Barns v Barns & Ors A68/2002 [2002] HCATrans 382 (13 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 TUESDAY, 13 AUGUST 2002, AT 10.18 AM

(Continued from 12/8/02)

Copyright in the High Court of Australia

________________

GLEESON CJ: Yes, Ms Shaw.

MRS SHAW: May it please the Court, may I outline the points we wish to make on behalf of the first respondent as follows: firstly, we submit that the Inheritance (Family Provision) Act is a creature of statute; secondly, that the relevant public policy is that if a testator has left an estate as at the date of his death from which an order, for example, for maintenance of dependants and others nominated under the Act, could be made - he could have provided, then he should do so and those persons should not become a charge on the public purse.

Our third submission will be that the property that is available for such an order is determined by the statute and, in particular, section 7(1) and, indeed, section 9 and section 10. Pursuant to section 7(1), the order for family maintenance may be made "out of the estate of deceased person". The meaning of "estate", as it has been interpreted by the case law, is the net estate and, secondly, it refers to those assets that the deceased might at his death disposed of.

GLEESON CJ: Now, when you have finished your propositions, would you come back to that question of the meaning of "estate", please?

MRS SHAW: Yes, I propose to, if your Honour pleases. Next, we say that a court's powers under the Act are limited to doing only what the testator could have done. Hence, if as at the date of his death, any property is not available for him to dispose of, for example, because it is passed by the rules of survivorship on a joint tenancy or it is the subject of pre-existing contractual obligations, so that it is not available to be disposed of at his death, it is therefore not available for the making of an order under the Act.

Our next proposition will be that the agreement for mutual wills, in this case, is in accordance with what has been described in the cases as the doctrine of mutual wills, has the consequence that the property of the testator that falls within the terms of the contract is subject to contractual obligations and upon the death of the testator, in accordance with the effect of the deed, the survivor holds the property on trust to be dealt with in accordance with the provisions of the deed.

KIRBY J: If that is right, it means that in every case by mutual wills, parties who do not want their dependants to receive any part of the estate can really just walk straight out of the Act.

MRS SHAW: That is so, and that is the very reason why we say the New South Wales Parliament and the English Parliament passed legislation. The Queensland Parliament did pass an amendment, but solely directed to the donatio mortis causa.

GLEESON CJ: Well your argument, as I understand it, is that the only special thing about the use of mutual wills to achieve this result is that it is tax effective. If you are prepared to spend the stamp duty, the simplest way to do it would be to enter into a contract of sale or to transfer an equitable estate.

MRS SHAW: That is so. Indeed, on the day before the testator dies he could have vested all his property jointly with his son, for example, and it would have passed by survivorship.

GLEESON CJ: If he had been prepared to pay the stamp duty.

MRS SHAW: Yes, that is so. So, in other words, we say that there are numerous estate planning tools that are available according to the law and Parliament, from time to time, has seen fit to intervene to essentially remove them from the availability of citizens, which is what we say is the effect of the New South Wales Act. It is for that reason our submission will be that the approach of the majority of the board in Schaefer v Schuhmann is correct and, in particular, that this case is very much on all fours with what was before the court in Re Richardson's Estate, the Tasmanian Full Court decision, where his Honour Chief Justice Nicholls - - -

GLEESON CJ: Sitting on appeal from himself.

MRS SHAW: Sitting on appeal from himself, supporting his judgment at first instance - made it plain, in our submission, correctly, that the wills are, in essence, the terms of the contract and it is the contract that is being enforced, not the wills. It is the contract that determines what the obligations are that arise on the death, for example, of the first testator and the nature of the rights that are held pursuant to the contract.

We say, to that extent, the reasoning of his Honour Judge Burley at first instance and his Honour Justice Lander in the Full Court as to the operation of the mutual wills doctrine is, in the result, correct. We say too that, finally, there are no public policy considerations which have the result that the deed ought to be avoided.

GLEESON CJ: Now, could I take you back to the word "estate".

MRS SHAW: Yes.

GLEESON CJ: I am uncertain in my own mind at the moment, and you may be able to assist, on whether the decision of the majority in Schaefer went on the basis that Mrs Schaefer was in the same position as a creditor of the estate whose claims were to be met before the net amount available for distribution was subject to the operation of the Act, or whether it went on the basis that she was the beneficial owner of the house in question.

MRS SHAW: In my respectful submission, it went on the basis of the former. Can I take the Court to the specific passage in the judgment of Lord Cross at two separate passages on this topic, if the Court pleases. Firstly, at page 585, in relation to the interpretation of the Act, which is at page 23 of the book of cases, starting at point E:

the question of the jurisdiction of the court under the Family Maintenance Act. The Act contains no definition of the "estate" out of which the court is empowered by section 3(1) to make provision for members of the family.

Which is, of course, comparable to our section 7.

It is, however, clear that it cannot mean the gross estate passing to the executor but must be confined to the net estate available to answer the dispositions made by the will. Again if one reads the section without having in mind the particular problem created by dispositions made in pursuance of previous contracts the language suggests that what the court is given power to do is to make such provision for members of the testator's family as the testator ought to have made, and could have made, but failed to make.

And we emphasise "could have made", and I will come back to that when I deal with the judgment of this Court in Easterbrook v Young. His Honour goes on:

The view that the court is not being given power to do something which the testator could not effectually have done himself receives strong support from section 4(1) -

which is the equivalent of our section 10, the codicil -

which says that a provision made under the Act is to operate and take effect as if it had been made by a codicil executed by the testator immediately before his death.

GLEESON CJ: It really emerges most clearly, does it not, from the bottom of 586G?

MRS SHAW: Yes, but his Honour then goes on to discuss the topic raised during argument yesterday about a contract for a legacy and the cases that whereby a debt is raised or the person to whom the legacy is due becomes a creditor pursuant to the contract.

GLEESON CJ: Does this mean that the majority of the Privy Council rejected the argument that Mr Handley put, that is reported at the bottom of page 575H and accepted the argument that Mr Browne-Wilkinson put that is at the bottom of 579H?

MRS SHAW: No, not in my submission.

GLEESON CJ: Well, if Mr Handley was right, Mrs Schaefer was not a creditor of the estate; she was the beneficial owner of the house. That is a different basis - both of them could result in a decision in your favour, in a situation such as the present, but I want to know which it is. Did Mrs Schaefer succeed because she was regarded as a creditor of the estate of the testator and therefore the devise to her was not part of his net estate or did she succeed because she was the equitable owner of the house?

MRS SHAW: Your Honours, in my submission, perhaps both, namely a creditor under the contract, but in equity as the trustee, with her trustee rights, then the equitable ownership.

GLEESON CJ: Well, which of the two arguments did the majority prefer: Mr Handley's argument at the bottom of 575 or Mr Browne-Wilkinson's contradictory argument at the bottom of 579? We know Mr Handley won, but on what basis?

MRS SHAW: Your Honour, in my submission, Mr Handley, if one goes over to page 576 - - -

GUMMOW J: She had it both ways, I think.

MRS SHAW:

Such contracts to leave property by will create debts which take priority over applicants under the Act . . . The rights under the contract do not merge with the rights under the will. The former are greater rights.

Now, we submit that that is the basis upon which the majority proceeded and - - -

GUMMOW J: But it is not self-evident that that is right, is it, because in Schaefer v Schuhmann, what was the contract? To make a codicil, was it not? What did the testator undertake to do?

MRS SHAW: The testator undertook to make a codicil which would ensure - - -

GUMMOW J: No. What is the actual terms of the contract?

CALLINAN J: That the appellant be the housekeeper of the testator at the date of his death in exchange for which she would be left the property. Was that the contract?

MRS SHAW: Sorry, your Honour, I did not hear.

CALLINAN J: Was it the contract that the appellant be the housekeeper of the testator at the date of his death and, if she were, then she would get the property? That was the contract, was it not?

MRS SHAW: Yes, an implied contract.

GUMMOW J: Well, no, that would be a contract. Where is the finding of its terms?

GLEESON CJ: It appears on page 581, does it not? He made the codicil to his will, which is set out at letter F, and then the next day, as appears from letter G:

he told her that he did not propose to pay her any more wages because he had left her the house - adding "If you need any money to help you out, let me know."

GUMMOW J: So the contract was to make the codicil and it had been performed. So when you say someone is a creditor, what does that mean? There has been no breach of any contract. There is no right to unliquidated damages.

GLEESON CJ: Presumably the contract was not to revoke the codicil.

MRS SHAW: That is so.

GLEESON CJ: There was a big argument in the case as to whether there was a contract at all, was there not?

MRS SHAW: There was, at first instance.

GLEESON CJ: And on appeal, I think.

GUMMOW J: But did he ever revoke the codicil?

GLEESON CJ: He did not revoke it, no.

MRS SHAW: No, he did not revoke the codicil but he - - -

GUMMOW J: Well, where is the breach of contract and where is the claim to be a creditor for some contractual breach? It would just be performance - there would be a plea of performance to any action on the contract, discharged by performance. An action against his estate would be met with a plea of performance, "I have done it." He is dead and has not revoked the codicil. There you are.

MRS SHAW: What Lord Cross discussed was, indeed, whether or not there was an enforceable contract. That appears at page 584 to 585.

KIRBY J: That is what Mr Browne-Wilkinson opened his argument on, on 578:

The first question is: was there a contract at all?

MRS SHAW: Yes, and Lord Cross went on to deal with this question upon the basis that the board or the majority were not prepared to differ from the conclusion reached by the judge on the contract point, namely that there was a contract. Having determined that, indeed, there was a contract, the question was then to consider the extent to which the application for an order under the Family Maintenance Act would encroach on the right to receive under that contract.

GLEESON CJ: Suppose that in the present case - and I would have thought this would make the present case very close to Schaefer - you did not have the interposition of the widow; you simply had the father making an agreement with the son that if the son would work the farm without any wages until the father died, the father when he died would leave the farm to the son in his will. That would be on all fours with Schaefer, I would have thought.

