Bagot's Executor and Trustee Co Ltd v Minda Home Inc, Julia Farr Centre Inc, Ruth Loveday Morcom, Doris Lorna Pointon, Bryan Leonard Canty, Executor Trustee Australia Ltd and IOOF Australia Trustees Ltd No. Scgrg

[1994] SASC 4630

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA MILLHOUSE J

CWDS
Wills, probate and letters of administration - construction and effect of testamentary dispositions - Wills - whether residues in each estate to be distributed to residuary beneficiaries under each Will or whether distributed under the laws of intestacy following the death of intellectually disabled son, a beneficiary under each will - HELD: matter of constructions of each will on "the armchair principle" - intention of each testator - in each a discretionary trust for the advancement of the son during his lifetime rather than a life interest - Accordingly distribution of residual to residuary beneficiaries. Law of Property Act (SA) s.60. In re Berkeley (1968) 1 Ch 744, discussed. In re Sanderson's Trust (1857) 69 ER 1206; In re Osoba (dec'd)
(1979) 1 WLR 247; Randfield v Randfield (1860) ER 414 and In re Trusts of the Abbott Fund, Smith in Abbott (1900) 2 Ch 326, considered.

HRNG ADELAIDE, 14-15 June 1994 #DATE 24:6:1994

Counsel for plaintiff:                Mr N Morcombe QC and
  Mr C McCarthy

Solicitors for plaintiff:             Nancarrow and Jew

Counsel for Minda Home Inc:         Mr H Williams QC and
  Ms M Perry
Solicitors for Minda Home Inc         Kelly and Co

Counsel for all other defendants
except Morcom and Pointon:            Mr H Williams QC and
  Ms M Perry

Solicitors for all other defendants
except Morcom and Pointon:            Lempriere Abbott Mcleod

Counsel for defendants
Morcom and Pointon:                 Mr R Lawson QC and
  Mr M Frayne

Solicitors for defendants
Morcom and Pointon:                 Carpenter and Associates

Counsel for third party IOOF:         Mr S Roder

Solicitors for third party IOOF:     Treloar and Treloar

ORDER
Answer each of the questions f. and g. - NO.

JUDGE1 MILLHOUSE J Roderick Waring Wright was born on 31 July 1909. He died on 13 October 1992, intestate. Roderick's father, Norman Waring Wright, made his last will on 20 March and died on 11 May 1951. Norman's widow (and Roderick's mother) Gertrude Wright made her last will on 7 May and died on 7 August 1952. Each parent by will made provision for Roderick. The question presently at issue in this action is whether certain monies should be distributed to the residuary legatees in each of the estates of Norman and of Gertrude or whether they should be distributed to those entitled under Roderick's intestacy.

2. I have only the vaguest idea of how much money is at stake: "half a million dollars" and "$600 000" have been mentioned. That is all I know. Apart from what I can glean from the wills and what I have heard from counsel and read in the other exhibits, I know nothing about the assets of the estates nor their administration nor anything else - nor need I know for the time being at least.

3. On 19 August 1993, the plaintiff, the trustee of each of the estates of Norman and of Gertrude, took out a summons seeking the determination of two questions. Later a Master added two more questions. During the hearing Mr H C Williams QC, with Miss Melissa Perry, for the first two defendants, residuary beneficiaries of Norman's estate and for the trustees of two of the residuary beneficiaries of Gertrude's estate, drafted yet two more questions. He persuaded all other partiesto consent (subject to liberty to speak to minutes of any orders) to my answering them first and not yet going on to answer the other four questions. The answers to the new questions may be only the first step in determining the issues - but, hopefully, they will be a sufficient guide to the parties so that they may resolve their differences. The questions are:-
    "f. In the Estate of Norman Waring Wright dec'd.
    Whether upon the true construction of the will, Roderick
    Waring Wright was beneficially entitled during his life
    to the whole of the income of the residuary estate of
    the deceased from and after the death of the widow of
    the deceased and irrespective of the exercise by the
    Trustees of their powers as expressed in the will.

g. In the Estate of Gertrude Wright dec'd. Whether
    upon the true construction of the will, Roderick Waring
    Wright was beneficially entitled during his life to the
    whole of the income of the residuary estate of the
    deceased irrespective of the exercise by the Trustee of
    its powers as expressed in the will.

