Brown v Hunt
[2021] VSC 683
•22 October 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2020 03348
| CHARLOTTE BROWN (EXECUTOR OF THE ESTATE OF BETTY MAY HUNT) | Plaintiff |
| v | |
| MATTHEW ALEC HUNT | Defendant |
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JUDGE: | Incerti J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 September 2021 |
DATE OF JUDGMENT: | 22 October 2021 |
CASE MAY BE CITED AS: | Brown v Hunt |
MEDIUM NEUTRAL CITATION: | [2021] VSC 683 |
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WILLS AND ESTATES – Construction of will – Beneficiaries – Great-grandchildren as survive testator – Whether great-grandchildren not born at date of date of death to be included in class of beneficiaries – Meaning of the word ‘survive’ – Admissibility of extrinsic evidence – Application of the ‘armchair principle’ – Date for closure of the class of beneficiaries – Re Lapalme; Daley v Leeton (2019) 60 VR 71.
TRUSTS – Removal of trustee – Retirement of trustee – Application for approval of arrangement – Whether for benefit of minors and persons unborn – Trustee power to apply income and/or capital for maintenance – Trustee Act 1958 (Vic) ss 2, 37, 38, 48, 63A.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Young | Andrew Spilva Stewart & Co |
| For the Defendant | Mr T McLean | Brooks Lawyers |
HER HONOUR:
Introduction
By an originating motion filed 20 August 2020, the plaintiff, Charlotte Brown, commenced this proceeding. The plaintiff was granted leave to file an amended originating motion (‘the amended OM’) at the hearing before me on 21 September 2021 which significantly reduced the issues before the Court.
The amended OM contains approximately eight questions that the plaintiff would like the Court to answer in relation to the construction of the will of the late Betty May Hunt (‘the deceased’), of which she is the executor. The plaintiff also seeks orders that the plaintiff be replaced as trustee and that the trust be varied. While the plaintiff originally sought rectification of the will under s 31 of the Wills Act 1997 (Vic) (the ‘Wills Act’) and a vesting order under s 53 of the Trustee Act 1958 (Vic) (‘Trustee Act’), those claims were not pursued at trial.
The deceased died on 22 June 2018 and she left a will made on 6 October 2014 (‘the Will’). Probate was granted to the plaintiff, who is the deceased’s daughter-in-law, on 27 August 2018. In summary, the issues raised in the proceeding relate to:
(a) the meaning and effect of cl 9 of the Will and, in particular, when the class of great-grandchildren referred to closes;
(b) whether the capital and income of the trust created by cl 9 of the Will can be used for the benefit of any great-grandchild before that person turns 30 years of age;
(c) whether the plaintiff can be replaced as trustee by Equity Trustees Limited and Equity Trustees Wealth Services Limited (‘Equity Trustees’) pursuant to s 48 of the Trustee Act; and
(d) whether, pursuant to s 63A of the Trustee Act, cl 9 of the Will can be varied so that the great-grandchild/ren become entitled to a distribution at an age of less than 30 years.
Clause 9 of the Will states:
I give the sum of one million dollars ($1,000,000) to such biological child or children of my said grandson Matthew Alec Hunt (being my great-grandchild or great-grandchildren) as survive me and if more than one in equal shares upon attaining the age of thirty (30) years.
While the amended OM sets out approximately eight questions, the plaintiff’s counsel agreed in the course of submissions that a number of them could be deleted and that the questions to be answered by the Court could be reduced to the following:
Question 1On its proper construction should cl 9 be construed to only apply to great-grandchildren alive as at the date of the deceased’s death?
Question 2If no to question 1, on its proper construction should cl 9 be construed to apply to all great-grandchildren of the deceased born before the first great-grandchild reaches the age of 30 years so that the class of beneficiary closes when the first great-grandchild reaches 30 and all great-grandchildren who are at that time members of that class only receive a share if and when each one turns 30?
Question 3If no to questions 1 and 2, on its proper construction should cl 9 be construed to apply to all children of the great-grandchildren of the deceased born at any time during the defendant’s lifetime?
Question 4If yes to question 3, how is the trustee of the trust provided for in cl 9 obliged to administer the trust given that it is possible that the defendant may father children after his first child turns 30?
Question 5Can the trustee of the trust apply the capital and/or income of the trust to the education and maintenance of any great-grandchild before the great-grandchild turns 30?
The parties were essentially in agreement as to how the questions should be answered. The evidence before the Court was uncontested and set out in the affidavits and exhibits of the following persons:
(a) the plaintiff sworn 20 August 2020 and 17 September 2021;
(b) Vivien Mary Spilva, legal practitioner employed by the plaintiff’s solicitors, sworn 31 August 2020;
(c) the defendant, the deceased’s only biological grandchild and the plaintiff’s son, sworn 28 October 2020 and 20 September 2021;
(d) Hailey Elizabeth Hunter, the solicitor who drew the Will, sworn 8 September 2021; and
(e) Helmut Gerhard Fuhrmann, the financial power of attorney holder for the deceased, sworn 15 September 2021.
The facts
The plaintiff is the executor of the deceased’s estate. The plaintiff was born on 2 August 1951 making her 70 years old. The deceased died on 22 June 2018 and left the Will dated 6 October 2014. There was no evidence before me of the deceased’s age, her health at the time of executing the Will, or age at death. She died within four years of executing the Will, at which time her daughter-in-law, the plaintiff, was 63 years of age. It is safe to assume that the deceased was elderly when preparing her Will.
Probate of the Will was granted on 27 August 2018 to the plaintiff as substitute executor. The defendant was named as executor but renounced his appointment.[1]
[1]Transcript of Proceedings, Charlotte Brown (Executor of the Estate of Betty May Hunt) v Matthew Alec Hunt (Supreme Court of Victoria, S ECI 2020 03348, Incerti J, 21 September 2021) (‘T’) 16.05-08.