Now, in that case, then, if Mr Tilmouth's client made an application under the statute, you would have to face up to the question whether you were resisting the application on the basis that the farm was not in the net estate available for distribution because the son stood in the position of a creditor of the estate or whether it was not in the net estate available for distribution because the son was the beneficial owner of the farm. Which is it?

MRS SHAW: Your Honour, we submit there is an additional step that is determinative and that is that if there is the contract and the farm is subject to the contract, which predates death - - -

GUMMOW J: Do you mean subject to the contract?

MRS SHAW: - - - that the testator does not have the ability to dispose of the farm because it is subsequent - - -

GUMMOW J: To dispose of it to whom?

MRS SHAW: To anybody else.

GUMMOW J: Well, he has not disposed of it to anybody else.

MRS SHAW: I appreciate that, but when the court acts, what the court does under the Act, is to put itself in the position of the testator and, therefore, in determining what is the estate that it can make an order against, it can only make an order against the estate that the testator himself could have disposed of as at the date of his death. That is the decision of this Court in Easterbrook v Young. It is for that reason that if there is a pre-existing debt or for any reason that the property is not available to the testator as at the date of his death to dispose of, the court cannot stand in his shoes and make a disposition that the testator should have made.

GLEESON CJ: Well, take the simplest possible case, which would have arisen if the father had been prepared to spend some stamp duty. If the father had entered into a binding contract, uncompleted as at death, to sell the land to his son, perhaps for a nominal consideration - it would not matter as long as the contract was binding - then the result for which you contend would be clear, would it not, because the son would be the equitable owner of the land?

MRS SHAW: Yes.

GLEESON CJ: And the arrangement involving mutual wills was just a stamp duty avoidance arrangement, was it not?

MRS SHAW: That was a purpose that was referred to in the letter that the solicitors provided but, in addition, it was in the context of a family arranging its affairs in the light of the son, as the material discloses, having worked on the farm for many years, and various provisions having been given to the daughter along the way. But whatever the reason, we say that what is critical is that the effect of the deed is, on the death of the testator, to make the agreement irrevocable, with the result that, whereas the testator and his wife had made commitments to each other on the contract to dispose of property in accordance with the terms of the will, the wife, as at the date of death, then became trustee for the completion and carrying out of the obligations under the contract, which were, of course, the terms of the will.

HAYNE J: Do you accept that at the date of the deceased's death the deceased had fully performed the obligations he had stipulated for in the agreement to make mutual wills?

MRS SHAW: He had fully performed his part of the contract.

HAYNE J: Just so. So as far as he was concerned, he had not, in any respect, broken the agreement he had made, had he?

MRS SHAW: That is so.

HAYNE J: That being so, how does any notion of the son being creditor of the father's estate intrude?

MRS SHAW: It arises in this way, that, firstly, under the contract - and I might say, as I understand it, it is the wife - - -

GLEESON CJ: In this case.

MRS SHAW: - - - in this case - who is the creditor on the contract. It arises in this way, because pursuant to the contract the husband has essentially not revoked his will prior to his death and therefore acted in accordance with the terms of the agreement, and completed the terms of the agreement, as your Honour has said, and in equity the Court of Equity says because the husband has completed his terms, it will then ensure that the wife completes her part of the bargain.

HAYNE J: For the moment I am not concerned to identify what, if any, equitable rights arise; I am concerned to identify whether there was any claim as creditor against the estate of the deceased. For the moment I do not see any claim by anyone as creditor, but if there is, I want to understand what you say the claim as creditor was.

MRS SHAW: The claim, we say, is that the testator has bound himself by contract to comply with the terms of the will. Those obligations then repose in the survivor, so that she, to that extent, is a creditor.

GLEESON CJ: But there is a paradox here, is there not? What he contractually bound himself to do was something which, if he had done it directly, without any contractual obligation, would have left the devisee or legatee vulnerable to a claim under the Act. In other words, he contracted to do the very thing which is vulnerable to attack by a claimant under the Act. He contracted to make his widow his beneficiary. If he had entered into no contract at all but had simply made a will along these lines, then the Act would have operated and the discretion of the judge to - although they always denied that they were doing it - remake the will would be enlivened.

GUMMOW J: Is that not what Sir Laurence Street was saying, at first instance, in Schaefer v Schuhmann?

MRS SHAW: Certainly Sir Laurence considered he was bound by Dillon.

GUMMOW J: No, in terms of reasoning.

MRS SHAW: Our submission is that his Honour's reasoning was that he was bound by Dillon to not - and in Dillon there was no discussion at all of the terms of the Act, that is, no discussion at all of whether or not the question of the estate, what is in the estate, is determined by what the testator can dispose of as at the date of his death.

GUMMOW J: I am inviting your attention to page 600 of the report of Schaefer v Schuhmann, which you looked at yesterday, which sets out a passage of Justice Street's judgment at D and E.

MRS SHAW: Yes, your Honour, and, indeed, Lord Cross discusses - - -

GUMMOW J: Well, what is wrong with that reasoning? That is what I am trying to find out.

MRS SHAW: We say that the reasoning of Lord Cross is preferable, when he addresses the reliance on In re Brookman's Trust. That is at the bottom of page 587 when Lord Cross does discuss what "disposes of his property by will" entails. We say this is where Lord Cross is adopting what has been termed in many of the publications of the creditors' theory - the discussion about "disposes of his property by will" commences at paragraph E and then his Honour goes on to consider what happens if there is no breach and raises the anomaly that essentially a person might be worse off if there is no breach than someone who is. At paragraph G he says:

that notwithstanding that the testator could not have made any other disposition without breaking his contract the court despite the wording of section 4(1) could make a fresh disposition which he could not effectually have made; and that the fact that the promisee might have been better off if the testator had died insolvent or broken his contract was irrelevant.

GLEESON CJ: Now, that was apparently the criticism that some people had of Dillon.

MRS SHAW: Yes.

GLEESON CJ: They said, "This is absurd. If a person enters into a contract to make a will in somebody else's favour, then that person will be less vulnerable to claims of relatives under the Testator's Family Maintenance legislation if he repudiates his contract than if he observes it." But it brings you back to this paradoxical situation: if the testator had never told Mrs Schaefer about his plans to benefit her but had simply made a will leaving the house to her, plainly she would have been vulnerable to claims by relatives under the Testator's Family Maintenance Act of New South Wales.

MRS SHAW: Yes.

GLEESON CJ: But she lost that vulnerability because the testator had promised her that he would leave the house to her in his will for consideration. So what took away her vulnerability was the fact that she was not merely a devisee, she was a person who had a contractual right to be a devisee. Is that the way the reasoning proceeds?

MRS SHAW: In our submission, yes, and the explanation for the difference - and we say it is not paradoxical, we say it is the result of the interpretation of the Act, that the Act - can I take the Court to the passages in Easterbrook v Young, which have discussed - - -

GLEESON CJ: Yes.. What is the reference then, Mrs Shaw?

MRS SHAW: Easterbrook v Young [1977] HCA 16; (1976) 136 CLR 308 and the Court was concerned with the meaning of the expression "out of the estate" in that case where there was an issue as to whether or not the administration of the estate had been completed and whether or not an order could be made if distribution had occurred. The relevant passages that I wish to refer the Court to in the joint judgment are firstly at page 318 in the middle of the page:

In our opinion, the expression "out of the estate of the testator" refers to the assets of which the testator might at his death dispose and which have come or could come to the hands of the personal representative by reason of the grant of probate or letters of administration.

Further, at page 320 at about point 8 of that page, commencing:

But, in our opinion, the Act in using the expression "out of the estate of the testator" is not concerned with these settled doctrines. The words are used to indicate both the financial limits to which the court may go in making provision for those having unsatisfied claims on the testator and the source from which any provision so made shall be satisfied. It is, as we have said, that which the testator had to dispose of which is relevantly his estate -

and so on.

GUMMOW J: Yes, but that is not the issue in Easterbrook v Young, is it? They were not worrying about these problems in Easterbrook v Young. They were worried about the argument that a line had been drawn between administration and trust and if that line had been crossed from administration into trust, it was too late and no order could be made under the Act, and that they rejected.

MRS SHAW: Certainly that was the topic at court but the statement - - -

GUMMOW J: There had been a big debate about applications being made too late, was there not?

MRS SHAW: That is certainly true.

GUMMOW J: And that was put an end to by Easterbrook v Young.

MRS SHAW: But we say these statements of principle explain why it is that if property is subject to contractual obligations or otherwise passes by death in such a way that the testator could not have disposed of it, it does not fall within the estate or it - - -

GUMMOW J: Well, you say "could not dispose of it". He could dispose of it, but there would be an action for damages. Is that not right? I mean, no property had shifted, on this hypothesis, had it? It is still in contract. You would not get an injunction against the testator changing his will, would you?

MRS SHAW: For the same reasons that, for example, a - - -

GUMMOW J: Or specific a performance, a specific performance that he make a will or go to prison for contempt.

MRS SHAW: We say that what he could have disposed of is determined by the applicable law, so if it is contrary to law, or it would be contrary to law for him to dispose of it, for example, because he receives it or he has promised a donatio mortis causa that does not go into the estate. Now, he could unlawfully dispose of that.

GLEESON CJ: Have you looked at Schaefer, page 586F where their Lordships say that in a case such as the present, if the father had tried to dispose of the property during his lifetime, provided a court could intervene before a purchaser, without notice, obtained an interest, the wife could have obtained an injunction to restrain the father from disposing of it. Is that right?

MRS SHAW: Yes, but they are, in our submission, examples by Lord Cross to - - -

GUMMOW J: They are linked to specific property, are they not?

MRS SHAW: Yes, but, in our submission, what Lord Cross is explaining is why it is not necessary that there be a breach of contract, that these are all transactions which affect what is available to be subject to a claim, applying the wording of the section, as his Honour goes on at page 587 to say.

