In the Estate of MOGENS HARLOFF JENSEN (DECEASED)

Case •

[2011] SASC 243

•

23 December 2011

SUPREME COURT OF SOUTH AUSTRALIA

(Testamentary Causes Jurisdiction)

In the Estate of MOGENS HARLOFF JENSEN (DECEASED)

[2011] SASC 243

Judgment of The Honourable Justice Gray

23 December 2011

EQUITY - TRUSTS AND TRUSTEES - APPLICATIONS TO COURT FOR ADVICE AND AUTHORITY

SUCCESSION - WILLS, PROBATE AND ADMINISTRATION - THE MAKING OF A WILL - TESTAMENTARY INSTRUMENTS - MISTAKES AND OMISSIONS

Advice and direction was sought from the Court pursuant to section 69(1) of the Administration and Probate Act 1919 (SA) and sections 90 and 91 of the Trustee Act 1936 (SA) as to whether the deceased's will effectively created testamentary trusts for the benefit of the deceased's two adult children - if there was any unresolved doubt, the applicant sought rectification of the will.

Held: The words used by the deceased in his will created testamentary trusts in favour of his two adult children - in the circumstances, it was unnecessary to proceed to consider the application for rectification - were it necessary to order rectification, such an order would have been made.

Administration and Probate Act 1919 (SA) s 69(1); Trustee Act 1936 (SA) s 90 and s 91, referred to.
In the Matter of Australian Motors SA Pty Ltd Staff Superannuation Fund [2010] SASC 62; Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; Gale v Gale (1914) 18 CLR 560; In re Hamlet; Stephen v Cunningham (1888) 39 Ch D 426; Re Woolfitt (deceased) [1948] SASR 232; Smidmore v Smidmore (1905) 3 CLR 344; Nicol v Chant (1909) 7 CLR 569; Fell v Fell (1922) 31 CLR 268; Currie v Glen (1936) 54 CLR 445; King v Perpetual Trustee Co (Ltd) (1955) 94 CLR 70; Re Fowler [1963] VR 639; Estate of Wemyss (deceased) (1951) 7 LSJS (SA) 426; Sidle v Queensland Trustees Ltd (1915) 20 CLR 557; Ritchie v Magree (1964) 114 CLR 173; Sexton v Horton (1926) 38 CLR 240; Brennan v Permanent Trustee Co of New South Wales (1945) 73 CLR 404; Re Murphy; Queensland Trustees Ltd v Cleary [1958] Qd R 456; In re Harrison; Turner v Hellard (1885) 30 Ch D 390; Perpetual Trustee Co Ltd v McKendrick [1973] 2 NSWLR 784; Public Trustee v Executor Trustee & Agency Co of South Australia Ltd (1984) 36 SASR 32; Dobryden v Wagner (2004) 90 SASR 515; Re Gregory’s Settlement and Will (1865) 34 Beav 600, considered.

In the Estate of MOGENS HARLOFF JENSEN (DECEASED)
[2011] SASC 243

Testamentary Causes Jurisdiction

GRAY J.

  1. This is an application for rectification.

  2. The last will of Mogens Harloff Jensen, the deceased, made on 18 December 2009 was admitted to probate on 26 August 2010.  A question was raised by the Registrar of Probates as to whether the will effectively created testamentary trusts for the benefit of the two adult children of the deceased, Pia Louise Jensen and Henry Robert Jensen.  It is the raising of this issue that has led to the application for rectification. 

  3. Notwithstanding the concerns raised by the Registrar, the solicitors for the deceased maintain that properly construed, the will does create testamentary trusts for the benefit of the children.  However, the solicitors accept that there may be an ambiguity and as a consequence, the application for rectification is pursued. 

  4. On the hearing of the application, counsel for the applicant, Andrew Peter Lathlean – the executor and trustee appointed by the will – broadened the application. The primary submission of the applicant was that on its construction the will does effectively create testamentary trusts for the benefit of the children. Advice and direction was sought from the Court pursuant to section 69(1) of the Administration and Probate Act 1919 (SA)[1] and sections 90 and 91 of the Trustee Act 1936 (SA).[2] 

    [1] Section 69(1) of the Administration and Probate Act 1919 (SA) is in the following terms:

    (1) The Public Trustee shall, and any trustee, executor, or administrator may, when in difficulty or doubt, apply to a Judge for advice or direction as to matters connected with the administration of any estate, or the construction of any will, deed, or document.

