Banks v RSPCA and the Lost Dogs Home: IMO the estate of Carl Laurie Sutton (deceased)
[2019] VSC 451
•7 August 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S ECI 2019 00512
IN THE MATTER of the Will and Estate of CARL LAURIE SUTTON, deceased
- and -
IN THE MATTER of Order 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic)
BETWEEN:
| CLAUDIA CONSTANCE BANKS | Plaintiff |
| v | |
| ROYAL SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS IN VICTORIA | First Defendant |
| THE LOST DOGS HOME | Second Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers: written submissions filed by the plaintiff on 26 April 2019, and by the second defendant on 17 May 2019 |
DATE OF JUDGMENT: | 7 August 2019 |
CASE MAY BE CITED AS: | Banks v RSPCA & The Lost Dogs Home: IMO the estate of Carl Laurie Sutton (deceased) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 451 |
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WILLS AND ESTATES – Application by the executor for determination of questions arising in the administration of an estate pursuant to Order 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – General principles of construction of wills – Fell v Fell (1922) 31 CLR 268, applied – Whether the Will creates charitable trusts in favour of animal welfare institutions.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Mah | Klonis Kirby |
| For the First Defendant | HWL Ebsworth Lawyers | |
| For the Second Defendant | Mr R C Wells | McNab McNab Starke |
HER HONOUR:
Introduction
The plaintiff, Ms Claudia Constance Banks (‘executor’), is the sole executor and trustee of the estate of Carl Laurie Sutton (‘deceased’), who died on 3 September 2016. The defendants, the Royal Society for the Prevention of Cruelty to Animals in Victoria (‘RSPCA’) and The Lost Dogs Home, are the beneficiaries named in clauses 10 and 11 of the deceased’s last will dated 11 March 2016 (‘Will’), along with Nathan Christopher Smith, a person under a disability.
Difficulties have arisen regarding the interpretation and effect of clauses 10 and 11 of the Will, and there are outstanding questions regarding from which part of the estate’s liabilities and expenses should be borne, and who benefits from the residuary estate.
The estate of the deceased is comprised of a residential property in Sandringham (‘Sandringham property’) valued at approximately $1.5 million, a share portfolio valued at $772,696.67 and cash and like assets of $381,476.04 (as at 7 February 2019). The liabilities of the estate are modest. There is no issue in this proceeding regarding the disposition of the proceeds of sale of the Sandringham property: they are to be shared equally between the executor and her family on the one hand, and the RSPCA on the other hand. What is in question is the manner in which the income and capital of the share portfolio is to be dealt with, the disposition of the residuary estate, and from what pool of assets the expenses and liabilities of the estate (including the costs of this proceeding) are to be paid.
Clause 10 of the Will provides as follows:
SHARE PORTFOLIO
After paying all debts and funeral and memorial debts and testamentary expenses and all probate and estate and other duties payable by my estate (actual or notional) to any State or Federal Authority in consequence of my decease. I GIVE the following in percentages shown:
I.My Trustee shall be empowered to make 50% of the income payments of my Share Portfolio to a parent, guardian or other person charged with the care and education of NATHAN CHRISTOPHER SMITH the son of GEOFFRY WAYNE SMITH of 36 Barclay Drive Cheltenham absolutely.
II.My Trustee shall be empowered to make 50% of the income payments of my Share Portfolio to THE LOST DOGS HOME of 2 GRACIE STREET NORTH MELBOURNE in VICTORIA absolutely.
Clause 11 of the Will provides as follows:
Upon NATHAN CHRISTOPHER SMITH’S passing that 50% to go to THE ROYAL SOCIETY for the PREVENTION of CRUELTY to ANIMALS in VICTORIA of 3 BURWOOD HIGHWAY BURWOOD for the benefit and care of the animals within Victoria absolutely.
The Will is silent as to the disposition of the residuary estate, which, as can be seen from paragraph 3 of these reasons, is not an unsubstantial sum of money.
Executor’s application
The executor seeks an order from the Court for the determination of the following questions:
Question 1 (Clauses 10 and 11: Share income and capital)
(a)Regarding clause 10 of the Will, does the provision only pass 50 per cent of the income payments derived from the deceased’s share portfolio to The Lost Dogs Home; or is The Lost Dogs Home also entitled to 50 per cent of the capital of the deceased’s share portfolio and, if so, when?
(b)Regarding clause 11 of the Will, does the provision mean that, upon the death of Nathan Christopher Smith, the RSPCA is entitled to:
(i)only 50 per cent of the income derived from the deceased’s share portfolio formerly enjoyed by Nathan Christopher Smith; or
(ii)is it also entitled to 50 per cent of the capital of the deceased’s share portfolio?
(c) If the answer to questions (a) and (b) is ‘no’, who is entitled to:
(i) the said income; and
(ii)the 50 per cent share in the capital of the share portfolio?
(d)Do the provisions of clauses 10 and 11 create a charitable trust, of which the beneficiaries are the two defendant organisations?
Question 2 (Clause 10: Funeral and testamentary expenses)
Regarding clause 10 of the Will, are all the deceased’s funeral and testamentary expenses payable out of:
(a)the sale of such part of the deceased’s share portfolio as is sufficient to meet these debts; or
(b) the deceased’s residuary estate.
