Mackenzie v Learmonth
[2004] VSC 337
•9 September 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4966 of 2004
IN THE WILL AND ESTATE OF KEITH LEWIS MEIER deceased
| RICHARD JAMES MACKENZIE (as Executor of the Will of Keith Lewis Meier deceased) | Plaintiff |
| V | |
| CAROLYN ANNE LEARMONTH & ORS | Defendants |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 September 2004 | |
DATE OF JUDGMENT: | 9 September 2004 | |
CASE MAY BE CITED AS: | In the Will and Estate of K L Meier (deceased) | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 337 | |
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WILLS – general legacy of “a sufficient amount of money” to be held on trust for the payment of school fees of children and unborn children of certain beneficiaries – whether, to the extent that the residuary estate was insufficient, the testator intended the amount to be payable out of property specifically disposed of by the will.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr I J Hardingham QC with Mrs K R Rees | Eales & Mackenzie |
| For the First, Second, Third and Fourth Defendants | Mr J D Merralls QC with Mr R T A Waddell | Harry M Hearn |
| For the Fifth Defendant | No Appearance | |
| For the Sixth Defendant | Mr S F McNab | James Higgins & Co |
HIS HONOUR:
Keith Lewis Meier (“the Testator”), Retired Sales Representative, died on 2 August 2002, leaving a will dated 25 July 2002 and assets valued at about $2,860,000. Probate of the Will was granted to the plaintiff on 18 June 2003. By originating motion dated 10 March 2004 the plaintiff, in his capacity as executor and trustee of the Will, seeks the determination of a number of questions arising thereunder.
The questions have arisen as a result of the provision in cl.5 of the Will whereby the Testator gave “to my Trustee a sufficient amount of money to hold on trust” and directed his trustee “from those said moneys held on trust, to pay for the annual private school fees” of certain children. The residue will be insufficient to enable the plaintiff to set aside the full amount that an expert actuary advises to be adequate for the purpose. The questions raised include questions as to the validity of the gift in cl.5 of the Will, and as to the assets which may be drawn upon to provide the money given by cl.5 of the Will.
By cl.4 of his Will, the Testator gave pecuniary legacies of $1,000 each to a number of named persons not otherwise mentioned in the Will.
Clause 5 of the Will, as I have said, gives rise to the main questions for determination by the Court. It provides for the payment of school fees for the children (including any children born within five years of the Testator’s death) of three nieces and a nephew (the first to fourth defendants) and a friend of the Testator (the fifth defendant). The sixth defendant is joined to represent the children and unborn children. The same nieces and the nephew are also beneficiaries under cll. 7, 8 and 9 of the Will (and the residuary estate under cl.10). The friend is not a beneficiary under cl.7, but is also a beneficiary under cll. 8, 9 and 10. Clause 5 provides as follows:
“5.(a) I GIVE DEVISE AND BEQUEATH to my trustee a sufficient amount of money to hold on trust and I DIRECT my Trustee, from those said monies held on trust, to pay for the annual private school fees, covering Form 1 to Form 6 inclusive, and being equivalent to the amount charged by Caulfield Grammar School, in respect of all of the natural children who are alive or who are born within five (5) years of my death, and who will be or are attending Caulfield Grammar School or a private school of similar standard, of each of the following:
(i) my niece CAROLYN ANNE LEARMONTH;
(ii) my niece JULIE GAYE DYER;
(iii) my niece DEBRA JAYNE MEIER;
(iv) my nephew JOHN EDWARD MEIER;
(v) my friend EDWARD BERTHOLD PREUSKER.
…
(b)I DECLARE that my trustee will not be liable for any shortfalls in the provisions held on trust referred to in clause 5(a) above, and that should there in fact be a shortfall, then my bequest shall be limited to such shortfall and if there is any over-provision, then such over provision shall form part of my residuary estate.”
By cl.6 of the Will, the Testator gave certain house contents to his brother but none of the parties considered that this provision was relevant to the present questions.
