IN THE ESTATE OF FAITH ELIZABETH BERYL McMULLEN
[2014] ACTSC 53
•4 April 2014
IN THE ESTATE OF FAITH ELIZABETH BERYL McMULLEN
[2014] ACTSC 53 (4 April 2014)
SUCCESSION – WILLS, PROBATE AND ADMINISTRATION – construction and effect of testamentary dispositions – where testator died partially intestate – testator directed that a class of persons were “not to benefit in any way from any distribution from my estate” – whether testator’s negative direction operated as an implied gift to next of kin entitled to an interest on intestacy except for excluded persons – class of excluded persons included several individuals not entitled to an interest on intestacy – not sufficient to constitute an implied gift.
Administration and Probate Act 1929 (ACT) ss 49, 49C, 97A, schedule 6
Wills Act 1968 (ACT) s 12A
Bund v Green (1872) 12 Ch D 819
Re Holmes (1890) 62 LT 383
Muir v Archdall (1918) 19 SR (NSW) 10
Pedulla v Nasti (1990) 20 NSWLR 720
Pickering v Stamford (1797) 3 Ves Jr 492; 30 ER 1121
Lett v Randall (1855) 3 Sm & G 83; 65 ER 572
Ramsay v Shelmerdine (1865) LR 1 Eq 129
Re Taylor (1885) 52 LT 839
Vachell v Breton (1706) 5 Bro Parl Cases 51, 2 ER 527
Re Wynn [1984] 1 WLR 237
P 371 of 2012
Judge: Master Mossop
Supreme Court of the ACT
Date: 4 April 2014
IN THE SUPREME COURT OF THE )
) No. P 371 of 2012
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY
Plaintiff
AND:REBECCA DOWLING SMITH
First Defendant
AND: CAROLINE SMITH
Second Defendant
ORDER
Judge: Master Mossop
Date: 4 April 2014
Place: Canberra
THE COURT DIRECTS THAT:
The proceedings are listed for further directions on 11 April 2014 at 10 am.
Application
This is an application brought by the Public Trustee for the Australian Capital Territory as administrator of the estate of Faith Elizabeth Beryl McMullen (“the testator”) concerning the administration of the deceased’s estate. The plaintiff seeks the Court’s direction in relation to the construction of the testator’s will or in the alternative seeks an order for rectification of the testator’s will. Rebecca Dowling Smith and Caroline Smith, two of the testator’s nieces who were purportedly excluded from benefitting from the testator’s estate were joined as defendants to these proceedings.
Background
The testator died on 19 December 2011. She had resided in the ACT since 1963, leaving a will that had been drawn by a solicitor dated 15 April 1993.
The relevant part of the will for present purposes is clause 5 which provides:
I GIVE DEVISE AND BEQUEATH the rest and residue of my estate both real and personal ... to my son JOHN RODERICK McMULLEN for his own use absolutely if he shall survive me for a period of thirty (30) days BUT IF my son shall predecease me ... I DIRECT that if my son JOHN RODERICK McMULLEN has remarried to a woman other than his first wife then that person is to be given my jewellery and my clothes and... THEN I DIRECT my trustee to give the rest and residue of my estate to my brother RAYMOND GORDON SMITH ... for his own use absolutely... BUT IF my brother RAYMOND GORDON SMITH ... shall predecease me... THEN I DIRECT my trustee to give the rest and residue of my estate to my brother WILLIAM HENRY JACK SMITH for his own use absolutely AND I DIRECT that EILEEN MARTIN or any of her children or relatives or MARGARET, EILEEN, GWEN, ELSIE, ANGELA, VERONICA, KIRSTI, JANET, REBECCA or CAROLINE may not live in any house that I own at my death AND I DIRECT that they are not to benefit in any way from any distribution from my estate AND I FURTHER DIRECT that any house I own at my death must not be sold for use as a brothel. (italics added)
The italicised portion of the clause is of central importance in this case.
By the will she appointed her son John, then her brother Ray and other brother Jack successively as executor and trustee. All executors and beneficiaries of the residue pre-deceased the testator except for Jane McMullen, the second wife of her brother John.
Letters of administration were granted to the Public Trustee on 11 July 2012 to administer the estate. When letters of administration were granted the estimated gross value of the testator’s property was $483,572.13.
On 29 August 2013, I ordered that Rebecca Dowling Smith and Caroline Smith be joined as parties to the proceedings. Rebecca and Caroline are two of the deceased’s nieces and consequently two of the persons who would be entitled to an interest on intestacy pursuant to sections 49, 49C and Schedule 6 of the Administration and Probate Act 1929 (ACT).
