Kempson v Haydon
[2022] VSC 30
•4 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2020 04795
| PETER RUSTON KEMPSON (AS ADMINISTRATOR AND TRUSTEE OF THE ESTATE OF JILL NGARITA HALL, DECEASED) | Plaintiff |
| v | |
| STEPHANIE LYN HAYDON | First Defendant |
| -and- | |
| ANDREW GEORGE HALL | Second Defendant |
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JUDGE: | FORBES J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 December 2021 |
DATE OF JUDGMENT: | 4 February 2022 |
CASE MAY BE CITED AS: | Kempson v Haydon & Anor |
MEDIUM NEUTRAL CITATION: | [2022] VSC 30 |
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PROBATE – Administration of Will – Administrator and Trustee of deceased Estate – Supreme Court (General Civil Procedure) Rules 2015 (Vic), Order 54 – Judicial Direction – Construction of Will – Will described gift of transfer of real property – Registered proprietor of land a company in which Testatrix held 50% share – Whether Testatrix intent is to gift her share in company - Whether purported gift valid - Hendry v The Perpetual Executors & Trustees Association of Australia (1961) 106 CLR 256 – Re Bowcock [1968] 2 NSWR 697 - Re O’Callaghandeceased [1972] VR 248 – Re Lewis’s Will Trusts [1985] 1 WLR 102 – Salier v Angius [2015] NSWSC 853.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Rizzi | Sinisgalli Foster Legal |
| For the First Defendant | Mr P. Cawthorn QC Mr J. McKay | Belleli King & Associates |
| For the Second Defendant | Mr L. Glick QC Mr V. Murano | Clayton Utz |
HER HONOUR:
Jill Ngarita Hall (the Testatrix) died on 30 May 2015 leaving a will dated 13 June 2000 (the Will). She was survived by her husband Bruce Chandler Hall and their three adult children Stephanie Lyn Haydon, Andrew George Hall and Jennifer Robyn Cowie.[1] Jennifer subsequently died on 6 November 2018. The plaintiff[2] as administrator and trustee of the estate seeks judicial direction under Order 54 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). Both Andrew and Stephanie have been joined as necessary and proper parties to the proceeding.[3] By the Further Amended Originating Motion dated 28 July 2021, direction was sought on four issues, together with costs and other consequential orders. This judgment deals with the first issue only. A separate hearing will be listed for determination of the remaining three issues. The issue with which I am concerned deal with the construction of the Will and in particular the clauses that gift land to Andrew.
[1]For clarity, I will use first names only to describe the various members of the Hall family, meaning no disrespect to any.
[2]The plaintiff was granted leave to apply for a grant of administration of the Will and the executors named in the Will renounced their right to obtain probate. Letters of Administration with the Will annexed were granted on 3 November 2017
[3]Order of Judicial Registrar Keith in Kempson (as Administrator and Trustee of the Estate of Jill Hall) v Haydon (Supreme Court of Victoria, S ECI 2020 04785, 29 April 2021).
At the time of her death the Testatrix had interests in land including two parcels of land located along the Cobb Highway, Moama. One was Lot 230 in Deposited Plan 751152 (Lot 230) known by the address 361 Cobb Highway Moama, 2731. She and her husband Bruce were registered proprietors as joint tenants. The other was Lot 231 in Deposited Plan 751152 (Lot 231) located at PH Moama Cobb Highway, Moama, 2731 (which is also known as Volume 7978 Folio 158 and formerly known as Portion 231). The registered proprietor of Lot 231 was Halls Poultry Farm Pty Ltd (HPF). The two issued shares in HPF were held beneficially, one by Bruce and the other by the Testatrix.
The Hall family carried on a poultry business and other businesses. They did so utilising various companies, including HPF. Those businesses were not conducted from or otherwise connected to Lot 231.
