH: That, in effect, in our submission, is what we purported to do by the reference to the letter at page 44 of the appeal book which crystallised in the final ruling of the Master at page 62.

GLEESON CJ: I would have thought that Lord Cross expressed himself quite carefully. If you look at the passage quoted on page 62, he did not talk about defeating the operation of the Act in that passage; he talks about contracts:

with a view to excluding the jurisdiction of the court - - -

MR TILMOUTH: That is true, your Honour.

GLEESON CJ: I have no difficulty understanding how a covenant not to bring an application under the Act falls within that, but in the present case the jurisdiction of the court was not excluded. All that happened in the present case was that it produced, if the argument against you is correct on the first point, a nil result. How is the jurisdiction of the Supreme Court of South Australia excluded in the present case?

MR TILMOUTH: Because there was no estate.

GLEESON CJ: That did not exclude the jurisdiction; it just meant you would lose or there was nothing there.

MR TILMOUTH: The point about that though, if the Court pleases, if the "effect of the scheme", if I can put it that way, is to contrive a situation so there is no estate, then it may be possible for the court to set it aside. It just depends on the scheme, as a whole.

GLEESON CJ: That seems to me to be a long way removed from excluding the jurisdiction of the court. It means that a scheme like this would work if you left $100 in the estate.

MR TILMOUTH: That is true and, of course, if literally read, it is limited to excluding the jurisdiction but in the end result, in my submission, the outcome is the same, essentially because, although there is jurisdiction, there is jurisdiction over no subject matter.

KIRBY J: You have to argue, I think, that if you left $100 in the estate, it would not solve the problem. It would still be defeating the jurisdiction in the sense that you are expressly - if you left 300,000 in the estate or 500, maybe you would not. You have to say the jurisdiction of the court means the jurisdiction to do that which the Parliament has envisaged the court will be able to do.

MR TILMOUTH: Yes. We would put in that situation that what was done would be a device, or - perhaps not a sham, but a device which the court could, in appropriate circumstances, think is one that should be set aside.

GLEESON CJ: I would have thought that if you look at the identity of some of the people who are parties to this majority judgment in Schaefer, they were not cutting themselves loose on such an uncertain course as to be talking about defeating the operation of the Act in the broad sense in which you use that expression. They would have had something far more precise in mind.

MR TILMOUTH: Yes. I would have to agree with that, if the Court pleases.

KIRBY J: But if we are talking about public policy, it is focused on substance. Public policy is concerned with substance, not just with form.

MR TILMOUTH: Quite.

KIRBY J: And if there is in substance a high public policy of the Parliament of South Australia to ensure that at the last moment people do not deprive the court of the utility of the jurisdiction which the Parliament of South Australia has given to this court, the Supreme Court of South Australia, then we are not just talking about the way they do it, we are talking about what they do.

GLEESON CJ: So deathbed gifts to the Royal Blind Society are at risk.

KIRBY J: Or to churches.

MR TILMOUTH: It would depend on all the circumstances.

GLEESON CJ: The circumstance being that I postulated earlier, "I would rather give my money to charity than to this ungrateful child", a thought that might sometimes go through somebody's head.

MR TILMOUTH: If the Court pleases, could I rest on that by going back to the letter:

The effect of this contract is that the provisions of the Act are avoided -

et cetera, which I read earlier.

KIRBY J: That is good forensic stuff but it still leaves the general question.

MR TILMOUTH: Of course it does but - - -

KIRBY J: It is a powerful piece of armoury for your argument - - -

MR TILMOUTH: It was a strong case.

KIRBY J: - - - but the principle still has to be formulated.

MR TILMOUTH: I accept that but the production of the letter by the respondents made for a strong case, on any view of the policy. Your Honours, the final matter is this, in the primary written submission, at page 11 we sought an order using the words, the deed is ineffective for the purposes of the Act.

GLEESON CJ: Could you just give us a moment to turn up your submission, Mr Tilmouth.

MR TILMOUTH: Yes. Page 11, your Honours.

GLEESON CJ: Yes.

MR TILMOUTH: As appears from the previous page, that is adopting the words used by this Court in Smith v Smith at page 252. That deals with the public policy issue. The alternative order sought, if the Court pleases, is order 2 which would be arguably independent of the public policy issue. It is simply a declaration that there is an estate of Lyle Barns over which an order under the Act can be made. They may be alternatives and I wish to point that out to the Court, but the primary submission there was an estate - - -

GLEESON CJ: Do we have evidence about that?

MR TILMOUTH: I am sorry, as to which aspect, your Honour?

GLEESON CJ: Declaration 2. You have told us a little earlier that there was an estate worth $2 million, or something like that, and I do not understand it to be in any serious dispute that there would be a substantial estate, if your first argument is right, but a possible course for us to take would simply be, if you succeed on your first point, to allow the appeal and remit the matter for further hearing to the Supreme Court of South Australia.

MR TILMOUTH: Yes, I could - - -

GUMMOW J: What you really want is a declaration that the deed of 2 May 1996 is not effective to produce a result that there is no estate, but whether there nevertheless is an estate will be another question.

MR TILMOUTH: Indeed. I just wanted to point out to the Court the origin of that drafting. But the purpose of order 2 is not to be quantitative, as it were, it was simply to highlight the fact that there was an estate within the meaning of section 7, and perhaps it is badly drafted in that sense. It was not at all meant to put a dollar sign or quantify, as I say, the amount in the estate, simply there was an estate within the meaning of the Act. If the Court pleases.

