Borlaug v The University of Western Australia
[2001] WASCA 425
•20 DECEMBER 2001
BORLAUG -v- THE UNIVERSITY OF WESTERN AUSTRALIA [2001] WASCA 425
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 425 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:78/2001 | 13 DECEMBER 2001 | |
| Coram: | WALLWORK J STEYTLER J OLSSON AUJ | 20/12/01 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| A | |||
| PDF Version |
| Parties: | JOAN ODNA BORLAUG THE UNIVERSITY OF WESTERN AUSTRALIA |
Catchwords: | Appeal against order declaring construction of Will Bequest of "all my shares and stock in all companies" Whether included debenture stock and/or funds invested in various unit trusts Principles to be applied to construction Inferred intention of testatrix Bequest includes debenture stock, but not holdings in unit trusts |
Legislation: | Nil |
Case References: | Brennan v Permanent Trustee Co of New South Wales Ltd (1945) 73 CLR 404 Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 Henry v Great Northern Railway Co (1857) 27 LJ Ch 1 In re Alleyn (Dec) [1965] SASR 22 In Re Bodman [1891] 3 Ch 135 In re Everett [1944] Ch 176 In re O'Connor [1970] NI 159 In re O'Mullane [1955] VLR 217 In re Pearce (Dec) [1946] SASR 118 In re Purnchard's Will Trusts; Public Trustee v Pelly [1948] Ch 312 In the matter of the Will of Arndt [1990] WAR 5 Lutheran Church of Australia South Australia District Inc v Farmers Co-operative Executors & Trustee Ltd (1970) 121 CLR 628 Perrin v Morgan [1943] AC 399 Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99 Charter v Charter (1874) LR 7 HL 364 In Re Allsop (Dec) [1968] 1 Ch 39 Layer v Burns Philp Trustee Co Ltd (1986) 6 NSWLR 60 Morrice v Aylmer (1874) LR 7 HL 717 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : BORLAUG -v- THE UNIVERSITY OF WESTERN AUSTRALIA [2001] WASCA 425 CORAM : WALLWORK J
- STEYTLER J
OLSSON AUJ
- Appellant
AND
THE UNIVERSITY OF WESTERN AUSTRALIA
Respondent
Catchwords:
Appeal against order declaring construction of Will - Bequest of "all my shares and stock in all companies" - Whether included debenture stock and/or funds invested in various unit trusts - Principles to be applied to construction - Inferred intention of testatrix - Bequest includes debenture stock, but not holdings in unit trusts
Legislation:
Nil
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Result:
Appeal allowed
Category: A
Representation:
Counsel:
Appellant : Mr M H Zilko SC
Respondent : Mr J D Allanson
Solicitors:
Appellant : Dwyer Durack
Respondent : Blake Dawson Waldron
Case(s) referred to in judgment(s):
Brennan v Permanent Trustee Co of New South Wales Ltd (1945) 73 CLR 404
Charles v Federal Commissioner of Taxation (1954) 90 CLR 598
Henry v Great Northern Railway Co (1857) 27 LJ Ch 1
In re Alleyn (Dec) [1965] SASR 22
In Re Bodman [1891] 3 Ch 135
In re Everett [1944] Ch 176
In re O'Connor [1970] NI 159
In re O'Mullane [1955] VLR 217
In re Pearce (Dec) [1946] SASR 118
In re Purnchard's Will Trusts; Public Trustee v Pelly [1948] Ch 312
In the matter of the Will of Arndt [1990] WAR 5
Lutheran Church of Australia South Australia District Inc v Farmers Co-operative Executors & Trustee Ltd (1970) 121 CLR 628
Perrin v Morgan [1943] AC 399
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Case(s) also cited:
Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99
Charter v Charter (1874) LR 7 HL 364
In Re Allsop (Dec) [1968] 1 Ch 39
Layer v Burns Philp Trustee Co Ltd (1986) 6 NSWLR 60
Morrice v Aylmer (1874) LR 7 HL 717
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1 WALLWORK J: I agree with the reasons for judgment and the conclusions of Olsson AUJ.
2 STEYTLER J: I have had the advantage of reading, in draft, the reasons to be delivered by Olsson AUJ. I agree with them and with the order proposed by his Honour. There is nothing I wish to add.
3 OLSSON AUJ: This is an appeal against a portion of an order made by a single Judge of this Court on 22 November 2000, declaring the proper construction of a clause of the last Will and Testament of the late Mary Agnes Horsfall.
