Farrelly v Phillips

Case [2017] SASCFC 111

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Civil)

In the Estate of MONICA GERTRUDE FARRELLY (DECEASED)

FARRELLY v PHILLIPS & ORS

[2017] SASCFC 111

Judgment of The Full Court

(The Honourable Chief Justice Kourakis, The Honourable Justice Stanley and The Honourable Justice Nicholson)

30 August 2017

SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - CONSTRUCTION GENERALLY - PRINCIPLES OR RULES OF CONSTRUCTION - GENERALLY

SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - PARTICULAR TESTAMENTARY DISPOSITIONS - CLASS GIFTS

SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - PARTICULAR TESTAMENTARY DISPOSITIONS - CONTINGENCY INVOLVING DEATH - DEATH COUPLED WITH CONTINGENCY - DEATH OF PERSON IN TESTATOR'S LIFETIME AND SUBSTITUTION

This is an appeal from a decision of a judge of the Supreme Court regarding the proper construction of a will.

In issue is whether, upon proper construction of the will, the children of the first cousins of the testatrix take the share of the residuary estate their parents stood to inherit, should they have survived the testatrix. The judge found that they did not.

Whether the testatrix’s objective intention was simply to give her residuary estate to such of her first cousins who might happen to survive her, or whether she intended to distribute the residue of her estate to the first cousins who survived her and to the children of those first cousins who did not survive her.

Held per Stanley J, dismissing the appeal, Kourakis CJ agreeing:

1.  Clause 3(n) of the will is a class gift rather than a gift to individuals (at [53]).

2.  Clause 4 is a substitution clause. In this case substitution is only effected by clause 4 in respect of persons who are members of the class. The class prescribed in clause 3(n) is established as at the date of death of the testatrix. It follows that there is no effective substitution in respect to those first cousins who died before the testatrix (at [57]).

3.  Where a first cousin did not survive the testatrix, the potential share of that cousin is to be distributed amongst the first cousins who did survive, rather than any child or children of that cousin taking (at [57]).

Per Nicholson J (dissenting) at [74]:

1.  Clause 4 of the will applies to extend the operation of clause 3(n) to encompass surviving children of the testatrix’s first cousins who had died before the date of the will and who had died between the date of the will and the date of the testatrix’s death.

Supreme Court Civil Rules 2006 (SA) r 206; Administration of Justice Act 1982 (UK); Wills Act 1936 (SA), referred to.
In re Coleman and Jarrom (1876) 4 Ch D 165, applied.
Loring v Thomas (1861) 1 Dr & Sm 497, distinguished.
Marley v Rawlings [2015] AC 129; Phillips v McCabe & Ors [2016] SASC 27; Perrin v Morgan [1943] AC 399; Fairbairn v Varvaressos (2010) 78 NSWLR 577; Perpetual Trustee Co Ltd v Wright (1987) 9 NSWLR 18;

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Farrelly v Phillips [2017] SASCFC 111
Case
[2017] SASCFC 111
Decision Date

CaseChat Overview and Summary

This case concerned an appeal to the Full Court of the Supreme Court of South Australia, brought by a child of a first cousin of the testatrix who had predeceased her. The executor of the will, the first respondent, had sought the determination of questions arising in an action for administration, specifically concerning the construction of clauses 3(n) and 4 of the testatrix's will. The central dispute was whether the children of the testatrix's first cousins who had died before her were entitled to inherit a share of the residuary estate.

The legal issues before the court were: (1) whether clause 3(n) of the will, which described the beneficiaries of the residue as "those of the children of the deceased brothers and sisters of both my late mother and father who survive me," constituted a class gift; and (2) whether clause 4, which provided for a substitutionary gift to the children of a predeceased beneficiary, operated to include the children of first cousins who had died before the testatrix made her will. The court was required to determine the testatrix's intention regarding the distribution of her residuary estate in light of these clauses and the fact that some of her first cousins had predeceased her.

The court's reasoning focused on the precise language of the will and the principles of testamentary construction. It was held that clause 3(n) was indeed a class gift, as the beneficiaries were identified by a general description rather than by name. The court considered whether clause 4 acted as a true substitutionary clause, meaning it only applied to beneficiaries who were alive at the time the will was made and subsequently predeceased the testatrix, or whether it conferred an original gift on the children of predeceased beneficiaries. Drawing an analogy to cases such as *Christopherson v Naylor* and *Re McPherson*, the court concluded that clause 4 was a substitutionary clause that did not operate to include the children of first cousins who had died before the will was even made. The court found that the language of the will did not evince an intention to substitute the children of predeceased first cousins for their parents, particularly where those parents had died prior to the will's execution.

The appeal was dismissed. The court found that the testatrix's intention, as expressed in the language of the will, was to benefit only those first cousins who survived her, and that clause 4 did not extend this benefit to the children of first cousins who had already died before the will was made.