Issues
The Public Trustee’s application sought directions under s 97A of the Administration and Probate Act1929. That section permits the Public Trustee to obtain the opinion of the Court or directions from the Court on matters of fact or law arising in the course of his or her duties. Relevantly the application sought directions as to:
(1) whether or not the names “Rebecca” and “Caroline” referred to the defendants; and
(2) the proper construction and legal effect of the exclusion of Rebecca and Caroline at the end of clause 5 of the will.
The defendants conceded that the references in the will to “Rebecca” and “Caroline” are references to them. That leaves the proper construction and legal effect of the exclusion of Rebecca and Caroline in clause 5.
The plaintiff also made an application for rectification of the will pursuant to s 12A of the Wills Act1968 (ACT). However the application for rectification was made late and had the potential to raise factual matters that the defendants had not had an opportunity to address and the parties agreed that I should determine the issue of construction first. I will say no more about the claim for rectification.
Submissions
On the construction of the will, the plaintiff submits that the preferable construction of the relevant part of clause 5 is that there is a gift by implication of the residue to the persons entitled on intestacy, excluding Rebecca and Caroline. Counsel for the plaintiff submitted that whether the testator had the requisite intention depends on whether the exclusion excludes the named persons from taking any benefit from the deceased’s estate and operates as a gift by implication to the other persons entitled on intestacy, or whether the exclusion merely excludes a person from benefits under the will but preserves their right to claim outside the will upon intestacy. In support of this submission, counsel for the plaintiff points to the clear and broad language used by the testator which suggests that the language was to cover both any distribution pursuant to the will and any distribution upon intestacy. She also points to the extrinsic evidence of hostility between the testator and Eileen Martin and the fact that Eileen Martin was good friends with the defendants’ mother.
Counsel for the defendants submits that the persons in the excluded class of named persons, except for Rebecca and Caroline, are all persons who are not entitled to benefit on intestacy and thus it is unlikely that the deceased was contemplating intestacy. He submits that the testator had the benefit of legal advice when making her will and, as a consequence, it can be inferred that she would have known that it was not necessary to expressly exclude persons who were not next-of-kin in order to prevent them from participating on intestacy. None of the named persons except for Rebecca or Caroline were eligible to participate in distribution on intestacy. The other named persons are wives or children of her brothers who might stand to benefit indirectly from the residue of her estate or are unknown. Eileen Martin was the second wife of the testator’s ex-husband. Veronica, who the testator also referred to as Angela, was the wife of the testator’s brother Ray, the second residuary beneficiary, and Kirsti was the first wife of the testator’s son John. Counsel for the defendants submits that the other named persons, Margaret, Eileen (second appearing), Gwen, Elsie, Angela (if not Veronica) and Janet are persons unknown to anyone who knew the testator and not the testator’s next of kin. Of the known named persons, he submits that those who have been excluded share one thing in common; they each stand to benefit indirectly from gifts to beneficiaries. This would support a conclusion that the exclusion was limited to any entitlement under the will. That outcome he submitted was consistent with the use of the word “distribution” which was more consistent with a distribution under the will than an entitlement on intestacy.
In the alternative, counsel for the defendant submits that the exclusionary words used by the deceased would cut down on the earlier gifts to her son or brothers which in each case is a gift “for his own use absolutely”. He submits the direction is incapable of certain enforcement or obedience and should be held void for uncertainty.
Consideration
The issue that arises in the present case is an example of a recognised category of case where a will states that person X is to receive nothing from the deceased’s estate. I will refer to such a provision as a negative direction.
If the distribution of assets is to be dealt with in accordance with the terms of the will, then the terms of the will must disclose to whom the estate is to be distributed. If it does not do so or does not do so completely then the estate is an intestate estate and the statutory regime in the Administration and Probate Act1929 will apply to the extent that property remains to be distributed after distribution in accordance with the terms of the will. Under that Act a person is an intestate and leaves an intestate estate where, if there is a will, the whole or part of the person’s real or personal property is not effectively disposed of by the will: s 44. Part 3A of the Act and, in particular, s 49, 49C and Schedule 6 of the Act set out the rules for the distribution of an intestate estate.
If the negative direction in the will is simply construed as such then it will not constitute a gift of property to anyone and hence will not prevent an intestacy arising. In such a situation, where person X is entitled to some distribution of the estate under the statutory rules, an intestacy will result in a person receiving a distribution from the estate where the deceased has expressed an intention that the person should receive nothing.