    [2] Sections 90 and 91 of the Trustee Act 1936 (SA) are in the following terms:

    90—Parties entitled may apply to Court by summons

    (1)     Any person entitled to apply for an order of the Supreme Court under this Act may apply by summons, and may give evidence, by affidavit or otherwise, in support of that summons, and may serve such person or persons with notice of the application as he may deem entitled to service thereof.

    (2)     Upon hearing the application the Court may either dispose of the matter in the first instance, or may direct a reference to the Master to inquire into any facts which require investigation, or may direct the application to stand over until the right of the applicant has been declared in an action instituted for that purpose, or to enable the applicant to adduce evidence, or for further consideration, or to enable notice or any further notice of the application to be served upon any person, and may deal with the applicant, and may make such order with respect to costs as shall seem just.

    91—Advice and directions of court and commission

    Sections 69 and 70 of the Administration and Probate Act 1919 apply to trustees as defined by this Act, and section 90 of this Act shall extend to applications under either of the same sections, but without limiting the powers of the Supreme Court, apart from the said section 90, with regard to such applications.

  5. Counsel drew attention to the decision of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand where the Court considered the construction and reach of section 63 of the Trustee Act 1925 (NSW) in relation to the giving by the court of advice or directions to a trustee. Their Honours treated their observations as having application in regard to parallel legislation throughout Australia and, in particular, to section 91 of the Trustee Act 1936 (SA). Gummow ACJ, Kirby, Hayne and Heydon JJ, in their joint judgment, identified the following propositions which I collected and summarised in In the Matter of Australian Motors SA Pty Ltd Staff Superannuation Fund in the following terms:[3]

    [3]    In the Matter of Australian Motors SA Pty Ltd Staff Superannuation Fund [2010] SASC 62, [12] citing Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [55]-[74].

    -Provisions conferring powers to the court are not to be subject to implied limitations.

    - Section 63 contained no implied limitations on the power to give advice.

    -The only jurisdictional bar to relief pursuant to section 63 or its equivalent, is that the applicant must point to the existence of a question respecting the management or administration of trust property or a question respecting the interpretation of the trust instrument.

    - Nothing in section 63 limits or mandates consideration of discretionary factors.

    - The procedure pursuant to section 63 and its equivalents is summary in character.

    -The provisions operate as an exception to the Court’s ordinary function of deciding disputes between competing litigants as they afford a facility of giving “private advice” as the function of the advice is to give personal protection to the trustee.  

    -Section 63(2) precludes any trustee, who acts in accordance with the private advice, from being held liable for breach of trust in the event that in conventional proceedings it is later held that the legal position does not correspond with the advice given, so long as the proviso to section 63(2) is satisfied.

    -The application of section 63 will tend to vary with the type of trust involved and as a consequence the context of the application for advice will be important.

    -Section 63 has a relationship to rights of indemnity. Provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee's duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs.

  6. The applicant sought the Court’s advice that his interpretation of the terms of the will was correct, but if there was any unresolved doubt then the application for rectification was to be pursued.  In my view, this was an appropriate course to be followed.  I grant leave to the applicant to amend the summons to seek advice and directions. 

  7. The provision in the will under consideration is clause 3, which provides:

    I GIVE DEVISE AND BEQUEATH the residue of my estate of whatsoever kind wheresoever situate both real and personal unto my Trustee UPON TRUST subject to the powers of postponement and retention hereinafter provided to sell call in and convert into money the same or such part thereof as shall not consist of money and after payment out of the net proceeds of my just debts funeral and testamentary expenses TO HOLD the balance then remaining UPON TRUST as to an amount equal to the sum forgiven under clause 2 of this my Will and one half of the balance of my estate (if any) for the testamentary trust established pursuant to clause 4 of this my Will and the other half of the balance of my estate (if any) then remaining for the testamentary trust established pursuant to clause 9 of this my Will.