By cl.7 of his Will, the Testator specifically bequeathed his investment holdings in the “Keith Meier Superannuation Fund” (valued at some $570,000) on trust for the said nieces and nephew, to distribute the annual income therefrom to them, and to distribute the capital component thereof “in specie, and not as cash” to those of the beneficiaries alive on 1 March 2020. Clause 7 provides as follows:
“7.(a) I GIVE DEVISE AND BEQUEATH my investment holdings in the KEITH MEIER SUPERANNUATION FUND to my Trustee upon trust to hold the capital therein with power to distribute the annual income accruing in respect of the investment holdings on the 1st June of each year to the following as shall survive me by thirty (30) days as tenants in common in equal shares: my neices CAROLYN ANNE LEARMONTH, JULIE GAYE DYER and DEBRA JAYNE MEIER and my nephew JOHN EDWARD MEIER.
(b)I DIRECT that the capital component of my investment holdings referred to above be distributed in specie, and not as cash, to each of the above beneficiaries who are alive on the 1 March 2020, as tenants in common in equal shares.”
By cl. 8 of his Will, the Testator specifically bequeathed his “script [i.e., scrip] and share holdings” (valued at some $634,000) on a similar trust to that contained in cl.7 save that his friend Edward Preusker is an additional beneficiary. Again there is a direction that the “actual script and shares” be distributed “in specie, and not as cash” to such of the beneficiaries as are alive , this time on 1 March 2015. I note that a question also is asked as to the scope of the words “my script and share holdings”. Clause 8 provides:
“8.(a) I GIVE DEVISE AND BEQUEATH my script and share holdings to my Trustee upon trust to hold the script and shares therein with power to distribute the annual income accruing in respect of the shares on the 1st December of each year to each of the following as shall survive me by thirty (30) days as tenants in common in equal shares: my said nieces CAROLYN ANNE LEARMONTH, JULIE GAYE DYER and DEBRA JAYNE MEIER, my said nephew JOHN EDWARD MEIER and my friend EDWARD BERTHOLD PREUSKER.
(b)I DIRECT that the actual script and shares referred to above be distributed in specie, and not as cash, to each of the above beneficiaries who are alive on 1 March 2015, as tenants in common in equal shares.”
Clause 9 of the Will specifically devises the Testator’s real estate as follows:
“9.(a) I GIVE DEVISE AND BEQUEATH my real estate properties, at the time being 2 Curraweena Road, 3 Curraweena Road, and 6 Bundeera Road, all of Caulfield South in the State of Victoria, to my Trustee upon trust to hold therein with power to distribute the monthly rental income accruing in respect of the said real estate property, subject to clause 9(e), monthly to the each of the following as shall survive me by thirty (30) days as tenants in common in equal shares: my said nieces CAROLYN ANNE LEARMONTH, JULIE GAYE DYER and DEBRA JAYNE MEIER, my said nephew JOHN EDWARD MEIER, and my friend EDWARD BERTHOLD PREUSKER.
(b)I DIRECT that as of the 31 July 2030, the real estate properties may, with the consent of the majority of the abovementioned beneficiaries who are alive at the time, be sold at market value, and the proceeds therein be distributed to each of the said beneficiaries who are alive as tenants in common in equal shares.
(c)I DIRECT THAT, should one of the beneficiaries specified in clause 9(a) above desire to reside in any of my said real estate properties, they shall be allowed to do so at the normal market rental rates, but shall be given preference to third party applicants.
(d)NOTWITHSTANDING the power of sale contained in clause 9(b), I DECLARE THAT should any of my beneficiaries who have resided at any of my real estate properties for longer than ten (10) years desires to purchase the said real estate property, they shall have the option to do so at the mean price of five valuations.
(e)I DIRECT THAT, in relation to my said real estate properties, they are to be maintained using the rental income from the properties in the same condition as at my date of death, and FURTHER THAT no extensions or renovations are to be done which costs in excess of $20,000 or such equivalent amount as adjusted from the date of my will.
(f)I FURTHER DIRECT THAT my real estate properties are to be managed by a member of the Real Estate Institute of Victoria, preferably Geoff Nixon & Associates or Gary Peer.
