Miller v Davis
[2000] VSC 79
•16 March 2000
| SUPREME COURT OF VICTORIA COMMERCIAL & EQUITY DIVISION | |
| Not Restricted | |
No. 5348 of 1999
| ALICE ELKA MILLER and JOAN IONA HELD (who sue as trustees of the Phyllis Trust-Kaye Settlement) | Plaintiffs |
| v | |
| SALLY JANE DAVIS (who is sued as representing children of Ancestors and their issue under the said Settlement living at 10 July 1985) | Firstnamed Defendant |
| ELI CHAIM HOCHBERG, an infant, by JAMES WILLIAM ANTONY HIGGINS, his litigation guardian (who is sued as representing issue of children of Ancestors under the said Settlement living at 28 September 1994 but born after 10 July 1985) | Secondnamed Defendant |
| BRITTANY JORDANA MARLOW, an infant, by PETER JOHN WALSH, her litigation guardian (who is sued as representing issue of children of Ancestors under the said Settlement born after 28 September 1994) | Thirdnamed Defendant |
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JUDGE: | Balmford, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 March 2000 | |
DATE OF JUDGMENT: | 16 March 2000 | |
CASE MAY BE CITED AS: | Miller v Davis | |
MEDIA NEUTRAL CITATION: | [2000] VSC 79 | |
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TRUSTS – Deed of Settlement – Ascertainment of “Secondary Beneficiaries” – Definition of “issue”.
In re Gulbenkian’s Settlements [1970] AC 508
Matthews v Williams (1941) 65 CLR 639
Re Drummond’s Settlement [1986] 3 All ER 45
Re Matthews [1960] VR 3
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Dr IJ Hardingham QC | Mallesons Stephen Jaques |
For the Firstnamed Defendant | Mr A Garantziotis | McNab McNab & Starke |
For the Secondnamed Defendant | Mr DM Maclean | James Higgins & Co |
For the Thirdnamed Defendant | Mr JD Elliott | Peter J Walsh Carroll Kiernan & Forrest |
HER HONOUR:
Introduction
By an originating motion filed on 7 May 1999 the plaintiffs seek, as well as appropriate representative orders, answers to the following questions:
In the events that have happened and having regard to the terms of the settlement known as “The Phyllis Trust-Kaye Settlement” (“the Deed of Settlement”)
(1) How are the Secondary Beneficiaries ascertained from time to time?
(2) Without prejudice to the generality of the foregoing, are the Secondary Beneficiaries ascertained
(a) at the date of the Deed of Settlement?
(b) at the date of death of the Primary Beneficiary?
(c) from time to time until the day of distribution?
(d) at some other time (indicating what time)?
At the commencement of the hearing, an order was made by consent amending the originating motion by the addition of the following question:
(3) Without prejudice to the generality of question [(1)], upon the death of a Secondary Beneficiary are income distributions under clause 3 and capital distributions under clause 6 of the Deed of Settlement to be made:
(a)equally among surviving Secondary Beneficiaries; or
(b)equally among Secondary Beneficiaries and the legal personal representative of the deceased Secondary Beneficiary?
Facts
No issue arises as to the facts, which appear from the affidavits of the plaintiffs and their solicitor, Mr Beeny. The Deed of Settlement was executed on 10 July 1985 by a nominal settlor who established the Trust Fund with a payment of $20, and by the plaintiffs (who are expressed to execute the document “for or on behalf of the Company”, as to which see paragraph 7 below). Shortly after its execution, Phyllis Peshke Steinberg conveyed to the plaintiffs, as trustees of The Phyllis Trust-Kaye Settlement, a property in Carlton now valued at one million dollars. Mrs Steinberg died on 28 September 1994 and the income of the Trust Fund has been accumulated since the end of the “income period” (as defined) in which that occurred. The gross income of the Trust for the financial year ending 30 June 1999 was $89,262. “The Ancestors” (as defined) are the four children of Mrs Steinberg who were living at the time of making of the Deed of Settlement.
The number of issue stricto sensu of the Ancestors has increased considerably since the execution of the Deed of Settlement, and it seems likely that it will continue to increase.
·At the date of the Deed of Settlement, namely 10 July 1985, there were eighteen children and grandchildren of the Ancestors, being sixteen children and two grandchildren.
·At the date of death of Phyllis Steinberg, namely 28 September 1994, there were thirty children and grandchildren of the Ancestors, another twelve grandchildren having been born since the making of the Deed of Settlement.
·At the date of the hearing, namely 1 March 2000, there were forty-six children and grandchildren of the Ancestors, another sixteen grandchildren having been born since the death of Phyllis Steinberg.
No child of an Ancestor has been born since the date of the Deed of Settlement, and there is no evidence that any child or grandchild of the Ancestors has died since that date. The eldest grandchild of an Ancestor was born in July 1983 and the youngest in April 1999. No child has been born to any grandchild.