KIRBY J: The entitlement to get the injunction to prevent the disposal implies that the property is still with the person who would be the subject of the injunction.

MRS SHAW: But still subject to the contractual obligations.

KIRBY J: Yes, but the question is whether it is still in the estate.

MRS SHAW: As at that point in time.

KIRBY J: Yes. There would be a breach, or arguably a breach of contract, but the issue is whether it is still there in the estate and that entitlement to get the injunction implies that it is.

GLEESON CJ: It implies that the legal title is in the father. According to the next sentence, the wife could have registered what we would call a caveat and she could only do that if she had a proprietary interest.

MRS SHAW: Your Honours, we say that those matters as to how one would approach the matter prior to death do not assist in the interpretation of what is an estate and the role of the court in determining what is an estate upon the basis that it is only to look at, as at the date of death, what the testator could do.

GLEESON CJ: Does your argument turn upon the fact that the widow, in the present case, was in the position of a creditor with a claim and, if so, what kind of a claim, or does it turn upon the proposition that, at the time of his death, the testator was not the beneficial owner of any of the property of which he was the legal owner?

MRS SHAW: I apologise if I put it in this way, but the difficulty that arises is because, at the time of the death, or upon the death, the contract becomes irrevocable that different considerations arise immediately on death and we say that the way in which his Honour Chief Justice Nicholls, which is set out in the judgment of Lord Cross and is described by him, as I understand it, as being an approach that he agrees with - - -

GLEESON CJ: This is page 589.

MRS SHAW: Page 589. That was a mutual wills case where each - I will come back to it, but it was a Testator's Family Maintenance case in relation to a mutual wills agreement. The reasoning that his Honour Chief Justice Nicholls there applied to the issue was at point D:

the respondent's rights do not arise under the will. They arise contractually and exist independently of the will. If the testator had made no will, or had made a will leaving everything to his widow and daughter, he would have made a breach of his contract with the respondent. She then could have sued for damages for the breach, and the measure of her damages would have been the value of the testator's estate. Her status afterwards would have been that of a judgment creditor. It is true that the performance of the contract was to be, and actually was, in the form of a will, but, as is proved by the fact that it prevents a cause of action for breach arising, the will operates as the performance of the contract, not as bounty, as it would in the ordinary case of a testator giving, by way of a free gift, property which he had the right to dispose of as he pleased.

His Honour went on to say:

Any interference with respondent's rights now, must amount to wholly or partially setting aside the contract. What we are asked to do is to reduce contractual rights to the level of gifts under a will, and to make the performance of the contract the reason why we can prevent its full performance, and to do that by an order which by section 9 will take effect as if it were a codicil, which as a fact the testator had no right to make.

GUMMOW J: Now, assume there was death duty still and assume there is this codicil, and it is not revoked and it operates, why would death duty not be payable on the actual estate? You somehow have to give some artificial meaning to the expression "estate" in section 7, do you not, of the Inheritance Act? It means something less than what it would mean at general law.

KIRBY J: And then the question arises, why would the Court give such an artificial construction given the purpose of the Act?

GUMMOW J: I mean, there is no doubt that on the grant of probate the estate that is vested in the grantee of the probate includes these assets, you would think. You would think, well, that is the estate. It is what the executor has under a grant and the executor is going to be the defendant to the action under the Inheritance Act. But somehow the estate has some contracted meaning and the reason for the contraction is that reasoning of Chief Justice Nicholls, that it is a contraction which comes from giving it a character which traces the origin of it, how it got into the estate, if you like, the antecedent events which led to it getting into the estate added to the mere fact there was the will, and somehow the fact that there were these superadded circumstances in addition to the will taken out of the estate for this special purpose of the Inheritance Act. Is not that what it all comes to?

MRS SHAW: In our respectful submission, no. We say that what the genesis of the mutual wills doctrine, irrespective of its application for these purposes - - -

GUMMOW J: But it does not need to be mutual wills. Schaefer v Schuhmann is not a mutual will case.

MRS SHAW: Well, we say in mutual wills cases in fact stronger than Schaefer v Schuhmann, because in a mutual wills case the contract continues on after the death of the testator and that is, in essence, what we say his Honour Chief Justice Nicholls was saying, that the wills are the terms of the contract, so that the survivor is bound to carry out and continue on the terms of that contract to hold the estate in the way that the - or whatever passes to her, and, indeed, hold whatever she herself has that passes to her in accordance with the contract.

GUMMOW J: Yes, I know that, sure, but that all assumes the administration of the first estate. People talk about the survivor being the trustee, the relevant person.

MRS SHAW: Yes.

GUMMOW J: It cannot be. The trustee of what? The trustee of what is left after a due administration a la Easterbrook v Young. Right.

MRS SHAW: In our respectful submission - - -

GUMMOW J: And the executor is by no means always the survivor.

MRS SHAW: Can I just, by way of example, illustrate, in our submission, how the mutual wills doctrine involves contractual rights which must be greater, as was the argument in Schaefer v Schuhmann, than beneficiary rights and it is this. If, pursuant to the mutual wills agreement, the property that the parties held was joint property and the first testator died, rather than the property passing by survivorship, the surviving testator, under the agreement, would hold that property on trust for - - -

GUMMOW J: You say "that property", you see. Assume the estate was insolvent. Surely those debts get paid first.

MRS SHAW: In our respectful submission, that is a separate question, because the debts that one is concerned with are - - -

GUMMOW J: You keep talking about the property as if it is a block of cheese. It is not really.

MRS SHAW: I apologise. I should really be talking about the subject matter of the contract. So if the subject matter of the contract includes a property that is held in a joint tenancy, then according to the application of the doctrine of mutual wills, rather than that property proceeding by way of survivorship so it does not fall within the estate and it does not, therefore, become subject to an order under the Testator's Family Maintenance Act, the effect of the mutual wills doctrine is that the property on death is held in accordance with the contract, on trust by the survivor for the beneficiaries of the will, that is, in accordance with - - -

GUMMOW J: No debate about that.

MRS SHAW: Well, that, in our submission, demonstrates that the - - -

GUMMOW J: It means, in some circumstances, there may be some breach of trust and remedies apply at the instance of this third party to the contract.

MRS SHAW: In our respectful submission, there does not need to be, and a breach of trust is irrelevant. It is the way that the mutual wills doctrine has in its operation - - -

GUMMOW J: Well, it is said to be a constructive trust.

MRS SHAW: That is so.

GUMMOW J: So it is designed to achieve some remedial situation.

MRS SHAW: Not in the way it operates. In fact, there has been much discussion as to whether it is implied or remedial, but whatever label it is given, it is considered as coming into existence at the moment of death, and the reason for that is because at the moment of death the testator has performed his part of the bargain.

GLEESON CJ: That is the way it was put by Justice Morritt in In re Dale [1994] Ch 31 at 37D. He says:

on the death of the first . . . the property of the survivor . . . the subject matter of the agreement, is held on an implied trust for the beneficiary named in the wills.

MRS SHAW: Your Honours, indeed, at page 43 of the same judgment, his Honour discusses the impact, as I have put it arguendo, of a joint tenancy and refers to the case of In re Wilford's Estate; Taylor v Taylor at point E to support the contention that the survivor holds the property on trust and the obligation to act in accordance with the agreement:

In In re Wilford's Estate . . . two sisters who were joint tenants of a leasehold property each made a will leaving her property to her sister for life and subject thereto to certain named nieces. One of them had died and the question arose whether the agreement to make such wills severed the joint interest. Hall V.-C. decided . . . that it did, because

"It was acted upon by both sisters, their wills being made in accordance with it, and it effected, in my opinion, a severance of the joint tenancy. It would be a monstrous thing to hold, after the agreement had been so far perfected, that after the death of one sister the other could claim the joint property belonging absolutely to her as survivor."

Indeed, at page 45E his Honour considers the case of In re Hagger and his Honour Justice Clauson applying Dufour v Pereira, quoting from Hagger, at point F:

the first testator the position as regards that part of the property which belongs to the survivor is that the survivor will be treated in this court as holding the property on trust to apply it so as to carry out the effect of the joint will.

GUMMOW J: Now, what was the particular debate in Dale?

MRS SHAW: The particular?

GUMMOW J: Debate about principle.

MRS SHAW: The particular debate about principle, your Honour, was to make the submission that if a mutual wills agreement can have the effect of, rather than property passing by survivorship at law and, therefore, through that route the estate being determined and the property not going into the estate, the effect of the mutual wills agreement, the way it operates was to demonstrate that, indeed, contractual rights were greater than rights that applied, for example, at law on survivorship and confirm that those contractual rights and obligations were attached to the property of the testator and, indeed, to the property of the survivor pursuant to the mutual wills agreement. Hence, because the obligation is attached to the property, the testator could not dispose of it at his death.

CALLINAN J: Ms Shaw, I was looking at your submission, paragraph 1.6, in which you refer to Ms Cassidy's monograph, and you refer to a number of cases which are cited there. Is there any stronger case for you than that Dominion Law Reports case of Re Kerr.

MRS SHAW: I am sorry, your Honour. Which proposition was your Honour - - -

CALLINAN J: The proposition that you have in inverted commas on page 3 at the end of 1.6 of your submissions on that page and it goes over to the following page in which the proposition appears that, in respect of new wills, the beneficiaries under it:

would only be entitled to that which remained after "satisfaction of actions by the intended beneficiaries -

At the moment, if that proposition is right, if it is right, I do not immediately see any distinction between that situation in which there is a new will and the situation that we have here. At page 58 of the monograph there is a reference to Re Kerr [1948] 3 DLR 668 at 679.

MRS SHAW: I apologise, your Honour. I just do not have that handy at the moment.

CALLINAN J: See, if the intended beneficiaries under the mutual wills can enforce their rights because they have an enforceable trust, the statement there seems to suggest that the property covered by the mutual wills is not part of the estate. The citation from Re Kerr in the monograph is:

If his -

the testator's -

assets were impressed with a trust in favour of the beneficiaries mentioned in the joint will, the section could not, in my view, have any effect as to such assets.