Question 3 (Residuary estate)
Who is entitled to the residuary estate of the deceased?
All of the named beneficiaries in the Will, along with the relatives of the deceased who would take upon a partial intestacy, have been notified of this proceeding. Only the executor and The Lost Dogs Home made submissions regarding how the questions identified by the executor should be answered.
For convenience, the questions will be dealt with in the following order: question 1, question 3 and question 2.
The Will
The executor and her late husband, Mr Peter Banks, had been friends of the deceased for approximately twenty years, having met through their church congregation. They met with the deceased at least weekly, and shared special occasions with him.[1]
[1]First affidavit of executor in support of originating motion filed 8 February 2019 (‘First affidavit’), para 8.
During the lifetime of the deceased, the executor and her husband assisted him with care of his car, home, garden, and personal maintenance. Their assistance increased after 2006, as the deceased became less mobile, being dependent on an electric wheel chair at home and a motorised scooter away from home.[2]
[2]Ibid, para 8.
The executor deposed that some time prior to 2015, the deceased expressed dissatisfaction with his will and requested the Certificate of Title for the Sandringham property from his previous solicitors. The executor deposed that the deceased asked her to assist him with preparing a will, using a previous will (‘2007 Will’) as a template. The executor agreed to do so.[3]
[3]Ibid, para 9.
The executor deposed as follows:
The deceased had difficulty with handwriting and typing due to problems with his hands. He tried to make some notes but then pushed his notebook away and said to me: ‘I can’t do this. I can’t write properly’. Another time when we met, he would discuss what he wanted to do in his Will. I made some notes as to the deceased’s testamentary wishes as dictated to me. The deceased told me that he was unable to write properly with either hands due to his harsh schooling. I typed up the Will as dictated to me by the deceased. He would tell me what he wanted to write and how he wanted it written. He used his existing Will by saying what he wanted crossed out and what he wanted used and how he wanted it written from his existing Will. When he was finished he asked me to print it out, which I did. The deceased then carefully read through it and said to me ‘we will make an appointment with the solicitor in Sandringham to make sure it is correct’. He requested that I attend at the solicitors with him.[4]
[4]Ibid. See also, Supplementary affidavit filed 29 March 2019 (‘Second affidavit’), para 3.
On 29 March 2019, the executor filed and served a supplementary affidavit that provided further detail regarding the process by which the Will was drafted, as follows:
[T]his process took over [sic] several visits. The Deceased and I would go through part of the document before the Deceased would tire and we talked about other things.[5]
…
The entire process of the making of the Deceased’s final Will, from the Deceased making the [initial notes on the notepad][6] and until his execution of his final will, took several months. I cannot now recall precisely how long it took but it would have taken about 4 to 5 months.[7]
[5]Second affidavit, para 10.
[6]Ibid, para 3; Exhibit CCB-5.
[7]Ibid, para 16.
A copy of the 2007 Will was exhibited to the executor’s supplementary affidavit, and shows the deceased’s markings, as well as the executor’s notes. While there is no reference to a firm of solicitors in the annotated copy of the 2007 Will in evidence, the 2007 Will bears all of the hallmarks of having been prepared by a solicitor, including the technical nature of the language used, the inclusion of clauses conferring express powers upon the trustees appointed under the 2007 Will, and the inclusion of a clause authorising the charging of executor’s commission. The 2007 Will also includes a cover sheet and footers with a document reference number.
The key terms of the 2007 Will were as follows:
(a) the proceeds of sale of the Sandringham property were to be shared equally between the RSPCA and an organisation associated with the Christian Science Church;
(b) the deceased’s tools and the contents of his workshop were bequeathed to Mr Geoffrey Smith (as in the Will); and
(c) the residue of the deceased’s estate (after payment of duties, expenses and liabilities) to be divided into one hundred parts, with fifteen parts to go to Mr Geoffrey Smith, thirty parts to The Lost Dogs Home, and the remaining fifty five per cent to a fund, the income of which was to be used for the support of Nathan Smith. Upon the death of Nathan Smith, the balance of the fund was to be shared equally between the Salvation Army and The Lost Dogs Home.
The executor deposed as follows in relation to the use of the 2007 Will to prepare the Will:
All the crossing-out on the Deceased’s old Will done with a ruler and the crossing-out on the last page of old Will were done by the Deceased. All the handwritten notes were made by me. All the ticks were made by me.[8]
[8]Second affidavit, para 17.
And further:
A few weeks later, my husband and I visited the Deceased and he produced a document and told me and my husband that it was his old Will. He then started crossing out parts of the document using a ruler. He crossed out a few paragraphs before it became too difficult for him and he stopped.
This continued over several visits. On each of our visit [sic] the Deceased would cross out further parts of his old Will, stopping when it became too difficult for him. The Deceased made all the crossing out in front me [sic] and my husband.
After the Deceased had finished crossing out the sections of his old Will, he then asked me to make notes on his old Will, the changes he wanted to make. I wrote out what he told me to write. When I finish writing each section I would show it to the Deceased. The Deceased would read them and then tell me whether what I wrote was what he had wanted or not.[9]
[9]Ibid, paras 5–7.
Regarding the bequest to Nathan Smith, the executor deposed as follows:
On page 2 of the Deceased’s old Will, next to paragraph 5.3, I had originally written:
‘100% of income on passing of Nathan to the Animals’.