Construction of the Will
The Will of the Testatrix, at clause 2, reads as follows:
… I GIVE DEVISE AND BEQUEATH unto my Trustees the whole of my estate as aforesaid to sell call in and convert into money such parts thereof as shall not consist of money and to stand possessed of the proceeds of such sale calling in and conversion together with any parts of my estate for the time being remaining unconverted after payment thereout of all my just debts funeral and testamentary expenses and all duties and taxes payable on my estate UPON TRUST to so arrange my affairs so that the following gifts to my children are effected (whether by direct gift or control of shares or otherwise):
2.1 To transfer all my interest in the land and buildings situated on the Cobb Highway, Moama on which is conducted the business(es) known as Halls Poultry Farm and/or Rich River Poultry Farm and/or Rich River Ice together with all stock, plant and equipment including motor vehicles and the like to my son ANDREW GEORGE HALL (“ANDREW”) for his own use and benefit absolutely SUBJECT however to any business overdraft in existence at the time of my death whether or not that overdraft is secured by business assets or otherwise;
2.2 …
2.3 To transfer to ANDREW the land in Crown Grant Volume 7978 Folio 158 (Portion 23, Parish of Moama) for his own use and benefit absolutely;
The questions for direction are:
Construction of clauses 2.1 and 2.3
1.In the events that have happened, and on the true construction of the Will, does the purported gift in clause 2.1 to Andrew of all the deceased’s interest in the land and buildings situated on the Cobb Highway, Moama fail?
2.In the events that have happened, and on the true construction of the Will, does the purported gift in clause 2.3 to Andrew of the land in Crown Grant Volume 7978 Folio 158 (Portion 23, Parish of Moama) fail?
The parties accept that ownership of Lot 230 passed to Bruce pursuant to the right of survivorship on the death of the Testatrix and does not form part of the estate. Therefore, the first question should be answered in the negative. There was no evidence that the business of HPF, stock, plant or equipment or other assets within the wording of clause 2.1 are identified as being in issue. The second question is addressed to Lot 231.
The plaintiff takes a neutral position on the construction question and has made submissions outlining relevant factual matters and the applicable principles concerning construction of a will. The parties submitted, and I accept, that the reference in clause 2.3 of the Will to Portion 23, is most likely a typographical error and ought be understood to be a reference to Portion 231.
The competing constructions are advanced by Andrew and Stephanie. In summary, Andrew contends that on a proper construction of clause 2.3 he ought receive the Testatrix’s share in HPF. Stephanie contends that the gift fails because the Testatrix did not own Lot 231 at the time of her death. She further contends that because Ms Hall’s shareholding in HPF is not specifically dealt with in the Will it falls into the residuary estate. The residuary estate is distributed to Stephanie, Andrew and Jennifer as tenants in common in equal shares.[4]
[4]By clause 2.6 of the Will.
Order 54 procedure
Order 54 provides a summary procedure allowing those administering trusts or estates to obtain answers to questions that arise in a quick and efficient manner so as to avoid protracted disputes. Such questions include questions as to the proper construction of a will.[5] The procedure protects both the position of the trustee and the interests of the trust.[6]
[5]Morris v Smoel [2013] VSCA 11.
[6]Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [72].
The second defendant submits that question 2 as posed demands a yes or no answer, and a negative answer as presently framed would not give guidance to the administrator as to what is needed to give effect to clause 2.3. It would not therefore be useful for providing an answer in the interest of the trust and the trustee.
Andrew submits that, if the gift does not fail, there is no guidance for the administrator on how to give effect to the gift. He contends that the second question should properly ask:
Upon the proper construction of the Will, is the deceased’s intention to transfer her interest in the land in Crown Grant Volume 7978 Folio 158 to be effected by a transfer of the Deceased’s share in Hall’s Poultry Farm Pty Ltd (the registered proprietor of Lot 231 in deposited plan 751152 at the time of the Deceased’s death) to Andrew Hall?
Principles for construction of a will
The applicable principles were not in dispute and can be briefly summarised:[7]
[7]The summary is drawn from the 10 principles set out by Isaacs J in Fell v Fell (1922) 31 CLR 268 (‘Fell’) and the cases there cited in support of each proposition. They have been summarised more recently in Jepson v Bowman [2014] VSC 590 at [7] and Craven v Bradley [2021] VSC 344 at [75].