4 The testatrix executed her Will on 18 January 1990 and died on 12 March 1998. She was an elderly person of considerable means and held what was described as a large, diverse and valuable investment portfolio. This included equity shares in many major, publicly listed companies and interest-bearing debenture stock in the Australian Guarantee Corporation ("the AGC stock"). There were also substantial funds invested in unit trusts known as the Westpac Moderate Growth Fund, the Westpac Australian Bond Fund and the Westpac Balanced Growth Fund. I shall, collectively, refer to the units held in those funds as "the Westpac units".
5 The AGC stock, as at the date of death of the testatrix, consisted of three separate holdings of fixed-term debenture stock. These matured on varying dates and conferred an entitlement to differing fixed rates of interest for the respective terms of the investments.
6 The Westpac units were units in three separate funds, which attracted payment at variable rates of income distribution, dependent on the financial performance of the funds. Subject to payment of a so-called "exit" fee, in some circumstances, the testatrix was entitled to withdraw amounts, in multiples of $1,000 or more, from any fund at short notice.
7 It will be seen that there are, therefore, significant differences between the various types of investments held, both as to their inherent nature and the type of income return in relation to them. Of particular note is the fact that the distributions in respect of Westpac units were not in the nature of fixed interest payments. They varied from time to time, as a reflection of the performance of the relevant fund. The unit value also varied, as a reflection of the market value of the fund assets at any given point in time.
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8 The Will of the testatrix was a relatively simple document. The body of it was expressed in these terms:
"THIS IS THE LAST WILL AND TESTAMENT of me MARY AGNES HORSFALL of 28 Gibney Street COTTESLOE in the State of Western Australia Widow
I REVOKE all previous Wills and Testamentary writings
I APPOINT the PUBLIC TRUSTEE in and for the State of Western Australia to be the Executor and Trustee of this my Will
I DEVISE and BEQUEATH:
(a) my land situate at and known as 26 Gibney Street Cottesloe to PETER GRAHAM SOUTH
(b) all my shares and stock in all companies together with any dividends accrued or accruing thereon at my death to ODNA BORLAUG
(c) my house and property situate at and known as 28 Gibney Street Cottesloe and all my furniture furnishings and articles of domestic household use or ornament to PATRICIA MOLLY HALLEEN
SUBJECT TO the payment of my just debts funeral and testamentary expenses I DEVISE and BEQUEATH the whole of my real and personal estate to the University of Western Australia UPON TRUST for the use and benefit of the Faculty of Medicine
I REQUEST that my Trustee advise all beneficiaries of this my Will that the gifts are from MARY MORRIS
I DECLARE that the receipt of the Vice Chancellor or Secretary or Treasurer for the time being of the abovenamed [sic] University shall be a sufficient discharge to my Trustee and my Trustee shall not be liable to see to the application thereof"
9 Following the death of the testatrix and a grant of probate to the Public Trustee, two separate questions arose as to the proper construction of her Will. On 29 April 1999, the Public Trustee filed an ex parte
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- originating motion seeking the opinion and direction of a Judge in relation to them, pursuant to s 58 of the Public Trustee Act 1941.
10 By the time those proceedings came on for hearing four respondents had been joined, namely Patricia Molly Halleen, Peter Graham South, Joan Odna Borlaug and the University of Western Australia, being the four beneficiaries named in the Will.
11 The two issues which arose for consideration were whether -
• the land described as 26 Gibney Street, Cottesloe had been adeemed by subdivision and amalgamation with the adjoining properties; and
• the Westpac units and the AGC stock held by the testatrix at her death formed portion of the bequest to Odna Borlaug of "all my shares and stock in all companies together with any dividends accrued or accruing thereon".
12 In reasons published by him on 26 October 2000 the learned trial Judge held that the relevant land had been adeemed and that the units and stock did not form portion of the specific bequest to Odna Borlaug, but fell into residue.
13 The respondent, Joan Odna Borlaug, appeals against the decision of the learned trial Judge, insofar as it relates to the Westpac units and the AGC stock. She contends that, on the true interpretation of the Will of the testatrix, those investments were encompassed in the bequest to her.
14 No challenge has been made as to the ademption finding.
15 To adopt the words of Lord Romer in Perrin v Morgan [1943] AC 399 at 420, it is a cardinal rule of construction that a Will should be so construed as to give effect to the intention of the testatrix, such intention being gathered from the language of the Will, read in the light of the circumstances in which the Will was made. (See also Brennan v Permanent Trustee Co of New South Wales Ltd (1945) 73 CLR 404 at 415 ("Brennan")). The language employed in the instrument should be read in the sense which the testratrix herself appears to have attached to the expressions used (Brennan at 414, In the matter of the Will of Arndt [1990] WAR 5 at 7).