(g)NOTWITHSTANDING the above, I DIRECT THAT should, in the opinion of my trustee, any of the said real estate properties become untenantable or uneconomical, I give to my trustee the power to sell the said untenantable or uneconomical property at market value and the proceeds therein be invested, with any monthly accrued income being distributed in accordance with clause 9(a) above, and the capital to be distributed on 31 July 2030 to each of the beneficiaries referred to in clause 9(a) above that are alive at that time.”
Clause 10 of the Will deals with the residuary estate (being solely personalty and valued at about $203,000 before payment of liabilities of about $6,000 and before payment of testamentary and administration expenses). Clause 10 provides as follows:
“10.(a) I GIVE DEVISE AND BEQUEATH the residue of my estate to sell, call in or convert into money the whole or any part of my estate in the payment of all or any debts or taxes or funeral or testamentary expenses associated with my death or the administration of my estate and to divide the residue then remaining into equal parts, one such part to each of the following as survive me by thirty (30) days, as tenants in common in equal shares: my said nieces CAROLYN ANNE LEARMONTH, JULIE GAYE DYER and DEBRA JAYNE MEIER, my said nephew JOHN EDWARD MEIER, and my friend EDWARD BERTHOLD PREUSKER.
… “
At the date of the Will there were four children falling within the eligible class described in cl.5(a) of the Will but, having regard to the age and marital status of the Testator’s said nieces, nephew and friend, there was obviously the prospect of more children within that class being born within five years of the Testator’s death. At present there are five children within the eligible class.
Question 1 in the originating motion asks whether, in the events that have happened, and on the true construction of the Will, the gift contained in cl.5 of the Will creates a valid trust. The plaintiff submitted that the subject matter of the trust is defined with sufficient certainty because the amount which is to be held on trust – “a sufficient amount of money… to pay for the annual private school fees [etc]” – is objectively ascertainable by the trustee with appropriate advice[1] and that once that amount is raised by the trustee it will constitute a sum certain to be held on trust. The first to fourth defendants, and the sixth defendant, agreed with that submission. It is thus undisputed that cl.5 creates a valid trust and, in any event, I think that this conclusion is correct.
[1]I note that there is evidence before the Court from an actuary as to the amount which it would be appropriate to set aside to provide for the private school fees of children already born and those likely to be born within five years of the Testator’s death.
Question 2 in the originating motion asks whether the trust in cl.5 of the Will operates in favour of the five named beneficiaries as parents, or the children and unborn children defined by that clause. The plaintiff and the first to fourth defendants, and the sixth defendant, again agree (and I also agree) that the trust operates in favour of the children and unborn children.
Question 3 in the originating motion raises the central question for determination by the Court, namely, whether the plaintiff’s power to appropriate money for the purposes of cl.5(a) of the Will extends to the whole estate. Question 4 in the originating motion raises the related question as to which class or classes of assets may be drawn upon by the plaintiff to provide “a sufficient amount of money” for the purposes of cl.5(a) of the Will. The plaintiff contends that the money for the trust under cl.5(a) of the Will was intended by the Testator to be raised from the personal estate and the real estate dealt with by cll.6 to 10 of his Will. The sixth defendant contends that the money for the trust under cl.5(a) of the Will was intended by the Testator to be raised from his real estate only. The first to fourth defendants contend that the plaintiff may only have recourse to the residuary estate (cl.10) and may not have recourse to any other part of the estate to provide money for the trust under cl.5(a) of the Will.
It is common ground that the well-established general rule of law is that,[2] in the absence of a contrary intention disclosed by the Will, a general legacy, such as that provided under cl.5 of the Will, is payable out of the general personal estate of the deceased, i.e. that which is not otherwise disposed of by the Will, and is not payable out of personal estate specifically bequeathed by the Will (or out of real estate).
[2]Subject to exceptions not presently relevant.
In Robertson v Broadbent[3] the Lord Chancellor, the Earl of Selborne, said:
“The general rule of law as to pecuniary legacies (in the absence of any sufficient indication of a contrary intention) is, that they are payable by the legal personal representatives of the testator (in whom the whole personal estate vests by law) out of the personal estate not specifically bequeathed. The presumption is that the testator intends them to be so paid. Unless charged upon it by the will they are not payable out of the real estate.