The Deed of Settlement
The relevant provisions of the Deed of Settlement read as follows:
2. The Trustee shall hold the Trust Fund until the end of the income period in which the Primary Beneficiary dies UPON TRUST from time to time during each income period to pay such income to the Primary Beneficiary for her sole benefit and use absolutely.
3. The Trustee shall hold the Trust Fund after the end of the income period in which the Primary Beneficiary dies UPON TRUST from time to time during each income period to determine with respect to all or any part of the income of that income period as the Trustee thinks fit to pay apply or set aside the same to or for the benefit of each Secondary Beneficiary equally and in default of and subject to any determination to accumulate and add the income to the capital of the Trust Fund.
. . .
5. Upon the day of distribution the Trustee shall hold the Trust Fund UPON TRUST to divide the capital amongst such of them the children of the Ancestors and their remoter issue as are then living in equal shares per stirpes so that none of such issue shall take whose parent is then alive and so capable of taking AND IN DEFAULT OF ANY SUCH CHILDREN AND ISSUE to hold the Trust for the Ultimate Beneficiary.
6. Notwithstanding the Trusts hereinbefore contained the Trustee may as it thinks fit from time to time before the day of distribution raise any sum out of the capital of the Trust Fund and pay the sums or transfer the whole or any portion of the Trust Fund in its existing form of investment to or for the advancement or benefit of the Secondary Beneficiaries in equal shares as tenants in common.
. . .
11. The Appointor may from time to time as it thinks fit remove a Trustee or appoint a new or additional Trustee and if there is no Appointor the power of appointing new or additional Trustees may be exercised by the two eldest of them the Ancestor or Ancestors (as the case may be) and their issue then living and in the last mentioned case may be exercised in their own favour or in the favour of either one of them and it is hereby declared that any person may be appointed to be sole Trustee hereof.
Clause 1 provides that the Schedule is to be read as if incorporated in the Deed of Settlement, and the relevant provisions of the Schedule read as follows:
In this Settlement each of the following expressions shall have the meaning set out after it : -
(a)“Ancestor” means ALICE ELKA MILLER of 67a Wellington Street, Kew, Married Woman, JOAN IONA HELD of 6 Otira Road, Caulfield, Married Woman, PAULINE ZEPORA HALPERIN of 4 Chaddesley Avenue, St Kilda, Married Woman and MYER MAX STEINBERG of 6 Redcourt Avenue, Armadale, Company Director.
(b) “The Company” means
(i)ALICE ELKA MILLER aforesaid during her lifetime (and thereafter in her place her son MARK IAN MILLER)
together with
(ii)JOAN IONA HELD aforesaid during her lifetime (and thereafter in her place her son ADAM GREGORY HELD)
(c)“As the Trustee thinks fit” or “as it thinks fit” means that the Trustee has the widest and most absolute and unexaminable discretion but specifically excluding the power to prefer any of the Secondary Beneficiaries to the exclusion or disadvantage of any other of them.
(d)“Primary Beneficiary” means PHYLLIS PESHKE STEINBERG of 142 Elgin Street, Carlton, Widow.
(e)“Secondary Beneficiary” means the children of the Ancestors and their issue.
(f) “Capital” includes accumulated income.
(g) “Child” and “Issue” includes [sic] any adopted child.
(h)“The Appointor” means the said JOAN IONA HELD and ALICE ELKA MILLER.
(i) “Income period” means –
(i)the period from now until the 30th day of June next; and thereafter
(ii)each complete year until the 30th day of June before the day of distribution; and thereafter
(iii)the period up to and including the day of distribution.
.. .
(k)“The day of distribution” means the Eightieth Anniversary of the execution of this Deed.
(l)“The Trust Fund” means the said sum of $20.00 and any additional property real or personal which is hereafter vested in the Trustee upon the trusts of this Settlement.
(m)“The Ultimate Beneficiary” means THE MONTEFIORE HOMES FOR THE AGED on St Kilda Road , Melbourne for its charitable purposes.
The draftsmanship of the Deed of Settlement is most kindly described as unusual. It appears to have been prepared by pasting together parts of two standard forms and then melding the two parts by the definitions in the Schedule. That seems an unnecessary economy in a document only six pages long. It may be that it was prepared in haste. The introductory portion of the document, constituted by four clauses lettered A to D, is set out with the formal appearance of recitals (although omitting the normal introductory “Whereas”), but includes two operative provisions. Those four clauses appear to derive from a form employing the word “Company” to describe the trustee of a settlement, and read as follows:
A)This Settlement is made between “the Settlor” of the one part and “the Company” of the other part.
B) The Settlor wants to create a Trust for the Beneficiaries.