Orders

Orders of the court

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Background

Background to the litigation

The first respondent, Vikki Marie Phillips, as executor of the will, brought an application pursuant to 6SCR 206 seeking the determination of questions arising in an action for administration. For the purposes of this appeal the questions concerned the construction of clauses 3(n) and 4 of the will. At issue is whether, where the testatrix’s first cousins predeceased her, their children take the share of the residuary estate their parents stood to inherit. Factual background The testatrix was born on 16 April 1914. Her last will was made on 4 April 2003, just prior to her 89th birthday. She died a spinster on 19 June 2012 at Mallala in South Australia at the age of 98. Probate was granted to the first respondent on 2 November 2012. The testatrix’s estate was substantial, being valued in excess of $7 million at the time probate was granted. The testatrix was one of two children. Her sister and parents had died before she made her last will. Her sister died without issue. The testatrix had a large extended family. Her father had six siblings, five of whom had issue. Her mother had 11 siblings, four of whom had issue. The testatrix’s uncles and aunts had all died by the time she made her last will. Accordingly, at the time the testatrix made her last will her closest relatives were first cousins. Some of those cousins were alive, while others had died with issue. Before the trial judge, there was limited evidence of the testatrix’s state of knowledge of her extended family at the time she made her will, including whether she was aware of how many first cousins she had, their ages, whether they were still alive and, of those who had died, whether they had left issue. As I say, at issue before the judge, and on appeal, is whether children of the cousins of the testatrix who had predeceased her take under her will. The judge found they did not. The appeal is brought by a child of one cousin of the testatrix who had predeceased her, on behalf of that class of descendants excluded from the will by the construction adopted by the judge. The class of cousins who the judge found to be beneficiaries under the will did not seek to be heard on this appeal to keep amity in the family and reduce costs. The appeal turns on a short but difficult question of construction. It is convenient to commence with a consideration of the relevant terms of the will.The will I set out clauses 3 and 4 of the will:3.I GIVE the whole of my estate to my trustees UPON TRUST to sell call in and convert the same into money with power in their discretion to postpone such sale calling in and conversion for so long as they in their discretion think fit and after paying all my debts funeral and testamentary expenses TO HOLD the balance as follows:(a) AS TO the sum of TWENTY THOUSAND DOLLARS ($20,000.00) for my late sister’s step-daughter VIOLET MARTHA PHILLIPS of Unit 5 27 Daws Road Mitchell Park in the said State(b) AS TO the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) for the said VIKKI MARIE PHILLIPS if she survives me but if she has predeceased me then for her son COREY VICTOR PHILLIPS if he survives me and attains his majority(c) AS TO the sum of TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000.00) for the said COREY VICTOR PHILLIPS subject to him attaining the age of twenty five (25) years and until that time I direct my trustees that such sum shall be invested and the income arising therefrom may be paid to COREY for such purposes as my trustees in their absolute discretion think fit(d) AS TO the sum of TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000.00) for the said MARY FRANCES CAINS if she survives me but if she has predeceased me then in equal shares as tenants in common for those of her children JAMES and CHRISTINE who survive me and attain their majority(e) AS TO the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) EACH for those of the following who survive me(i)GERALD FREDERICK McCABE(ii)RAYMOND MICHAEL McCABE(iii)MAURICE JAMES McCABE(iv)JOSEPH DONALD McCABE and(v)CHRISTOPHER JOHN McCABEthe sons of my late mother’s brother FREDERICK(f) AS TO the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) for NICHOLAS McCABE the son of the abovenamed GERALD McCABE(g) AS TO the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) for TERRY JOHNSON if she survives me(h) AS TO the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) to be invested by my trustees for the purpose of applying both the capital and income at the discretion of my trustees for the up keep and maintenance of the family graves at Pinkerton Plains(i) AS TO the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) for ST MALACKYS CATHOLIC CHURCH at Mallala to be used for such general purposes of the Church as shall be approved by my trustees(j) AS TO the sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) for ST MARY’S CABRA SCHOOL at Clarence Park to be used for such general purposes as the trustees or directors thereof shall think fit(k) AS TO the sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) for XAVIER COLLEGE of Kentish Road Gawler Belt to be used for such general purposes as the trustees or directors thereof shall think fit(l) AS TO the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) for CALVARY HOSPITAL to be used for such general purposes as the trustees or directors thereof shall think fit(m) the sum of THREE THOUSAND FIVE HUNDRED DOLLARS ($3,500.00) to be set aside by my trustees for the purpose of contribution towards the funeral expenses of my friend KATHLEEN WILLIAMS if she survives meand(n) all the rest and residue in equal shares as tenants in common per capita for those of the children of the deceased brothers and sisters of both my late mother and father who survive me.4.IF any beneficiary under my will does not survive me or if it should be uncertain as to whether such beneficiary did survive me but leaves surviving a child or children who shall be living at the date of my death and attain majority I DIRECT that such child or children shall take and if more than one in equal shares as tenants in common the share under this my will which his her or their parent otherwise would have taken.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