KIRBY J: Do not be too suspicious, Mrs Shaw, this is in favour of you.

GLEESON CJ: It must be the case, must it not, that estate must mean beneficial estate. It must be the case that if the testator is the legal owner as trustee of Blackacre and Jones is the beneficial owner, Blackacre is not part of the estate of the testator for the purposes of this Act.

MRS SHAW: That is so. Yes.

GLEESON CJ: That is elementary.

MRS SHAW: Yes.

GLEESON CJ: So the question must be, what is the legal status, in terms of legal and beneficial ownership, of all the assets of a person such as this testator who has made an agreement to make mutual wills, not in relation to Blackacre, but in relation to the entirety of his estate?

MRS SHAW: Your Honour, we say that the status of it is that which arises consistently with the application of the mutual wills doctrine, namely that on the testator's death the survivor holds in trust for the beneficiaries under the will because that is the terms of the contract and, therefore, the beneficial ownership does not pass to her. The ownership is determined and governed by the trust that then arises.

KIRBY J: Yes, but is not the question whether the legal estate remains with the parties to the executor and is therefore part of the estate, even though there may well be, if the obligations of the mutual wills are not followed through, there would be possible actions for breach of contract, possible actions for breach of trust, but the legal estate is still with the executor because the legal estate is subject to the trusts and obligations assumed by the contract, but it is separate from the beneficial interests pursuant to the mutual wills.

MRS SHAW: Your Honour, we accept that clearly there is a separation of legal interests and beneficial interests, and that the effect of the trust, we say, is to create that beneficial interest in someone other than the survivor.

KIRBY J: Well, let that be so.

MRS SHAW: Yes, and hence the estate, because it can only refer to the net estate, consistently with Schaefer v Schuhmann, and secondly, and more importantly, because it must be a property that the testator could have disposed of by will because he had both the legal and beneficial interest in it.

GLEESON CJ: We seem to be fluctuating - and this is where we came in earlier - between notions of contract and notions of property. They are, of course, belated.

MRS SHAW: Yes.

GLEESON CJ: The bare legal estate, if that is all it is, does not matter. If a person who dies, at the time of his death, held Blackacre upon trust for some other person, then Blackacre is not available for any of the people who might make an application under this Act. That, I should have thought, is clear.

MRS SHAW: Yes.

GLEESON CJ: And if it had been the case that you could demonstrate that at the time of his death the late Mr Barns was not the beneficial owner of a particular farm, then that farm was not available by claimants under the Inheritance Act. But do you go so far as to say that upon his death the late Mr Barns was the beneficial owner of nothing, because he had contracted to leave the whole of his estate to his widow, or do you say, which seems to me to be a different proposition, he was the legal and beneficial owner of a number of assets, but his widow had a contractual claim which produced the consequence that the net value of his estate was zero? Which of those two do you say?

MRS SHAW: Your Honour, perhaps in so far as Schaefer v Schuhmann is concerned, it would be the latter, although in terms of the operation of the mutual wills doctrine, what he had before his death was not indefeasible. That is, whatever was subject to the mutual wills agreement was not indefeasible; and I say that in the same way as the properties described in Nowell v Palmer in the judgment of the New South Wales Full Court in our book at page - - -

CALLINAN J: Before you get to that though, why could not both the testator and the widow and, indeed, Malcolm - he is the son, is he not - all have beneficial interests in the property? It does not necessarily have to be either/or, does it? The beneficial interests of the widow and the son crystallise at the moment of death.

MRS SHAW: That is so.

CALLINAN J: But they exist as a beneficial interest existing before the moment of death.

MRS SHAW: That is so and, indeed, somewhat the distinction might be rights at law and rights in equity because at law the widow always has the ability to enforce the contract.

CALLINAN J: So does Malcolm. Malcolm is a party to the deed - - -

MRS SHAW: He is a party to the deed, so there are rights at law and rights in equity.

CALLINAN J: The deed recites that Alice has agreed with Lyle and with Malcolm to act in such a manner as to ensure that all property owned by him at his date of death devolves in the manner set out in the will. Now, if there is any suggestion of any departure from that, then Alice and Malcolm could have got an injunction, could they not?

MRS SHAW: Yes.

CALLINAN J: But I do not see at the moment why it has to be either/or.

MRS SHAW: That is so and that, in my submission, supports the contention that because they are parties to the deed from the moment of the entry into the deed, there are interests that they have, not necessarily - - -

CALLINAN J: It is an unconditional contract, is it not?

MRS SHAW: Yes.

CALLINAN J: Normally, if it were an unconditional contract for sale, then there would be an immediate equitable interest in the purchasers.

MRS SHAW: Yes.

HAYNE J: That leads to your difficulty, does it not, because the subject matter of this was, was it not, the residue, the residue that I die possessed of? So you have a subject matter problem lurking. This is not a mutual will case concerning disposition of Blackacre where you have an identified piece of property that you can grapple with. That leads on, does it not, to the difficulty that Justice Dixon referred to in Birmingham v Renfrew, that the trust to which reference is made is an unusual kind of trust, something akin, if you like, to a floating charge; it hovers over the estate until death of the survivor and then, I would have thought, really takes life only if there is a breach. So there are a lot of concepts being engaged here which really do require very precise analysis.

If there is a trust, what is it a trust of, when did it arise, what are its terms? To speak simply of "Well, a trust was imposed" is not, I think, sufficiently precise.

MRS SHAW: Your Honours, we say the terms of the trust - - -

GUMMOW J: I think you had better look at Birmingham v Renfrew 57 CLR 689 because that is a crucial passage, I think.

MRS SHAW: Yes. Your Honours, first of all, we say that there is no difficulty about the identification of the subject matter because the terms of the trust are the terms of the will and that the wills provide the implementation for the agreement.

HAYNE J: Just so, and the wills were in terms of disposition first to the executor to pay debts, funeral and testamentary expenses and then, on a survival condition, the residue.

MRS SHAW: Yes. Could your Honour permit me - - -

HAYNE J: Now, was there any intention in the contracting parties that they were not to be free to deal with assets of which they were then possessed at the time of making the contract? I hardly think so.

MRS SHAW: Would your Honour permit me to answer your Honour's question by first of all going to Nowell v Palmer because of the analogy that is drawn with - - -

GUMMOW J: I want to know whether you accept Sir Owen Dixon in Birmingham v Renfrew.

MRS SHAW: Can I come back to that, your Honour, once I have been to Nowell v Palmer because I want to make a submission, if I might, having referred to Nowell v Palmer.

GLEESON CJ: Nowell v Palmer, is it?

MRS SHAW: Nowell v Palmer, and the passage I wish to refer to is at page 5 of the book of cases.

GUMMOW J: Now, what were the facts in Nowell v Palmer? A lot of mischief arises in these cases by looking at bits and pieces and not understanding - - -

MRS SHAW: Yes. Your Honours, it was a case where there was an agreement to make mutual wills and the issue that arose was really proof of the agreement and whether or not statements made by the second testator during the first testator's lifetime were admissible. The objection was that they were not admissible because they were not statements made in relation to proprietary interests, namely before the first testator died there was no proprietary interest in the property.

GUMMOW J: Just a minute. The relevant facts appear at the top of 576, do they not?

MRS SHAW: Yes.

GUMMOW J: Ms Brown died first, then Mr McGrath changed his will, so he broke the arrangement, and that is what the debate was about.

GLEESON CJ: The submission is on page 578C, is it not, the principle being a principle about the admissibility of evidence?

MRS SHAW: Yes.

GLEESON CJ: The point was raised that the principle about the admissibility of evidence did not apply because there was no property.

GUMMOW J: It is all about predecessors in title.

MRS SHAW: The question was whether or not prior to the death of the promisor, there was any interest in the property that was the subject of the mutual wills agreement that passed when his wife died and his Honour said that - - -

GUMMOW J: It is all about admissions, is it not, and privity?

MRS SHAW: Yes, and whether or not - for the admissions to be admissible, it was argued that they had to be related to proprietary interest and what his Honour provided an example - in our submission, a relevant example - was that at paragraph E in particular, as to the status of the interest of the survivor in the mutual wills agreement prior to the death of the first testator was that:

It is not necessary to determine, for purposes of the present case, the exact nature of the right which the promisee has in such a case as this. The concept of a proprietary interest, not in individual assets, but in the general fund of which the assets form part, is well recognised in the law. The interest of a beneficiary in an unadministered estate has been said generally to be of a similar nature. The fact that the promisee may during the promisor's lifetime have set aside a disposition of property by the promisor if there is fraud upon his promise indicates, I think, that the promisee has, prior to death, an interest, albeit of a special kind, in relation to the property of the deceased.

GUMMOW J: That is right, like a floating charge. That was the special property.

MRS SHAW: No, the floating charge, as I understand Sir Owen Dixon's judgment in Birmingham, arose when the testator died because at that point in time the subject matter of the agreement was impressed with a trust and that meant that both the property that the testator had and the property that the survivor had was impressed with a trust.

GLEESON CJ: Mr Justice Mahoney has expressed himself very cautiously there. He talks about "an interest . . . of a special kind, in relation to the property". Now, if it is not possible to put a finer point on it than that, the question arises whether property in relation to which a third party has an interest of a special kind is part of the estate of a deceased within the meaning of the word "estate" in the legislation.

MRS SHAW: Your Honour, we say that the interests alter and become irrevocable, if you like, at the moment of death of the testator and it is at that moment that the question of what the testator can dispose of is to be determined. If I can come back now to Sir Owen Dixon's comments, the distinction we say that is being drawn is that "floating" his Honour is, if we might say, using to indicate that the subject matter is not precisely identified in the same way as the interests of a partnership are not precisely identified. But the constructive trust arises immediately on death because at that moment the survivor is required to hold the property on trust.