C)The Settlor promises that he will pay to the Company the sum of Twenty Dollars ($20.00).
D)The Company promises that it will hold the Trust Fund upon the trusts and with the powers and subject to the conditions as follows:-
There follow the remaining operative provisions of the Deed of Settlement, namely clauses 1 to 13, in which the expression “the Company” does not appear. However in the attestation clause the plaintiffs are described as executing the document “for and on behalf of the Company”. The expression “the Company” is defined in the Schedule as appears in paragraph 6 above. Given the promises expressed in clauses C and D, the definition appears inappropriate in its references to persons who are to be included in the definition of “Company” only at the death of persons now living. The definition of “the Company” might otherwise have served as a definition of the expression “the Trustee”, which is nowhere defined, but which is employed throughout clauses 1 to 13 in places where one would expect to find that expression employed in a Deed of Settlement. No doubt clauses 1 to 13, in contrast to clauses A to D, were taken from a form which employed the expression “the Trustee”. There are other imperfections of drafting, which it is not necessary to specify. The document is endorsed with the name of a firm of solicitors practising in Melbourne and may be presumed to have been prepared by that firm.
The relevance of the preceding paragraph appears from the following extract from the speech of Lord Upjohn in In re Gulbenkian’s Settlements [1970] AC 508 at 522:
Counsel for the appellants argued that you must give the words used their literal meaning and then apply the test to see whether you can predicate with certainty whether a given individual is or is not within the class and no modification of the literal language is permissible to make sense of it. This argument is based on a fallacy.
There is no doubt that the first task is to try to ascertain the settlor’s intention, so to speak, without regard to the consequences, and then, having construed the document, apply the test. The court, whose task it is to discover that intention, starts by applying the usual canons of construction; words must be given their usual meaning, the clause should be read literally and in accordance with the ordinary rules of grammar. But very frequently, whether it be in wills, settlements or commercial agreements, the application of such fundamental canons leads nowhere, the draftsman has used words wrongly, his sentences border on the illiterate and his grammar may be appalling. It is then the duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate common sense and desire to make sense of the settlor’s or parties’ expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language if it can do so without doing complete violence to it.
The recognition by His Lordship that draftsmen are not perfect is consistent with the remarks of Sholl J in Re Matthews [1960] VR 3 at 8 where His Honour said:
True it is, that in construing a lawyer’s will [by which, as His Honour had made clear at 6, he meant a will drafted by a lawyer] the court assumes that the draftsman proceeded on logical principles; but I often think that in the argument and decision of originating summonses counsel and judges attribute to the draftsman a profundity of logical analysis which is, to say the least of it, improbable in the circumstances in which many wills are prepared.
Mrs Steinberg, having contributed almost the whole of the trust fund, is to be regarded as the real, as opposed to the nominal, settlor. It is her intention which is to be considered in the interpretation of the Deed of Settlement with which I am concerned. When that document is read as a whole, the inescapable conclusion is that the intention of Mrs Steinberg (or indeed, of the nominal settlor), in respect of the operation of the settlement after her death, was to benefit those of her grandchildren who are the children of the Ancestors, and their descendants (to use at this stage a non-technical term), and to benefit equally all persons who are entitled to be benefited. (The three children of her son Oscar, who died in 1980 before the making of the Deed of Settlement, clearly do not come within the class to be benefited, which is defined by reference to descendants of “the Ancestors” as defined.) Clauses 3, 5 and 6 of the Deed of Settlement and paragraph (e) of the Schedule thereto make it abundantly clear that any distribution of income or capital is to be made equally among all those who may, at the time of that distribution, be entitled to benefit thereunder (although on the final distribution, when entitlement is not dependent on membership of the class defined as “Secondary Beneficiaries”, the equality is to be per stirpes rather than per capita).
Submissions of counsel
Dr Hardingham, for the plaintiffs, opened the matter and indicated that his clients would abide the decision of the Court.
- submissions for the firstnamed defendant
The principal submission of Mr Garantziotis, for the firstnamed defendant, was that clause 6 by its terms authorised a distribution of the whole of the capital of the trust fund equally among the Secondary Beneficiaries at any time after the making of the Deed of Settlement. There was no temporal limitation on the commencement of clause 6, and it was expressed to operate “Notwithstanding the trusts hereinbefore contained”, that is, the trusts contained in clauses 2, 3 and 5. Accordingly, the expression ”Secondary Beneficiaries” must, in his submission, be intended to be defined in such a way that that power could be exercised during the life of Mrs Steinberg. The only way in which that power could be exercised during her lifetime, he submitted, would be for the members of the class of “Secondary Beneficiaries” to be ascertained as at the date of making of the Deed of Settlement. If the members of the class were to be ascertained as at the death of Mrs Steinberg, then the exercise of that power during her lifetime, but before the birth of any one or more of those grandchildren who were born between the making of the Deed of Settlement and her death, would have been a breach of the duty of the plaintiffs as trustees to benefit all entitled persons equally.