I showed this to the Deceased who said that that’s not what he wanted, and that he wanted to give 50% of the income from the shares to Nathan. So I crossed out that note and wrote:
‘income 50%’.[10]
[10]Ibid, paras 8–9.
Further, the executor deposed as follows:
After we had gone through the whole document, I told the Deceased that I wanted to go through the entire document again. I read out each paragraph to him. When he confirms [sic] the accuracy of the paragraph I read out I placed a little tick next to the paragraph or the specific details contained in the paragraph.
The Deceased then asked me to write out his Will. He dictated to me while I wrote down what he said on paper. I then typed out his Will based on the notes that I took. I typed out the Will at my home because the Deceased’s printer was not working. I then took the typed Will to show to the Deceased on my next visit. The Deceased made some changes, and I went home and made those changes.
I prepared two or three draft wills to show to the Deceased. I did not keep the notes that I took. When I made the changes to the draft Will on my computer I worked on the same copy, so I do not have separate copies of the past drafts.
I cannot now remember all the changes that the Deceased had wanted to make. I recall that he wanted to add ‘and her children’ in clause 8 of the Will, and the word ‘all’ in clause 12 of the Will.
The Deceased read the final version of the Will and he did not make any changes. He then said that he wanted to see a solicitor to make sure it’s correct.[11]
[11]Ibid, paras 11–15.
In the first affidavit, the executor described accompanying the deceased to the office of a solicitor, Mr Kim Harris, in Sandringham. She deposed that the deceased insisted upon her attendance. The executor described Mr Harris’s manner as follows:
The solicitor reviewed the Will and took what I regarded as a rather brusque and off hand attitude towards the deceased. He said ‘the address is wrong, you will not be living there when you die’. He repeated that the address is wrong and also said ‘bad things happen to good people’. The deceased was devastated as it was his prayer and wish to be at his home when he passed away. He did not want to be in a nursing home. The solicitor also stated words to the effect: ‘she’s got the lot’. The solicitor threw the Will across the table and did not otherwise query or question the terms of the Will, and finally said ‘Well what do you want me to do, sign it?’ ‘Yes’ said the deceased in a rather meek and barely audible manner. The Will was then signed by the deceased and witnessed by Kim Harris, solicitor and Frances Brunner the receptionist.[12]
[12]First affidavit, para 10.
The executor deposed that Mr Harris had no input into the drafting of the Will, and that his involvement was limited to witnessing the execution of the Will. Mr Harris refused to accept payment for his role in the execution of the Will, which was then provided to the deceased.[13]
[13]Ibid, para 10.
Following their attendance upon Mr Harris, the executor states that the deceased — who appeared visibly shaken by the visit — then insisted that the Will be taken to another solicitor, Mr Harry Singer in Glen Waverley, as the deceased wanted ‘to see if it is correct’.[14] The executor then described what happened next, stating that:
I told him that he would need to come with me. He told me ‘No, I am not going to “the sticks”, you go and see if it is correct’. He also told me to leave it with the solicitor if it is confirmed as correct. I went to Mr Singer’s office but he was out of the office as he had been apparently detained on a matter. I was seen by Margaret who I believed dealt with Probate matters in Harry Singer’s office. She reviewed the Will and confirmed that the Will was valid and correct. I then left the Will in the possession of Mr Singer’s office in accordance with the deceased’s instructions.[15]
[14]Ibid, para 11.
[15]Ibid, para 11.
The Will revoked all previous wills and testamentary dispositions. The Will provided for the plaintiff to be appointed as the deceased’s executor and trustee of his will and estate. In the event that the executor predeceased him, the deceased appointed her children as the executors and trustees of his will and estate.
The deceased directed that the Sandringham property should be sold by the executor, with fifty per cent of the proceeds from the sale of his house to pass to the executor and her children. The other fifty per cent of the proceeds from the sale of the Sandringham property was bequeathed to the RSPCA ‘for the benefit and care of the animals within Victoria’.
The deceased’s furniture and other personal belongings were bequeathed to the executor, with the exception of his tools and the contents of his workshop, which were bequeathed to his friend, Mr Geoffrey Smith (as in the 2007 Will). The clauses of the Will which are the subject of the current proceeding are set out in the paragraphs 4 and 5 of these reasons.
General principles of construction of wills, and the admissibility of extrinsic evidence
The legal principles governing the construction of wills are, for present purposes, uncontroversial. Counsel for the executor submitted that the Court’s primary task in construing a will is ‘to ascertain the testator’s intention as expressed in the will’, referring to Lord Simon LC’s observation in Perrin v Morgan[16] that:
[T]he fundamental rule in construing the language of a will is to put on the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case — what are the ‘expressed intentions’ of the testator.[17]
[16]Perrin v Morgan [1943] AC 399.
[17]Ibid, 406.
Counsel also referred to the High Court decision of Fell v Fell,[18] summarising the established principles concerning the judicial construction of wills as outlined by Isaacs J, as follows:
[18](1922) 31 CLR 268.
Firstly, by reason of the requirement that a Will must be in writing it follows that the necessary meaning of the Will must be discovered from that document. Extraneous evidence is necessary only to enable the Court to understand the words which the testator has used.