The defendant was born on 11 April 1981 and is 40 years of age. The defendant is:
(a) the residuary beneficiary in the deceased’s Will;
(b) the deceased’s (his paternal grandmother) only biological grandchild;
(c) the plaintiff’s son;
(d) Nathanial Hunt’s father. Nathanial Hunt was born on 12 November 2012 and is the eldest of the deceased’s great-grandchildren;
(e) Matilda Charlotte Hunt’s father. Matilda Hunt was born on 15 November 2020, and is the deceased’s second and only other living great-grandchild; and
(f) the only person who is capable of producing the deceased’s biological great-grandchildren.
The estate had a gross value of $5,765,214.[2] Following the distribution of bequests, transfer of real property and payment of expenses, the balance of the estate funds held in trust by the plaintiff’s solicitor as at 17 September 2021 was $1,086,736.15.[3]
[2]Affidavit of Charlotte Brown sworn 20 August 2020, [8].
[3]Affidavit of Charlotte Brown sworn 17 September 2021, [3], Exhibit A.
As noted above, cl 9 of the Will uses the phrase ‘survive me’. That phrase is also used in cl 11 of the Will, which provides:
I direct my Trustee to pay or transfer my residuary estate to my said grandson Matthew Alec Hunt if he survives me. If my said grandson Matthew Alec Hunt should fail to survive me and take his benefit under clause 10 [sic] of this my will leaving a biological child or children then that child or children (being my great-grandchildren or grand-children) the survivor of my said grandson so dying who attain the age of thirty (30) years shall take and if more than one equally the share in my residuary estate that my said grandson so dying would otherwise have taken.
The Will was drawn by Hailey Hunter, a solicitor then employed by Robinson Gill. The deceased was introduced to Robinson Gill by Helmut Fuhrmann, acting on behalf of the deceased as her financial power of attorney.
Before the deceased made the Will, she spoke with the defendant, her grandson, and he told her that he did not intend to have any more children.[4] At that time he had one child, Nathanial. However, after the deceased’s death the defendant re-partnered and has since fathered another child, Matilda, with his new partner, Lauren Sutherland.
[4]Affidavit of Matthew Alec Hunt sworn 28 October 2020, [5].
Robinson Gill’s file in relation to the Will does not contain any information that assists to explain when the class of great-grandchildren in cl 9 will close.[5]
[5]Affidavit of Vivien Spilver sworn 31 August 2020, Exhibit VMS-2.
Hailey Hunter’s evidence is that she recently reread the Robinson Gill file and searched her memory. She believes that the deceased thought the defendant may father one more child, and that that prospective child was to be included in the class established by cl 9. However, Ms Hunter inferred that the deceased wanted the class of beneficiaries to close when the first great-grandchild reached the age of 30. Ms Hunter deposes:
5 …
(g)the deceased specifically stipulated that the funds should benefit only the biological children of Matthew (as opposed to any stepchildren). It is for this reason that the word ‘biological’ appears in cl 9 where otherwise a usual clause would have directed only to the ‘child or children’.
(h)The inference I drew at the time from the deceased’s instructions was that she anticipated that Matthew was likely to have a further child in the near future and that, by the time that the eldest grandchild (being the [great] grandson already born at the time of the Will’s execution) was 30 years old, she would be satisfied for distribution to be made absolutely to that grandchild. This would trigger a closing of the class of beneficiaries necessarily.
(i)From recollection of our discussions and drawing from the notes and the inferences I have drawn from the deceased’s instructions given to me, I do not believe that the deceased turned her mind to the possibility that Matthew may continue to have children until the end of his life. It was foreshadowed that this money would benefit the child he had now and any children he would have with his partner in the forthcoming, but approaching, years.[6]
[6]Affidavit of Hailey Elizabeth Hunter sworn 8 September 2020.
The law
Construction of a will
The principles governing the construction of wills are long established and not in dispute in this proceeding. As such, I do not intend to canvass them in detail here. Relevant to the questions for determination are the principles governing the interpretative approach adopted by the courts to the phrase ‘survive me’, and the ‘rule of convenience’ adopted to read in a means of closing a class of beneficiaries.
‘Survive me’
The ordinary rules of will construction apply to the phrase ‘survive me’. That is, it must be given its natural meaning, considered as part of the will as a whole, and in the context of the circumstances surrounding the execution of the will. There is a presumption that a class of beneficiaries is determined by reference to those persons who meet the description at the date of death of the deceased.[7] The courts have also determined that the natural meaning of ‘survive me’ is to outlive the testator, that is, it has the effect of narrowing the class of beneficiaries to only those who were alive at the time of the testator’s death.[8]
[7]Bullock v Downes (1860) 9 HLC 1.
[8]Knight v Knight (1912) 14 CLR 86, 98 (Barton J).
If a person asserts that ‘survive me’ has the broader meaning of ‘live after me’ (so as to capture beneficiaries born after the testator’s death), that person bears the burden of proving that the testator intended to depart from the natural meaning.[9] The mere fact that the exclusion of potential beneficiaries born after the testator’s death may ‘seem fanciful or even harsh’ is not sufficient to demonstrate that such an effect was not the testator’s intention.[10] A person relying on the secondary meaning must point to other features of the will itself, or surrounding circumstances validly admitted into evidence, which indicate that the testator’s intention was to broaden the class of beneficiaries to include those not yet born at the date of their death.
[9]Hutchinson v National Refuges for Homeless and Destitute Children [1920] AC 794, 802 (Viscount
Finlay).
[10]Re James’s Will Trusts [1962] Ch 226, 245 (Buckley J).
