D H, Re Will of W v Perpetual Trustees Tasmania Limited

[1998] TASSC 83

83/1998

PARTIES:  D H, In the Matter of the Will of

W

v
PERPETUAL TRUSTEES TASMANIA LIMITED

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  M 300/1997
DELIVERED:  9 July 1998
HEARING DATE/S:  5 May 1998
JUDGMENT OF:  Cox CJ
CATCHWORDS:

Succession - Wills, probate and administration - Construction and effect of testamentary dispositions - Generally - Various other conditions - Right of beneficiary absolutely entitled to call for transfer of aliquot share notwithstanding prohibition in will on transfer of estate's interest in lottery business - Whether prohibition extended to aliquot share - No danger that transfer of one share would reduce value of shares of others entitled.

Saunders v Vautier (1841) Cr & Ph 240; 41 ER 482; Gosling v Gosling (1859) Johns 265; 70 ER 423; In re Marshall;Marshall v Marshall [1914] 1 Ch 192, applied.
McCulloch v Anderson [1904] AC 55, distinguished.
Aust Dig Succession [212]

Succession - Wills, probate and administration - Construction and effect of testamentary dispositions - Generally - Condition, forfeiture and gift over - On disputing will or bringing action against trustees.

In the Will of Gaynor, deceased [1960] VR 640, followed.
Aust Dig Succession [210]

REPRESENTATION:

Counsel:
             Applicant:  A M Blow QC
             Respondent:  T G Bugg
Solicitors:
             Applicant:  Glade-Wright & Mahindroo
             Respondent:  Dobson Mitchell & Allport

Judgment category classification:
Court Computer Code:  
Judgment ID Number:  83/1998
Number of pages:  4

Serial No 83/1998
File No M 300/1997

IN THE MATTER OF THE WILL OF D H
W v PERPETUAL TRUSTEES TASMANIA LIMITED

REASONS FOR JUDGMENT  COX CJ

9 July 1998

By his will dated 16 March 1901, George Adams, the "Conductor of the Tattersall Sweep Consultation" gave and bequeathed to his trustees:

"… All that my business so as aforesaid carried on by me at Hobart aforesaid under the style or name of the 'Tattersall Sweep Consultation, care of George Adams'  And all my estate and interest therein  And the Goodwill thereof  And all moneys credits office furniture fixtures and fittings effects and personal estate used or employed in connection with my said business"

and authorised them to carry on that business.  He then directed his trustees:

"… to stand possessed of the net profits which may arise from the carrying on and continuance of my said business under the power for that purpose hereinbefore given Upon Trust to pay the same to the persons and for the purposes hereinafter named and mentioned in the following proportions".

He then bequeathed a one-tenth share of that income to one "H".  In his lifetime, H assigned a fractional part of his one-tenth share to his daughter "D H" (the testatrix).

By her will dated 20 June 1966, the testatrix appointed the respondent company her trustee and executor, and after certain specific legacies, devised and bequeathed the rest and residue of her estate for conversion, subject as therein mentioned, into a trust fund to be divided into four equal parts.  The income of one such part was to be paid to a female relative during her lifetime and upon her death, that part was to revert to the trust fund and be divided and accrue equally to the other parts of the trust fund in relation to which the trusts were still subsisting.  This beneficiary has since died.  The second part was to be divided between the children of a named brother on their attaining twenty-one years of age.  The third part was similarly disposed of to the children of another named brother.  The applicant is one of the four children of that brother.  The fourth part was to be held upon trust to pay the income to yet another brother during his lifetime and on his death to be divided between his children.

By cl 7 the testatrix provided:

"7I DECLARE that my Trustee shall not sell or alienate or part with my interest in the business of Tattersalls Sweep Consultations conducted by the Trustees of the Estate of the late George Adams deceased but shall retain possession thereof during the whole period the same shall be in existence NOTWITHSTANDING any express prohibition as to the sale of my interest in Tattersalls Sweep Consultation hereinbefore contained I EMPOWER my Trustees to concur at their discretion in any scheme or arrangement for reconstruction or carrying on the business of Tattersalls Sweep Consultations either in the State of Victoria or elsewhere and either under its present name or otherwise and to concur with the Trustees for the time being of the said George Adams' estate in carrying out any of the matters aforesaid or any matters which the Trustees of that Estate shall deem expedient or desirable for the efficient carrying on of the said Sweep Business either in the State of Victoria or elsewhere as fully and effectually in all respects as if my Trustee were the absolute owners thereof."