Secondly, the Will must be construed according to the plain meaning of the words and sentences therein contained. In order to do that, the Court must look at the Will as a whole. Where there is any inaccuracy or inconsistency in the Will, then it is for the Court to ascertain what is the meaning of the Will, taken as a whole, in order to give effect to the testator’s intentions.
Thirdly, if the Will evinces an intention on the part of the testator to devise an interest which in the words of the Will it has not expressly devised, then the Court is entitled by implication to make good that defect by using the language of the testator to carry out his or her intentions as far as is possible having regard to the terms of the Will as a whole. The Court however does not have the power to rewrite the will for the testator to order to improve upon it or even to seek to achieve a different result that the Court considers more sensible.
Fourthly, inferences can only be drawn when taken from the Will as a whole.
Fifthly, the court cannot give effect to any intention which is not expressed within the plain meaning of the language of the Will.
Sixthly, if words can be shown to have been omitted or added incorrectly, and it can be demonstrated to the Court that without the addition or omission of a particular word the construction of the Will does not fulfil the intention of the testator, then the addition or omission of the word may be justified.
Finally, the Court has the power to omit certain words or to add certain words if on the face of the Will it can clearly be said to be necessary and so as to avoid intestacy. The so-called ‘golden rule’ of construction of Wills states that a court should adopt an interpretation which will not lead to intestacy or partial intestacy and which will assist the Court to construe the Will so as to preserve rather than destroy the gifts under it.[19]
[19]Ibid, 272-6.
Section 36 of the Wills Act 1997 (Vic), which governs the admissibility of evidence for the purposes of construing a will, provides as follows:
36 When is evidence admissible to clarify a will?
(1)In any proceedings to construe a will, if the language used in a will renders the will or any part of the will—
(a) meaningless; or
(b) uncertain or ambiguous on the face of the will; or
(c)uncertain or ambiguous in the light of surrounding circumstances—
evidence may be admitted to assist in the interpretation of that language.
(2)Evidence which may be admitted under subsection (1)(c) does not include evidence of the testator's intention.
(3)Nothing in this section prevents the admission of evidence which would otherwise be admissible at law in any proceedings to construe a will.
In addition to s 36, the Court may also have regard to extrinsic evidence in accordance with the ‘armchair principle’. In Re Melbourne; Wall v Wathen,[20] McMillan J described the principle as follows (omitting footnotes):
If, in the context of the will read as a whole and the surrounding circumstances, the ordinary meaning of the words in the will does not make sense, extrinsic evidence is admissible in a court of construction under the ‘armchair principle’. This principle allows the court to place itself in the position of the testator at the time of executing the will and take into account all of the circumstances actually known to the testator when the will was made.[21]
[20][2016] VSC 514.
[21]Ibid [21].
Relevantly, greater latitude is afforded to the Court when faced with the task of construing a home-made will.[22]
[22]See, for example, Lewis v O’Loughlin (1971) 125 CLR 320, 330.
Question 1 (Clauses 10 and 11: Share income and capital)
In her first affidavit the executor deposed as follows regarding the terms of clauses 10 and 11 of the Will:[23]
[23]First affidavit, para 13(d).
The Deceased’s share portfolio is left to me as trustee upon trust to hold the shareholding and to:
i.By clause 10.1 to pay half the dividend income of the portfolio to the parent, guardian, or other person charged with the care and education of a disabled friend Nathan Christopher Smith, (Nathan); and
ii.By clause 10.2 to pay the other 50% of the net dividends and income of the portfolio to The Lost Dogs Home;
iii.By clause 11 upon Nathan’s death one half of the portfolio income that had been applied for Nathan’s benefit during his lifetime on the wording of the Will is to pass to the Royal Society for the Prevention of Cruelty to Animals.
ix.The Will does not directly deal with the application of the capital of the share portfolio only for the application of the income.
v.The Will in its wording does not specifically deal with the disposal of the capital of that part of the portfolio capital generating the income to be paid to the Lost Dogs Home.
Further, the executor deposed that:
On the wording of paragraphs 10 and 11 of the Will I have been advised that these clauses together may establish a charitable trust whereby on Nathan’s death one half of the income will be paid to the RSPCA and the other half of the income right for Mr Sutton’s death [sic] will be paid to the Lost Dogs Home.[24]
[24]Ibid, para 14.
Question 1(a): Clause 10
The issue here is whether The Lost Dogs Home is entitled to fifty per cent of the share capital under cl 10(ii), as well as fifty per cent of the income from the share portfolio. The executor submitted that The Lost Dogs Home is only entitled to fifty per cent of the income from the deceased’s share portfolio, given that the deceased expressly used the phrase, ‘50% of the income’.
Counsel for the executor submitted that this interpretation is reinforced by comparison with the wording in cl 10(i), submitting that:
[C]lause 10(ii) is identical to clause 10(i), save that the identity of the beneficiary is different. In clause 10(i) the Deceased clearly did not intend Nathan to receive 50% of the shares outright, as evidenced by the gift-over provision in clause 11. Had the Deceased intended Nathan to receive half of the shares absolutely, there would not have been a need to deal with the shares after Nathan’s death. It therefore follows that, by adopting the same language used in clause 10(ii), the Deceased’s intention was to make the same gift to Nathan and the Lost Dogs’ Home, namely the income derived by the Deceased’s shares.[25]
[25]Plaintiff’s Submissions, para 21.