The common law ‘armchair principle’ allows evidence of surrounding circumstances, namely the testator’s general habits and knowledge, including of their family, property, friends and acquaintances, to be admitted to aid in the process of determining the testator’s intention.[11] However, this principle does not permit a court to rely on such circumstances to override the clear and unambiguous words in the will, and does not permit the use of direct extrinsic evidence of the testator’s intention, for example, the testator’s instructions to the solicitor drafting the will.[12]
[11]Perrin v Morgan [1943] AC 399, 420 (Lord Romer).
[12]Re Lapalme; Daley v Leeton (2019) 60 VR 71, [63].
If the will is, on its face, or when considered in light of the surrounding circumstances, uncertain or ambiguous then the common law doctrine of equivocation, and s 36 of the Wills Act may enable the Court to rely on other extrinsic evidence. Section 36 of the Wills Act provides:
(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.
The effect of subsections (1) and (2) is that, if the uncertainty or ambiguity exists on the face of the will, direct evidence of the testator’s intention may be admitted. However, that uncertainty or ambiguity must be objective, and not the result of subjective unfamiliarity with a particular phrase.[13] On the other hand, if the uncertainty or ambiguity only arises after considering the surrounding circumstances, direct evidence of the testator’s intention is not admissible.[14]
[13]Re Niall 60 VR 1, [28] (McMillan J).
[14]Re Niall 60 VR 1, [30] (McMillan J).
In Re Lapalme; Daley v Leeton (‘Re Lapalme’)[15] McMillan J conveniently summarised the courts’ treatment of the phrase ‘survive me’. I do not intend to replicate that review here but I adopt her Honour’s summary. In short, the word ‘survive’ has been held to attract its natural meaning in some circumstances, and its secondary meaning in others.
[15](2019) 60 VR 71, [36]-[45].
A person’s youth and unmarried status, where they are the person capable of bearing potential beneficiaries, has supported findings that the testator anticipated future children beyond their lifetime and, consequently, a construction of the word survive as ‘to live after’, not ‘outlive’. In Re Clark’s Estate[16] the bearer of potential beneficiaries was, at the time the will was executed, a 12 year old girl, and in Brennan v Permanent Trustee Co of NSW Ltd[17] all of the 12 relevant individuals were young women, six of whom were unmarried and childless. In Re Laird[18] those individuals were 13 and 17. However, there is also authority for the proposition that the person need not be that young. In Re Lapalme the relevant individuals were 19, 21 and 22, only one of whom already had a child. In Re Andrews[19] the daughter of the deceased already had two children and was 25 years old.
[16](1864) 46 ER 579, 581.
[17](1945) 73 CLR 404.
[18][1982] 2 NZLR 325.
[19][1985] 2 Qd R 161.
Notably, in McGrath v Hughes[20] Bryson J adopted the secondary meaning of ‘survive’ despite the fact that the children capable of begetting the potential beneficiaries were between 39 to 45 years of age at the time of the testator’s death. Relevantly, Justice Bryson was persuaded by the fact that the will applied an additional hurdle for prospective beneficiaries –being the attainment of 25 years of age. Similar reasoning was applied by McMillan J in Re Lapalme, which also involved a second test that potential beneficiaries must pass, attaining the age of 18.
[20]McGrath v Hughes (Supreme Court of New South Wales, 24 July 1991, unreported).
Courts do not often consider it appropriate to have regard to extrinsic evidence under s 36 of the Act or under the doctrine of equivocation, however, there have been instances where such evidence has been ruled admissible.[21]
[21]Corda v Davey [2000] VSC 27.
Closing the class
The question of when a class of beneficiaries will close arises where the testator’s death does not delimit the class.[22] The plaintiff seeks advice on what event, if not the testator’s death, would close the class of beneficiaries under cl 9 of the Will, other than the defendant’s death and concomitant inability to father any further children.
[22]Andrews v Partington (1719) 3 Bro CC 401.
The parties referred me to the ‘rule of convenience’ espoused by the High Court in Crane v Crane.[23] In that case the residue of the estate was to be paid on trust for the benefit of the testator’s brother’s sons and daughters when they married (for his nieces) or reached 21 years of age (for his nephews and unmarried nieces). Justice Dixon, as he then was, outlined the principle:
If a fund is bequeathed to a class so that when each member attains a specified age or fulfils some other condition attached to the gift he is enabled to call for his share, only those may take who are in existence when the first member reaches that age or fulfils the prescribed condition and those who come into existence afterwards are excluded. The class is then closed and although the numbers who ultimately share may be diminished by reason of the failure of one or more of them to attain full age or comply with some other condition on which the title to participate may be contingent, the numbers cannot be enlarged by the birth of additional persons who if born earlier would have been eligible for membership of the class.[24]
[23](1949) 80 CLR 327.
[24]Ibid, 335 (Dixon J).
Justice Dixon explained the justification for the rule:
The purpose of the rule is to enable those members of a class who have qualified so that they have an interest vested in possession to enter at once into enjoyment of their shares. This could not be done if the class were kept open so long as it were possible that other children might be born and become members. As long as the parent lived the class might be increased by the birth of further children and the share of existing children diminished accordingly. As the share would thus be ascertainable and the minimum amount even could not be fixed no payment could be made, until the parent died, to those whose interests were otherwise vested in possession.[25]
[25]Ibid, 335-336 (Dixon J)
The rule is designed to resolve inconsistencies in a testator’s intention:
When the rule is adopted the solution arrived at is the result of an endeavour by the court to reconcile two apparently inconsistent directions, the one that the whole class of children shall take and the other that the fund shall be divided at a moment when the whole class cannot be ascertained.[26]
[26]In re Stephens; Kilby v Betts (1904) 1 Ch 322 (Buckley J) cited by Dixon J in Crane v Crane (1949) 80 CLR 327, 336.
Trustee power to use funds prior to distribution
Division 3 of the Trustee Act is entitled ‘Maintenance advancement and protective trusts’.