GUMMOW J: It certainly arises and crystallises on the death of the defaulting survivor and what Sir Owen Dixon is talking about is the situation before that, which is your case.

MRS SHAW: Yes, before that, we say what his Honour is talking about is - - -

GUMMOW J: He is talking about the interval between the death of the first and the death of the second.

MRS SHAW: If your Honour goes on to page 690, we say, no, he is not. He is referring to a constructive trust arising on the death of the first testator. I am sorry, did I - at page 690 his Honour says, in the time between the two deaths:

But I do not see any difficulty in modern equity in attaching to the assets a constructive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallised on his death and disabled him only from voluntary dispositions inter vivos. On the contrary, as I have said, it seems rather to provide a reason for the intervention of equity. The objection that the intended beneficiaries could not enforce a contract is met by the fact that a constructive trust arises from the contract and the fact that testamentary dispositions made upon the faith of it have taken effect. It is the constructive trust and not the contract that they are entitled to enforce.

So we say between the death of the first testator and the death of the second testator the subject matter of the agreement is the entire estate that the testator had as at the moment of his death which is fixed or the subject of a constructive trust.

GUMMOW J: I have to say to you I think that at 690, Sir Owen Dixon is offering further explanation of what he is saying at 689.

MRS SHAW: Yes, that is our submission and we say that because if it were otherwise, our submission is that what his Honour Chief Justice - - -

GUMMOW J: Particularly the use of the word "crystallised" on 690.

MRS SHAW: Yes, but we say that if it were otherwise, what his Honour Chief Justice Nicholls says in Re Richardson's Estate would follow, that there would be a break in the contract and an interference with the contract if the property or the subject matter of the contract was not fixed with the trust and subject to the operation of the trust.

Your Honours, the other reference, if I might give the Court briefly, in relation to this topic is we rely on the discussion by his Honour Justice McPherson in Bigg v Queensland Trustees Ltd which is at page 40 of our book. Again, it was a mutual wills case. The terms of the wills at page 12, line 15:

The idea, he said, was that, because each of them had two children, each would leave his or her property to the other, and that at the death of the survivor all the assets would be divided among the four children. Each of them knew what property the other owned.

Consequently, the mutual wills were executed. At line 20:

By his will dated 11 June 1976 (ex.1) the plaintiff appointed Mrs Bigg his executor and trustee giving to her the whole of his estate on trust for her own use, provided that, if she should not survive him for thirty days, it should devolve upon and be shared equally among the four children.

We say a comparable term to that involved in the deed here, except it was only one child.

GLEESON CJ: Ms Shaw, mutual wills are just one technique of achieving a particular result adopted here mainly for purposes of stamp duty but they also give a degree of flexibility that might otherwise not exist by other arrangements. But let me take a very simple example. Suppose a man who owns Blackacre in South Australia has two children, a son and a daughter, and by his will he leaves Blackacre to his son and he leaves his daughter nothing. Then she can make an application under the Inheritance Act and perhaps, in the exercise of a judge's discretion, get an interest in Blackacre. Is that right?

MRS SHAW: Yes.

GLEESON CJ: Now suppose the same man a week before he dies, leaving Blackacre to his son and nothing to his daughter, enters into a deed whereby in consideration of natural love and affection for his son he covenants to leave his son Blackacre, full stop. Does that produce the result that the daughter cannot make a claim under the Inheritance Act?

MRS SHAW: Yes.

GLEESON CJ: It is not hard to defeat the Inheritance Act if you are prepared to pay a little stamp duty, is it?

MRS SHAW: Your Honour, with respect, that is so and that is, we say, why - in fact, there are many examples of a way to defeat the Inheritance Act. As I said, it can be a transmission during life to the son, a minute before he dies, the entire estate when he is on his deathbed can be transmitted to the son. There are numerous ways of defeating the Inheritance Act and hence the reasons, no doubt, why the New South Wales legislation challenged that course in its Parliament to say that particular transactions would not have the result that property did not form part of the estate. So the approach was to say these identifiable transactions which includes, we say, transactions for mutual wills agreements because transactions which put property on trust, that property is able to be brought into the notional estate, have been specifically addressed by the New South Wales legislature.

But no such attempt has been made in this State. We say that the Court's approach to this legislation has to have been to make it - this Court's approach in White v Barron was to make it plain that this is social legislation that the Parliament has essentially implemented or introduced and it is for Parliament to determine what its ambit and flexibility or matters that, as your Honour has raised with me, ought to be covered, we say, in our respectful submission.

Can I take your Honours to White v Barron [1980] HCA 14; (1979) 144 CLR 431 which assists with something of the history of the legislation. It was concerned with a claim under the relevant Testator's Family Maintenance provision. It was just the discussion of his Honour Justice Stephen as to the history of this legislation in the introduction of this legislation in this country, commencing at page 438. I apologise, your Honours, it was a case I referred to the Court last night. In particular, his Honour Justice Stephen addressed the changing needs of the community, the different emphasis on, for example, mental health, the need for companionship and the continued enjoyment of sexual relations into old age, the topic of de facto relationships which have been the subject of legislation in this State, for example, and his Honour at the bottom of page 438 says:

Quite major changes in accepted community values would seem to be required to render outmoded the established doctrine of some twenty years ago; and any new doctrine taking its place would first have to be shown to be the necessary consequence of those changes.

His Honour then - - -

KIRBY J: What page is this on, I am sorry? I have lost you. Page 439, is it?

MRS SHAW: Going on to the top of 439, your Honour, commencing at the bottom of page 438.

KIRBY J: Yes, I am sorry I interrupted. Go on.

MRS SHAW: I raised it, your Honour, because your Honour Justice Kirby yesterday raised these issues of changing issues.

KIRBY J: Yes.

MRS SHAW: His Honour referred here to the difference in the status of women and women's increased participation in the workforce and so on and the weight that is to be accorded for a spouse's contribution. His Honour goes on to say in the middle of page 439 that:

Nothing which I have said is intended to suggest that old doctrines should necessarily be adhered to. The old may be founded upon no surer foundation than are the new. The better course appears to me to acknowledge that in the area of testators' family maintenance there is relatively little room for the propounding of broad judicial doctrine, old or new, at least when it takes the form of rules of purportedly general application and relative inflexibility.

This area of law is peculiarly the creature of statute.

His Honour then goes on to refer to the history of the introduction of the legislation, beginning in New Zealand, reaching through South Australia in 1918 and then through to England in 1935 and, importantly, interfering with the "former freedom of testamentary disposition". The freedom of testamentary disposition, of course, is a matter of statute under the Wills Act, originally under the statute of wills.

KIRBY J: I am grateful for the reference to that and, as Justice Callinan has pointed out, statutory changes have been introduced in Queensland and New South Wales, specially New South Wales, and I believe also the United Kingdom. So that is a powerful argument, but the argument to the other side is the key word is "estate". We have to give meaning to "estate" in this context. The changing social circumstances to which Justice Stephen correctly referred may import an ambiguity in a case like the present and that is a legitimate opportunity for judges in giving the construction that is best suited to carry forward the purpose of the Act, which has been a purpose since 1918, to prefer that construction which gives the Act force and effect, rather than that which allows a testator by just mutual agreements, contracts and without paying any burden of tax to walk straight out of the Act. That is the argument on the other side, and that is not departing from statute and the role of statute or saying judges can jump in and do what Parliament has not done. It is giving meaning to a key word in the statute, "estate".

MRS SHAW: Your Honour, two matters about that: First of all, that in other areas of legislation the Parliament has stepped in and decided to interfere with transactions that appear to be directed towards avoiding the operation of provisions of certain acts and we know in the taxation area, bankruptcy area, indeed under our De Facto Relationships Act there is a specific provision which is introduced to set aside transactions which might appear to be inconsistent with the Act.

GLEESON CJ: I think you may be overlooking an important element of the structure of the Act that was the subject of some submissions by Mr Tilmouth, but we have not heard what you have to say about it, and it is relevant to this point you are now discussing. A key provision of the Act is section 10 which tells you how an order made under the Act operates. It operates as a codicil to the will and not otherwise.

So let me ask you: suppose in the present case a successful application under the Act was made and the Court ordered that there be a legacy of $200,000 paid out of the estate to Mr Tilmouth's client. Now suppose before his death the testator had made a codicil to his will providing that there should be a legacy of $200,000 to his daughter. The order made under the Act would operate in exactly the same way as the codicil, would it not?

MRS SHAW: Yes.

GLEESON CJ: What would be the consequences if the testator before his death had made a codicil to his will providing for a legacy of $200,000 to his daughter?

MRS SHAW: Is your Honour talking in the context of the breach of mutual future wills agreement? I am sorry, your Honour.

GLEESON CJ: I want you to assume all of the facts of the present case are the same, except I want you to add one fact: before he died the testator made a codicil to his will providing for a legacy of $200,000 to his daughter.

KIRBY J: Without the consent of the mother or the son.

MRS SHAW: Yes, it clearly would be - - -

GLEESON CJ: That is the only additional fact.

MRS SHAW: I apologise, your Honour. Yes, it clearly would be a breach of the mutual wills agreement.

GLEESON CJ: What would be the consequence of that?

MRS SHAW: The consequence would be that, although the legacy might be admitted into probate, there would be no estate from which that legacy could be paid out.

GLEESON CJ: You mean the widow would have a claim for damages against the estate in an amount of $200,000?

MRS SHAW: No. I am sorry, your Honour, in my submission, the effect of the contract is that the subject matter of the estate is already committed to the contract.

KIRBY J: You say it is equivalent to the pauper leaving $100,000 to a relative because there is just nothing in the estate out of which the legacy is to be paid?