4. In clause 4 of his will, Norman describes his son Roderick as "my very dear but mentally abnormal son".

5. During the hearing Mr Williams tendered parts of some of the documents in Supreme Court file 493/1952, an application made on 22 April 1952 by Gertrude pursuant to The Aged and Infirm Persons Property Act, for a guardianship order in relation to Roderick. (An order was made on 6 June 1952.) In her affidavit in support of the application, Gertrude deposed that Roderick was "wholly unable to manage his affairs". There was other information in these exhibits which confirmed the impression I already had that Roderick had been mentally subnormal since birth, had always been quite incapable of looking after himself in any way and was likely to remain (and did remain) so until his death. There is no need for me to refer to the exhibits again.

6. I must keep steadily in mind the family background in construing these wills and answering the two questions.

7. I may do that because of the "armchair principle". As Theobald (15th edition at p.216) puts it:
    " Under the armchair principle, evidence of the
    circumstances surrounding the testator at the date of
    his will is admissible as an aid in the construction of
    the will. 'You may place yourself, so to speak, in (the
    testator's) arm-chair, and consider the circumstances by
    which he was surrounded when he made his will to assist
    you in arriving at his intention." (per James LJ in
Boyes v. Cook, (1880), 14 ChD 53 at 56). "The
    justification for the armchair principle is that the
    court infers that the testator had his own surrounding
    circumstances in mind when he made his will and used the
    words in his will with reference to those circumstances.

8. To quote Blackburn J in Allgood v. Blake ((1873), LR 8 Ex 160 at 162):
    'The general rule is that, in construing a will, the
    Court is entitled to put itself in the position of the
    testator, and to consider all material facts and
    circumstances known to the testator with reference to
    which he is to be taken to have used the words in the
    will, and then to declare what is the intention
    evidenced by the words used with reference to those
    facts and circumstances which were (or ought to have
    been) in the mind of the testator when he used those
    words ... the meaning of words varies according to the
    circumstances of and concerning which they are used.'".

9. The learned author immediately goes on to qualify the principle:-
    " The incapable meaning rule. However, extrinsic
    evidence can never make words in a will bear a meaning
    which on the face of the will they are incapable of
    bearing. As already explained, a testator can make
    'black' mean 'white' if he makes the dictionary
    sufficiently clear in his will, but extrinsic evidence
    alone can never make 'black' mean 'white'."

10. I may use the armchair principle in this case. As Mr Williams put it, Roderick's parents would have been appalled at the thought of his having any control over his own affairs, of his being able, at least before the guardianship order was made, of going to his trustees and demanding his money. I accept entirely what Mr Williams said.

11. Each of the wills has been drawn (after providing for legacies and for distribution of residue) with a view to making sure that Roderick was looked after by others after his parents' deaths.

12. I have already recited the two questions I have first to answer. The point of each is whether, under each or either will, Roderick was given an absolute life interest in the residue or whether each merely set aside funds from which the trustees made, in their absolute discretion, payments for his benefit. Dependant on which view is taken the monies left will be distributed either pursuant to the rules of intestacy to Roderick's heirs or pursuant to the terms of each will, to the residuary legatees therein named. I must therefore go to the significant provisions of each will.

13. I begin with Norman's.
    " In the appointment of trustees the testator said
    (Cl.1), 'it being my express intention that there shall
    be always a medical practitioner as trustee of this my
    Will,......'
    Cl.4. I GIVE DEVISE AND BEQUEATH (etc)     ... UPON
    TRUST to stand possessed of same upon the following
    trusts that is to say:- FIRSTLY To permit my Wife during
    her life and after her death my son for his life to have
    the use occupation and enjoyment of my ...
    dwelling-house, ... (etc) ... THIRDLY During the joint
    lives of my widow and my very dear but mentally
    subnormal son RODERICK WARING WRIGHT to hold the income
    produced from the whole of the capital of my residuary
    estate in trust for ... division equally between them,
    the share of my said son RODERICK to be handed to his
    Mother for his care, maintenance and benefit for such
    period as his Mother shall be considered by my medical
    trustee for the time being in fit and proper state and
    health to properly care for him, but thereafter to be
    administered by my trustee ... FIFTHLY That should my
    son Roderick survive me and my said Wife then I DIRECT
    my trustees to hold the income of the capital of my
    residuary estate UPON TRUST to be used by my trustees
    for the use and benefit of my said son, my said son to
    be placed under the care and attention of some patient
    competent humane and conscientious person with some
    medical or nursing training, under the care and
    supervision of all my trustees but particularly under
    the constant observation and care of my medical trustee
    as hereinafter provided. It is specifically directed
    that my said son is not to be placed in any home or
    institution, but my trustees are directed to see that he
    has the individual and personal care of some competent
    and trustworthy person at such remuneration as my
    trustees shall deem necessary ...