Further, counsel for the executor submitted that the language used in cl 10(ii) can be contrasted with the language used in cl 8 and 9 of the Will. Counsel submitted that:
In those clauses the Deed gave ‘50% of the proceeds of my house sale’ to the Plaintiff (and her children) and the RSPCA. The difference suggests that the Deceased is well aware of distinction between gifting the income derived from an asset and gifting the asset itself. Accordingly, by only referring to income, it can be inferred that the Deceased did not intend to gift the capital to the Lost Dogs Home.[26]
[26]Ibid, para 22.
In response, counsel for The Lost Dogs Home submitted that the proper construction and effect of cl 10(ii) is to make a gift of capital and income to The Lost Dogs Home, rather than a perpetual gift of income.
In support of this submission, counsel for The Lost Dogs Home noted that cl 10(ii) contains no ‘express disposition of the capital to any other person or entity’. This clause can be contrasted with cl 10(i), which is limited to income through the operation of cl 11.[27]
[27]Second Defendant’s submissions, paras 3(c), 3(d).
Counsel for The Lost Dogs Home referred to the inclusion of ‘I give the following’ in the parent paragraph to cl 10(ii), and submitted that ‘[t]he natural and ordinary meaning of the word give — is to create a gift, simpliciter’.[28]
[28]Ibid, para 4(a). See also, para 3(a).
Counsel referred to the phrase, ‘My trustee shall be empowered’, which appears at the beginning of both cll 10(i) and (ii). Here, counsel submitted that this phrase ‘ought be regarded as permissive only and not as derogating from the absolute words of gift used in the first part of clause 10’, and that ‘[t]he word empower means to give authority or power to do something’. In this respect, counsel submits that:
Gifts in a Will are made by the testator using words of gift. In carrying out gifts contained in a Will an executor or Trustee may be given certain powers or authorization, incidental or additional to the making of the gift.[29]
[29]Ibid, para 4(c).
In my view, the executor’s construction of cl 10(ii) is to be preferred. This construction is consistent with the plain meaning of the words used in the clause, while The Lost Dog’s Home’s preferred construction impermissibly strains the meaning of the words used by the deceased in the Will. Indeed, one queries whether there is sufficient ambiguity in the words used in clause 10 of the Will to justify embarking upon the exercise of construing the Will.
Question 1(b): Clause 11
The question here is whether the RSPCA is entitled to a gift of fifty per cent of the share portfolio under cl 11 after the death of Nathan Smith, or fifty percent of the income from the share portfolio. Counsel for the executor submitted that the deceased’s intention was that the RSPCA would be entitled to fifty per cent of the income from the share portfolio, but not the capital, in the manner formerly enjoyed by Nathan Smith.
Counsel for the executor submitted that determination of this issue requires close analysis of the phrase, ‘that 50%’, stating:
‘That’ is a demonstrative pronoun pointing to a specific thing. In the context in which the phrase ‘that 50%’ appears in clause 11, ‘that 50%’ can only refer to the 50% which Nathan is receiving under the Will, being 50% of the income derived from the Deceased’s shares.
As Nathan had no entitlement to any part of the capital of the Deceased’s shares, the Deceased was unlikely to have intended ‘that 50% to include any part of the capital of the shares.[30]
[30]Plaintiff’s Submissions, paras 27–28.
In other words, ‘that 50%’ is referrable to the entitlement of Nathan Smith under the Will, not the capital sum from which Nathan Smith’s entitlement was derived.
Counsel for the executor submitted that this construction of ‘that 50%’ is consistent with the contents of the deceased’s 2007 Will, stating that:
In the 2007 Will the Deceased gave a similar gift to Nathan. In clause 5.3 of the 2007 Will the Deceased gave 55% of his residuary estate to the trustee to hold on trust to pay the income for the benefit of Nathan. That clause then goes on to provide that, upon Nathan’s death, to ‘divide the principal and accumulated income then remaining’ equally between the Salvation Army Victoria and the Lost Dogs’ Home.
The Plaintiff’s evidence is that the Deceased prepared his Will using the 2007 Will. Accordingly, the Deceased must have been aware of the language used in clause 5.3 of the 2007 Will. This is reinforced by ticks made by the Plaintiff when reviewing the changes with the Deceased, which suggests that the wording was considered by the Deceased. Nevertheless, the Deceased chose not to use the language contained in the 2007 Will. This suggests that the Deceased did not intend RSPCA to receive any part of the capital of his shares.[31]
[31]Ibid, paras 29–30.
I accept that there is some ambiguity in the language used in cl 11 on the face of the Will, such that extrinsic evidence of the intention of the deceased is admissible. However, the evidence does not conclusively support either of the alternative constructions contended for by the parties, although the evidence of the executor in the second affidavit supports the view that the deceased intended that the income from the share portfolio, rather than the shares themselves, should go to the RSPCA.
I also agree with the submissions of the executor that the reference to ‘that 50%’ in cl 11 of the Will is more likely than not to be a reference to the income previously paid to Nathan Smith, rather than the capital from which that income was derived.
