The Costly Pursuit of the Meaning of the Terms of a Will
By Natalie Lewis, Lawyer.
The recent case of Greenham v Greenham  VSC 749 involved the estate of the late Ethel Elizabeth Greenham who died in 2017 survived by her adult children Alan and Jennifer. The estate included a 310-acre property at Pental Island on the Murray River which was used to operate a farm and caravan park business. Alan and his wife Mary lived on the property and operated the farm and caravan park business.
Under her Will dated 9 December 2003, the deceased specifically gifted her livestock, plant and equipment, shares in the caravan park business and her real estate interest in the Pental Island property to Alan, and left the rest and residue of her estate (‘the residuary estate’), which included two other properties, to Jennifer. Jennifer lived most of her adult life in Melbourne and had little involvement in the farm and caravan park business except for a short period following the death of the deceased’s husband in 1987. Alan, on the other hand, had worked continuously on the property since 1997.
Water supply to the Pental Island property was sourced exclusively from rainfall and the Murray River which abutted the property. There was no access to town water.
At the time the Will was made, property rights to water abutting land were considered common law rights which were ‘appurtenant to’ the land. Upon an owner disposing of their property, whether by transfer of land or by a devise under a Will, such rights would be assigned to the transferee or devisee.
However, in 2007 the Victorian government introduced a statutory scheme, known colloquially as ‘unbundling’, the effect of which was that property rights to water abutting land were capable of being disposed of independently of the assignment of land. As a result of this scheme, the deceased became the owner of three valuable water shares issued in relation to the Murray River Water system.
Following the deceased’s death, Jennifer issued proceedings in the Supreme Court of Victoria seeking a declaration that the water shares formed part of the deceased’s residuary estate to which she was solely entitled. Alan disputed this claiming that the water shares were inextricably linked with the gift to him of the Pental Island property.
The gift of the Pental Island property (‘the devise’) was set out under clause 4(d) of the Will and provided as follows:
I GIVE to my Son, the said ALAN LINDSAY GREENHAM for his sole use and benefit absolutely my interest in:
my real estate at Pental Island being Allotment 7 in the Parish of Pental Island County of Tatchera and being the land comprised in Crown Grant Volume 9429 Folio 754.
Justice Moore, before whom the matter was heard, agreed with Alan and dismissed the proceedings. He accepted that the statutory scheme of unbundling created uncertainty and ambiguity in the meaning of clause 4(d) of the Will, necessitating an enquiry into, and application of, the common law and statutory rules of Will construction. One of the fundamental rules of construction being that the intention of the testator must be ascertained from the terms of the Will construed in light of the circumstances and factual matrix in existence at the time the Will was made.
The factual matrix in existence at the time the Will was made
As already noted, the Will was made four years before unbundling was introduced. His Honour accepted the evidence of a local retired lawyer who deposed that prior to the changes in 2007, it was notorious that testamentary gifts of farming property abutting the Murray River implicitly included the proprietary right to use and access the river’s water. This did not need to be explicitly stated in the Will.
Further, looking at the actual terms of the Will, his Honour found that by expressly giving the livestock, plant and equipment, shares in the caravan park business and the real estate interest in the Pental Island property to Alan, the deceased intended him to have the ‘the whole kit and caboodle’. It would be incongruous that she would intend to leave this entire package of rights and interests which went with the Pental Island property and its business operations, to him, but give the water shares, which were integral to the operation of those businesses, to a third party.
Upon reading this case, it is clear that his Honour’s decision is just and logical in all the circumstances. However, the introduction of the system of unbundling in 2007 threw a spanner in the works in terms of the construction of the Will. Jennifer was able to lead a prima facie case against the more natural and logical import of the terms of the Will.
One of the ways she did this was by invoking section 34 of the Wills Act 1997 (Vic) (‘the Wills Act’) which provides that unless a contrary intention appears in the Will or elsewhere, a Will takes effect with respect to the disposal of property as if it had been executed immediately before the testator died. For Jennifer this meant that the 2007 changes gave rise to separate personal proprietary interests in the water shares. As the deceased had not specifically dealt with the water shares under the terms of her Will, they formed part of her residuary estate which was gifted to Jennifer.
Justice Moore was able to displace the presumption under section 34 by finding a contrary intention in the actual terms of the Will. He examined a number of cases involving the application of section 34 of the Wills Act and found authority for the proposition that if a gift of property is specific and worded particularly, as was the devise of Pental Island under clause 4(d) of the Will, it followed that the deceased intended the Will to take effect as at the date it was executed. At the date the deceased executed her Will, property rights to access and use Murray River water abutting the land attached to ownership of the land, and this was the setting in which the deceased’s testamentary dispositions were to be read.
Even though Jennifer’s application was dismissed, the case involved the costly exposition and application of technical rules of construction and evidence.
Some if not most of the costs are likely to come out of the estate. This could have been avoided had the deceased reviewed her Will at least once since she made it in 2003. A visit to a local solicitor conversant with the 2007 changes would have enabled her to update her Will to explicitly add the water shares to the gifts to Alan, making her intention unequivocal.
Clients are reminded to review their Wills and estate plans every three to five years not only to deal with potential changes in their personal and financial circumstances, but to ensure contingencies of the type which occurred in this case can be properly dealt with.
If you have any questions about this article or about your estate planning generally, please feel free to contact our Wills and Estates team on (03) 8540 0200