I GRANT to my Trustees the following powers to be
    exercised by them in their absolute discretion without
    being liable for any loss or diminution in my estate
    occasioned through such exercise:- ...
    (3) Power that should my widow become incapacitated in
    health and unable in the opinion of my medical trustee
    to properly care for my said son Roderick, then my
    trustees shall care for him in the same way as is
    provided herein upon the death of my widow from and out
    of his share of the income of my estate
    (4) Power that should in any one year or more in the
    administration of my estate there be a surplus of the
    income ... allocated for the use and benefit of my son
    Roderick unexpended, that such surplus shall be
    accumulated and invested in the same manner as the
    capital of my estate with the intention that such
    accumulation shall be a fund for the use of my said son
    Roderick as my trustees shall think fit for his health
    care and nurture or for his comfort recreation
    preferment or benefit, with liberty for my trustees to
    resort to same in any subsequent years ...
    (5) Power should the income from all sources fall below
    the sum of 20 per week nett to resort to capital for
    such deficiency if so needed by the person entitled to
    the income for the time being, and to apply same at any
    time to the use of the person entitled to the income for
    the time being under this my Will
    (6) Power to employ such skilled advice, professional
    attendances and services and to do such acts deeds and
    things with and out of the income allocated to them for
    use in relation to my said son Roderick as they shall in
    their discretion deem fit and to ... remunerate such
    person or persons from and out of the income ...
    allocated. I DIRECT that my trustees shall if it be so
    deemed ... advisable make application to the Supreme
    Court that they be ... appointed managers of the estate
    of my said son and that my said son be declared a
    Protected Person under 'The Aged and Infirm Persons
    Act', it being my express desire that they administer
    his affairs and not the Public Trustee of the State for
    the reason of the individual care and attention
    necessitated by my said son ... I DIRECT such medical
    trustee for the time being of this my Will to cover
    general personal supervision over the welfare and well
    being of my son Roderick including ... regular visits to
    him in intervals of at least one in every ten days and
    special medical attention to him in case of physical
    sickness.....".

14. I now come to Gertrude's will.
    "5. I GIVE DEVISE AND BEQUEATH all the residue of my
    real and personal estate ... FIRSTLY To hold the income
    of my residuary estate UPON TRUST to be used by my
    Trustee for the use and benefit of my son RODERICK
    WARING WRIGHT during his life, my said son to be placed
    under the care and attention of some patient competent
    humane and conscientious person or persons with some
    medical or nursing training under the care and attention
    and supervision of my Trustee. It is specifically
    directed that my said son is not to be placed in any
    Home or Institution, but my Trustee is directed to see
    that he has the individual and personal care of some
    competent and trustworthy person or persons at such
    remuneration as my Trustee shall deem necessary...
    SECONDLY FROM AND AFTER the death of my said son UPON
    TRUST both as to the capital as the Income thereof to
    divide ...
    6. WHEREAS my late husband NORMAN WARING WRIGHT by the
    terms of his last Will made similar provisions for the
    care of our son the said Roderick Waring Wright as are
    contained in this my Will NOW I DIRECT my Trustee to
    co-operate in every way with the Trustees of the said
    Will of my said late husband (hereinafter referred to as
    'my husband's Trustees') and not to interfere with any
    arrangements made by my husband's Trustees for the care
    of our said son unless in my Trustees' opinion such
    arrangements are not in accordance with the tenor of the
    provisions of this my Will and the said Will of my said
    late husband ...
    7. I EXPRESSLY DIRECT that my Trustee may use and apply
    the whole or any part of the income of my residuary
    estate for the Trusts hereinbefore set out for the
    benefit of my said son Roderick Waring Wright
    notwithstanding that there is any other fund or funds
    available for the purposes of the said Trusts ...
    8. I GRANT to my Trustee the following powers to be
    exercised by them in their absolute discretion without
    their being liable for any loss or diminution in my
    estate occasioned through such exercise ...
    (3) Power that should in any one year or more in the
    administration of my estate there be a surplus of the
    income allocated for the use and benefit of my son the
    said Roderick Waring Wright unexpended that such surplus
    shall be accumulated and invested in the same ... manner
    as the capital of my residuary estate with the intention
    that such accumulation shall be a fund for the use of my
    said son as my Trustee shall think fit for his health
    care and nurture or for his comfort recreation
    preferment or benefit with liberty for my Trustee to
    resort to the same in any subsequent years ...
    (5) Power to employ such skilled advice, professional
    attendances and services and to do such acts deeds and
    things with and out of the income allocated to them for
    use in relation to my said son Roderick Waring Wright as
    they shall in their discretion deem fit and to
    remunerate such person or persons from and out of the
    income allocated and if such income shall not be
    sufficient then with power to resort to the capital of
    my residuary estate as provided in the immediately
    preceding sub-paragraph of this my Will. I DIRECT that
    my Trustee shall if it be deemed advisable make
    application to the Supreme Court that they be appointed
    manager of the estate of my said son and that my said
    son be declared a Protected person under "The Aged and
    Infirm Persons Act", it being my express desire that
    they administer his affairs and not the Public Trustee
    of the State for the reason of the individual care and
    attention necessitated by my said son."