While initially decisions of courts in England differed as to the effect of a negative direction, by the middle of the 19th century the position was reached where if person X was one of the persons who would take on intestacy then such a negative direction could be construed as a gift of property to those persons who would otherwise take upon an intestacy except person X. By interpreting the negative direction as an implied gift to others, intestacy was avoided. The approach can be criticised as being a somewhat artificial one because on a plain reading a statement that “person X shall not get any of my estate” does not say anything about who should. However the effect of the approach is a desirable one because it gives best effect to the principle of freedom of testamentary disposition by, in effect, incorporating the statutory regime that would otherwise apply upon intestacy qualified by the expressed intention of the deceased.
The cases usually cited to demonstrate the earlier unsettled position are Vachell v Breton (1706) 5 Bro Parl Cases 51, 2 ER 527; Pickering v Stamford (1797) 3 Ves Jr 492, 30 ER 1121. Those reflecting the more settled position of the nineteenth century are Lett v Randall (1855) 3 Sm & G 83; 65 ER 572; Bund v Green (1872) 12 Ch D 819; Re Taylor (1885) 52 LT 839; Re Holmes (1890) 62 LT 383. In the 20th century the highpoint for implication of gifts was Re Wynn [1984] 1 WLR 237.
I will deal first with the most relevant English cases.
Bund v Green is a clear statement of the potential for appropriately drafted provisions in a will to amount to a gift by implication of property to persons who would take by law upon a distribution under statute but excluding particular identified persons. In that case the testator specifically dealt with the position of persons who would have been entitled to a distribution on intestacy. By way of example, one of those persons was the testator’s niece, Lucy Seeley. The will said:
it is therefore my will that neither she nor her children shall ever take or enjoy any benefit or interest from my property other than and except what is hereby or otherwise specifically given or provided for her or them respectively.
Later in the will the testator continued:
Now I do hereby declare that it is my will that they the said Lucy Seeley… shall not… be entitled to take any part of my real estate, nor any share or proportion in the distribution of my personal estate of which I may happen to die intestate, or not have fully disposed of either in the character of my heir or heiresses at law, or as my next of kin, but shall be wholly excluded therefrom in the same manner as if they had all died in my lifetime.
The competing arguments were on the one hand that there was nothing in the will which amounted to a gift of the residue to the balance of the next of kin and on the other that there was a bequest by implication to those persons who would have been the next of kin, excluding the named persons. Hall VC said (at 821-822):
I am of opinion that according to the true construction of the will the declaration of the testator is one which amounts to a gift in favour of those persons who take by law upon a distribution of personalty under the statute, but excluding the persons specified, and not including those who would come within the description of persons who would take under them.
Bund is a case which illustrates the features favouring implication of a gift – clear words excluding some of the next of kin and express words making clear the intention of the testator that the exclusion is to extend beyond any gift under the will to circumstances of intestacy.
Re Taylor was a case in which the testator had expressly picked up the distribution that would occur under the statutes for distribution of estates of intestates but then modified how the distribution should occur by, relevantly, excluding two named persons. The Court of Appeal found that to be effective to exclude the named individuals. It was not a case involving any implication of a gift but rather an example of how a will may expressly pick up and then modify a statutory scheme of distribution.
Re Holmes involved a will which ended:
And now revoking and hereby making utterly and for ever void and powerless any and all wills by me at any time heretofore by me made, and hereby utterly and for ever excluding any and all relatives except my two dear nieces aforesaid… from any and all advantages or benefit in this my last will and testament, I hereby lastly nominate, constitute, and appoint my said two dear nieces [and certain other persons as executors of the will]. (italics added)
Justice Kay said (at 383-384):
A testator cannot deprive those who are by law entitled to his estate by words of exclusion only. He can only do that by giving the estate to somebody else… A testator cannot deprive his next of kin who take in succession to him by law except by making a will and disposing of the property to somebody else. If he does not do that, the next of kin have, by law, the right of succession to his personal estate.… There is of course a third class of cases which is quite obvious, which is this: Supposing the testator frames his will so that the words of exclusion of some of the next of kin amount in fact to a gift of the whole of his residue to others of the next of kin. I quite admit that is like the case before Hall, VC. which was cited to me, namely, the case of Bund v Green (12 Ch. D. 819). There you do find that which was necessary in order to exclude some of the next of kin, namely, a gift to others.
He then referred to the text of the will and continued:
“What are they excluded from? They are only excluded from any advantage under the will. But there is no advantage given to them under the will. The testator has made no disposition of his residuary estate, and the next of kin come and say, “The residue belongs to us.” Then they are met by this: “No you are excluded from any advantage under the will.” But the answer is: “We are not claiming any advantage under the will. We are claiming an advantage outside the will which the law gives us, and we cannot be deprived of that unless you can show that the will has given the property to somebody else.” The claim is unanswerable. The will has not given the property to somebody else; therefore the next of kin are entitled to all the residue just as if there had been no will whatsoever as to that residue.