(1) The purpose is to discern the intent of the Testatrix.
(2) To do so one commences by examination of the words of the Will.
(3) Those words are to be construed by reference to the document as a whole and with regard to the surrounding circumstances.[8]
[8]These first three are outlined by Lord Romer in Perrin v Morgan [1943] AC 399.
(4) Construction should, where possible, give effect to intent rather than the literal words, where the literal words produce an unintended result.[9]
[9]Re Allsop [1968] Ch 39 at 47 (Lord Denning).
(5) Where the ordinary meaning of the words themselves and the surrounding circumstances are not clear as to intent, a court may have regard to admissible extrinsic evidence in order to understand the language of the document. The court may ‘sit in the testator’s armchair’ to take account of circumstances known to him or her at the time the will was made (the Armchair principle).[10]
[10]Boyes v Cook (1880) 14 Ch D 53, 56 (James LJ).
(6) The Armchair principle is supplemented by s 36 of the Wills Act (1997) Vic, which governs the admission of evidence to aid construction of a will. Section 36(1) permits the admission of evidence to assist in the interpretation of the language if the language used renders the Will or any part of it:
(a) meaningless; or
(b) uncertain or ambiguous on the face of the Will; or
(c) uncertain or ambiguous in light of surrounding circumstances –
(7) Evidence of the testator’s intention is not admissible as evidence to assist the interpretation of language used.
The evidence
The plaintiff swore an affidavit[11] exhibiting the Will and grant of letters of administration, relevant title searches and company searches. The affidavit also exhibited the trust deed establishing the Hall Family Trust, the corporate trustee of which, after some name changes, is Rich River Ice Pty Ltd (Rich River). Beneficiaries under the Hall Family Trust include companies in which a beneficiary is a shareholder and so includes HPF.
[11]Sworn on 10 December 2020.
Andrew affirmed an affidavit dated 18 June 2021.[12] It exhibited documents confirming HPF was, at the date of the Will and remains, the registered proprietor of Lot 231. The ASIC search of HPF demonstrated, amongst other things, that the Testatrix was a director of HPF from 26 August 1977 to 1 September 2009, and was secretary from 30 June 1987 to 1 September 2009. Andrew replaced her as director and secretary on 1 September 2009 and remains in both roles. Andrew is also secretary and director of Rich River. Bruce is the other director.
[12]His second in the proceeding, the first being in support of his joinder as a party.
Andrew’s third affidavit also exhibited financial documents of the Hall Family Trust. Financial statements of the Hall Family Trust that were exhibited indicated that since at least 2016 it has been involved in the family poultry business.
Stephanie affirmed an affidavit dated 1 December 2021 exhibiting further financial documents of HPF produced by Andrew.
While financials going back to the 1990’s indicated that HPF was conducting business trading in stock, by the year to June 2001 HPF’s balance sheet showed it owned fixed assets including land and buildings, plant and equipment as well as current and intangible assets and had liabilities, but no longer engaged in trade. The profit and loss statement that year showed income from hire of plant, rent and interest. By 2015, income was from distributions and interest. Company assets largely comprised noncurrent assets relating to amounts receivable from the Hall Family Trust[13] and goodwill. Lot 231 was not identified in the financial documents of HPF that were produced.
[13]Amount appearing in the financials as Unpaid Present Entitlements.
The documents exhibited to the various affidavits demonstrate relevant surrounding circumstances including ownership of Lot 231, the company details for HPF including shareholding and financials, including that it was the registered proprietor of Lot 231 despite its absence from the recorded assets of HPF. Largely these matters were not controversial in the context of the present questions.
It was not contested that the businesses referred to in clause 2.1 were conducted on Lot 230. It is common ground that the gift in clause 2.1 failed because that Lot was acquired by Bruce on the death of the Testatrix. It was also not contested that Lot 231 was used for agricultural purposes with no connection to any business of Halls Poultry Farm.[14]
[14]Affidavit of Stephanie sworn on 21 June 2021, [12] and accepted by Andrew in submissions dated 7 December 2021, [18].