The principle of the exemption of personal estate specifically bequeathed is, that it is necessary to give effect to the intention apparent by the gift. If the bequest is of a particular chattel, such as a horse or a ship, it is manifest that the testator intended the thing itself to pass unconditionally, and in statu quo, to the legatee; which could not be if it were subject to the payment of funeral and testamentary expenses, debts, and pecuniary legacies. As against creditors the testator cannot wholly release it from liability for his debts; but as against all persons taking benefits under his will he may. The same principle applies to everything which a testator, identifying it by a sufficient description, and manifesting an intention that it should be enjoyed or taken in the state and condition indicated by that description, separates in favour of a particular legatee, from the general mass of his personal estate, the fund out of which pecuniary legacies are in the ordinary course payable.
This reasoning does not apply to a gift in general terms of the whole personal estate to which a testator may be entitled at the time of his death … It is of course in the power of any testator, if he so pleases, to direct that his pecuniary legacies … shall be exclusively charged on his real estate, or on any particular property real or personal which he may think fit … But an intention to do so must be discoverable from the terms of his will.”
[3](1883) 8 App. Cas. 812, 815-816; see too: McBride v Hudson (1962) 107 CLR 604, 617 per Dixon J.
The plaintiff accepted that, prima facie, the money for the purpose of the trust under cl.5 was to be raised out of residuary personalty only but the plaintiff submitted that the Will manifested or exhibited an intention of subjecting not only residue but also the specific bequests, and, indeed, the specific devises, to the payment of that money. Such intention was of course not express but was, the plaintiff submitted, to be implied on a reading of the Will as whole. The plaintiff submitted that the wording and placement of cl.5 supported an inference that the Testator intended to bequeath “a sufficient amount of money” out of the estate as a whole rather than simply out of residue.
The plaintiff contended that the matter had to be considered in the light of the facts (as known at the date of the Will and at the date of death) that the residue was worth about $200,000, that there were then already four children that were potentially eligible under cl.5 and that there was a likelihood in all the circumstances of further children of the nieces, nephew and friend, being born within five years.
The plaintiff submitted that it was nonsensical in the light of those facts to attribute to the deceased an intention that the “sufficient amount” could only be drawn from residue and further nonsensical, if that were so, to contemplate that there might be an under-provision or over-provision from such residue (as contemplated by cl.5(b) of the Will).
The plaintiff emphasised that all of the specifically gifted property, both personal and real, had the character of “liquid” investments and was quite unlike the horse or ship referred to by Lord Selborne and as such was intended by the Testator to bear the burden of the trust under cl.5(a). The plaintiff further pointed to the fact that the beneficiaries were largely the same in relation to all relevant clauses of the Will and it was they and their children who would benefit by the payment of private school fees.
The sixth defendant submitted that there were some indications in the Will that the Testator intended his trustee to have recourse to parts of the estate other than the residuary estate for the purpose of the trust in cl.5(a). Like the plaintiff, reference was made to the words “a sufficient amount” in cl.5(a) and to cl.5(b) dealing with any over-provision. Reference was also made to the language of cl.10(a) – “I GIVE DEVISE AND BEQUEATH the residue of my estate to sell, call in or convert into money the whole or any part of my estate” – but I should say at once that I read the last mentioned words as simply a reference to the whole or any part of the Testator’s residuary estate.
The sixth defendant’s main contention was that the Testator intended, if necessary, to burden the specific devise of the real estate, and not the specific bequests, with the money required for the trust under cl.5(a). The basis of this contention was that, whereas the Testator had not shown such intention under cll.7 and 8 of the Will because of the direction that the investment holdings (in cl.7(b)) and the shares (in cl.8(b)) be distributed “in specie, and not as cash”, he had shown no such intention in cl.9, when dealing with the real estate. In respect of the real estate reference was made to the power of the trustee under cl.9(g) to sell “untenantable or uneconomical property”.
On the other hand, the first to fourth defendants submitted that the Will manifested no intention, and that no intention was to be implied, that the general legacy contained in cl.5 should be paid out of any of the property specifically disposed of by the Will. The words “sufficient amount of money” were words of description and did not show an intent that the gift take priority over the specific gifts or should be payable from them. The mere placement of cl.5 did not indicate such intention. Nor did the Will contemplate a possible insufficiency and there was no reason to think that the Testator believed that his residuary estate would be insufficient for the purposes of the trust in cl.5(a).