Question 1(c): Entitlement to share capital and income
Given the answers to questions 1(a) and 1(b) above, this question can be answered as follows: the income from fifty percent of the share portfolio is payable to The Lost Dogs Home in perpetuity, with the income from the other fifty per cent of the share portfolio payable in the first instance to Nathan Smith, and, after his death, to the RSPCA, rather than the capital.
Question 1(d): Charitable trust
The executor submitted that ‘there is little doubt that RSPCA and the Lost Dogs’ Home are both charitable institutions’, with both being ‘dedicated to improving the welfare of animals which is of benefit to the public generally’.[32] In support of this submission, counsel for the executor cites Re Inman, deceased,[33] where this Court found that the RSPCA was a charitable institution.
[32]Plaintiff’s Submissions, para 36.
[33][1965] VR 238.
Accordingly, the executor contends that as cls 10 and 11 establish a trust for the benefit of the defendants, it follows that the Will creates a charitable trust for their benefit.[34]
[34]Plaintiff’s Submissions, para 37.
Counsel for The Lost Dogs Home submitted that this question does not fall for consideration if the gift to The Lost Dogs Home contained in cl 10 is for both income and capital. However, in the event that the gift is limited to income only, then The Lost Dogs Home agreed with the executor’s submission that the effect of cls 10 and 11 of the Will is to create a charitable trust for the benefit of the defendants in equal shares.
Further, the solicitor for the Attorney-General wrote to the executor’s solicitor, as follows:
The Attorney-General has instructed us to write to you and state that she considers the overall effect of clauses 10 and 11 of the deceased’s will to create charitable trusts in favour of the defendant organisations, the RSPCA and the Lost Dogs Home.[35]
[35]Letter from the Victorian Government Solicitor’s Office to the Klonis Kirby & Co dated 12 June 2019. This letter also stated that, as the parties are represented, the Attorney-General would not seek leave to make submissions before the Court, nor will it be represented at any hearing unless required to do so by the Court. I did not consider it necessary to further involve the Attorney-General in this proceeding.
As submitted by counsel for the executor, there is authority clearly identifying the RSPCA as a charitable institution.[36] While this is a finding of fact which is not necessarily binding upon me, it is an unremarkable finding to make. Further, that [a]ll charitable trusts must have some ‘public’, as distinct from ‘private’, purposes’.[37] The principles outlined below also support the proposition that The Lost Dogs Home is a charitable institution.
[36]See Re Inman, deceased [1965] VR 238, 242 (Gowans J).
[37]JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) 126 [10-06], (‘Jacobs’ Law of Trusts’).
In Jacobs’ Law of Trusts in Australia, the authors state that ‘[a]ll charitable trusts are trusts for purposes not persons’.[38] In that regard, the learned authors stated as follows (omitting footnotes):[39]
No trust will be deemed to be charitable unless the carrying out of its object will be of benefit to the public. This benefit will be presumed until the contrary is proved in the case of trusts for the relief of poverty and the advancement of education and religion, but must be affirmatively proved in all other cases. In order to displace the prima facie assumption of public benefit it is not necessary to show that the trust purpose is detrimental to the public, but only that it is “non-beneficial to the public”.’
[38]Ibid, 125 [10-05] (footnote omitted).
[39]Ibid.
Trusts benefiting animals have been found to be charitable. The authors of Jacobs’ Law of Trusts state as follows (omitting footnotes):
In Re Grove-Grady, which concerned the validity of a secret trust for the protection and benefit of animals, Russell LJ stated:
There can be no doubt that upon the authorities as they stand a trust in perpetuity for the benefit of animals may be a valid charitable trust if in the execution of the trust there is necessarily involved benefit to the public; for if this be a necessary result of the execution of the trust, the trust will fall within Lord Macnaghten’s fourth class in Pemsel’s case …
So far as I know there is no decision which upholds a trust in perpetuity in favour of animals upon any other ground than this, that the execution of the trust in the manner defined by the creator of the trust must produce some benefit to mankind.[40]
[40]Ibid, 163 [10-57].
On the benefit of such trusts, the authors of Jacobs’ Law of Trusts state that (omitting footnotes):
The benefit to the public in such trusts lies in the fact that they are calculated to promote public morality by checking the innate tendency to cruelty, or as Swinfen Eady LJ said in Re Wedgwood:
[A] gift for the benefit and protection of animals tends to promote and encourage kindness towards them, to discourage cruelty, and to ameliorate the condition of the brute creation, and thus to stimulate humane and generous sentiments in man towards the lower animals and by these means promote feelings of humanity and morality generally, repress brutality, and thus elevate the human race.
Thus gifts to societies for the prevention of cruelty to animals, to promote prosecutions for cruelty to animals and for homes for lost cats and dogs have been held to be charitable.[41]
[41]Ibid.
The above statements are reinforced by s 12 of the Charities Act 2013 (Cth), which defines ‘charitable purpose’ to include ‘the purpose of preventing or relieving the suffering of animals’.[42]
[42]Charities Act 2013 (Cth) s 12(1)(i).
Accordingly, based upon the principles above, the trusts created by the Will in favour of the RSPCA and The Lost Dogs Home are charitable trusts.
