Fraser & Anor v Fraser - [1999] QSC 97

IN THE SUPREME COURT
OF QUEENSLAND

No.4812 of 1998

Brisbane
[Fraser & Anor v Fraser & Anor]
BETWEEN:
  ROBERT MARTIN FRASER
  First Plaintiff
AND:
  BEVERLEY MADGE BONDESON
  Second Plaintiff
AND:
  ALEXANDER DUNCAN FRASER
  and SIMON MARTIN FRASER
  as personal representatives of the estate of
  William Martin Fraser Deceased
  Defendants

REASONS FOR JUDGMENT - DERRINGTON J
Judgment delivered on 30 April 1999

William Martin Fraser deceased was a grazier on property owned by three companies in which he inherited a shareholding. In two of them he had a controlling interest, but not so in the third (“NAP Co.”). By the time of his death he had married several times, and he had had four sons from his first marriage and from his marriage to the second plaintiff, one son, the first plaintiff.
The defendants are the executors and trustees of his estate, which is insolvent. The first plaintiff, supported by the second plaintiff who has been joined for that purpose, has commenced this action for declarations as to his interest under a deed of settlement between his father and his mother consequent upon their divorce.
The relevant terms of the deed are as follows:
In the Preamble
“WHEREAS
...
4.        The husband is a substantial shareholder in Logan Estates Pty. Ltd. And Mundoolun Pty. Ltd., (hereinafter called ‘the companies’) and the permanent governing director in both companies and a shareholder in North Australia Pastoral Company Pty. Limited (hereinafter called ‘NAP Co.’).
5.        There is a child of the marriage ROBERT MARTIN FRASER born the 28th day of May, 1964.
6.        The husband and wife have reached agreement as to settlement of property and lump sum maintenance.
7.        The husband desire to confer benefits upon ROBERT MARTIN FRASER by way of a transfer of shares in the companies and to make provision for ROBERT MARTIN FRASER upon his death and so as to secure ROBERT MARTIN FRASER’s shareholding in the companies and NAP Co., while making provision on his death for his present wife Mrs Margaret Fraser for her life.
...   “.
In the Operative Part
“NOW THIS DEED WITNESSETH AS FOLLOWS:
...
ii)        the husband will transfer to GLENDON FRANCIS YOUNG, Solicitor and EDWARD MICHAEL CROUCH, Solicitor on or before the 2nd April, 1984 a parcel of shares in the company LOGAN ESTATES PTY. LTD., being 4800 and MUNDOOLUN PTY. LTD.,being 8238 shares which parcel represents 15% of the presently allotted shares in those companies such shares to be held on trust for ROBERT MARTIN FRASER the child of the marriage until the said ROBERT MARTIN FRASER attains the age of 21 years.
iii)        the husband further agrees to leave the way of Will or make provisionally other testamentary dispositions for a further parcel of the husband’s shares in LOGAN ESTATES PTY. LTD., and MUNDOOLUN PTY. LTD., such parcel representing 5% of the allotted shares in those companies the terms of such Will or other testamentary disposition being that ROBERT MARTIN FRASER succeeds to the further 5% of the allotted shares in the companies absolutely upon the death of the present wife of the husband or the husband whichever occurs the later in time.
iv)       the husband further agrees to leave by way of Will or make provisionally other testamentary dispositions for a parcel of the husband’s shares in NAP Co., such parcel representing 20% of the husband’s shares in that company the terms of such Will or other testamentary disposition being that ROBERT MARTIN FRASER succeeds to the shares absolutely upon the death of the present wife of the husband or the husband whichever event occurs the later in time.
v)        the husband further agrees that he will not use or fail to use his powers as permanent governing director of the companies so as to defeat the objects of this agreement or so as to adversely effect the entitlement of ROBERT MARTIN FRASER to any shares under this agreement or their value ...
...”.
The settlor plainly intended to grant to his new wife a life interest in the property referred to in paras.(iii) and (iv), but as it turned out, on a property settlement related to their subsequent divorce she did not receive any life interest in this property, and she was not left anything under his Will.
That Will provided that, with one qualification, each of his five sons should receive an equal interest in the testator’s shareholding in NAP Co, but by the date of his death his holding in that company had been seriously reduced to 58,833 shares from 176,808 at the date of the relevant settlement. The qualification referred to is that before making an equal division of the shares between his sons, he bequeathed 20,708 of them to his sister. Because of the point of the plaintiffs’ claims, this is academic, and the reasons for this will be discussed later. In the meantime, for the convenience of the major discussions, it will be ignored.
The remedy sought in the plaintiffs’ action is a declaration that the testator’s obligation to the first plaintiff under the deed was to bequeath to him twenty percent of his shareholding in the company as it was at the date of the deed rather than at the date of his death; that the deed had the effect of creating an equitable interest in that property in the beneficiary at once so that the grantor thereafter held it as trustee for him; and that, having attained his majority, he is entitled to direct an immediate transfer to himself of the legal title to the property, notwithstanding that the lady who was the grantor’s wife at the time of the deed is still alive. The effect of the first of these is that the first plaintiff will receive most of the testator’s final shareholding in NAP Co. at the expense of his half-brothers; and the effect of the second is that he would claim to have the trust property free of the debts of the estate at the expense of its creditors.
In this case, these consequences have some importance because the second plaintiff’s support of the first plaintiff’s claim amounts largely to a plea of estoppel based upon a statement by the grantor in an affidavit filed in the Family Court in the proceedings that led up to the deed. He said:
“It has always been an understanding with my father and my sons that [the] shares [in NAP Co] are merely held by me as a life tenant with the understanding that upon my death the shares will pass ‘in toto’ to my sons.”
In reliance upon this she claims, and for present purposes it should be accepted, that she did not seek what otherwise might have been her full entitlement, and she entered into the deed believing that the deceased held one-fifth of his then shareholding in NAP Co for the first plaintiff who would eventually succeed to them as legal owner. Her belief, as distinct from the nature of the representation, is irrelevant.
Though the application seeks to strike out the statement of claim as disclosing no cause of action, this really involves no more than a final determination of the first plaintiff’s interest under the deed of settlement based upon the construction of the relevant documents. The factual matrix in which the provisions are to be construed are, it is agreed by the applicant, set out in the statement of claim and restated in effect above; and it is further agreed that the deceased made the statement in his affidavit upon which estoppel is sought.