MRS SHAW: That is so. Your Honours, can I come back to the point of section 10 though in this way and its relevance to the interpretation of the Act. I think I took your Honours to the passage in Schaefer v Schuhmann but the way in which their comparable section 4 was interpreted was to confirm, we say, that the codicil is the mechanism by which the court decides that its order operates. But it does not identify the time at which you determine what the estate is and it could not because there are a number of sorts of transactions which occur on death, that is, for example, I have mentioned donatio mortis causa which happens only on death, so a gift then goes, but that gift does not form part of the estate.

GLEESON CJ: Section 10 actually tells you that every provision made by an order takes effect as if the deceased had died leaving a will, making a codicil immediately before his death to the same effect as the order.

MRS SHAW: Yes, we say that is a separate question, that is, the effect of the order is a separate question to the approach the court takes in determining whether or not it should make an order. The approach the court takes in determining whether it should make an order is to say what should the testator have left as at the date of his death, based on what estate he had at his disposal as at that time. So that would exclude, for example, various - whether it be superannuation policies that only crystallise on death and are not within the estate, whether it be pension funds, all sorts of contractual arrangements that come into effect and operate to provide property from the testator directly to another person but do not fall within the net estate which is available for the order.

GLEESON CJ: Is not the effect of section 10 that a person in whose favour an order is made can be no better off in consequence of that order than if the testator immediately before his death had made a codicil to the will to the same effect as the order of the court?

MRS SHAW: That might be so. We say that it is the other way round, with respect, that the purpose of the legislation is to bring home that the court can only do what the testator could have done.

GLEESON CJ: But does not that mean that a way of testing the significance of the mutual wills is to ask what the consequence in law would have been if the testator, in breach of his contract, immediately before his death had made a codicil to his will, making some provision for his daughter?

MRS SHAW: Your Honour, we say that that does not provide a test as to what the net estate is. It does not assist in the interpretation but rather the legislation in its terms and the way that it has been interpreted in this Court is to read those provisions as making it plain that this Court or any court dealing with this legislation will address the matter upon the basis that an order can only be made by the court saying, "If I was the testator as at the date of death and I had this estate available to me to dispose, this net estate, what should I have done?" So the focus is not on the estate when it goes to the survivor; the focus is on what is the net estate that the testator had as at the time he died which this Court says he has failed to make appropriate provision from.

HAYNE J: I would have thought the point the Chief Justice was putting to you was one that if accepted might tend in your favour but if it were to be adopted, would it involve the equation of curial intervention pursuant to statute, that is the court's order under section 10? Would it equate that with the voluntary act of a testator in breach of contract and, if it does equate those two, is that equation right?

MRS SHAW: Well, your Honour, we adopt that as another reason why the interpretation of the Act is directed solely to what the testator could have done lawfully, that is, both in terms of the equitable and the - - -

HAYNE J: Well, that seems to me to be a proposition which adopts the equation and treats curial intervention pursuant to statute, that is compulsive intervention pursuant to statute, with a voluntary act taken by the testator in breach of the contract voluntarily assumed by the testator. It is not self-evident to me that those two are properly equated. Indeed, the dissenting opinion in Schaefer v Schuhmann would say categorically they are not to be equated, but is not that the difficulty that is presented by fastening on the significance of section 10?

MRS SHAW: We say there are a number of difficulties and that is why the section has been interpreted to indicate that this is the mechanism by which the order will operate in the estate as a whole but, more importantly, to emphasise that the court is only doing what it considers the testator could and should have done at the time of death.

GLEESON CJ: Leaving aside what the testator should have done, which is a discretionary matter, there is an ambiguity, is not there, in asking what the testator could have done? Anybody can break his contract. The question is what are the consequences of it?

MRS SHAW: Well, your Honour - - -

HAYNE J: We are confronted with a position where there has been no breach of contract.

MRS SHAW: Your Honours, what are the consequences? It does not assist in determining what is in the net estate because, if that were right, then the estate could include matters, for example, that there is a beneficial ownership under a property subject to a trust. Any matters that are restrained by legal or equitable obligations in theory could be included in the estate, and we say that that is not the interpretation of this legislation; that this legislation limits a court to determining the estate only from what the testator could, without breaching any legal or equitable obligations, have disposed of as at the date of his death.

KIRBY J: There was some mention yesterday of the return on the estate showing that it was valued, for some purpose, at $2 million, and the parties, I think, were going to bring that material to our notice if it was part of the record. You have not done that. You represent the executor?

MRS SHAW: I am acting for the first respondent in his personal capacity, your Honour. I have had no role in acting for the respondent.

GLEESON CJ: I think Mr Tilmouth suggested that the best information we have about that subject is in the pleadings.

MRS SHAW: Yes, your Honour. In the statement of claim, that is in the appeal books - - -

KIRBY J: I saw that, but that does not prove - are they sworn, the statement of claim?

MRS SHAW: No, that, as I understand it, is the only information that was before the court.

CALLINAN J: In this State, you would still have to pay probate duty, would not you? Even though there is no succession duty, there would be a probate fee, would not there?

MRS SHAW: I am afraid I do not know the answer to that.

CALLINAN J: If there is, is it based upon the value of the subject matter of the will? I mean, is it based upon how much property is referred to in the will? It normally would be. I think most probate fees are progressive like succession fees and death duties used to be.

KIRBY J: Perhaps you had better have that checked. You could send a note to us if you are unable to answer that now.

MRS SHAW: I understand - my instructions have come through that it is actually a flat fee here.

CALLINAN J: Flat fee?

MRS SHAW: Yes, as I understand it, so that probably does not throw any light on that issue. We are not absolutely sure but that appears to be - - -

KIRBY J: So all that we have is the assertion of the plaintiff that the value of the estate was so much, which is the very question that has to be answered.

MRS SHAW: Yes.

KIRBY J: You do not accept that. You contest it.

CALLINAN J: You have not pleaded yet, have you?

MRS SHAW: No. This matter has come to this Court on a preliminary question of law without any issue of purpose or any evidence or information as to the value of the estate.

GLEESON CJ: Well, we only have to understand the nature of the plaintiff's claim. We do not have to decide whether she is entitled to anything.

MRS SHAW: That is so.

HAYNE J: The plaintiff at pages 15 to 17 of the appeal book in paragraph 78 sets out what is said to be the content of the executor's declaration of assets and liabilities.

MRS SHAW: Yes.

HAYNE J: Whether that is right or wrong, that is what is said to be so.

MRS SHAW: Yes, that is the information as far as it has gone.

KIRBY J: It is unsworn.

MRS SHAW: Yes.

KIRBY J: You have not yet had to plead to it.

MRS SHAW: That is so.

KIRBY J: You have not yet pleaded to it, but it is inherent in your argument that you contest it. You say it is nil.

MRS SHAW: Yes. In terms of the way it is set out, I am not sure whether or not it is intended to represent what assets there were as compared to what assets there were in the estate for the purposes of determining what the net estate is, so I cannot assist the Court any further than what is in those pleadings.

KIRBY J: Who enjoyed the assets at the moment of the death of the testator then? Who was the legal and beneficial owner of the assets at that moment? It must have been somebody.

MRS SHAW: The ownership, we say, passed pursuant to the agreement in terms of the legal and beneficial ownership - the beneficial ownership.

GLEESON CJ: That comes back to the question that we discussed earlier, does not it? Do you say that the equitable estate was outstanding or do you say that the legal and beneficial ownership was in the testator but it was subject to a claim pursuant to a contractual right? In other words, was there a liability in the estate or was there no equitable property in the estate?

MRS SHAW: Your Honour, we say Schaefer, for the reasons we have addressed before, supports the submission that it is a creditor's claim under the contract.

GLEESON CJ: Schaefer was decided at a time when there was ad valorem death duty, so it would not have been important in that case, because it was apparently a fairly humble dwelling house that was the subject of the devise in Schaefer, but if there had been ad valorem death duty in South Australia at the time this testator died, you would have had to face up to that question, would not you? You would say the net value of the estate is nil. Why? Because the estate was not the beneficial owner of any property. That is one possible answer. Another possible answer is, because the estate was the beneficial owner of property worth $2 million but it had a liability worth $2 million.

KIRBY J: And thereby you would have walked not only out of the testator's family maintenance legislation but out of the revenue legislation as a likely consequence.

CALLINAN J: Except the revenue legislation would have captured this, I am sure. Most of it had provisions that made the duty assessable on the property referred to in the will, and things of that kind. It did not depend upon refinements of this kind. There was almost always a provision that would have captured this.

MRS SHAW: And indeed, in the deed itself, it provides for the payment in the will itself, which is incorporated in the terms of the deed.

CALLINAN J: I think it may be - and I know Justice Gummow is familiar with this - that those provisions in the New South Wales amendments with respect to notional estate came from relevant succession duty legislation in New South Wales. So that there would have been provision to capture this property no matter what assertions were made or no matter who it might have turned out was the actual owner.

MRS SHAW: Your Honours, I wondered whether or not the case that is referred to in Schaefer v Schuhmann of Coffill v Commissioner of Stamp Duties (1920) 20 SR(NSW) - in Coffill's case there was a partnership business and in consideration of the wife forgoing her claim for the share under the partnership, her husband made a will bequeathing her a legacy of [sterling]5000. The Commissioner of Stamp Duties denied that the sum of [sterling]5000 was deductible for the purpose of the assessment of stamp duty because he said that Mrs Coffill was not a creditor because she had abandoned her position and accepted instead of it the position of a legatee.

It was argued that the moment the will was made the obligation under the covenant was discharged, which is essentially what is being raised in argument. In the result, his Honour the Chief Justice held at page 285:

It seems to me, therefore, that it is not open to the Commissioner to treat this particular legatee as if she had no other right than that which appears on the face of the will naming her as a legatee -

essentially because she -

could have sued for her share, whatever it was . . . realised by the sale of the partnership assets.

His Honour said:

In other words it is, in my opinion, as effectual an undertaking on the part of the husband that the sum of [sterling]5,000 shall be paid to her by his executors in satisfaction of his obligation to make good her share in the estate.

It is referred to in Schaefer v Schuhmann, your Honours.