Section 37 outlines the power of a trustee to apply or accumulate the income of a trust while the beneficiary is a minor. Sub-section (1) outlines the power to apply the income for maintenance or education of the beneficiary:
(1)Where any property is held by trustees in trust for any person for any interest whatsoever, whether vested or contingent, then, subject to any prior interests or charges affecting that property—
(a)during the minority of any such person, if his interest so long continues, the trustees may, at their sole discretion, pay to his parent or guardian (if any) or otherwise apply for or towards his maintenance, education, advancement, or benefit, the whole or such part (if any) of the income of that property as may in all the circumstances be reasonable, whether or not there is—
(i) any other fund applicable to the same purpose; or
(ii)any person bound by law to provide for his maintenance or education; and
(b)if such person on attaining the age of eighteen years has not a vested interest in such income, the trustees shall thenceforth pay the income of that property and of any accretion thereto under subsection (2) of this section to him, until he either attains a vested interest therein or dies, or until failure of his interest:
Provided that, in deciding whether the whole or any part of the income of the property is during a minority to be paid or applied for the purposes aforesaid, the trustees shall have regard to the age of the minor and his requirements and generally to the circumstances of the case, and in particular to what other income (if any) is applicable for the same purposes; and where trustees have notice that the income of more than one fund is applicable for those purposes, then, so far as practicable, unless the entire income of the funds is paid or applied as aforesaid or the Court otherwise directs, a proportionate part only of the income of each fund shall be so paid or applied.
…
Sub-section (2) outlines the power of a trustee to accumulate and invest trust income while the beneficiary is a minor.
Section 38 outlines the power of a trustee to apply the capital of a trust for the benefit of a beneficiary:
(1)Where under a trust a person is entitled to the capital of the trust property or any share thereof, the trustees, in such manner as they in their absolute discretion think fit, may from time to time out of that capital pay or apply for the maintenance education advancement or benefit of that person, an amount not exceeding in all $2000 or half that capital (whichever is the greater) or with the consent of the Court an amount greater than that amount.
(2)The power conferred by this section may be exercised whether the person is entitled absolutely or contingently on his attaining any specified age or on the occurrence of any other event, or subject to a gift over on his death under any specified age or on the occurrence of any other event, and notwithstanding that the interest of the person so entitled is liable to be defeated by the exercise of a power of appointment or revocation, or to be diminished by the increase of the class to which he belongs.
(3)The power conferred by this section may be exercised whether the person is so entitled in possession or in remainder or reversion.
(4)If the person is or becomes absolutely and indefeasibly entitled to a share in the trust property, the money so paid or applied shall be brought into account as part of that share.
…
These provisions apply only in so far as a contrary intention is not expressed in the trust deed or instrument. Section 2(3) of the Act provides that:
(3) This Act, except where otherwise expressly provided shall apply to trusts including, so far as this Act applies thereto, executorships and administratorships constituted or created either before or after the commencement of this Act.
The powers and discretions conferred and the duties imposed on, and the directions given and indemnities immunities and protection allowed to, trustees and other persons by this Act shall be in addition to the powers discretions duties directions indemnities immunities and protection set out in the instrument (if any) creating the trust, but the powers discretions duties and directions provided for in this Act, unless otherwise stated, shall apply if and so far only as a contrary intention is not expressed in the instrument (if any) creating the trust, and shall have effect subject to the terms of that instrument.
The trustee’s statutory powers to apply the income and capital of the trust are therefore enlivened in situations where the trust deed is silent as to the question, or where the trust deed specifically states that the statutory provision applies.[27]
[27]Re Delamere’s Settlement Trusts; Kenny v Cunningham-Reid [1984] 1 All ER 584, 587 (Slade LJ), 592 (Waller LJ).
Applications under the Trustee Act
Section 48 of the Trustee Act provides:
Power of the Court to appoint new trustees
(1)The Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient difficult or impracticable so to do without the assistance of the Court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
In particular and without prejudice to the generality of the foregoing provision, the Court may make an order appointing a new trustee in substitution for a trustee who is convicted on indictment of any offence, or is a patient within the meaning of the Mental Health Act 2014, or is a bankrupt, or is a corporation which is in liquidation or has been dissolved.
(2)Nothing in this section gives power to appoint an executor or administrator.
In McNee v Lachlan McNee Family Maintenance Pty Ltd[28] Moore J summarised the meaning and application of this provision, noting that:
[28][2020] VSC 273.
(a) the reference to ‘expediency’ does not detract from the dominant concern for the welfare of the beneficiaries;[29]
[29]Ibid, [23].
(b) ‘expedient’ means:
conducive to advantage in general, or to a definite purpose; fit, proper, or suitable to the circumstances of the case … In the context of appointing a new trustee in substitution for an existing one, I take it to mean then conducive to, or fit or proper or suitable having regard to, the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee...[30]; and
(c) there is no need to find misconduct on behalf of the trustee, lack of confidence in their further administration may be sufficient.[31]
[30]McNee v Lachlan McNee Family Maintenance Pty Ltd [2020] VSC 273, [24] citing Porteous v Rinehart (1998) 19 WAR 495, 507, citing Re Estate of Roberts (1983) 20 NTR 13, 17, referred to with approval by McMillan J in Re Cooper Street Property Trust [2016] VSC 756, [87].
[31]Ibid, [25] citing Miller v Cameron (1936) 54 CLR 572, 575 (Latham CJ), 582 (Dixon J).
Under the common law, the court has power to allow a trustee to retire from their office.[32]
[32]Re Phillips (1879) 5 VLR (E) 274 (Molesworth J); Mann v Grantham [2004] VSC 156 (Byrne J).
There are separate statutory provisions for the discharge and removal of an executor who desires to be discharged from their office.[33]
[33]Administration and Probate Act 1958 (Vic) s 34(1)(b).