By cl 8 she provided:

"8AND I DECLARE that any person attempting to upset any provision of this my will shall be divested of any share in my Estate which they would have otherwise taken under this my will and for this purpose I GIVE my Trustee absolute power to so divest any person attempting to upset this my will."

The originating application asks the following questions:

"1Whether the direction contained in clause 7 of the will of the late D H dated 20th June 1966 that the trustee thereof 'shall not sell or alienate or part with my interest in the business of Tattersalls Sweep Consultations conducted by the Trustees of the Estate of the late George Adams deceased but shall retain possession thereof during the whole period the same shall be in existence' prohibits the trustee from assigning to a beneficiary who is under no legal disability, and who has requested such an assignment, his or her vested fractional or aliquot share of the late D H's interest in the business known as Tattersalls Sweep Consultations.

2         Whether clause 8 of the will of the late D H is void.

3If no to question 2, whether the issue of proceedings by the Applicant seeking an order requiring the Respondent to assign to her her fractional or aliquot share of the said deceased's interest in the said business would amount to attempting to upset a provision of the will of the deceased within the meaning of the said clause 8."

The evidence is that since the death of the testatrix in 1968, the applicant has been receiving regular quarterly distributions of her fractional share of Tattersalls' income from the respondent, which divides and remits distributions received from the trustees of George Adams' estate.  Since about 1994, however, the latter trustees have introduced a system whereby distributions from Tattersalls are no longer paid by cheque and can easily be transferred to the nominated bank account of a beneficiary.  The applicant has applied to the respondent to assign her fractional share to her so that distributions may be made directly to her by George Adams' trustees rather than through the respondent.  There will be a resultant termination of the respondent's right to a commission on the income distributed to her by it.  In an affidavit by Mr Simon Doyle, General Counsel for the trustees of the estate of George Adams, he deposes to holding the opinion that D H's interest in the business is readily divisible and that if her fractional share in the testatrix's interests in the business is assigned to her, that will not lead to a reduction in the value or worth of the other beneficiaries' fractional shares in the testatrix's interest in the business in the event that those other beneficiaries choose not to seek an assignment of their share or shares.  He does not believe that there would be any financial detriment to the other beneficiaries if the applicant seeks an assignment of her fractional share.

The applicant contends that upon its true construction, cl 7 prohibits not the transfer of a fractional interest to a beneficiary who is sui juris, but rather the disposal of the entirety of the testatrix's share in the Tattersalls business to a stranger.  In the alternative, it is argued that a prohibition upon the transfer of the interest to a beneficiary in whom that interest is absolutely vested offends the principle laid down in Saunders v Vautier (1841) Cr & Ph 240; 41 ER 482 and is therefore void. The fact that such a prohibition did offend that rule, if that be the case, would be an added reason for interpreting the clause in such a way that it did not produce that result.

That rule has been stated in these terms:

"Where there is an absolute vested gift with a direction to accumulate the income for a certain time and then to pay the original sum with the accumulations, the beneficiary, if of full age and capable of giving a valid discharge, may require payment without waiting until the lapse of the appointed time."  (Jacobs, Law of Trusts in Australia, 6 edn, par956.)

This was reaffirmed in Gosling v Gosling (1859) Johns 265; 70 ER 423 and in Wharton v Martin (1895) AC 186. In In re Marshall;Marshall v Marshall [1914] 1 Ch 192, it was recognised that beneficiaries absolutely entitled might, in some circumstances, be unable to insist upon the transfer to them of their interest in assets in which others had an interest. At 199, Cozens-Hardy MR said:

"Speaking generally, the right of a person, who is entitled indefeasibly in possession to an aliquot share of property, to have that share transferred to him is one which is plainly established by law.  There is also another case which is equally plain and established by law, that where real estate is devised in trust for sale and to divide the proceeds between A, B, C, and D - some of the shares being settled and some of them not - A has no right to say 'Transfer to me my undivided fourth of the real estate because I would rather have it as real estate than personal estate.'  The Court has long ago said that that is not right, because it is a matter of notoriety, of which the Court will take judicial notice, that an undivided share of real estate never fetches quite its proper proportion of the proceeds of sale of the entire estate; therefore, to allow an undivided share to be elected to be taken as real estate by one of the beneficiaries would be detrimental to the other beneficiaries.  But that doctrine, it seems to me, has no application, apart from special circumstances, to personal property.  It may apply to a case of a mortgage debt which you cannot conveniently split up into shares; but when you are dealing with the case of a limited company with ordinary and preference shares, you want to know a great deal more than that before you can say that the trustees are entitled to deprive an absolute owner of his right to claim a transfer."