15. Seven counsel appeared. Mr Neville Morcombe QC with Mr C D McCarthy, for the trustee of each estate helpfully set the scene but did not address argument. I have already mentioned Mr Williams and Miss Perry. Mr Robert Lawson QC with Mr Martin Frayne appeared for the third and fourth defendants, residuary legatees of Gertrude's estate and for beneficiaries of another deceased beneficiary of that estate. Mr J S Roder appeared for IOOF Australia Trustee Limited, the trustee of Roderick's intestate estate.

16. I heard argument from Mr Williams and Mr Lawson substantially to the same effect (Mr Lawson was directly concerned with Gertrude's estate but generally supported Mr William's arguments) and to the contrary, Mr Roder.

17. All counsel accepted that the words in each will - "UPON TRUST to be used by my trustee for the use and benefit of my said son" (Norman) and "UPON TRUST to be used by my Trustee for the use and benefit of my son RODERICK WARING WRIGHT during his life, ........" (Gertrude) - that these words on the face of them created an absolute life interest. Mr Williams and Mr Lawson argued that the subsequent provisions of each will qualified the words, that the scheme of each will was to set up a discretionary trust for Roderick's advancement. Mr Roder on the other hand argued ably that the subsequent provisions merely provided the machinery for the administration of Roderick's absolute life interest, that there were no trusts with discretionary powers of advancement. My job, byconstruing the wills, is to decide which argument be correct - on the decision depends whether the moneys left - not all the moneys set aside were needed for Roderick's maintenance, a substantial amount has "built up", to use Mr Williams' term - are distributed pursuant to the terms of the wills or whether pursuant to Roderick's intestacy.

18. All counsel acknowledged the principle of law which guides me. Garrow and Alston's "Law of Wills and Administration" fifth edition, paragraph 42.10, (p.497) sets it out in this way:-
    " If an absolute gift is followed by directions as to
    the use of the property or the disposal of it which are
    unnecessary to or inconsistent with a gift of an
    absolute interest, the absolute interest will stand
    unless there is anything in the context to limit that
interest: Public Trustee v Edmond (1912) 32 NZLR 202; 15
    GLR 62; Randerson v Commissioner of Stamps (1914) 33
    NZLR 910; 16 GLR 497; In re Tiemi Wirihana, Peti Toka v
Foster (1920) NZLR 427, and In re Milson (1926) GLR 332.
See also In re McKay, McKay v McKay (1902) 22 NZLR 121;
    5 GLR 161 (absolute devise subject to restraint on
alienation), and In re Bowyer (1914) 33 NZLR 1039. In
In re Rathbone (1922) NZLR 391; (1922) GLR 99, absolute
    bequests were followed by a direction that the shares
    should be settled 'subject to such usual provisions as
    my trustees shall approve'. On the terms of the will it
    was held that the beneficiaries took absolutely, the
judgment following Laing v Laing (1839) 10 Sim 315; 59
    ER 636 (stock to be paid transferred or settled as the
    trustees and executors should think proper), and Magrath
    v Morehead (1871) 12 Eq 491. In re Rathbone (supra) was
    applied in In re Logan, Perpetual Trustees Estate and

    Agency Co of New Zealand v Cooper (1935) NZLR s73. If
    there are clear express directions for settlement,
    clearly set out, of course they will be effective and
    may either entirely exclude the absolute interest or
    limit it according to the circumstances. ...
    An absolute gift in the first instance has been held to
    be cut down by later provisions or considered on the
    terms of the will as a whole not to be intended to be an
    absolute gift......"