The plaintiff also seeks to vary the Will pursuant to s 63A of the Trustee Act, which provides:
Power of Court to vary trusts
(1)Where property, whether real or personal, is held on trusts arising, whether before or after the commencement of this Act, under any will settlement or other disposition, the Court may if it thinks fit by order approve on behalf of—
(a)any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of minority or other incapacity is incapable of assenting; or
(b)any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class (as the case may be) if the said date had fallen or the said event had happened at the date of the application to the Court; or
(c)any person unborn; or
(d)any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined—
any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees or managing or administering any of the property subject to the trusts:
Provided that except by virtue of paragraph (d) of this subsection the Court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.
A s 63A arrangement can only be approved by a court where it would benefit those who cannot consent to the variation.[34] In Re Remnant’s Settlement Trusts Pennycuick J noted that the court must be ‘further satisfied that the arrangement is in its nature a fair and proper one.’[35] The task for the court was described by Ungoed-Thomas J in Re Van Gruisen’s Will Trusts, Bagger v Dean as follows:
The court is concerned whether the arrangement as a whole, in all the circumstances, is such that it is proper to approve it. The court’s concern involves, inter alia, a practical and business-like consideration of the arrangement, including the total amounts of the advantages which the various parties obtain, and their bargaining strength.[36]
[34]George v Kollias [2007] VSC 46, [41] (Hansen J).
[35][1970] 1 Ch 560, 565.
[36][1964] 1 All ER 843, 844 (Ungoed-Thomas J).
This Court has held that one relevant, but not determinative consideration is the extent to which the variation alters the intended position of the testator.[37] Another relevant factor is the cost of administering the trust.[38]
[37]George v Kollias [2007] VSC 46 [51], [68].
[38]Ibid, [62]-[63] (Hansen J).
In W E Pickering Nominees Pty Ltd & ors v Pickering & ors[39] McMillan J considered an application under s 63A to vary the trust deed such that the class of beneficiaries would be expanded. After summarising the relevant case law and legislative history of the provision, McMillan J noted:
The emphasis throughout the case law examined, as well as in the extraneous materials and in the wording of s 63A itself, is upon the interests of beneficiaries, or potential beneficiaries, who are incapable of providing their own consent to variations that could affect them. In this instance, there remain potential unborn beneficiaries who are not capable of consenting to the proposed variations to the deed, in particular, the proposed variation to expand the class of beneficiaries of the trust. The plaintiffs did not address the question of whether this proposed variation would adversely affect the interests of any potential unborn beneficiaries in the trust. Although the litigation guardian of the two minor defendants has stated that she would not act contra to their interests, this does not account for any potential unborn beneficiaries.[40]
[39][2016] VSC 71.
[40][2016] VSC 71 [57] (McMillan J).
Justice McMillan held that, as the proposed variation would substantially expand the pool of beneficiaries and thereby dilute the proportion of assets to be distributed to each beneficiary and potential beneficiary, it was not appropriate to approve the variation.
In the Queensland Supreme Court case of In Re Ritchie’s Will Trusts[41] Helman J considered an application under the equivalent Queensland provision. The will created a trust whose class of beneficiaries remained open for 20 years from the date of the testator’s death if any of the five children of the testator had further children in that 20 year period. That is, the class could not close while the children remained capable of producing heirs. The executors and living beneficiaries of the will brought an application by consent to vary the term to close the class 30 days after the date of the testator’s death. As at the date of the application each of the testator’s children had children and asserted that he or she would have no further children. Two had undergone vasectomies, and the other three indicated that they did not intend to have further children. The grandchildren of full age did not object to the application.
[41][2005] QSC 81 (Helman J).
Justice Helman held that he could not discount the impact on any unborn grandchildren of deeming the class of beneficiaries to have already closed. They would necessarily be denied any entitlement under the trust. It was not sufficient that there was evidence before the court of the current intention of the testator’s children not to have further children, however honestly held that belief was. As Helman J reflected, such intentions ‘are notoriously subject to change with changed circumstances - and, I should add, such events are notorious for occurring unexpectedly, even with no change of mind.’[42] The variation application was rejected.
[42]Re Ritchie’s Will Trusts [2005] QSC 81, [11].
Analysis
Who is eligible to be considered within the class of beneficiaries?
Both parties submitted that the phrase ‘survive me’ in cl 9 of the Will includes great-grandchildren unborn at the time of the deceased’s death (ie, that the phrase has its secondary meaning). While this construction issue was not in dispute, it still falls to the Court to be satisfied of the correctness of that interpretation, having regard to the words of the clause, the Will as a whole, and the surrounding circumstances of its execution.
As in Re Lapalme,[43] the phrase ‘survive me’ in the Will is ambiguous, when read in the context of the testator’s familial circumstances. The deceased only had one great-grandchild at the date of the Will. Clause 9 is stated to benefit the deceased’s ‘great-grandchild or great-grandchildren’ who ‘survive [her]’. The $1,000,000 is to be divided amongst them in ‘equal shares’ ‘if more than one’. The use of the plural clearly anticipates and provides for the prospect of biological great-grandchildren as yet unborn at that time. Similar language is adopted in cl 11, which bequeaths the residuary of the estate to the defendant or, if he is not alive at the time, to his ‘biological child or children … (being my great-grandchildren [sic] or grand-children)’.
[43]See [64]-[65] of that judgment.
Thus, it is clear that cl 9 is not intended to be limited to great-grandchildren alive at the time the Will was executed. However, it is unclear whether the deceased intended to extend the class to: those of her great-grandchildren not yet born at the date of the Will but born before her death (by adopting the natural meaning of ‘survive’ as to ‘outlive’); or all of her great-grandchildren born before or after her death who satisfy the other class criteria (by adopting the secondary meaning of ‘survive’ as ‘live after’). Giving the phrase its natural meaning, cl 9 would benefit only Nathaniel Hunt, being the only great-grandchild alive at the time of the deceased’s death, and exclude any great-grandchildren not born at that time, thereby excluding Matilda Hunt and the defendant’s future children (if any).