First Defendant’s submissions
Stephanie submits that the purported gift in clause 2.3 fails as the Testatrix did not own Lot 231 at the time of her death. HPF owns assets of significance beyond Lot 231 as demonstrated by the financial records of the company. A share is an interest in a company carrying rights and liabilities arising from the contract between shareholder and company, but which does not give the shareholder any proprietary interest in the assets of the company.[15]
[15]Sydney Futures Exchange Ltd v Australian Stock Exchange (1995) 56 FCR 236, 255-256.
The prefatory words in clause 2, ‘…the following gifts are effected (whether by direct gift or control of shares or otherwise)’ do not permit a transfer of shares where the transfer would confer assets beyond that which is the subject of the gift. In short, the transfer of the control of the share would not give effect to a transfer of the land but to some other gift. The Testatrix’s shareholding in HPF is not dealt with otherwise in the Will. Stephanie submits that the share in HPF therefore falls into the residue of the estate.
She relies on Re Lewis’s Will Trusts,[16] and the cases that have applied it, to demonstrate that where a bequest is of land in fact owned by a company in which the testator holds shares, a court cannot make assumptions about what the testator intended to pass on. At its simplest, the submission is that a gift of land does not mean a gift of a company share. She submits that the prefatory words are only generic in nature and do not permit a gift of interest in Lot 231 by a transfer of the company share.
[16][1985] 1 WLR 102 (‘Lewis’).
Second Defendant’s submissions
Andrew submits that the intent is clear from the plain reading of clause 2.3. First, it directs the administrator ‘to so arrange my affairs so that the following gifts to my children are effected’. The ways that the affairs be arranged depends upon the nature of what is being gifted ‘by direct gift, or control of shares or otherwise’. There is then a specific direction to transfer to Andrew. All three matters, the two directions and the steps required to carry them out, are in plain language.
Andrew relies on Hendry v The Perpetual Executors & Trustees Association of Australia[17] where a gift of ‘all my real estate’ by a testator who owned no real estate but was a partner in a partnership that owned real estate, had a manifest intent to gift the partnership interest. By analogy, he submits that the intent of the Testatrix here was to gift her interest in the land represented by her HPF share. He says the intent is clear because her only interest in Lot 231 was through her beneficial shareholding, and therefore the only gift that she could make, bringing it about by ‘direct gift, control of shares or otherwise’. Hendry was applied by the Supreme Court of Western Australia in Drinkwater v Drinkwater,[18] where a will that gifted ‘my share in farmland’ in property owned by a company in which the testator was a shareholder, was found to be a valid gift.
[17](1961) 106 CLR 256 (‘Hendry’).
[18]WASC (unreported) heard and judgment delivered 9 November 1988 (Walsh J).
Finally he submits that, if it were necessary to do so in order to properly construe the clause, the Court may insert additional words to make the intent clear.
Consideration of the case law
In Re Lewis’ Will Trusts, the testator made a gift in this form:
I devise and bequeath my freehold farm and premises, known as Talygarn, Pontyclun, together with all stock fixtures fittings and implements and machinery and together with the contents of the farmhouse to my son…
The farm was in fact owned by G R Lewis (Talygarn) Ltd, a company specifically incorporated upon purchase of the land by the testator and in which he and his wife were the only shareholders. Scott J said the bequest was in clear and unambiguous terms. He accepted that the testator intended to dispose of property that he owned, but said that it was clear that the testator
… intended to dispose – and thought he was disposing – of the farm. The evidence also makes it quite clear that he did not when he made this will have in mind his shares in G R Lewis (Talygarn) Ltd., and did not have in mind that the farm in fact was owned by that company. He intended to describe and did describe the farm.[19]
[19]Lewis (n 16), 105.