In my opinion, considering the Will as a whole and in all the circumstances, the submissions of the first to fourth defendants are clearly to be preferred. I do not consider that the Will manifests any intention, or justifies the implication of any intention, that the legacy contained in cl.5 of the Will should be paid out of any property specifically disposed of by the Will, that is to say out of any property other than the residuary estate.[4]
[4]The plaintiff advanced some persuasive arguments why, if property specifically disposed of was to be burdened, real estate should no longer be treated any differently to personal estate – but it is unnecessary to consider that issue.
I do not think that the use of the words “a sufficient amount of money” or the sequence of the provisions in the Will of themselves demonstrate an intention to have recourse to property specifically disposed of by the Will. Nor do I think that the “liquidity” of the various investment assets or the identity of the beneficiaries who were to receive them supports such an implication. Not only does the Will fail to indicate that the Testator intended his trustee to have recourse to property specifically disposed of by the Will but, on the contrary, cll.7 to 9 contain language indicating a preference that the property specifically disposed of should be retained by the trustee for later distribution in specie. Clause 7 provides for the trustee to hold the capital constituted by the investment holdings and to distribute the annual income thereof until the year 2020 at which time it is to be distributed in specie. Clause 8 takes a like approach with distribution in specie to occur in the year 2015. Clause 9 directs the holding of the real estate subject only to a possibility of sale in the year 2030 (under cl.9(b)) and a power of sale in the case of untenantable and uneconomical property (under cl.9(g)). All of these provisions (even allowing for the statutory powers and discretions of a trustee as to sale) in my view tend to negative any implication that the Testator intended the property thereby specifically disposed of to bear any part of the burden of the provision of the money required for the trust under cl.5(a). That apart, as I have said, there is in any event no reasonable basis for such an implication.
Further, there is no evidence that the Testator was of the view that the residuary estate was insufficient for the purposes of cl.5(a). Rather, it is proper to assume that the Testator regarded his residuary estate as sufficient, and not deficient, for such purpose.[5]
[5]See Miller v Huddlestone (1851) 3 Mac. & G. 513, 523-5; 42 ER 358, 362-3.
For the foregoing reasons I think that the answer to Question 3 in the originating motion is “No”. Question 4 in the originating motion asks, if the answer to Question 3 is “no”, from which class or classes of assets may the trustee draw “a sufficient amount of money” for the purposes of cl.5(a) of the Will. Again, for the foregoing reasons, the answer in my opinion should be in substance as proposed by the first to fourth defendants: “Only from the residue of the estate remaining after the payment of debts and testamentary expenses and after the satisfaction of the cll.6, 7 and 8 bequests and the cl.9 devises”.
It follows that Question 5 does not arise.
Question 6 enquires as to the time when the trustee should determine the “sufficient amount” mentioned in cl.5 of the Will. It was accepted that the answer to this question was of little significance if the plaintiff could have recourse only to the residue for the purposes of cl.5. The timing seems to me to be a matter within the discretion of the plaintiff as executor and trustee, but in the circumstances I agree that it is unnecessary to answer the question.
Question 7 asks whether certain assets in the nature of loans fall into the residuary estate and all parties agreed that the answer was in the affirmative to both parts of the question.
Accordingly I would answer the questions in the originating motion as follows:
1. Yes
2. (a) No
(b) Yes
3. No
4. Only from the residue of the estate remaining after the payment of debts and testamentary expenses and after the satisfaction of the cll.6, 7 and 8 bequests and the cl.9 devises
5. Unnecessary to answer
6. Unnecessary to answer
7. (a) Yes
(b) Yes
There will also be an order that for the purposes of this proceeding James William Antony Higgins of 443 Little Collins Street, Melbourne represent the children, born and unborn, referred to in cl.5(a) of the Will. There will be a further order that the costs and expenses of the plaintiff be paid or retained out of the residuary estate and that the costs of and incidental to this application of the first to fourth defendants, and of the sixth defendant, be taxed as between solicitor and client, and paid out of the residuary estate.
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