The phrase ‘survive me’ is used in cl 11 of the Will (in addition to cl 9), which distinguishes this case from Re Lapalme, where the clause in question was the only clause that used the term ‘survive’. In cl 11 of the Will, the phrase ‘survive me’ unambiguously refers to the defendant outliving the deceased. The same clause also refers to the scenario where the defendant dies ‘leaving a biological child or children’ and describes such child or children as ‘the survivor of my said grandson son dying’ (emphasis added). ‘Survivor’ might be argued to have its ordinary meaning, particularly given its use together with the word ‘leaving’.
However, I do not consider that the ordinary use of ‘survive’ in cl 11 necessarily means that the same use was intended in cl 9. This is because cl 11 contemplates fundamentally different familial relationships between the ‘surviving’ parties as compared to cl 9:
(a) the phrase ‘survive me’, as it relates to the deceased and the defendant in cl 11, could only have its ordinary meaning as both parties were alive at the time the Will was executed; and
(b) the phrase ‘survivor’, as it relates to the defendant and his children in cl 11, is necessarily narrower than the equivalent concept in cl 9, given that the defendant could not father further children after his death. However, even then, a departure from the ordinary meaning of ‘survivor’ might be warranted to accommodate conceived but unborn children at the time of the defendant’s death (a question which does not fall for determination in this proceeding).
What this analysis demonstrates is that proper construction of the term ‘survive’ requires consideration of the particular relationship(s) in question, and that rigidly applying a uniform meaning throughout the Will risks distorting the testator’s intention in respect of some of those relationships.
The deceased’s imposition within cl 9 of a second hurdle for potential beneficiaries to overcome also suggests that the class was not intended to close with her death. As in Re Lapalme and McGrath v Hughes the fact that potential beneficiaries must satisfy the definition of ‘biological great-grandchildren’ and attain the age of 30, when considered in light of the surrounding circumstances, is itself suggestive that the deceased intended the secondary meaning of ‘survive’ in cl 9.
It is appropriate that I have regard to the surrounding circumstances, in accordance with the armchair principle. Before I do so, it is important to address the question of the admissibility of extrinsic evidence going not to context, but to the deceased’s specific testamentary intentions. The parties relied on the affidavit of Ms Hayley Hunter, who drafted the Will based on instructions from the deceased. Ms Hunter deposes that she did not believe that the deceased had turned her mind to the possibility that the defendant could continue to father children until he died. It was her view that the deceased wanted to benefit Nathanial Hunt and any children he would have with his partner ‘in the forthcoming, but approaching, years’.[44] The defendant also deposes that the deceased reported to him on 12 November 2014 that she was going to set up a trust fund for his son.
[44]Affidavit of Hayley Hunter sworn 8 September 2021, [5(i)].
As per ss 36(1) and (2) of the Wills Act, such ‘evidence of the testator's intention’ is not admissible unless the language of the Will is ‘meaningless’, or uncertain or ambiguous on its face. I am not satisfied that is the case. I am also not satisfied that common law principles would enable me to have regard to it. Regardless, it is not clear how such evidence would assist in identifying which of the two available meanings the deceased intended.
However, I can, and did have regard to the evidence of:
(a) the age of the defendant at the time of death, and real possibility of having more children;
(b) the number of grandchildren alive at the date of the Will;
(c) evidence of the discussion between the defendant and the deceased about whether or not the defendant would have more children; and
(d) the deceased’s stage of life and health when executing the Will.
While the deceased’s date of birth was not in evidence, I am satisfied that she was an elderly woman when executing her Will. Helmut Fuhrmann deposes that he acted on her behalf under a financial power of attorney.[45] As at the date of the Will the deceased’s daughter-in-law was 63 years old, the deceased’s grandson, the defendant, was 33 years old and had one child, Nathanial Hunt, who was 22 months old. By the time of the deceased’s death, the defendant was 37 years old with a five year old son. There was no evidence before me about the defendant’s relationship status at the date of the Will or the deceased’s death. The defendant is currently 40 years old. His son is now eight years old. He has a 10-month-old biological daughter, Matilda Hunt, to his new partner and fiancé, Lauren Sutherland.
[45]Affidavit of Helmut Fuhrmann sworn 15 September 2021.
The deceased was aware of the defendant’s relative youth. In keeping with other cases where the potential bearer of beneficiaries was still of child-rearing age, and given the late stage of her life in which the deceased executed her Will, it is reasonable to infer that she anticipated that the defendant may father other biological children beyond her lifetime. This is highly suggestive that she did not intend to adopt the ordinary meaning of ‘survive’.
It is open to me under s 36 of the Wills Act to have regard to evidence of the deceased’s knowledge about the defendant’s childrearing intentions to assist in the interpretation of words in the Will that are uncertain or ambiguous in light of surrounding circumstances. I am satisfied that such evidence is admissible.[46] It was Ms Hunter’s evidence that the deceased told her that she anticipated that the defendant might have another child in the ‘near future’.[47]
[46]Corda v Davey [2000] VSC 27; Re Andrews [1985] 2 Qd R 161.
[47]Affidavit of Hayley Hunter sworn 8 September 2021, [5(d)].
This impression was formed by the deceased after, and likely in spite of, conversations that the deceased deposes to have had with the deceased prior to the Will being executed, where he informed her that he ‘did not want to have any more children’ and that he ‘wouldn’t be fathering any more children’.[48] The express contemplation of great-grandchildren (plural) in cl 9 is also inconsistent with the deceased having formed the view that the defendant would not father another child. For these reasons, this case should be distinguished from McDonald J’s decision in Corda v Davey, where the testator’s son had made it clear to his father that he did not intend to have any more children and the natural meaning of ‘survive’ was adopted.