Scott J described the Court’s task as being to consider the language used in the testamentary provision in light of the extrinsic admissible evidence to form a view of what is meant by that language. He said the task is not to ask if, had the testator truly apprehended the nature of the asset he held, then would he have disposed of it in a particular way. Then having discerned that intention, as a matter of construction give effect to it. He further said:
…the court cannot properly construe a testamentary provision on the basis of what the testator would have done had he in mind the true nature of his proprietary asset, is because a court can never be properly satisfied as to a testator’s intention in that respect. There must always be some element of doubt where the asset which the testator was competent to dispose of is different in kind from the asset which he has in fact purported to dispose of.[20]
(emphasis added)
[20]Ibid 108.
The fact that the testator does not own the asset described will not always mean that the intent to gift the asset that is actually owned cannot be ascertained. Such was the case when a testator who owned no real estate purported to bequeath ‘all my real estate’ in Hendry. The testator was a partner in a partnership of three siblings which owned real estate and livestock, and conducted a cattle business. Partnership land was registered in the names of existing partners as tenants in common in equal shares. At the time of death there had remained two partners. The testator bequeathed livestock to a nephew, real estate to the sons of a cousin, and the residue of the personal estate to his sister. The executor sought advice as to construction of the will and in particular the gift of livestock and the gift of real estate. At first instance, it was held that the beneficiaries were entitled to a sum equal to one half of the net proceeds of livestock sales, and one half net proceeds of real estate sales respectively. The sister’s appeal, contending that she was entitled to the whole of the estate because the testator owned no livestock and no real estate, was unsuccessful.
The Court (Taylor and Menzies JJ)[21] accepted that on the testator’s death the partnership dissolved and that the personal representative of the deceased and the other partner were each entitled to an account taken of the partnership’s assets and liabilities and, after payment of liabilities, a distribution of surplus. Therefore, on death, the personal representative had a right to money but not to livestock or real estate. But the question was not as to his rights as a partner but what he meant when he said ‘my livestock’ and ‘my real estate’. This exercise looks to the words of the will rather than to any strict legal analysis of rights during life or on death. They concluded that:
The conclusion is inevitable that he was dividing what he had into three parts, and that he was disposing separately of whatever interest he had in livestock(which could only be his partnership interest), the net proceeds of whatever interest he had in land, (which again could only be his partnership interest) and of the net proceeds of whatever interest he had in personalty other than livestock.[22]
[21]Fullagar J having also constituting the bench at hearing but died before judgment was delivered. The reasons note his indication of agreement prior to his death with the reasons published.
[22]Hendry (n 17) 267.
To dispose of the entire estate to the sister under the phrase of ‘residue’ was said to be contrary to the manifest intent of the testator.
In the NSW case of Re Bowcock (deceased),[23] a bequest of a property known as ‘Kelvinside’ was owned in fact by a company in which the deceased owned all shares. It was held by Else-Mitchell J to plainly intend a transfer of that property. Applying Hendry, the judge found from the language of the will as a whole that the deceased did not fully understand the precise manner in which Kelvinside was vested, consistent with a belief that he owned the property. Having determined a clear intent, the judge determined that the trustees controlling the company were in a position to transfer title in accordance with the gift. The judge did not conclude that the testator had an interest in the property of the company that he was able to dispose of. Rather the will intended to dispose of property that he did not have an interest in but which the executors had the means to get in and dispose of in accordance with the will.
[23][1968] 2 NSWR 697.
This was also the conclusion reached in the decision of Re O’Callaghan.[24] In Re O’Callaghan, the Supreme Court of Victoria was asked to interpret a will where the testator gifted ‘my flat’ and ‘my shares’ in circumstances where he owned neither. He had incorporated a company for the purpose of holding property (described as Name Company). He held all beneficial shares in Name Company, as the one share held by his wife was found by the judge to be held by her on trust for her husband. He possessed no property or shares in his own name. The registered proprietor of the flat was a different company, in which Name Company held shares entitling it to tenancy of the flat. His will made gifts of the flat and shares to his wife. In applying Hendry and Re Bowcock, Gowans J found that the gifts were valid as the intention was clearly to dispose of ‘my company’s flat’ and ‘my company’s shares’. Following a consideration of a number of relevant cases, among them Hendry and Re Bowcock, his Honour concluded:
Aided by these authorities, my conclusion is that where a testator conveys to his executor a direction to reduce into possession an asset not owned by the testator and the executor is armed by the testator with the power to get it in, he is bound to do so, and to deal with it by way of disposition in the way that the testator directs.[25]
Having ascertained the intention, his Honour turned to the question of whether the testator armed the executor with the ability to make the disposition effective and concluded that it did.