STANLEY J
This is, to adopt the words of Adams J in Re McPherson,[51] a Christopherson v Naylor[52] case not a Loring v Thomas[53] case. In Re McPherson a testatrix gave the residue of her estate to “all my children who shall survive me in equal shares”, and directed that “if any of my children … shall predecease me leaving children him or her surviving … such children shall take and if more than one in equal shares the share to which his or her or their parent would have been entitled had he or she or they survived me”. One child of the testatrix died many years prior to the making of the will leaving surviving her son who also survived the testatrix. Adams J held that this grandson did not take under the residuary clause because the expression “if any of my children … shall predecease me” referred to the testatrix’s children who were alive when the will was made and did not include the child who died earlier. Adams J found that this was a true substitutionary clause, substituting “their children” only for parents who were capable of taking under the will and was not a clause conferring an original gift on the grandson independently of any share intended for his mother. [51] [1968] VR 368 at 373.[52] (1816) 35 ER 693.[53] (1861) 1 Dr & Sm 497.Conclusion I would dismiss the appeal. I have had the advantage of reading in draft the judgments of Stanley J and the Chief Justice. I agree with and am grateful for the factual background, the summary of the will, the summary of the reasons of the Judge at first instance and, in large part, the principles of construction of wills,[54] provided by Stanley J. However, I have taken a different view to the majority and the Judge at first instance as to the proper construction of clause 4 as deployed in this will and, in particular, as to its interaction with clause 3(n). Given that I am in dissent I will keep my reasons relatively short. [54] I prefer not to express a final view as to the applicability in South Australia of the approach adopted by the Supreme Court of the United Kingdom in Marley v Rawlings [2014] UKSC 2; [2015] AC 129 with reference to the relevance or otherwise of earlier will drafts. The bequests in clause 3 considered in isolation fall within the following categories.(i)Those which identify a named proposed recipient of a bequest but with no requirement to survive the testatrix and no gift over in default of survivorship – paragraphs (a), (c)[55] and (f). (ii)Those which identify a named proposed recipient of a bequest but with a requirement to survive the testatrix and with a gift over in default of survivorship – paragraphs (b) and (d).(iii)Those which identify a named proposed recipient of a bequest but with a requirement to survive the testatrix and no gift over in default of survivorship – paragraphs (e), (g), (m) and (n).(iv)Those which establish charitable gifts – paragraphs (h) to (l).[55] The bequest in paragraph (c) is subject to a condition that its recipient obtain the age of 25 years. This restriction can be ignored for present purposes.

Ratio Decidendi

Legal Principle Established

Established by: STANLEY J

Murray J’s analysis emphasises the importance of the precise language employed by the testator. Consideration It is a difficult question of construction as to whether the testatrix’s objective intention was simply to give her residue to such of her first cousins who might happen to survive her or whether she intended to distribute the residue of her estate to those first cousins who survived her and to the children of those first cousins who did not survive her. Much of the appellant’s submissions are based in arguments about what the testatrix could have said but did not say. The issue of constructional choice is to be answered by reference to what she actually said in her will. There is no extrinsic evidence available which can assist in ascertaining which choice the testatrix intended to make. As the judge found, the evidence of the testatrix’s knowledge of her family was not extensive, although there was some evidence that she was interested in her first cousins. That evidence does not assist in the constructional choice. Neither does the evidence of the draft wills. While that evidence is admissible where it demonstrates knowledge of surrounding circumstances for the purpose of the armchair principle, the terms of the first draft relied upon by the appellant do not evince an intention on the part of the testatrix to vest the residue of her estate on first cousins who survive her as well as children of those cousins who do not survive her, rather than only on her first cousins who survive her. The inference for which the appellant contends based on the failure to refer to Vi in clause 4, is not compelling even considered in isolation. The inference is further weakened by the subsequent changes made to clause 3, culminating in the executed will, where some bequests are made to individuals on the basis of survivorship and others are not, and where specific provision sometimes is made for who takes the specific bequest if the beneficiary does not survive. Sitting in the position of the testatrix, and considering all the material facts and circumstances known to her at the time she made her will, does not throw any real light on the constructional choice to be made. Neither is the answer to ascertaining the testatrix’s testamentary intention to be found in making any assumption as to what she wanted. In this case given the absence of any extrinsic evidence which would assist in ascertaining the particular constructional choice with which the Court is faced, the testatrix’s testamentary intention must be found in the language of the will. It is clear that clause 3(n) of the will is a class gift rather than a gift to individuals. The judge was correct to so construe it. A class gift is where the beneficiaries are identified not by name but by general description, such as a term of relationship.[44] In Kingsbury v Walter,[45] Lord Macnaghten said:[46]When there is a gift to a number of persons who are united or connected by some common tie, and you can see that the testator was looking to the body as a whole rather than to the members constituting the body as individuals, and so you can see that he intended that if one or more of that body died in his lifetime the survivors should take the gift between them, there is nothing to prevent your giving effect to the wishes of the testator. I think this is a gift to a class ... I think it is pretty plain that the testator made one class of all his nephews and nieces, and intended that if any of them died during his lifetime the survivors should take.[44] Kingsbury v Walter [1901] AC 187 at 192.[45] Kingsbury v Walter [1901] AC 187.[46] Kingsbury v Walter [1901] AC 187 at 191.