[48]Affidavit of Matthew Alec Hunt sworn 28 October 2020, [5].
Looking at the Will as a whole and taking account of the circumstances at the time of its execution, I am satisfied that the deceased did not intend the capricious impact of giving the phrase ‘survive me’ its natural meaning. I find that all biological great-grandchildren of the deceased born either before or after her death who attain the age of thirty years are entitled to an equal share of the $1,000,000, subject to my findings below on the closure of the class of beneficiaries.
When does the class of beneficiaries close?
Having accepted that the class of beneficiaries is not defined by reference to the deceased’s death, the class must close by reference to some other event. The deceased’s intention to vest her great-grandchildren’s interest when they each turn 30 conflicts with her intention to provide for the biological children of the defendant born after his eldest child turns 30. The parties were in agreement that the rule of convenience has clear application here, and enables me to read cl 9 as follows:
I give the sum of one million dollars ($1,000,000) to such biological child or children of my said grandson Matthew Alec Hunt (being my great-grandchild or great-grandchildren) as survive me and if more than one in equal shares upon the eldest of my great-grandchildren attaining the age of thirty (30) years.
Trustee power to use funds prior to distribution
The plaintiff sought clarification as to whether she could apply the capital and/or income of the trust for the education and maintenance of any of the deceased’s great-grandchild before the trust funds vest in the beneficiaries and are distributed.
The position under ss 37 and 38 of the Trustee Act is uncontroversial and allow for application of trust income and up to 50 per cent of trust capital for these purposes. Additionally, cl 14 (e) of the Will expressly empowers the plaintiff, as executor:
to use the whole or any part of the capital and income of the expectant or contingent share of any beneficiary for his or her maintenance, education, support, advancement in life or benefit and to pay the same to the parent or guardian of any minor beneficiary without being responsible for its application.
The Will clearly states that the ‘whole or any part of the capital’ can be used. Such wording indicates a clear intention to exclude the 50% statutory cap on the use of trust capital for such purposes. Pursuant to s 2(3) it is the Will that overrides s 38 of the Trustee Act.
Application to replace the trustee
By consent the plaintiff seeks to be removed as trustee and replaced by Equity Trustees. By email to the Court on 5 October 2021 the plaintiff provided a copy of a letter from Equity Trustees consenting to their appointment as trustee under cl 9 of the Will.
In her affidavit sworn on 20 August 2020 the plaintiff deposes that she wishes to be replaced by a professional trustee company in light of:
(a) her age;
(b) the fact that the trustee administration will continue for a number of years;
(c) the professional trustee company’s expertise in investment and taxation; and
(d) the possibility that any other natural person appointed as trustee may become unwilling or unable to act, causing further cost, delay and stress.
Counsel for the defendant also noted that the plaintiff was the substitute executor under the Will, the defendant having renounced the role prior to the grant of probate.
The plaintiff is now 70 years’ old. As the Will is currently worded, she is required to manage the $1,000,000 for the benefit of the deceased’s great-grandchildren until Nathanial Hunt turns 30, which is just over 21 years away. Even if the Will were to be varied as the plaintiff seeks, as addressed below, her trustee duties would continue for at least ten years. It is appropriate, having regard to the defendant’s consent and the proposed replacement trustee, the interests of the deceased’s great-grandchildren, the security of the trust monies, and the efficient, sound and faithful exercise of trustees powers, especially of investment and management of trust funds, that the plaintiff be discharged from her role as trustee, and replaced by Equity Trustees.
Application to vary the Will
The plaintiff seeks an order under s 63A of the Trustee Act varying cl 9 of the Will. By the amended OM filed on 22 September 2021 the plaintiff seeks to alter the age at which any great-grandchild can receive a vested interest in the trust from 30 years of age to 18 years of age, or if that is not approved by the Court, to some other age below 30.
The plaintiff submits that she seeks to reduce ‘the age of the beneficiaries who are born at the time of this application’.[49] However, I am obliged to consider all persons who cannot consent to the variation when determining the application.[50] That necessarily includes not only Nathanial and Matilda Hunt but also any unborn children of the defendant who may be born prior to the class closing, namely, when the eldest great-grandchild attains the age of 30 years.[51]
[49]Plaintiff’s written submission dated 18 September 2021, [29].
[50]George v Kollias [2007] VSC 46 [41] (Hansen J).
[51]See Trustee Act s 63A(1)(c).
The plaintiff submits that decreasing the age of eligibility from 30 to 18 would be beneficial because:
(a) it would maximise the trust monies available to be distributed to beneficiaries by reducing the considerable expense of professional trustee fees which are paid out of the trust funds; and
(b) it would enable the beneficiaries to use their funds to purchase a house or set up a business.
The defendant supported the application in principle, but proposed that the age be varied to 25 and not 18 years. In addition to the above, the defendant noted that the variation would enable the beneficiaries to use their funds to:
(a) repay education debts; and
(b) choose to manage their own funds, in lieu of Equity Trustees.
Counsel for the defendant also submitted that the deceased did not anticipate that it would be necessary to appoint a professional trustee who charged fees, and opined that had she been aware that the pool of money available to the beneficiaries would be so depleted by fees she may well have specified an age of 25 rather than 30 years. Having determined that it is appropriate that Equity Trustees be substituted as trustee, it is appropriate, in my view, to take into to account the substantial fees that will be charged in the 21 years which will elapse between now and the closing of the class, upon Nathanial Hunt turning 30.
It was the defendant’s view that varying the age to 25 better gives effect to the deceased’s clear intention to delay the vesting of a beneficiary’s interest to enable them to, in counsel for the defendant’s words, ‘have attained a sufficient degree of emotional and intellectual maturity before he or she received a large sum of money in the hope that it was not squandered or frittered away.’[52] Ms Hunter deposes that she advised the deceased of her usual practice of recording 18 or 21 as a qualifying age, and that the deceased chose to depart from that standard.[53]
[52]Defendant’s written submission dated 16 September 2021, [22].