  8. Other clauses of relevance are clauses 4 to 8 and 9 to 13.  Clauses 4 to 8 were said to relate to the Henry Robert Jensen testamentary trust and clauses 9 to 13 were said to relate to the Pia Louise Jensen testamentary trust.  The two sets of clauses are relevantly identical and for the purposes of these reasons, I have extracted clauses 4 to 8:

    4. IN clauses 4, 5, 6, 7 and 8 in relation to the HENRY ROBERT JENSEN TESTAMENTARY TRUST:

    4.1    the “Trust Period” means the period starting on the date of my death and ending on the Vesting Date;

    4.2    the “Principal Beneficiary” means my son the said HENRY ROBERT JENSEN;

    4.3    the “Income Beneficiaries” means the Principal Beneficiary, the spouses, widows and widowers of the Principal Beneficiary and the spouses, widows and widowers, children, grandchildren and remoter issue of any such spouses, widows and widowers, children, grandchildren and remoter issue (and for the purpose of the forgoing provision and in relation to the following sub clause, a child shall be deemed to include an adopted child and “children” and “grandchildren” shall be construed accordingly and a spouse shall be deemed to include a putative spouse or a de facto spouse and “widows” and “widowers” shall be construed accordingly) and any corporation at least one share of which is owned by an Income Beneficiary;

    4.4    the “Capital Beneficiaries” means the Principal Beneficiary and the children, grandchildren and remoter issue of the Principal Beneficiary;

    4.5    the “Trust Fund Trustees” means my Trustees of this my Will as the case may be;

    4.6     the “Trust Fund Appointor” means:

    4.6.1my Trustee for any period during which my son the said HENRY ROBERT JENSEN survives me but has not yet attained the age of 21 years; and

    4.6.2otherwise my son the said HENRY ROBERT JENSEN and/or such other person/s as he may nominate by inter vivos instrument and on his death to the extent he remains a sole Trust Fund Appointor such person/s as he may nominate in his will or otherwise his legal personal representatives EXCEPT THAT if my said son shall commit an act of bankruptcy at any time when my said son is a sole Trust Fund Appointor resulting in him being admitted into bankruptcy then for the period of such bankruptcy the Trust Fund Appointor will be my Trustee;

    4.7    the “Trust Fund” shall mean the share of my estate provided for in clause 3 of this my Will;

    4.8    the “Vesting Date” shall mean the eighteenth anniversary of the date of my death or such earlier date as may be fixed by my Trust Fund Trustee in my Trust Fund Trustee’s absolute discretion as the vesting date whether by deed or memorandum in writing; and

    4.9    the “Trust” shall be known as the HENRY ROBERT JENSEN TESTAMENTARY TRUST.

    5.MY TRUST FUND TRUSTEE shall hold the income of the Trust Fund established under clause 4 UPON TRUST and shall pay all or part of the income to any one or more of the Income Beneficiaries as my Trust Fund Trustee may, in my Trust Fund Trustee’s absolute discretion, think fit without any obligation to make payment to all of the Income Beneficiaries or to ensure equality amongst them and in making such distribution, my Trust Fund Trustee shall have the powers as full as those which they could possess if they were the absolute beneficial owner of the Trust Fund established under clause 4 and in particular (but without prejudice to the generality of the foregoing) may:

    5.1    at any time or times by deed extinguish or restrict the future exercise of any or all of the powers given by this clause 5 of this my Will;

    5.2    determine (in the event of my Trust Fund Trustee disposing of or being deemed to have disposed of an asset) from which part or parts of the capital or income of the Trust Fund my Trust Fund Trustee will pay income tax liability flowing from the disposal or deemed disposal;

    5.3    identify, segregate into separate income accounts and allocate separately different sources and types of income and any taxation or other benefits which may accrue thereon and record this in the books of account of the Trust; and

    5.4    in default of and subject to any appointment made under provision of this clause during the Trust Period my Trust Fund Trustee may pay or apply the whole or any part or parts of the Trust Fund income to or for the maintenance or support or otherwise for the benefit of any one or more of the Income Beneficiaries as my Trust Fund Trustee may in the absolute discretion of my Trust Fund Trustee think fit but during the Trust Period my Trust Fund Trustee may if my Trust Fund Trustee in my Trust Fund Trustee’s absolute discretion thinks fit accumulate such income or any part of it by way of compound interest by investing the same and its resultant income in any way authorised by this will and if my Trust Fund Trustee does so my Trust Fund Trustee shall hold such accumulations as part of the capital of the Trust Fund by may nonetheless in any future year during the Trust Period apply it or any part of it as if it were arising in that year.