[24]Re O’Callaghan, deceased [1972] VR 248 (‘O’Callaghan’).
[25]Ibid 256.
To go slightly further, the case of Drinkwater v Drinkwater[26] was another illustration of the application of Hendry in relation to an intent to transfer land when the testator’s interest was that of a shareholder in the company owning the land. In Drinkwater it was important in ascertaining intent that the will bequeathed ‘his share of farmland’. In those circumstances, his Honour was able to ascertain the intent was to pass on his interest in land. There was no mention in the short reasons of any other assets owned by the company other than the property is question. Therefore, the company share is no more and no less than the share of farmland I also observe that the relevant provision of that will separately dealt with the share of farmland and any income derived from the farmland.
[26]WASC (unreported) heard and judgment delivered 9 November 1988 (Walsh J).
In Salier v Angius,[27] the NSW Supreme Court construed the intention of a testatrix who had left a will consisting of handwritten notes in Italian with an attached translation containing a list of properties which the Court construed were intended ‘to go to Roby Angius’. The list included properties that the deceased owned in her own name, had an interest in through corporations, or expected to own as a consequence of an earlier separation agreement entered into with her former husband. It nominated ‘my share’ in respect of some properties but otherwise simply listed the various property addresses. Having identified the intended property in each case, something that was not straightforward in itself, the Court was then asked, in respect of those properties where the registered proprietor was a company in which the deceased held shares, whether the phrase ‘all properties to Roby Angius at my death’ included both real property and shares in companies that owned real property.
[27][2015] NSWSC 853 (‘Salier’).
The competing constructions were, on the one hand, Roby Angius’ position that the clause was a residuary clause, its effect being to leave the whole of the residue to him; and on the other hand, a clause that disposes only of real property and does not deal with shareholdings in companies that owned property or other assets. The argument focused on the meaning of the word ‘property’ as it was used in Italian.
Having construed a general intent to leave ‘all properties to Roby Angius’, the judge then said:
It is evident from the deceased’ subsequent specific gifts to Robert that she intended to include the shares she held in various companies in her gifts to him. That is what she must have meant when she referred to the properties owned by those companies. There is no evidence to suggest that the companies did anything other than hold real estate and it would be natural in those circumstances for the deceased to refer to her interest in those companies by reference to the real estate they held, which is what she did.[28]
The clause in question dealt with the residue of the estate. The reference to property in this context had the broader meaning and was not confined to real property.
[28]Salier (n 27) [68].
As a principle of construction some greater latitude is afforded construing the words of a will written by a lay person, than one prepared by a lawyer.[29] The Will of Jill Hall is a typed document in formal language and witnessed by two clerks of a firm of solicitors in Moama. I accept it was professionally written.
[29] Fell (n 7), see also applied in Ashman v McHugh [2004] VSC 232 (R Osborn J).
Analysis
In Hendry, the conclusion of the court set out above [29] was reached in answer to a the question posed earlier in the reasons:
The circumstances are therefore that a farmer who owned no livestock or real estate of his own but was a member of a partnership which owned both land and livestock left a will disposing of his livestock and the proceeds of his real estate and the question is whether those gifts are just meaningless or refer to his interests in the livestock and the land of the partnership. This question would seem to admit of but one answer unless the law prevents the testator’s words from having attributed to them the meaning they would naturally bear in the circumstances stated, viz that he was disposing of his partnership interests.
The question was answered by whether the words evidence an intent to dispose of the interest that is held in partnership property real and personal. In Hendry, the interest was ‘an interest in every asset of the former partnership … proportionate to his share in the totality of the surplus assets of the partnership’. Hendry did not grapple with a will that purported to transfer any interest in land itself, because the death brought about the winding up of the partnership and the will directed the dispersal of the proceeds arising from the sale or conversion of those interests, other than the specific gift of livestock.