16 The learned trial Judge noted that use of phrases such as "stocks and shares" in Wills has, over time, "occasioned Courts some difficulty".
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17 Prima facie, such a phrase is apt to describe equity capital in limited companies (In re O'Connor [1970] NI 159 at 164; In re Everett [1944] Ch 176 at 178 - 179). As Cohen J said in Everett, that is the natural meaning of the phrase.
18 He accepted that a somewhat wider meaning was given to the phrase in In re Purnchard's Will Trusts; Public Trustee v Pelly [1948] Ch 312. However, he felt that it must be recognised that the interpretation there adopted was the product of specific circumstances; and the fact that a narrow interpretation would have resulted in a partial intestacy - contrary to the obvious intention of the testator.
19 In the instant case the learned trial Judge summarised his ultimate conclusion in this way:
"In my opinion in construing this will it is significant that the deceased used not only the words 'shares and stock in all companies' but also added 'any dividends accrued or accruing thereon'. The investments under consideration, particularly the investments in Australian Guarantee Corporation Limited which are expressed to be certificates of debenture stock, may arguably have fallen within the bequest insofar as it refers to 'stock'. In my view, however, the reference by the deceased to 'dividends' reveals an intention by the deceased to exclude interest bearing investments from the bequest. Both that investment and the investment in the Westpac Growth Funds do not attract dividends but interest, and in my opinion the ordinary rules of construction would require the court to construe that clause in such a manner as to exclude those investments from the bequest.
As I have said, the deceased had a significant investment portfolio in listed companies which attracted dividend payments. The investments presently the subject of consideration were not the subject of any dividend payments but interest payments as shown on the security certificates. In my opinion, therefore, the intention of the deceased was to exclude those investments from bequest (b) in the will."
20 The evidence before the learned trial Judge did not indicate who had prepared the Will of the testatrix, nor what instructions may have been recorded in relation to it. On the face of it, the Will does not appear to have been professionally drafted.
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21 An affidavit was sworn by Ms Borlaug, describing her relationship with the testatrix. She said that she had come to know the testatrix as the consequence of a close attachment between the latter and her late husband and Ms Borlaug's own parents. Ms Borlaug herself had become very close to the testatrix when her parents and the husband of the testatrix had all died.
22 Ms Borlaug deposed that she had been a client adviser with a large firm of stockbrokers and had, over many years, been able to assist the testatrix with the management of her investment portfolio. As the testatrix became very elderly and (I infer from the affidavit) to some extent senile, Ms Borlaug played a major role in relation to her financial affairs, which continued after the respondent, Ms Halleen, was appointed her guardian. Ms Borlaug said that she was particularly involved in setting up investments in the AGC stock and arrangements for the direct credit of interest payments to the bank account of the testatrix.
23 On the appeal Mr Zilko SC, senior counsel for the appellant, argued that the learned trial Judge had adopted an incorrect approach by taking "the words 'all my shares and stock in all companies together with any dividends accrued or accruing thereon at my death' to be a single composite item with each word therein qualifying the meaning of the other words. By doing so [he] limited the scope of the gift, when the words used by the deceased conveyed no such intention".
24 It was submitted that, on the contrary, the bequest was in the widest possible terms and that, on its proper construction, the relevant provision in the Will was intended to bequeath to the appellant -
• all shares of the testatrix in all companies;
• all her stock in all companies; and
• any dividends accrued or accruing on the shares or stock at her death.
25 It was contended that the construction opted for by the learned trial Judge failed to recognise the significance of the phrase "together with". Mr Zilko SC submitted that, by using that phrase, the testatrix made it clear that the reference to dividends was never intended to govern, control or limit the phrase "all my shares and stock in all companies" which preceded it. The words "together with" must be taken in the sense "in addition to" or "as well as", in the context of the bequest. It was also stressed that, by using the word "any", in relation to "dividends", the
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- testatrix recognised that there may or may not be dividends which had accrued or were accruing.
26 It was further argued that, in the course of seeking to ascertain the intention of the testatrix, it should be borne in mind that lay persons may not necessarily appreciate the technical difference between the receipt of income from one form of investment or another: (Lutheran Church of Australia South Australia District Inc v Farmers Co-operative Executors & Trustee Ltd (1970) 121 CLR 628 at 642 ("Lutheran Church"); In re Purnchard's Will Trusts at 317).