    6. MY TRUST FUND TRUSTEE shall hold the capital of the Trust Fund established pursuant to clause 4 UPON TRUST and may pay all or part of the capital to any one or more of the Capital Beneficiaries as my Trust Fund Trustee may, in my Trust Fund Trustee’s absolute discretion, think fit without any obligation to make payment to all of the Capital Beneficiaries or to ensure equality amongst them and in making such a distribution my Trust Fund Trustee shall have powers as full as those which they could possess if they were the absolute beneficial owner of the Trust Fund and in particular (but without prejudice to the generality of the forgoing) may:

    6.1    provide for the remuneration of any person who may be a professional or corporate trustee or solicitor or accountant;

    6.2    give or impose upon any person or persons (including my Trust Fund Trustee) such beneficial discretionary trust or powers or such other powers (including the powers of investment and other administrative powers), discretions, conditions, limitations, restrictions and provisions as my Trust Fund Trustees may in the absolute discretion of my Trust Fund Trustee think fit;

    6.3    my Trust Fund Trustee may at any time or times by deed extinguish or restrict the future exercise of any or all of the powers given by this clause 6 of this my Will;

    6.4    determine (in the event of my Trust Fund Trustee disposing of or being deemed to have disposed of an asset) from which part or parts of the capital or income or Trust Fund my Trust Fund Trustee will pay any income tax liability flowing from the disposal or deemed disposal; and

    6.5    in default of and subject to any appointment made under a provision of this clause during the Trust Period my Trust Fund Trustee may pay or apply the whole or any part or parts of the Trust Fund to or for the maintenance or support or otherwise for the benefit of any one or more of the Capital Beneficiaries as my Trust Fund Trustee may, in the absolute discretion of my Trust Fund Trustee think fit.

    7.THE TRUST FUND APPOINTOR shall have the power to appoint in writing whether by Deed inter vivos or by will a new or additional Trust Fund Trustee and to remove any Trust Fund Trustee in relation to the whole or any part of the Trust Fund.

    8. IF on the Vesting Date any amount of capital and/or income shall remain undistributed I DIRECT my Trust Fund Trustee to hold the same UPON TRUST for my son the said HENRY ROBERT JENSEN if he shall then be living and if not then for such of the children, grandchildren or remoter issue of my son the said HENRY ROBERT JENSEN as shall then be living in equal shares per stirpes PROVIDED HOWEVER that if there shall be no such child, grandchild or remoter issue of my said son then living or if my said son shall die without any issue whatsoever then UPON TRUST for my daughter PIA LOUISE JENSEN.

    [Emphasis omitted.]

  9. Other proceedings have been issued in the civil jurisdiction of the Court in which the plaintiff, Andrea Helen Koronis, seeks to be declared the deceased’s putative spouse at the date of his death and further seeks provision from his estate under the Inheritance (Family Provision) Act 1972 (SA). The two children of the deceased are identified in those proceedings as the other relations of the deceased. Both Ms Koronis and the two children have been served with the present proceedings and informed of the hearing of the application. They have not taken any part in the proceedings.

  10. Counsel for the applicant contended that the clear intent of clauses 3, 4 to 8 and 9 to 13 of the will when read together and in context was to constitute the executor as trustee of a conventional estate trust of the residue of the estate of the deceased and as trustee of two trusts dividing the residue of the estate of the deceased for the benefit of the children, Henry Robert and Pia Louise.  It was said that the words used in clause 3 “UPON TRUST” were a legal formulation of an intent to create a trust and do not bear any other sensible meaning.  It was then submitted that those words established the overall estate trust in respect of which later words in clause 3 established the trust of each child and that the will then expressly identified the trust for Henry Robert and the terms of that trust in clauses 4 to 8 and the trust for Pia Louise and the terms of that trust in clauses 9 to 13.