The first plaintiff’s argument is simply that the structure of the settlement reveals an intention to invest him with an immediate interest in the relevant shares in the same way that he was invested with an immediate interest in other shares under para (ii) of the deed; and that the reference to a bequest of them by Will or other testamentary dispositions was merely a description of the method whereby the title to them would ultimately be conveyed. This form of conveyance was appropriate, it is said, since the title was not to pass until the death of the grantor, and even then subject to an intended life interest to his then wife.
The difficulty with this argument is that it does not acknowledge the obvious intention of the grantor, which was in fact followed, that he retained to himself both legal and beneficial interest in the property throughout his lifetime and not dispose of it other than by his Will. Even then the first plaintiff’s interest would have been postponed to the life tenancy of the widow. This is fully consistent with the distinction clearly made in the preamble between conferring benefits on the first plaintiff by the immediate transfer of shares and making provision for him upon the settlor’s death. An undertaking that the settlor would by his Will leave a proportion of his shareholding to a beneficiary would, without more, prima facie mean that the gift would be made at the time the Will was to operate, and that the shareholding referred to should be that which was relevant at that time, that is, on the death of the settlor.
This construction is fortified by the language used in respect of the other provisions relating to shares in the other companies which were to be transferred immediately. In those cases a specific number of shares was referred to in each case and they were described as fifteen percent “of the presently allotted shares in those companies”, whereas the promise of a testamentary disposition of the relevant shares referred neither to a specific number nor to a proportion of the total at the then present time. The reference to “presently allotted shares” in the former but not the latter is significant.
An ordinary grammatical reading also favours this construction. The expression “... agrees to leave by way of Will ... a parcel of the husband’s shares in NAP Co, such parcel representing 20% of the husband’s shares in that company ...” expresses virtually the way in which the Will is to read, and a Will expressed in such terms or their equivalent would plainly refer to the shares held at the date of death. In a situation such as this, the meaning for which the first plaintiff contends, that the proportion should apply to the number of shares held at the date of the deed, would need to be made clear if that were intended.
The passage from the settlor’s affidavit which is relied upon for estoppel does not support the interpretation which the plaintiffs would seek to place on it. It does indicate that he intended that the first plaintiff, along with his half-brothers should inherit the shares in the company, and indeed he has complied with that obligation by providing in his Will to that effect. If anything, the construction which the plaintiffs propose is contrary to the statement’s possible implication that the settlor’s sons should share equally. That is impliedly confirmed by the indications in the deed itself that the first plaintiff was in effect to receive twenty percent of the shareholding which, as he was one of five sons, would indicate equality. At least, the plaintiffs could not succeed in advancing any implication of intended inequality, which is essentially what they are proposing.
The very strong conclusion is that the settlor’s obligation under the deed was to bequeath to the first plaintiff only twenty percent of those shares in the relevant company which he owned at the date of his death.
The second question is whether a trust or equitable interest in those shares was immediately created by the terms of the deed. Learned counsel for the plaintiffs conceded that upon the construction reached above, no such interest would be created, and this is probably correct since the postponement of the determination of the property to be conveyed probably prima facie implies a postponement of the passing of the interest as well. That of course would be co-ordinate with the passing of their respective interests to the other sons.
The effect of the deed was to create an enforceable right in the plaintiff to have the deceased’s promise specifically enforced, and in that respect there was a constructive trust. But the benefit which was the subject of the trust was not a right to any absolute property in the shares, but a right in the property that would be derived by the grantor’s doing what he was required to do, that is, to bequeath the shares to him by his Will.[1] The effect of this is to postpone any such rights in the property to the rights of the creditors in the usual way.
[1]Cf. Birmingham v Renfrew (1937) 57 CLR 666 per Dixon J at 683.
The third claim is that since the provision of a life tenancy to the settlor’s then wife later became irrelevant, the first plaintiff’s interest under the deed should no longer be postponed to her death. There must be some sympathy for the likelihood that it was intended that such interest was to be postponed only to any life interest that would be granted to the settlor’s then wife, so that in circumstances where a life interest was not given there would be no postponement. Unfortunately the deed makes no reference to any life interest but only postpones the plaintiff’s interest to the life of that lady. Although the document may have been badly drafted, its meaning is clear and not does not contain any absurdity that would lead to a different construction. It is not within the power of the court to amend the document, and the plaintiffs’ arguments would have failed.
In any case because of the construction that has been given to the settlement, and the fact that the settlor has bequeathed an immediate interest to the first plaintiff of the benefits to which he would have been entitled under the settlement, this issue is now probably otiose.
Mention was made above of the testator’s bequest of 20,708 of his 58,833 shares in NAP Co to his sister before the division of the balance equally between his sons. This means that the first plaintiff is bequeathed only 7,625 shares whereas twenty percent of the testator’s holding would have amounted to 14,708 shares. To that extent this is in breach of the settlor’s undertaking in the deed, and is a cause for valid complaint, but the estate’s insolvency and the absence of any trust from the date of the deed means that it has no practical effect.
Because the action as pleaded cannot succeed, the statement of claim and the action should both be struck out with costs.