[53]Affidavit of Hayley Hunter sworn 8 September 2021, [5(e)-(i)].
Although it was not raised by either party, I am required to consider the impact on any unborn great-grandchildren, even if the likelihood of their coming into existence is low. There was no evidence before me as to the defendant’s present intention about fathering further children, and future childrearing is necessarily uncertain. The proposed variation has the capacity to increase each great-grandchild’s share of the total fund relative to each other, given that it reduces the period of time in which the defendant may have further great-grandchildren who fall within the class. I must weigh this impact on Nathanial, Matilda, and the unborn children of the defendant who might be born before the eldest living great-grandchild reaches the proposed age of 18 or 25, with the interests of unborn children of the deceased who might be born later than that date, and thus become disentitled to any interest under cl 9 of the Will by virtue of this variation.[54]
[54]Thomas Hare Investments v Hare (2012) 34 VR 656, 666 [39] (Habersberger J); W E Pickering Nominees Pty Ltd & ors v Pickering & ors [2016] VSC 71 [56]; In Re Ritchie’s Will Trusts [2005] QSC 81 (Helman J), [11].
Although varying the age would disentitle yet unborn beneficiaries, the number of those potential beneficiaries affected can be minimised if the age of 25 is chosen, instead of 18. The benefits to those who currently, and may in future, fall within such a class outweigh the possible exclusion of a small number. Critically, it will reduce the extent to which their funds are depleted through trust management fees. Selecting 25 as the age of entitlement also better aligns with the deceased’s demonstrated concern to ensure that the beneficiaries have entered adulthood and gained some maturity before the distribution is made.
I am satisfied that it is appropriate to approve the arrangement which would vary the trust established by cl 9 of the Will made by substituting the age of 25 years for the age of 30 years.
Costs
The plaintiff and the defendant sought their costs, and that such costs be paid from the estate on an indemnity basis.
The defendant was joined to this proceeding in order for the Court to have an interlocutor. The defendant‘s counsel submitted that the defendant’s legal representatives had done a significant amount of pre-trial work.
As at 17 September 2021 the balance of estate funds held in the plaintiff’s solicitor’s trust fund was $1,086,736.15.[55] That balance would allow the payment of $1,000,000 for the great-grandchildren’s benefit and the remainder would be available for costs.
[55]Affidavit of Charlotte Brown sworn 17 September 2021, [3].
The plaintiff’s summons dated 21 September 2020 identified approximately 23 questions that the plaintiff wanted the Court to answer. In the amended OM this was narrowed to eight questions. As discussed by the time of the hearing the questions were further reduced, and to a large part the questions adopted the structure proposed by the defendant in his submissions
There were four affidavits filed by the defendant, critically, the affidavit of Hayley Hunter.
While the parties addressed me in submissions on the construction of clauses containing class gifts, there were no submission on the construction of the critical phrase ‘survive me’ in cl 9 of the Will.
I accept that the defendant’s significant preparation of the case was necessary due to the inadequate framing of the questions in the summons and general preparation of the case by the plaintiff. I consider the defendant should have his costs paid from the trust on an indemnity basis. As for the plaintiff’s costs, I accept that the application was necessary and appropriate. However, unnecessary costs have been incurred by the defendant, in effect, filling in the gaps for the plaintiff. As such, I consider the plaintiff should have her costs paid from the estate but on a standard basis not an indemnity basis.
Orders
The Court answers the questions, as narrowed by the amended OM and in oral submissions, as follows:
Question 1On its proper construction should cl 9 be construed to only apply to great-grandchildren alive as at the date of the deceased’s death?
AnswerNo.
Question 2If no to question 1, on its proper construction should cl 9 be construed to apply to all great-grandchildren of the deceased born before the first great-grandchild reaches the age of 30 years so that the class of beneficiary closes when the first great-grandchild reaches 30 and all great-grandchildren who are at that time members of that class only receive a share if and when each one turns 30?
AnswerClause 9 applies to all great-grandchildren of the deceased born before the eldest great-grandchild reaches the age of 30 years.
The class of beneficiaries closes when the eldest great-grandchild reaches the age of 30 years. At that time the trust monies will be distributed to all great-grandchildren then alive regardless of their age.
Question 3If no to questions 1 and 2, on its proper construction should cl 9 be construed to apply to all children of the great-grandchildren of the deceased born at any time during the defendant’s lifetime?
AnswerNot applicable.
Question 4If yes to question 3, how is the trustee of the trust provided for in cl 9 obliged to administer the trust given that it is possible that the defendant may father children after his first child turns 30?
AnswerNot applicable.
Question 5Can the trustee of the trust apply the capital and/or income of the trust to the education and maintenance of any great-grandchild before the great-grandchild turns 30?
AnswerYes, in accordance with these reasons.
I also make the following orders:
(a) The plaintiff has leave to file and serve an amended originating motion in the form emailed to the Court on 20 September 2021 forthwith;
(b) Pursuant to s 63A(1)(a) of the Trustee Act 1958 (Vic) the Court approves a variation to the trust established by clause 9 of the Will made by Betty May Hunt on 6 October 2014 by substituting the age of 25 years for the age of 30 years;
(c) Pursuant to s 48 of the Trustee Act 1958 (Vic) Equity Trustees Limited and Equity Trustees Wealth Services Limited is appointed trustee of the estate of Betty May Hunt in substitution for Charlotte Brown;
(d) The defendant’s costs of the proceeding are to be paid out of the estate of Betty May Hunt on an indemnity basis; and
(e) The plaintiff’s costs of the proceeding are to be paid out of the estate of Betty May Hunt on a standard basis.
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