Question 3 (Residuary Estate)
The deceased’s residuary estate includes the deceased’s assets other than the Sandringham property and the share portfolio. Counsel for the executor submitted that the residuary estate must be distributed in accordance with the intestacy provisions of the Administration and Probate Act 1958 (Vic) (‘Act’). While acknowledging the ‘Golden Rule’ of construction, which provides that a Court should adopt an interpretation which will not lead to an intestacy or partial intestacy, counsel for the executor noted that the Will simply made no attempt to dispose of the deceased’s residuary estate, and as such, the rules of construction cannot save the residuary estate from falling within the intestacy provisions of the Act.
Counsel for the executor referred to the text of cl 10, stating that:
Clause 10, unlike other clauses in the Will, has a heading, being ‘SHARE PORTFOLIO’. This suggests that the Deceased intended to deal only with his shares under clause 10. This is reinforced by the contents of Clause 10, which only dealt with the income of the Deceased’s shares.
It therefore follows that, by providing for the payments of the debts and expenses in clause 10, the Deceased’s intention is for those debts and expenses to be paid from the Deceased’s shares.[43]
[43]Plaintiff’s Submissions, paras 43–44.
The executor deposed that to her knowledge, ‘the deceased[‘s] wife predeceased him and he had no children, or remoter issue who survived him’.[44] The executor instructed her solicitors to engage Macbeth Genealogical Services Australia to conduct searches as to who would be entitled to the residuary estate of the deceased under the intestacy provisions of the Act as at the date of death of the deceased.[45]
[44]First affidavit, para 16.
[45]Ibid.
The executor referred to the report provided by Macbeth Genealogical Services Australia (‘Macbeth report’), which ‘established that the persons entitled to the deceased’s property on an intestacy are two cousins Shirley Burt Lobb of 2 Taylor Street New Plymouth New Zealand and Wendy Anne Longshaw of 7/20 Garden Street South Perth Western Australia’.[46] The Macbeth report includes the paternal and maternal family trees of the deceased. The above named cousins feature in the deceased’s maternal line.[47]
[46]First affidavit, para 16. See also, Macbeth report (Exhibit CCB-4).
[47]Macbeth report (Exhibit CCB-4).
Counsel for The Lost Dogs Home submitted that clauses 10 and 11 of the Will should be construed as dealing with the entirety of the deceased’s personal estate. Counsel submitted that the terms of the 2007 Will, and the executor’s evidence regarding the process of drafting of the Will supports the conclusion that the deceased intended to deal with all of his property in the Will, and the references in the Will to the share portfolio should be read as referring to the entirety of the deceased’s personal estate.
Counsel for The Lost Dogs Home submitted that (omitting footnotes):
[T]he court generally leans against a construction that would produce an intestacy or a partial intestacy. A construction that is reasonably open and which avoids an intestacy or partial intestacy should be preferred by the Court. However the Court cannot go so far as to misconstrue the language of the instrument.[48]
[48]Second Defendant’s submissions, para 7 (emphasis in original).
Counsel for The Lost Dogs Home emphasised the following principle enunciated by Isaacs J in Fell v Fell,[49] which the executor summarised in its submissions as follows:
Sixthly, if words can be shown to have been omitted or added incorrectly, and it can be demonstrated to the Court that without the addition or omission of a particular word the construction of the Will does not fulfil the intention of the testator, then the addition or omission of the word may be justified.[50]
[49](1922) 31 CLR 268, 274.
[50]Second Defendant’s submissions, para 9.
Counsel for The Lost Dogs Home submitted that the heading, ‘SHARE PORTFOLIO’, should be ignored, submitting that the evidence does not cast any light on how or for what purposes it was inserted, and noting that it is the only heading in the Will. Counsel submitted that the heading should be disregarded or omitted to avoid an intestacy, which would then lead to cl 10 being construed as ‘containing the effective residuary disposition of the whole of the deceased’s estate’.[51]
[51]Ibid, para 12.
Counsel for The Lost Dogs Home submitted that the circumstances in which the Will was drafted suggest that cl 10 was intended as the residuary clause: in particular, the lengthy drafting process and use of the 2007 Will as a template; the fact that the equivalent clause dealing with fractional parts in the 2007 Will dealt with the residue of the estate; the fact that estate debts and testamentary expenses are expressed in the 2007 Will as being payable from this portion; the absence of specific reference in the Will to other substantial assets of the deceased, such as his bank accounts; and ‘that save for paragraph 11, (which operates to qualify or limit the gift contained in sub-paragraph I of paragraph 10) this is last dispositive clause of the Will and hence occupies the position in the Will where one would ordinarily expect the residuary clause to be’.[52]
[52]Ibid, para 11.
Given the reasonably detailed and careful process by which the executor, together with the deceased, drafted the Will, it remains somewhat of a mystery as to why the Will failed to deal with the residuary estate. I accept that it is more probable than not that the deceased’s intention was to dispose of all of his property under the Will. The question here is whether the principles of construction can be utilised to enable the Will to deal with the entirety of the deceased’s estate. In my view, the construction contended for by The Lost Dogs Home would impermissibly strain the language used in the Will. In particular, it is impossible to ignore the use of the words ‘share portfolio’ in the Will, which appear more than once.