In Stephenson v Barclays Bank [1975] 1 All ER 625, Walton J said at 637:

"Now it is trite law that the persons who between them hold the entirety of the beneficial interests in any particular trust fund are as a body entitled to direct the trustees how that trust fund is to be dealt with". 

Later, at the same page and that following, he said:

"So much for the rights of the beneficial interest holders collectively.  When the situation is that a single person who is sui juris has an absolutely vested beneficial interest in a share of the trust fund, his rights are not, I think, quite as extensive as those of the beneficial interest holders as a body.  In general, he is entitled to have transferred to him (subject, of course, always to the same rights of the trustees as I have already mentioned above) an aliquot share of each and every asset of the trust fund which presents no difficulty so far as division is concerned.  This will apply to such items as cash, money at the bank or an unsecured loan, stock exchange securities and the like.  However, as regards land, certainly, in all cases, as regards shares in a private company in very special circumstances (see Re Weiner's Will Trusts [1956] 2 All ER 482, [1956] 1 WLR 579) and possibly (although the logic of the addition in facts escapes me) mortgage debts (see Re Marshall (supra), [1911-13] All ER 671 at 674 per Cozens-Hardy MR) the situation is not so simple, and even a person with a vested interest in possession in an aliquot share of the trust fund may have to wait until the land is sold, and so forth, before being able to call on the trustees as of right to account to him for his share of the assets."

Another instance in which the right to call for a transfer of an aliquot share in income was successfully resisted is McCulloch v Anderson [1904] AC 55 where there was a risk that by doing so, other beneficiaries would be prejudiced by a premature distribution of portion of the estate.

In the present case, it is clear from the affidavit of Mr Doyle filed by the respondent that no such considerations arise.

I accept the argument that if the beneficiaries are all sui juris and call for a transfer of their respective interests, the rule in Saunders v Vautier would require the respondent trustee to comply with their request, notwithstanding the apparent prohibition in cl 7.  I further accept the argument that the proper construction of that clause is that what is contemplated by the prohibition is not the distribution of the estate's interest in the business to those sui juris and entitled to those parts which make it up, or the distribution of aliquot shares to those individual beneficiaries who apply for such a transfer, but rather, the disposition to the possible prejudice or disapprobation of the beneficiaries under the will of this estate's interest in the business.  But for the inclusion of such a clause, the trustee would have had the power, notwithstanding the disapproval of the beneficiaries or some of them, to sell the interest in its entirety and to distribute the realised proceeds.  The fact that a broad reading of the clause would result in its being capable of offending the rule in Saunders v Vautier reinforces my view that this was not the testatrix's intention.  I accordingly answer the first question in the negative.

Question 2 involves a consideration of cl 8 of the will.  Whether or not it is void is somewhat academic, as, even if it is not, I am of the firm view that the issue of proceedings by the applicant seeking an order requiring the respondent to assign to her the share she is entitled to in the business would not amount to an attempt to upset any provision of the will as asked in question 3.  The answer to question 1 demonstrates that on its true construction, there is no prohibition in the will against the respondent acceding to a request that the applicant's aliquot share be assigned to her.  In the event that the respondent declined to accede to that request and the applicant took proceedings to require it to do so, that would involve no attempt to upset the provision in cl 7 of the will which I have said is confined to a prohibition against the respondent disposing of the entirety of the testatrix's interest in the business to a stranger.  However, I accept the submission that cl 8 is void as being in terrorem and repugnant to the gifts bestowed under the will.  There is a line of authority that such a clause may be contrary to public policy if its object is to deter the beneficiary from having recourse to the courts in a matter such as a claim for provision under the Testator's Family legislation (see, eg, Lieberman v Morris (1944) 69 CLR 69; In re Chester, Deceased (1978) 19 SASR 247; and Shah v Perpetual Trustee Company (1981) 7 Fam LR 97) but I do not rely upon it as none of the beneficiaries named in the will would have had any right to make such a claim. However, where there is a gift which vests, as the applicant's clearly has, and there is no gift over in the event of forfeiture, it can be seen that the condition subsequent was merely imposed in terrorem and was repugnant to the gift and void.  I respectfully adopt the reasoning of O'Bryan J in In the Will of Gaynor, deceased [1960] VR 640 at 642.

I answer the questions asked:

Question 1       No.

Question 2       Yes.

Question 3       Unnecessary to answer.