GLEESON CJ: It is referred to in Schaefer at page 528.

MRS SHAW: And Lord Cross relies on it to deal with that argument as to there needs to be a breach at page 588 and in addition In re Syme's case - I am sorry, your Honours, the discussion occurs at page 588. His Honour at point G:

The decision which seems to their Lordships to be good sense as well as good law is inconsistent with the view that the mere fact that the estate is solvent and the contract performed turns the other party to the contract from a creditor into a mere legatee.

His Honour then goes on to refer to In re Syme and then says in relation to re Richardson's Estate in 1935 the very point which their Lordships had to decide came before the Court of Appeal in Tasmania and his Honour then discusses re Richardson's Case. So we say that that approach is the one we put in response to the matters raised by the Court. If I might make one further point about section 10 and that is that we say that it operates so that an applicant under the Act ranks with the other beneficiaries under the will. So that her rights are no more or less than any other beneficiaries that would otherwise have been proceeding under the will.

In relation to the topic of the interpretation of the Act and the meaning of "estate" and the role of testator, without reading from it can I refer your Honours to the judgment of this Court in Coates v National Trustees Executors and Agency Co Ltd [1956] HCA 23; (1956) 95 CLR 494. It is on my learned friend's outline, and in particular the judgment is at 494, but the discussion of the public interest that I submitted at the commencement of my submissions appears at page 513, and we say that the question of jurisdiction that is raised arises, as is discussed by the Court, not just upon the basis of whether or not the applicant is left without adequate provision but, secondly, whether or not the testator has left an estate which is available for the order.

Your Honours, the mutual wills doctrine in the way that, in my submission, it operates continues to be applied in accordance with the original premises of Dufour v Pereira in New Zealand and in Canada and I merely refer the Court to Fisher v Mansfield, a more recent decision [1997] 2 NZLR 231, in particular at 233, where his Honour Justice Heron, applying Re Haggar, the Chancery judgment, said that:

On the death of the testator, the survivor is treated as holding the subject property on trust to apply it so as to carry out the provisions of the mutual wills.

And, secondly, in Canada it continues to be applied in the way that we contend for. And more recently in the case, on my learned friend's list of authorities, the discussion of its application in University of Manitoba v Sanderson Estate. The operation of the doctrine and in particular - - -

GUMMOW J: What is the citation?

MRS SHAW: The citation, your Honours, is (1998) 155 DLR (4^th ) 40. The relevant discussion commences at page 49. We submit that the court has set out in some detail the discussion of Dufour v Pereira, the Lord Chancellor's judgment, that appears in Hargraves' Juridical Arguments at page 52, and in particular at page 53 where the Lord Chancellor in that old case has said that the effect of the mutual wills agreement was that:

the property of both is put into a common fund, and every devise is the joint devise of both.

Again we say supporting our submission that there are interests of the parties to the agreement pursuant to the deed. Indeed, in Canada the approach is to apply the cases that are in our book of cases and Birmingham v Renfrew in so far as a constructive trust is said to arise at the death of the testator.

Your Honours, I was about to refer to Bigg v Queensland Trustees Ltd. I will not take the Court to that. I am sure the Court has had the opportunity to do that, but importantly, his Honour Justice McPherson at page 13 identifies the relief that is available if there is a breach but irrespective of whether there is a breach, we say that the interests and the obligations that arise are in equity, that equity would decrease specific performance of the promises under the wills which has the effect - - -

GUMMOW J: How? Is there any case of a decree of specific performance to execute a will?

MRS SHAW: Not to make a will. I accept that, your Honours, but - - -

GUMMOW J: Or to revoke a will?

MRS SHAW: Certainly not, but the specific performance is that the property or the subject matter of the contract is in equity to proceed in accordance with the terms of the will. That is the specific performance that is sought, not in relation to the making or non-revoking of the will itself. As his Honour said at page 13:

The result, then, is that those benefiting under the last will take their interests subject to a trust that gives effect to the agreement not to revoke.

If I could just refer it to your Honours without reading it, the case of Re Haggar [1930] 2 Ch 190, and in particular the discussion at page 195 as to the effect of the will.

GUMMOW J: Well, that is discussed in Birmingham, is not it?

MRS SHAW: It is.

GUMMOW J: It is probably enough for us.

MRS SHAW: Your Honours, can I turn then to the question of public policy considerations?

GLEESON CJ: One thing that appears to be common ground is that there are many ways in which the practical operation of the Inheritance Act can be defeated and what the difference is between this particular way, if it is effective, and any other way is not immediately clear.

MRS SHAW: Your Honour, we say that that supports our argument that to select this entrenched doctrine which gives rise - - -

KIRBY J: I think it was intended to support your argument. You seem to be very suspicious of little helpful things that come from the Bench.

MRS SHAW: I am sorry, your Honour.

KIRBY J: It may come of many years of experience. I suppose forensically the thing that is offensive here is that letter, that on the brink the testator wanted to know, "How can I get around this?", and the solicitor said, "Well, there are various ways to do it and this is the way to do it. That way you will get around the Act." That makes one upset when the Act is a beneficial Act designed to protect the vulnerable - daughters from rural fathers.

MRS SHAW: Yes. Your Honour, certainly that would be good evidence under the New South Wales legislation of an intention to avoid the legislation and that is why in New South Wales it would be extremely relevant. But unless the Act provides for that solicitor, or that expression of avoidance or evasion or whatever use one uses, it has the potential to affect the operation of the Act.

GLEESON CJ: This is an Act to protect women and children for reasons explained by Lord Simon at page 595 and 596, but the measure of protection that it gives them is inherently limited. It is limited to what is in the estate, and if you are right about what is in the estate, then all that has happened here is that a person without breaking any law has produced the result that what would have otherwise been in his estate was not in his estate.

MRS SHAW: Yes, and our submission is that there are many other ways he could have achieved the same result, whether he said he was doing it or not, within the ambit of the law that are not impliedly avoided by this Act.

KIRBY J: The argument to the contrary is that it is such a simple mechanism, such a simple scheme, that can be effected between parties who are supposed to be subject to the Act that it cannot have been what the legislature had in mind. It is true that sometimes slips are made by the legislature, but it would effectively mean that no one is subject to this Act because they can always make mutual wills and walk out of the Act and that that cannot be what the legislature meant, therefore, the Court should say you cannot do that because otherwise that renders the Act a futility.

MRS SHAW: Your Honour, there are many mechanisms by which testators could render the Act a futility. This one is not a simple one, that this one ensures that there are obligations and a divesting of the ability to deal with property freely by the surviving testator because the surviving testator is then unable to break the terms of the contract by otherwise disposing of the property and takes on the obligations to fulfil the agreement and, in addition, the testator is similarly limited.

So it is certainly simple - not necessarily simple but it is a well-known doctrine and it has been the subject of judicial discussion - In re Richardson is an example. In re Richardson Deceased was then discussed clearly in Schaefer's Case and it was a mutual wills doctrine which operated to exclude the operation of the Testator's Family Provisions Act in Tasmania, and that is 30 years ago, and although New South Wales has introduced legislation and although Queensland has introduced some legislation, no other State, despite the operation of the mutual wills doctrine in this area, has considered it necessary to make a contractual arrangement of that nature an exception to the estate that is available for disposition.

KIRBY J: It is a nice way to put it, "has considered it necessary". That implies that Parliament is sitting there cogitating all the time on the all the injustices it will fix up, but we all know that that is a myth and that is why courts have their own functions. I think you make a very powerful point about the legislation and Justice Callinan has shown me the Law Reform report, which would have been written by Mr Conacher, who was very knowledgeable about this area, so that I think that is a very strong argument, but it still leaves the Court with its function that is enlivened by the thought that this makes the Act laughable, that it makes it a voluntary Act - all you have to do is make mutual wills and you walk out of the Act. Now, that seems to be such a laughable result, and especially when the Act's purpose is to protect the vulnerable.

MRS SHAW: Your Honour, it is not necessarily the case that it is regarded as a simple Act and the simplicity of the Act is probably not as relevant from the point of view of public policy as purpose. What the courts, as your Honour has said, would be more sensitive to when this appears, if it is suggested that there was a deliberate purpose to avoid the operation of the Act, and the courts in cases such Lieberman v Morris have therefore made it plain that a covenant where there is an attempt to remove the jurisdiction of the court is not enforceable for those kinds of reasons.

Here, of course, the question before the Court is not purpose. The only issue is the effect of the agreement and that, of course, was made plain by my learned friend, Mr Tilmouth QC, and appears in his Honour's Justice Lander's judgment, but the only question is the effect of the agreement. We say that it would be a legislative act to select this particular estate planning tool and strike it down as compared to all of the other estate planning tools that there might be, including inter vivos transactions, when a simple measure of avoiding any claim would be to, the day before death, transfer all the estate to the son on that day. That then has to get back to purpose because otherwise, firstly, it would be legislative, we would say the remedy is with the legislature if a remedy is needed, and secondly, as the New South Wales Act demonstrates a most complex, we would say with respect, approach to all of the possibilities and qualifications for the operation of aid whether property comes within notional estate or it does not.

GLEESON CJ: I do not think anyone has ever suggested that the New South Wales Act is the perfection of human wisdom. It produces its own anomalies.

MRS SHAW: I realise that, your Honour, but what I am putting to the Court is that the legislature, who no doubt will have competing views in the community about interfering with the freedom of testamentary disposition under the Wills Act and other social issues that might bear upon this question, might consider that there are a number of exceptions to when mutual wills agreements, if they are to be struck down, should or should not be struck down - whether it is a time frame, whether it is the amount of property involved, whether or not there is some other provision.

KIRBY J: The question is, do we respect the Parliament of South Australia by saying, if they want to, they can follow the New South Wales Act, or do we respect it by saying that it cannot have been their purpose that you could just laugh at this Act and walk your way out of it in every case just by the simple expedient of mutual wills.