  11. Any possible ambiguity or uncertainty arises because the will, when referring to the trust in favour of Henry Robert, uses the words in clause 3 “established pursuant to clause 4 of this my Will” and when referring to the trust in favour of Pia Louise uses the words “established pursuant to clause 9 of this my Will”.  On a literal reading of clauses 4 and 9, it is apparent that both clauses assume the creation of the trusts in question and provide definitions for the express terms which follow in the ensuing four clauses – 5 to 8 and 10 to 13. 

  1. Counsel for the applicant accepted that the use of the words in clause 3 “established pursuant to clause 4” and “established pursuant to clause 9” could be described as clumsy or, at worst, mistakes but, in any event, could not in their context neutralise the express creation of the trusts by the use of the words “UPON TRUST”.  Counsel referred to the observations of Isaac J in Gale v Gale:[4]

    If, however, there is, as Lord Cairns says in O'Mahoney v. Burdett, "a context which renders a different meaning necessary or proper"; or, to use Lord Hatherley's words in the same case, there is found something "to favour a contrary construction"; or, again, as Lord Selborne says, "indicative of a contrary opinion"; the Court may and ought to give effect to what it finds to be the true intention of the testator. Again that is a general principle of construction. I take it to be the duty of the Court to look at this document as a whole (see Crumpe v. Crumpe), and find the real intention of the testator from a reasonable consideration and construction of what he has actually said, from all he has said and how he said it. Having so ascertained his main purpose and intention to its satisfaction, the Court must give effect to it and carry it out, even at the cost of particular expressions which in themselves may be inconsistent with it, but not sufficient to control it. For this no other authority need be cited than Towns v. Wentworth.

    In seeking the true intention it is patent that the same words differently arranged, either in speaking or in writing, may convey a very different signification; and, after all, what we have to regard is what is the meaning the testator intended to convey to those who came to read his testament after his death as a document representing his last will with regard to his property. It is obvious, therefore, that the manner in which he expressed his directions, or the form of the document, as well as its mere words, is important, and in the case of a will, just as in the case of a Statute or a contract, re-arrangement and transposition may seriously alter the substance. A man's intention may be found indicated in many ways. Where you have an inartificially drawn will …

    [Footnotes omitted.]

    [4]    Gale v Gale (1914) 18 CLR 560, 566-567.

  2. Counsel identified several propositions of law supporting each by reference to authority:

    -“A testamentary instrument will not be the subject of an interpretation by a court unless there is difficulty in understanding the terms of the document because of ambiguity or the like. Before any rule or principle of construction may be applied, there must be some uncertainty on the face of the document which touches on the intentions of its maker.”[5]

    -The key to interpretation is to discern the testator’s intention, express or implied, from the words of the will as a whole.[6]

    -One part of a will may provide a clue in respect of the meaning of another.[7]

    -The reading of the whole will may create a definite impression and is a more reliable guide to the intentions of a testator than an application of various technical rules of construction to its various parts.[8]

    -Authority is of limited utility.[9]

    -However, the court must have regard to any established rules of construction[10]

    -The court may resort to presumptions where, notwithstanding the preceding process, there remains uncertainty or ambiguity.[11]

    -To the extent the court need to consider presumptions,[12] the golden rule is that the testator is presumed to intend to give something to someone where he uses words of disposal[13] and that the court seeks to avoid failure of provision.[14]

    -To some extent, the court favours provision for children and grandchildren.[15]

    [5]    Thomson Reuters, Australian Succession Law, vol 1, [190-510]; In re Hamlet; Stephen v Cunningham (1888) 39 Ch D 426, 434; Re Woolfitt (deceased) [1948] SASR 232, 234; Re Wemyss (1951) LSJS 479, 482.