Thus, notwithstanding the statements in the will, because “benefits and advantages” from which all but the “dear nieces” were excluded were limited to those under the will, a nephew was entitled to make a claim on the residue of the testator’s estate.
Re Wynn provides the starkest example of the potential for the implication of gifts to next of kin. In that case the testator married the defendant when she was 73 and he was 48. He was facing criminal proceedings arising out of allegations that he was a confidence trickster who had married the testator only in order to obtain her money for himself. In order to deflect such allegations he requested that she make a will. She made a will, which was effective under the law of France, that said, relevantly, “I hereby wish that all I possess is not given to my husband Anthony Wynn.” The question was whether or not such a will prevented her husband from claiming on intestacy. The Court held (at 242) that “such a direction will operate as such an implied gift unless there is something in the will to indicate a contrary intention” and expressly approved the following passage from Jarman on Wills, 8th ed. (1951) vol 2, 684:
If a testator declares that his heir-at-law shall not take any part of his real estate, or that none of his next-of-kin shall take any part of his personal estate, this is nugatory and void, and cannot operate by implication so as to give the Crown a right to the real or personal estate. But a declaration excluding one or some only of the next-of-kin, if made in clear and appropriate language, is valid, and operates as a gift by implication to the rest of the share of those who are excluded.
This case has been criticised as extending “the use of a fiction already questionable in other cases”: see J Holland “Intestacies and Implied Gifts” (1984) The Conveyancer and Property Lawyer 441, 442.
I now turn to the two Australian cases to which I was referred. In Muir v Archdall (1918) 19 SR (NSW) 10 the relevant part of the will was explained as follows:
“John J Proudford to keep all cash in hand for work done and many kindnesses and is out of my debt, Mabel F Proudford is out of my debt through not being left in my will. My brother George not to have a penny” for a certain reason stated, “nor Edgar Chaff” for the same reason. The testator’s brother George was one of his next-of-kin, Edgar Chaff, mentioned in his will was not. The question is whether the reference to his brother George not getting a penny is by implication a gift of his own undisposed of personalty to his next of kin other than George.
Harvey J identified the following propositions (at 15-16):
(1) “A declaration by a testator that none of his next of kin shall take any portion of his property is of no effect if he in fact leaves property undisposed of, but a declaration that one of his next of kin shall be excluded may be effective and may amount to a gift by implication of any undisposed of property to the others of the class.”
(2) Whether or not a gift is to be implied “depends upon the construction of the will – i.e., whether the testator says that the person excluded is to have no share in his property or merely no share in what he has disposed of by his will.”
(3) “Where a testator makes a will which in terms disposes of the whole of his property and then says one of his next-of-kin is to have nothing under his will, this will not prevent the person named from sharing in any bequest which may lapse or fail”: Re Holmes (1890) 62 LT 383.
(4) “A codicil revoking a gift in the will to one of the next of kin will not prevent that person sharing in the property as one of the next of kin if it is not effectively disposed of: Ramsay v Shelmerdine [(1865) LR 1 Eq 129].”
(5) “If the testator says that certain of the next-of-kin are to take nothing from his property as to which he may die intestate, that is by implication a gift of such property to the other next-of-kin: see Bund v Green [(1872) 12 Ch D 819].”
The Court found that in the case at hand the exclusion should be limited to an exclusion of benefits under the will. That was because:
(1) the position of George, who was a next of kin, was assimilated with that of Edgar Chaff who was not a next of kin and hence would not take upon an intestacy;
(2) the position of Edgar Chaff and George Chaff was dealt with immediately following the two gifts to his debtors in the will itself.
Those factors meant that the statement “George not to have a penny” could not be implied to be a gift of his residuary estate to his other next of kin.
The decision in Archdall was referred to in Pedulla v Nasti (1990) 20 NSWLR 720. In that case the testator was married and had children but provided in his will “I specifically prohibit that any of my property be given either to my wife or my children as I have been separated from my wife since 1960 and I do not wish my children to receive any benefit whatsoever under this Will.”
Needham J found that the provision was not effective to exclude an entitlement upon intestacy because the testator had purported to exclude all of his next of kin entitled to distribution on an intestacy and having regard to the principle stated Archdall (quoted above at paragraph [33]) that could be of no effect if he in fact left property undisposed of. In Pedulla it appears also that, had the clause not been ineffective for the reasons stated, there might have been an alternative basis for the decision that the relevant provision in the will was explicitly limited to “any benefit whatsoever under this Will”.