A shareholding in a company does not give rise to ownership of the assets held by the company.[30] Nevertheless, as the cases above show in some circumstances the intent to gift company owned real property may nevertheless be valid. The cases considered above do not in my view proceed on the basis that the testator has any legal interest in the company owned asset capable of being transferred. Rather, they seem to assume, at least implicitly if not explicitly, that no such interest exists. They focus instead on two features to determine the validity of the gift. The first is whether the asset or interest of the company that was sought to be gifted was adequately described by the words of the will. In cases where the only asset of the company was one or more real properties, whether those properties, or the interest in them to be gifted, were sufficiently identified in the will. Where a company owned real property and other assets such as cash or shares, or derives income from the property, whether the intent is to transfer some or all of the interest. That concern goes to ascertaining what is intended to be gifted. The second feature is whether, where the will directs the trustee to make a gift of property belonging to a company, the trustee is in a position to give effect that intent by transfer of title or otherwise.
[30]The plaintiff’s submission referenced Sydney Futures Exchange Ltd v Australian Stock Exchange (1985) 56 FCR 236, 255.
Accordingly, in Re O’Callaghan, the testator gifted property of the company, particularising his indirect interest in real estate through shares, and the indirect interest in other shareholdings of the Name Company. The executor was able to give effect to both of those share transfers because of its control of the relevant company. Likewise in Re Bowcock, the intent to gift the company land was clear and the executors were, through control of the company that owned the relevant land, able to give effect to this intent by a transfer of title on behalf of the company. In my view, Salier similarly dealt with companies that were merely vehicles for holding real property. The judge accepted that by the words used in the will read as a whole, the testatrix understood and appreciated that those properties owned by the companies could not be dealt with immediately by the beneficiary of the gift. In any event, Salier ultimately construed property as both real and personal such that the company shares were gifted by the clause. Salier therefore dealt only with the first feature of adequate identification of the gift.
Applying the matters drawn from the cases, I begin with the words of clause 2.3. In plain English they gift real property: Lot 231. It is a simple bequest of land directing simply a transfer of ‘the land’ and described only by folio details. Read in the context of the will as a whole, it stands in contrast to clause 2.1. That clause specifically makes reference to her ’interest in the land and buildings’. It also references the business(es) of Halls Poultry Farm conducted thereon and makes reference to stock and other equipment subject to business overdrafts.
When read in light of the surrounding circumstances, there is nothing that connects Lot 231 to any businesses undertaken by HPF on Lot 230 or otherwise. The words of the Will draw no connection between Lot 231 and HPF. Nor is there a simple correlation between the activity of HPF and the ownership of the land such that they can be identified as one and the same. As best can be ascertained from the surrounding circumstances, ownership of Lot 231 is unrelated to any other activities of the company. The plain words of the Will have not qualified in any way the transfer of land.
I do not accept Andrew’s submission that the prefatory words make clear an intent to effect the gift by transfer of the HPF share. Firstly, because to transfer the share would not have the effect of transferring title to Andrew. Title would remain unchanged with HPF, and all Andrew would obtain would be an indirect interest in the value of the company assets which include Lot 231. The administrator holds the Testatrix’s 50% shareholding in HPF on trust for the estate. The executor is not in a position, by controlling HPF, to effect a transfer of the land from the company to Andrew in accordance with the Will. This can be distinguished from O’Callaghan where the widow who held one share in the company was found to hold it beneficially for the testator, so that the testator controlled the disposition of Name Company property.
Second, the Will bequeathed other land. Clause 2.2 discharged any mortgage held by the testatrix in respect of Andrew’s property at another address.
Clauses 2.4 and 2 5 read as follows:
2.4 To transfer to STEPHANIE my land house and contents of [address and title details] free of any debt for her own use and benefit absolutely.
2.5 To transfer the commercial property in [address and title details] to my Trustees upon trust for such of my grandchildren who are living at my death and attain the age of eighteen (18) years and if more than one then equally between them as tenants in common in equal shares.