27 In this regard reliance was placed on what fell from Knight-Bruce LJ in Henry v Great Northern Railway Co (1857) 27 LJ Ch 1 at 18, where he said:
"The word 'dividend' carries no spell with it. Applicable to various subjects, it is not intelligible without knowing the matter to which it is meant as referring … the word, as used in the places in which we have now to deal with it, means, I apprehend, share of profits."
28 Mr Zilko SC contended that, given the known circumstances and general mode of expression of the Will, there was no warrant to give the literal interpretation to the word "dividends" which was, in fact, accorded to it.
29 As to the AGC stock, Mr Zilko SC pointed out that such investments are properly described as "debenture stock" and, in the Trust Deed related to them, the holder is referred to as a "stockholder". Such stock can be traded on the Stock Exchange. Absent any qualification properly stemming from the use of the word "dividends", there seems little reason to doubt, he said, that these would be caught by the bequest. Indeed, the learned trial Judge expressly recognised the force of that contention in par [21] of his reasons.
30 It was also argued that no distinction ought to have been drawn between the Westpac units and the other investments, even given that these attracted income distributions, rather than "dividends" or "interest" in the technical sense . Mr Zilko SC submitted that units of the type here in question are akin to bonds; and that there is no relevant distinction between bonds and stock (In re Alleyn (Dec) [1965] SASR 22 at 23-25, In re Pearce (Dec) [1946] SASR 118 at 119 and 122; Lutheran Church at 641-642 and In re O'Mullane [1955] VLR 217 at 223-224). As such, they should be treated as "stock" within the terms of the bequest.
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31 Mr Allanson, counsel for the residuary beneficiary, submitted that the foregoing arguments did not accurately reflect the intention of the testatrix. There was, he said, simply no persuasive reason to do other than accord the language used its normal and natural meaning and significance. That was what the learned trial Judge had done.
32 There was, he submitted, a need to have regard to the whole of the expression of the bequest, in order to ascertain the meaning of the words used.
33 Due significance had to be attached to the use of the expression "dividends … thereon", which was apt to describe a share of profits and not interest. This expression clearly indicated that the testatrix had used the phrase "shares and stock" in a restrictive (and not expansive) sense.
34 It was pointed out that such an expression had been held not to include redeemable debenture stock in In re Everett; and that the natural and normal meaning of the expression "stocks and shares" comprehends investments of the nature of equity capital in limited companies, rather than interest-bearing securities. The word "shares" does not usually encompass debenture stock (In Re Bodman [1891] 3 Ch 135).
35 Mr Allanson further contended that units in a unit trust will not normally pass under a bequest of "stocks and shares" (Re O'Connor at 164-165). This is because such units are fundamentally different from shares in companies. Unlike shares, they confer a proprietary interest in all the property which, for the time being, is subject to the relevant trust deed. (See discussion in Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 at 609)
36 This matter is not without difficulty, because, as demonstrated by reference to the competing submissions of counsel, powerful arguments can be advanced to support both a restrictive and an expansive interpretation of the phraseology employed.
37 However, I consider that the vital clue to what was in the mind of the testatrix is to be found in the fact that she employed the phrase "shares and stock", rather than the phrase "shares and stocks" or "stocks and shares". It is to be noted that, as was pointed out by Chitty J in Bodman, at 136 – 137, so called "proprietary" stock in a company is, in practical terms, no different from shares in that entity. Hence the commonly used expression "stocks and shares", when the two words are virtually synonymous. Debenture stock is, as Chitty J was at pains to emphasise, of a fundamentally different nature, the holder being an actual creditor of
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- the company entitled only to a specific interest return. By way of contrast, a proprietary stock holder is member of the company entitled to share in its profits by way of dividend (Bodman at 138).
38 It seems to me that when it is borne in mind that the testatrix expressly used the word "stock", in association with the phrase "in all companies", against the background of the nature and actual mix of her investment portfolio, she was deliberately setting out to describe a form of investment which ranged beyond mere shares in companies, in the traditional sense.
39 There is a very real difference between the word "stocks" and the word "stock". The former, particularly when used in association with the word "shares", is, as I have demonstrated, apt to describe some form of equity capital. The latter can well convey a quite different import and, I consider, does so in the present case.
40 Additionally, it must, in any event, be noted that the authorities plainly recognise that expressions such as "stocks and shares", "shares and stock" and "stock" or "stocks" are generic expressions which all have ambulatory meanings, dependent on the context in which they are employed.
41 As was said by McTiernan and Menzies JJ in Lutheran Church at 642, just as many members of the community would not recognise the technical distinction between the words "stock" and "bonds", so also the "difference between 'stock' and 'shares' in a company is another difference of a like kind which ordinary people disregard".