In the United States, the position adopted in most State courts is to hold that an heir is entitled to the statutory share of an intestate estate despite the testator’s expression of contrary intent. Hence for a number of reasons courts have not accepted that an implied gift to some only of those entitled upon an intestacy can be recognised and given effect. This position has been persuasively criticised and the adoption of what is referred to as “the English Rule” advocated: see J A Heaton “The Intestate Claims of Heirs Excluded by Will: Should “Negative Wills” Be Enforced?” (1985) 52 University of Chicago Law Review 177.
The high point of the case for implication is reflected in the following statement in Re Wynn (at 242) in relation to a direction that one of the testator’s next of kin shall take no share in his property: “In my view such a direction will operate as such an implied gift unless there is something in the will to indicate a contrary intention.” Adopting that apparently presumptive approach at face value and combining it with the principle that one would prefer an interpretation of a will which did not lead to intestacy could lead to a more ready implication of gifts to other persons entitled on intestacy. However, I am not satisfied that Re Wynn should be read as standing for any general presumption that a negative direction gives rise to an implied gift. Consistently with the earlier authorities, the key to the quoted sentence from Re Wynn is that the direction being discussed is (a) one relating to one of the persons who would be entitled on intestacy and (b) that such a direction will only operate as a gift “unless there is something in the will to indicate a contrary intention”.
Thus, whether or not a gift is to be implied is very sensitive to the particular terms of the will and the extent to which the specific terms are consistent with an intention to deal with the circumstance where there would otherwise be an intestacy.
In the present case the relevant part of clause is “they are not to benefit in any way from any distribution from my estate”. That is a broader exclusion than one which is, either expressly or by necessary implication, limited to benefits under the will. Further, it is possible that intestacy laws might change and a direction which extended beyond persons entitled upon intestacy under legislation at the date of the will could be seen as ensuring that, despite any broadening of entitlements, the named persons would not benefit upon intestacy.
However I am not satisfied that these factors are sufficient to imply a gift to those otherwise entitled upon intestacy other than the defendants. The list of persons excluded goes far beyond those who might take upon intestacy, tending towards a construction which limits the direction to those gifts or distribution of the residue as specifically contemplated by the will. None of the cases have implied a gift in circumstances where the persons excluded go beyond those who would be entitled upon intestacy. In Archdall the inclusion in a negative direction of George Chaff, a person not entitled to take upon an intestacy, was a significant factor tending against the implication of a gift. Further, unlike Re Wynn, the testator did attempt in her will to dispose of her property and hence the distribution effected upon an intestacy was not necessarily being contemplated. Finally, the context of the direction did not support the proposition that it was targeted at the circumstance of intestacy. Context was a significant factor in Archdall. In the present case the direction is one of a number of directions given in the clause dealing with the distributions made under the will. The directions are odd ones relating to the use of the testator’s house by the named persons and the purpose for which it could be sold. It is not clear how they could have been given effect to or how they related to the express gifts earlier in the clause. However, the unusual nature of the directions and their integration with the express dispositions in the will tends against an interpretation that would see them operating where the dispositions in the will fail.
For these reasons I consider that the direction that the defendants and others not benefit in any way from any distribution from the estate is not sufficient to constitute an implied gift to all of those who would otherwise benefit upon an intestacy except the defendants.
Conclusion
In the light of the above reasons it will be necessary to consider further the plaintiff’s claim for rectification of the will. In relation to the application for directions I consider that the appropriate directions to give are:
(1) The names Rebecca and Caroline in the will refer to Rebecca Dowling Smith and Caroline Smith.
(2) In the circumstances that have occurred, clause 5 of the will does not amount to a gift of the residue of the estate to those persons who would otherwise be entitled upon intestacy under the Administration and Probate Act 1929 apart from Rebecca Dowling Smith and Caroline Smith.
However I will hear the parties further as to the terms of the directions that I propose and in relation to the further conduct of the matter.
In relation to costs, the plaintiff agreed that the appropriate order in relation to costs was that the costs of the plaintiff and the defendant be paid on an indemnity basis out of the estate. I consider that to be the appropriate order.
I will therefore list the proceedings for further directions on 11 April 2014 at 10 am.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master Mossop.
Associate:
Date: 4 April 2014
Counsel for the plaintiff: T Catanzariti
Solicitors for the plaintiff: Bradley Allen Love Lawyers
Counsel for the first and second defendant: R J Arthur
Solicitors for the first and second defendant: KJB Law
Date of hearing: 14 March 2014
Date of judgment: 4 April 2014
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