    [6]    Smidmore v Smidmore (1905) 3 CLR 344, 354; Nicol v Chant (1909) 7 CLR 569, 588; Fell v Fell (1922) 31 CLR 268, 273-274.

    [7]    Currie v Glen (1936) 54 CLR 445, 450; King v Perpetual Trustee Co (Ltd) (1955) 94 CLR 70, 77; Ritchie v Magree (1964) 114 CLR 173, 182.

    [8]    See Re Fowler [1963] VR 639, 644; Estate of Wemyss (deceased) (1951) 7 LSJS (SA) 426, 429.

    [9]    Sidle v Queensland Trustees Ltd (1915) 20 CLR 557, 560; King v Perpetual Trustee Co (Ltd) (1955) 94 LCR 70; Ritchie v Magree (1964) 114 CLR 173.

    [10]   Noting the limitations expressed in Sexton v Horton (1926) 38 CLR 240, 249; Brennan v Permanent Trustee Co of New South Wales (1945) 73 CLR 404, 409; Re Murphy; Queensland Trustees Ltd v Cleary [1958] Qd R 456, 466.

    [11]   In re Hamlet; Stephen v Cunningham  (1888) 39 Ch D 426, 434.

    [12]   See In re Hamlet; Stephen v Cunningham (1888) 39 Ch D 426, 434 where Cotton LJ made the following remark: “All rules of construction are simply rules to be applied where there is no definite expression of intention in the instrument”.

    [13]   In re Harrison; Turner v Hellard (1885) 30 Ch D 390, 394; Fell v Fell (1922) 31 CLR 268, 280, 282.

    [14]   Fell v Fell (1922) 31 CLR 268, 275, 278, 297; Perpetual Trustee Co Ltd v McKendrick [1973] 2 NSWLR 784, 797-798; Public Trustee v Executor Trustee & Agency Co of South Australia Ltd (1984) 36 SASR 32, 39; but see, Dobryden v Wagner (2004) 90 SASR 515, [19] which limits the use of the presumption where it would take the words of the testator out of context.

    [15]   In re Hamlet; Stephen v Cunningham (1888) 39 Ch D 426, 433; Re Gregory’s Settlement and Will (1865) 34 Beav 600, 601-602.

  3. Counsel contended that if any uncertainty existed, it was resolved by later provisions in the will.  Attention was drawn to the subsequent references in the will to the words “the HENRY ROBERT JENSEN TESTAMENTARY TRUST” and “the PIA LOUISE JENSEN TESTAMENTARY TRUST”; the detailed language of definition in clauses 4 and 9; the express empowerment in clauses 5 and 10; the machinery provisions in clauses 6 and 7, and 11 and 12; and, the residual vesting provisions in clauses 8 and 13. 

  4. Counsel further contended that the words “established pursuant to clause 4” and “established pursuant to clause 9” did not need to be disregarded.  It was said that those words should be read as referring to the following clauses which established the two trusts in the sense of defining them. 

  5. Counsel pointed to the plain intent arising from the words of the will and contended that the scheme of the will as a whole was to create the trusts for Henry Robert and Pia Louise and that the suggested uncertainty or ambiguity, if any existed, was “banished” by a reading of the entirety of the will and having regard to the context in which those provisions appeared. 

  6. I do not consider that any uncertainty or ambiguity arises when the words giving rise to the suggested uncertainty or ambiguity are considered in their context.  In my mind, any possible uncertainty or ambiguity has been resolved when regard is had to the entirety of the will.  In my view, the words used by the testator in his last will created a testamentary trust in favour of Henry Robert and a testamentary trust in favour of Pia Louise. 

  7. In these circumstances, it is strictly unnecessary to proceed to consider the application for rectification.  However, as the matter has been fully argued, it is appropriate that I express my views in short form.  The material before the Court established that the actual intention of the testator was to create testamentary trusts in favour of Henry Robert and Pia Louise.  That material includes the instructions given to the solicitor who drew the will and the intent manifest in the will including the demonstrably fair nature of the provision made in the will for the testator’s children.  Were it necessary to order rectification, I would do so. 

  8. The applicant may act in accordance with this advice.  I reserve liberty to apply should further advice be sought.


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