No application has been made to rectify the terms of the Will. However, while I accept that it is tolerably clear that the deceased intended to dispose of all of his property in the Will, I doubt, on the current state of the evidence, that it would be possible to reach a conclusion that the deceased intended to deal with his property in the manner contended for by The Lost Dogs Home with the requisite degree of certainty to warrant rectification of the Will.
Accordingly, the residuary estate falls to be dealt with under the intestacy provisions of the Act, which applies ‘if a person dies … leaving a will which does not effectively dispose of the person’s estate wholly or partially’.[53]
[53]Administration and Probate Act 1958 (Vic) s 70A(1)(b).
Section 70A(2) of the Act states that: ‘If a person dies leaving a will, this Part applies to the part of the person’s estate not disposed of by that will subject to … the provisions of the will’.[54]
[54]Ibid, s 70A(2).
As the deceased died without leaving a partner, the intestate part of his estate is subject to Div 6 of the Act, which relates to ‘distribution if intestate leaves no partners’, and results in the residuary estate being distributed in accordance with the hierarchy set out in the Division. There is no reason to doubt the accuracy of the Macbeth report.
Question 2 (Funeral and testamentary expenses)
The question here is whether, on a correct interpretation of cl 10 of the Will, the deceased’s liabilities and testamentary expenses are payable from the residuary estate of the deceased, or from the proceeds of liquidation of sufficient of the share portfolio to meet such expenses’. Counsel for the executor submitted that these expenses should be paid from the deceased’s share portfolio.
Counsel for the executor referred to s 39A of the Act, which provides for the order of assets from which such expenses, debts, and liabilities are to be paid from a solvent estate.
Section 39A of the Act provides that, ‘[s]ubject to any contrary intention appearing in the deceased’s will’, the ‘real and personal estate of the deceased must be applied towards the discharge’ of these expenses, debts, and liabilities in an order commencing with:
(a)from property specifically appropriated, devised, bequeathed, directed to be sold (either by a specific or general description) or subject to a charge for the payment of a debt or liability of the estate;
(b)from property comprising the residuary estate and property in relation to which a disposition in the deceased’s will operates as the exercise of a general power of appointment;
(c)from property specifically devised or bequeathed, including property specifically appointed under a general power of appointment and any legacy charged on the property devised, bequeathed or appointed.
Accordingly, in the absence of any provision in the Will to the contrary, the liabilities and testamentary expenses of the deceased are to be paid from the residuary estate. In the current case, the Will expressly provides for the liabilities and expenses to be paid from the share portfolio.
Counsel for the executor also submitted that the parties’ costs of this proceeding should also be payable from deceased’s share portfolio, on the basis that ‘by clause 10 of the Will the deceased evinced an intention for all estate debts and expenses to be paid from the deceased’s shares. Accordingly the costs of this application should be paid from the shares’.[55]
[55]Plaintiff’s submissions, para 53; see also para 39.
The Lost Dogs Home’s answer to this question arises out of its submissions to the effect that cl 10 should be construed as dealing with the residuary estate of the deceased; namely, that the estate debts and testamentary expenses are payable from that part of the estate disposed of by cl 10 of the Will. However, it concedes that if this contention is not accepted, then the estate debts and testamentary expenses should be paid out of the deceased’s share portfolio. I agree that, given the plain language of cl 10 of the Will, and my rejection of The Lost Dogs Homes’ submission that cl 10 should be construed as dealing with the entirety of the personal estate of the deceased, the deceased’s liabilities and testamentary expenses should be paid from the share portfolio.
Answers to questions
Question 1
(a) Regarding clause 10 of the Will, does the provision only pass 50 per cent of the income payments derived from the deceased’s share portfolio to The Lost Dogs Home; or is The Lost Dogs Home also entitled to 50 per cent of the capital of the deceased’s share portfolio and, if so, when?
The Lost Dogs Home is entitled to fifty per cent of the income from the deceased’s share portfolio.
(b)Regarding clause 11 of the Will, does the provision mean that, upon the death of Nathan Christopher Smith, the RSPCA is entitled to:
(i)only 50 per cent of the income derived from the deceased’s share portfolio formerly enjoyed by Nathan Christopher Smith; or
(ii)is it also entitled to 50 per cent of the capital of the deceased’s share portfolio?
Upon the death of Nathan Christopher Smith, the RSPCA is entitled to fifty percent of the income from the deceased’s share portfolio.
(c) If the answer to questions (a) and (b) is ‘no’, who is entitled to:
(i) the said income; and
(ii)the 50 per cent share in the capital of the share portfolio?
Not necessary to answer
(d)Do the provisions of clauses 10 and 11 create a charitable trust, of which the beneficiaries are the two defendant organisations?
Yes.
Question 2
(e)Regarding clause 10 of the Will, are all the deceased’s funeral and testamentary expenses payable out of:
(a)the sale of such part of the deceased’s share portfolio as is sufficient to meet these debts; or
(b) the deceased’s residuary estate.
The deceased’s funeral and testamentary expenses are payable out of the deceased’s share portfolio.
Question 3
(f)Who is entitled to the residuary estate of the deceased?
Shirley Burt Lobb and Wendy Anne Longshaw in equal shares.
I shall hear further from the parties on the question of costs, save to say that in the absence of any submission to the contrary, I agree with the executor’s submission that the parties’ costs of the proceeding should be payable from the share portfolio.
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