19. To much the same effect is Theobald at p.530:-
    " Gift of whole fund. 'If a testator has given the
    whole of a fund, whether of capital or income, to a
    beneficiary, whether directly or through the medium of a
    trustee, he is regarded, in the absence of any contrary
    indication, as having manifested an intention to benefit
    that person to the full extent of the subject-matter,
    notwithstanding that he may have expressly stated that
    the gift is made for a particular purpose, which may
    prove to be impossible of performance or which may not
    exhaust the subject matter.' The gift of the whole fund
    is reconciled with the statement of the purpose by
    treating the reference to the purpose as merely a
    statement of the testator's motive in making the gift.
    ...

Gift of amount required for purpose. This principle
    of construction does not apply if the testator has not
    given the whole of the fund but instead has given so
    much of the fund as will suffice, or be required, to
    achieve the purpose, or as a trustee or anyone else
    should determine. Such a gift does not carry the
    surplus capital or income."

20. I should look at each will as a whole and in doing so bear in mind the family background. Doing so the overwhelming impression I have is that the parents each intended to set up a discretionary trust for Roderick's advancement. This is not the case of gifts with a super added purpose which may be disregarded and the gifts accordingly are absolute.

21. It is a matter of impression: I have set out the parts of the wills which have led me to form that impression: I could (but it would be pointless) refer to the separate points which have lead to the impression: the inferences are irresistible and are obvious on the face of the words. Each will is a scheme to look after Roderick for the rest of his life when his parents are no longer alive and able to do so. There was no absolute life interest but discretionary trusts in Roderick's favour.

22. Mr Roder tried valiantly to argue to the contrary but, with respect to him, the interpretation for which he had to argue is necessarily strained.

23. Although I have now given my conclusion there are several other matters which I should mention.

24. The wills are not mirror images as is seen from the extracts I have set out.

25. The schemes of the wills may be similar but the wording is not. That is to be expected because Norman had already died before Gertrude made her will. She referred to his will in hers and I may construe Gertrude's will in the light of Norman's but not vice versa.

26. Mr Williams and Mr Lawson conceded that it was easier to argue for their point of view in the case of Gertrude's will and Mr Roder acknowledged that Norman's will was easier for him. All counsel said that I need not necessarily give the same answer to each question.

27. A quite significant difference between the wills lies in the use, in clause 7 of Gertrude's will, of the phrase "the whole or any part of the income". This seems to contemplate that only a part of the income, according to the trustee's discretion, need be used. There is no corresponding provision in Norman's will.

28. The phrase merely strengthens the view I have taken in construing Norman's will, standing alone.

29. Another matter is cl.6 (4) of Norman's will, cl. 8 (3) in Gertrude's, apparently a power to accumulate. Are these provisions void because of s.60 of the Law of Property Act (the old Thellusson Act)? If so, what is the consequence for these estates? I doubt if the questions are relevant at present to my answers to the questions but they may be relevant later: my view may be in some way helpful to the parties.

30. I doubt if there were accumulation. Mr Williams referred me to In re Berkeley (1968) 1 Ch 744 at 774 (per Harman LJ):- " .......in so far as the trustees decide in the exercise of their discretion that surplus income of residue ought to be retained in hand for the protection of the annuitants they are entitled so to retain it, and if they do, will not offend against the Thellusson Act,........". The other members of the Court of Appeal were of the same opinion. The position is the same here. As Mr Williams put it, income remained income: it all went into the same pot, available for use later for Roderick should that be necessary.

31. Finally, I should say that every will is unique and to be construed according to its own terms, guided by the appropriate principles of law. Each of the these wills is unique. For that reason I have not referred to all the authorities cited: although the principles are common, the terms of the wills are not and each decision turns on different terms. The cases I have in mind are: In re Sanderson's Trust (1857) 69 ER 1206 In re Osoba, (dec'd) (1979) 1 WLR 247 at 251-253 Randfield v Randfield (1860) 11 ER 414 at 418 In re Trusts of the Abbott Fund, Smith v Abbott (1900) 2 Ch 326. I have read and considered them and taken into account, I hope, the principles upon which they were decided.

32. I answer each of the questions f. and g. - NO.