This included a bequest to Stephanie at clause 2.4 of land at 8 Maiden Smith Drive, Moama. The Court was informed that this gift failed as the land was also owned jointly with her husband Bruce who acquired it by survivorship on the death of his wife.
In each bequest, where interest in land and other assets are gifted, those other assets are in some way identified: house and contents; stock, plant and equipment, business assets or overdrafts. Clause 2.3 says nothing about any other assets associated with HPF that might accompany it a transfer of Lot 231. Were the bequest intended to convey property beyond Lot 231 held by HPF, intending in fact to transfer the company share, some indication of that broader gift might be expected in the words of the Will.
Third, Andrew contends the arrangement of her affairs as described by the prefatory words intends to give effect to the gift of transfer of land by transfer of share. , This requires a construction of ‘control of shares’ to be read as control of my company share, and not as control of my share of the land. This makes the language quite different to the language in Drinkwater where the share explicitly referred to the share in farmland. Additional words necessary to give effect to this meaning are missing. The construction contended for by Andrew was that, if necessary, the following words (in bold) would be added to the clause:
To transfer to ANDREW all of my interest in Lot 231 represented by my share in Halls Poultry Farm Pty Ltd, the registered owner of the land in Crown Grant Volume 7978 Folio 158 (Portion 23, Parish of Moama) for his own use and benefit absolutely;
In my opinion, the proposed wording highlights that whatever the interest in Lot 231 that the Testatrix held through her share in HPF, the share in HPF was not by its content the same as an interest in Lot 231. The interest in Lot 231 was therefore not represented by the share in HPF. To paraphrase from Re O’Callaghan:[31] if her attention had been drawn to the distinction, could she have said ‘What is the difference?’ In that case there was no difference between ‘my flat’ and ‘my company’s flat’ and therefore intent was clear. Here, there is considerable difference between the land of Lot 231 and the interests arising from the shareholding, which include other assets and liabilities of which title to Lot 231 is just one. It matters little whether those other interests are substantial or not, what is important is that is there is a difference between the interest that is the share of the land and the share of the company.
[31]O’Callaghan (n 24), 254.
I cannot be satisfied that the intent expressed by the clear words transferring land was in fact intending to transfer a company share which represented a different and larger interest.
Whilst I accept that the gift in clause 2.3 could only be the interest in the company that owned Lot 231, I cannot accept that the Testatrix intended to convey the company’s interest. In Hendry, the testator owned the land and livestock albeit only half of it by virtue of the partnership. There was a direct correlation between the interest owned (a share of livestock and land) and no complication to his gifts arising from any business conducted on the land or in relation to the livestock. The clear words matched a clear intent. There is no comparable directness here.
The additional words ‘an interest’ in land were included in the will in Drinkwater. Their presence assisted in identifying the testators intent. In my view, it is unnecessary to add the word ‘interest in’ to ascertain the plain meaning of the provision and to do so would not remedy the fundamental problem that there is difference between an interest in Lot 231 and the interest that is the HPF shareholding such that they cannot be equated with or represent each other.
In any event, given the vague reference to the business of HPF in clause 2.1, but not in clause 2.3, nor elsewhere in the will, I am unable to conclude that, in the absence of express words regarding the company or the family business, when the Will is looked at as a whole, the intent of the Testatrix in clause 2.3 was to gift her share in HPF.
For these reasons, in my opinion the proper answer to question 2 as framed by the plaintiff is no, the gift fails. For completeness, I do not think that the proper question is as posited by the second defendant[32]. The question as proposed, seems to me to be directed at whether, had the testator apprehended the true nature of the asset she held, she would have disposed of it in a particular way. This was the approach that Scott J in Re Lewis’ Will Trusts did not accept to be a correct statement of principle[33] because it attempts to ascertain an intent upon some different understanding of the Testatrix.
[32]As set out at [12].
[33]As set out in these reasons above at [27].
Therefore, the answer to question 1, as submitted by all parties is Yes, the gift in clause 2.1 fails. The answer to question 2 is Yes, and the gift in clause 2.3 fails.