MRS SHAW: Your Honour, we say that that they are not proper alternatives, with respect, because in the South Australian case of In Re Richardson Deceased (1918) SALR, in the first application that was made after the Act was introduced, the South Australian Full Court - - -

KIRBY J: If you are going to tell me that it was called to notice and nothing has been done since 1918 - - -

MRS SHAW: No, no, I was not going to tell you that. What I was going to tell you - - -

KIRBY J: I would not be surprised even if that was so because the members of Parliament have so many things on their mind that consideration of a statute like this is often put on the backburner. After all, what is a century between citizens?

MRS SHAW: Your Honour, what is made clear In re Richardson at page 40 of the judgment is that the Act only addresses - - -

KIRBY J: Do we have this judgment, In re Richardson?

MRS SHAW: It is on the list of authorities.

KIRBY J: We do not have it in Court. It might be enough, as this is only my question, if you send in a note about it.

MRS SHAW: I will. Your Honour, the main point is that their Honours make it plain in that case that the Act is not intended to refer to any transmission or disposition of property during the lifetime of the testator so that any - - -

GLEESON CJ: Nobody doubts that, Ms Shaw. Nothing can stop people giving their money away and arrangements to avoid the operation of Inheritance Acts, like arrangements to avoid the operation of Tax Acts, flourish when free from the prophylactic effect of gift duty.

MRS SHAW: Yes.

KIRBY J: But we all know that human beings (a) think they will live forever and (b) do not like to part with their property unto death and this is a case where they can do that. They can live in their illusion that they will live forever and they can hang onto their property and not give it away, but they can avoid this Act by a simple contract, and that seems a curious result for this statute.

MRS SHAW: Your Honour, we say that if it were the only way to avoid the Act by some simplistic measure, then there may be force in what your Honour says, but the Act has limited the estate in respect of which of orders can be made to only that estate which was at the disposal of the testator at his death. So, therefore, any contractual arrangements entered into during life which give rise to binding agreements or any transaction which is perfected on death but does not necessarily fall into the estate, such as survivorship and so on, is not caught by the legislation in the way that the Parliament has seen fit to do it.

Your Honours, indeed, to give an example of when Parliament has turned its mind to a contract to leave property, there was an amendment to the Wills Act - and this is in the context of whether or not Parliament is or is not addressing issues from time to time - there was an amendment to the Wills Act - there have been two amendments to the Inheritance (Family Provision) Act since it was enacted, one enlarging the persons who might claim to include brothers and sisters and the other taking into the account the introduction of the Family Relationships Act in 1975 which gave rise to the ability of persons who lived in de facto relationships to have calls on property that became to be jointly acquired.

The Wills Act itself was amended in section 20A to specifically provide that if, after the making of a will, the testator's marriage is terminated, whereas ordinarily that would lead to the automatic revocation of a will, the section introduced in 1996 has an exception to what was a common law rule in relation to:

a disposition or grant of a power in accordance with a contract between the testator and the former spouse under which the testator is or was bound to dispose of property by will in a particular way -

So there is the Parliament specifically considering under the Wills Act the agreements between spouses to dispose of property by will in a particular way.

KIRBY J: But that cuts both ways. One could say where Parliament intends to deal with that, it does so expressly and has done so here.

MRS SHAW: Your Honours, only that plainly the Wills Act, if you like, is the counterpart of the Inheritance (Family Provision) Act in that under the Wills Act it provides for the privilege of testamentary disposition whereas the Inheritance (Family Provision) Act essentially provides for an intrusion into that and an adjustment.

GLEESON CJ: As I understand the way this point was argued in the Supreme Court of South Australia, it was common ground that its subjective purpose was not relevant and that it was the effect that was relevant.

MRS SHAW: Yes, that is right.

GLEESON CJ: I am not exactly sure what that distinction amounts to, but how would you apply that distinction to Schaefer? Was the effect of the provision in Schaefer to defeat the operation of the Act?

MRS SHAW: In my submission it was and it is the effect of any transaction inter vivos or any contractual arrangement that gives rise to a debtor/creditor relationship and a donatio mortis causa has that effect.

Your Honours, just one matter that relates to the way in which the Administration and Probate Act works and a matter raised by your Honour Justice Gummow - - -

GLEESON CJ: How long do you expect to require to complete your submissions?

MRS SHAW: I think I have nearly finished, your Honours. Just in response to that query about the operation of the Act, as I understand it, in our submission, the common law governs the passing of the property to the executor of the will and the section in the Administration and Probate Act - - -

GUMMOW J: Section 45, I think.

MRS SHAW: - - - section 45 - relates to where there is an intestacy, then the vesting is in the public trustee until an administrator is appointed. Section 46 provides the vesting in the executor subject to any mortgage, trust or equity, as if it where a chattel will, and so 46 is in relation to real estate. So that is the way in which the property of a testator passes after his death.

GUMMOW J: Yes, thank you.

MRS SHAW: And chattels continue to pass in common law, so there is no need to get probate to pass property but, of course, invariably it occurs when it is necessary to achieve the administration to prove the will.

Your Honours, I have not addressed the judgment of the Full Court or Justice Lander or, indeed, of - - -

KIRBY J: You do that in your written submissions.

MRS SHAW: Yes, I do and I rely on my written submissions and I rely on the passages from Wilkinson v Osborne in relation to public policy that we have set out in our written submissions and we ask that the appeal be dismissed.

GLEESON CJ: Thank you, we will adjourn until 2.15 pm.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

GLEESON CJ: Yes, Mr Tilmouth.

MR TILMOUTH: If the Court pleases, just a few matters if I may. The first, your Honours, is we put some materials together as a result of various requests made yesterday from various of your Honours and if I could just hand them up, a bundle of materials. Thank you, your Honours have them. Your Honours, there are copies here in item 1 of the New South Wales Act, item 2 is the Queensland Act and item 5 is an extract from a book concerning the United Kingdom Act. We cannot be absolutely sure that that is up to date but it was its position as of 1993.

Your Honours, page 23, item 3, are sections 45 and 46 of the Administration and Probate Act which was dealt with by my learned friend towards the end of her submissions and item 4 gives some of the history, the most extensive we could find of the equivalent legislation to that under review by the Court here, going right back to its early days in introduction in New Zealand and could I mention, your Honours, that some of that history is sketched by Justice Rich in Lieberman v Morris 69 CLR 85.

Your Honours, item 6 at page 36 which was added this morning is section 121A of the Administration and Probate Act, which is the section which contains the statutory requirement for the executor to file the statement of assets and liabilities.

GUMMOW J: I am sorry, what section was that?

MR TILMOUTH: Section 121A, it is the very last page, your Honour, and we put that in because it gives rise to the pleading which your Honour Justice Hayne pointed to this morning in the appeal book at page 15, paragraph 78 of the original statement of claim. That pleading and the properties listed therein as it suggests is based upon the declaration of the first respondent in his capacity of executor filed in pursuance of section 121A. It does not exactly say that but that is what the pleading is based on and it is that pleading, of course, which both courts below proceeded on and the assets in that case are something over $1.8 million as there set out, but that is how that pleading arose, may it please the Court.

Now, your Honours, the other point we wish to make in the context of the Administration and Probate Act is this. The estate as of the death, whatever it was, if any, passes to the executor from the will not on the grant of probate, of course. However, in this case, perhaps I should have emphasised more, the will, of course, was subject to the wife surviving for a period of 30 days. Now, of course, that has happened, but the estate, whatever it may have been, never passed to the wife until the expiration of the 30-day period. That must mean, in our respectful submission, that before any question of a trust could arise in any realistic sense in favour of the first respondent, in his personal rather than executive capacity, could only really arise after the precondition of the bequest was satisfied, namely, the effluxion of the 30 days under the will.

However, what the husband had left on his death must have been something and it must have been vested, in our submission, as an estate within the meaning of the Act under section 7, at least for that period. If that is right, there is a window, as it were, of a maximum of 30 days in which the estate, before any question of a trust practically arose, in which the estate fell into the hands of the executor and if that be right, in our submission, then an order can clearly attach under the Act.

The other point to make, if the Court pleases, in relation to that is partly associated with the question of section 10 and the effect of the order of the court being in the nature of a codicil, or being effective as a codicil is, of course, that a codicil made immediately before death necessarily happens in a point of time antecedent to a trust arising on any view of the facts.

In our submission, if the Court pleases, some further support is to be gained from Easterbrook v Young [1977] HCA 16; 136 CLR 308, referred to by my learned friend in her submissions, and could I quickly take your Honours to it, if I may, because it deals expressly with this codicil provision which was equivalent to our provision, section 10, for relevant purposes. May it please the Court, can I read briefly from right at the bottom of page 315, the last four lines, which is very important in our submission:

Because the court's order has effect as a codicil, the property out of which provision may be ordered includes property which, but for the order, would have been beneficially owned either wholly or partly by donees under the will or next of kin under an intestacy.

Of course, that begs one question, the contract question, but it answers another, in my respectful submission, because precisely as the Court there said, the power under section 10 takes effect even though others might have a beneficial entitlement to the property concerned.

The other passage could I take your Honours to is at page 317 in Easterbrook and it is the third line, if I may, that one sentence there and it is this:

There is nothing in the language or policy of the Act to suggest that the change in the capacity in which the personal representative holds assets he has received on the grant of probate or letters of administration constitutes either a removal of those assets from the power of the court under s. 3 or a relevant distribution of the estate.

I acknowledge, of course, that is not directly in point, but the point here is that the first respondent, in our submission, received the property initially as executor. He may well have an entitlement to it in a different capacity under the trust when it arose, but, in my submission, it still does not affect the entitlement, the capacity of the court, because it has effect as a codicil from operating over the estate within the meaning of the Act.

Those are the matters in reply, if the Court pleases.

GLEESON CJ: Thank you, Mr Tilmouth. We will reserve our decision in this matter and we will adjourn for a short time to reconstitute.

AT 2.24 PM THE MATTERS WERE ADJOURNED