42 In Purnchard, Jenkins J pointed out that the phrase "stocks and shares" was quite commonly used as a convenient, compendious and comprehensive term to denote all forms of investment commonly dealt with on stock exchanges.
43 Equally, as was recognised by Knight-Bruce LJ in Henry v Great Northern Railway Co at 18, the word "dividend" also has an ambulatory meaning, dependent on the circumstances. According to its normal dictionary definition, it can, inter alia, be a sum payable as interest on some form of loan, or a distribution by way of share of profits of a limited company.
44 These fundamental aspects assume particular importance in a case such as that presently before the Court.
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45 It seems clear, from its form, that the Will of the testatrix was not drawn by a solicitor. Whilst it may possibly have been prepared by an officer of the Public Trustee - although that is by no means clear - it must at least be assumed that it reflected positive instructions given by the testatrix in light of her then knowledge of the content of her investment portfolio.
46 What we do know is that, at the time of execution of her Will, the testatrix was an elderly woman, some 94 years of age, and in failing health.
47 In my view, the material before the Court strongly suggests that it is not to be imagined that the testatrix knew, understood or had in mind technical distinctions between various expressions used in the company law environment. Specifically, I do not consider that she would necessarily have used or understood the word "dividends" in its most restricted, technical sense. It is not uncommon for lay persons to use such an expression, in a loose sense, as embracing all regular income payments received in relation to investments - hence the wide range of possible dictionary meanings attributed to it.
48 Reading the Will as a whole, I am left with the very distinct impression that, in using the expressions contained in the bequest to Ms Borlaug, the testatrix was really referring to her investment portfolio generally - in the sense of forms of investment dealt in on the Stock Exchange, as adverted to in Purnchard and the income accruing in respect of them. This fits comfortably with the history of the relationship of Ms Borlaug with that portfolio.
49 In this regard, I see it as no accident that the Will employs the word "stock", as contrasted with "stocks". It is, I think, specifically contemplating something other than the mere alter ego of "shares", in the equity capital sense.
50 A fundamental problem which, with respect, I have with the reasoning adopted by the learned trial Judge is that it necessarily results in a situation in which the words "and stock" in the relevant bequest are left with no work to do. That strongly militates against the argument advanced by Mr Allanson. The only instruments of the nature of "stock" of any type held by the testatrix were, in fact, the AGC stock, and the compelling inference is that she was specifically referring to it.
51 Moreover, I consider that there is force in the point made by Mr Zilko SC that the phrase "together with … any" does imply that the
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- reference to dividends was not necessarily intended to limit the phraseology preceding it. A problem which I have is that the reasoning which appealed to the learned trial Judge really begs the question as to whether, in this non-professionally prepared document, the testatrix employed the word "dividends" in its restricted or expansive sense. I am inclined to think that the latter was the situation.
52 In my opinion, the Will manifests an intention, by the testatrix, to bequeath the whole of her shares and the AGC stock to Ms Borlaug.
53 I am, however, unable to conclude that the bequest extends to the Westpac units.
54 Such units are not normally considered to fall within the rubric of shares or stock in common parlance. Certainly the income distributions in relation to them are more akin to "dividends" in the traditional sense than mere interest payments, but these units do not otherwise possess the normal character of shares in a limited company and they are not traded on the stock exchange. Rather they are attached to a proprietary interest, pursuant to a trust deed, in an investment fund. They are certainly not "stock" in the sense of an interest bearing debt. The right to withdraw funds, more or less at will, and the notion of the amount of the investment regularly being reassessed in accordance with the market value of the fund investments, is quite foreign to the concepts of either an equity interest in the capital of a company or an interest-bearing stock.
55 In the course of argument on the appeal, Mr Zilko SC was constrained to concede the difficulties which confronted him in asserting that the Westpac units could fairly be said to be comprehended by the bequest to Ms Borlaug. In my opinion, those difficulties are insurmountable.
56 Accordingly, on the basis of the reasoning above expressed, I would allow the appeal for the purpose of varying the order appealed against, by excising from it the existing subparagraph 1(b) and substituting for it a new par 1(b) couched in the following terms:
"(b) the bequest to the appellant, in the said Will of 'all my shares and stock in all companies together with any dividends accrued or accruing thereon at my death' extends to and includes all shares in limited companies and all debenture stock held by the deceased in Australian Guarantee Corporation Limited at her death; but does not include any units held by the deceased in the Westpac
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- Australian Fund, the Westpac Moderate Growth Fund or the Westpac Balanced Growth Fund."
57 I would hear counsel as to the question of the costs of the appeal.
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