KIRBY J: In order 5 you have omitted reference to the cost before Justice Nyland. Are you throwing those away?

MR TILMOUTH: No. That was an omission, if the Court pleases.

KIRBY J: So you ask for those costs as well?

MR TILMOUTH: Yes, we do, although can it be said they would not be a great deal. There was not a trial, as such. It was a consent order.

KIRBY J: I am sorry?

MR TILMOUTH: They would not be a great deal, your Honour. There was not a trial before her Honour but it was - - -

KIRBY J: No, but if we are talking in terms of principle. If you are entitled to succeed, then you would be entitled to those costs. A question arose below as to whether - I think I saw an order for indemnity costs but - - -

MR TILMOUTH: You did. Judge Burley made that order, initially.

KIRBY J: But you are not seeking that?

MR TILMOUTH: Not at this stage, but that was an omission on my part to the proceedings before Justice Nyland.

GUMMOW J: Now, just go to page 76, if you would, Mr Tilmouth, before you sit down.

MR TILMOUTH: Of the appeal book, your Honour?

GUMMOW J: Yes. Paragraph 17. It is a reference to what the Master said in his reasons. Do we have any order of the Master setting out the issues? That seems to be the only statement we have as to what the Master was about.

MR TILMOUTH: Yes, your Honour. The Master defined the issues - - -

GUMMOW J: But did he make an order, first, or how did it happen?

MR TILMOUTH: It was just a direction that the preliminary issue - - -

GUMMOW J: Is there a direction anywhere?

MR TILMOUTH: No. There was no formal order drawn up, as I understand.

GUMMOW J: That is as best as it gets, does it, at page 76?

KIRBY J: Is it at 23 where the Master orders that:

The issues relating to the validity of the Deed be heard and determined before -

was there anything else?

GUMMOW J: That does not tell us what they are. That is my problem.

MR TILMOUTH: Yes. I am obliged to your Honour.

GUMMOW J: Is that all there is?

MR TILMOUTH: In terms of formal orders, yes. Of course, what was argued before the Master were two principal issues: whether the deed should be set aside, or what its effect was against the Act, and whether there was an estate. Of course, the Master ruled there was no estate but he set aside the deed applying Lieberman v Morris.

KIRBY J: Is there anything about that 2.2 million in the affidavit of - is it at 17? Did the executor make an affidavit - - -

MR TILMOUTH: He did, but it is not in these materials, if the Court pleases.

KIRBY J: Whose affidavit - that is the statement of claim, I see. So, there is no affidavit. Where did you get the 2 point - you were just sort of throwing that in, a little bit of evidence from the Bar.

MR TILMOUTH: I am aware of that from - - -

HAYNE J: Is there any reason we should not be supplied with a copy of the inventory affidavit?

MR TILMOUTH: Not in my submission because - - -

GUMMOW J: We should be.

MR TILMOUTH: Yes. We can attend to that, too, if the Court pleases.

GUMMOW J: Yes.

CALLINAN J: Is there any succession duty in this State?

MR TILMOUTH: No.

KIRBY J: Was the inventory an affidavit before the Master? I would not want to receive any fresh evidence.

MR TILMOUTH: It was, in a general sense. Whether it was specifically referred to - - -

KIRBY J: Either it was tendered or it was not.

MR TILMOUTH: No, it was not tendered, as such.

KIRBY J: If it is not part of the record, we cannot receive it conformably with the Court's authority.

MR TILMOUTH: No.

GLEESON CJ: Just check overnight and see what was in the record before the Master that throws any light on the extent of the estate.

MR TILMOUTH: Yes. Could I add this, though, if the Court pleases. The argument proceeded on the basis there was a substantial estate, otherwise it would be moot.

GLEESON CJ: That was why the matter was mentioned in the first place.

MR TILMOUTH: Yes.

GLEESON CJ: It would seem inconsistent with the argument against you that the inventory would have involved anything other than a nil return.

MR TILMOUTH: That is right. What I can say is that what was before the Master - in fact, put in by the respondents - I think it was the Master, and certainly the Full Court, was the pleading, the statement of claim of the appellants before this Court. That referred to an extensive - at least by reference to an extensive property left by the deceased - a description of real estate.

KIRBY J: There would have had to be an estate of some kind, I would have thought, in at least the 30 days before the period of the wife's succeeding the deceased. There would have had to be some estate.

MR TILMOUTH: In our submission, clearly so. But it was before the courts below, a description of the property. The affidavit by the first respondent was filed, I think, under the Probate Administration Act and I do not think it was an exhibit, but we will check that. But the courts below certainly had a statement of claim which referred to considerable real estate, in particular, comprising farmlands by description.

GLEESON CJ: Ms Shaw, I am not trying to rush you, but for the convenience of the next case can you tell me approximately how long you would expect to require?

MRS SHAW: I would anticipate perhaps an hour or so.

GLEESON CJ: Very well. We will say not before 11.45 for the next case. We will adjourn now until 10.15 tomorrow morning.

AT 4.19 PM THE MATTERS WERE ADJOURNED

UNTIL TUESDAY, 13 AUGUST 2002