Mr Garantziotis also submitted that the expression “their issue” in the definition of “Secondary Beneficiaries” in paragraph (e) of the Schedule should be interpreted as meaning only “the grandchildren of the Ancestors living at the date hereof”. That interpretation, he submitted, recognised the distinction between the expression “issue” used in that definition and the expression “remoter issue” used in clause 5 in relation to the final distribution. The existence of that distinction, in his submission, implied an intent to limit “issue” in the definition of “Secondary Beneficiaries” to mean “children”.
The legal meaning of “issue” is well known. It was dealt with by the High Court, consisting of Rich ACJ, Dixon and McTiernan JJ, in Matthews v Williams (1941) 65 CLR 639 at 650-651 in the following terms:
“Issue” is a word with a clear prima-facie legal meaning. It means descendants or progeny. No doubt “issue” is a flexible word and its prima-facie application may be restricted by any sufficient indications appearing in the documents: Cf. In re Birks (1900) 1 Ch at pp 418, 420. But “the essence of the word ‘issue’, which primarily means all descendants, is totality rather than succession” (In re Cust; Glasgow v Campbell (1919) VLR 221 at pp 254, 255, per Cussen J, distinguishing “issue” from “heirs of the body”).
“The best rule of construction is that which takes the words to comprehend a subject that falls within their usual sense, unless there is something like declaration plain to the contrary”(Church v Mundy (1808) 15 Ves 396, at p 406 [33 ER 804 at p 808], per Lord Eldon, applied to “issue” by Knight-Bruce VC in Head v Randall (1843) 2 Y & CCC 231, at p 235 [63 ER 101 at p 103], and by Isaacs J in Campbell v Glasgow (1919) 27 CLR 31 at p 51).
. . .
The word “issue” therefore ought not to receive a secondary or restricted meaning unless, upon a consideration of the whole document, it satisfactorily appears that it was so intended.
Being satisfied, from a consideration of the whole document, as to the intention of Mrs Steinberg (see paragraph 9 above), and noting the passages cited above from Gulbenkian and Matthews, I would be slow indeed to find that the members of the class “Secondary Beneficiaries” were to be ascertained on the basis of an intention imputed because of the choice of particular technical words by the person who drafted this document. In all the circumstances of this case, and on a consideration of the whole document, noting the quality of the draftsmanship, I do not consider that the use in clause 5 of the Deed of Settlement of the expression “remoter issue” is sufficient to lead to the conclusion that it was intended that “issue”, where elsewhere appearing in the document, whether by virtue of the definition of “Secondary Beneficiaries” or expressly in clause 11, should receive a restricted meaning. I see no basis for reading “issue” in the document as bearing any other than its normal legal meaning.
- submissions for the secondnamed defendant
Mr Maclean, for the secondnamed defendant, relied on Re Drummond’s Settlement [1986] 3 All ER 45 as authority for the proposition that, on the assumption that “issue” in the definition bore its ordinary meaning, the Secondary Beneficiaries were to be ascertained as at the death of Mrs Steinberg.
Given the emphasis on equality which appears throughout the Deed of Settlement, I would have great difficulty in finding that to be Mrs Steinberg’s intention. Mrs Steinberg (and similarly the nominal settlor) would have been well aware that it was likely that grandchildren of the Ancestors would be born after the date of the Deed of Settlement and after her death, whenever that occurred; and that the grandchildren of the Ancestors would have children and grandchildren before the day of distribution in the year 2065. Had she intended to benefit only those descendants living at her death, the Deed of Settlement could have so provided. I consider that a provision to that effect would have been seen by Mrs Steinberg as inconsistent with what I have found to be her desire for equality among beneficiaries.
It is significant that at the date of execution of the Deed of Settlement, the class “Secondary Beneficiaries” included only two of what are now thirty grandchildren of the Ancestors (great-grandchildren of Mrs Steinberg), and those two were the children of the same child of an Ancestor. I note that one of those two grandchildren of an Ancestor was born a month before the making of the Deed of Settlement. The imminence of her birth would have been known in the wider family for some time. Can it be suggested that the document was deliberately made so soon after her birth with a view to including that child but excluding any future grandchildren of the Ancestors? At that date there were sixteen children of the Ancestors, aged between twenty-six and eleven, and the potential for future grandchildren of Ancestors, even considered without the benefit of hindsight, could have been seen to be considerable.
Further, it would seem a strange way of drafting the Deed of Settlement to have it comprehend the two grandchildren in existence at the time of the making of that document, who are the children of only one child of an Ancestor, by the use of the expression “the children of the Ancestors and their issue” which is used to define the class of Secondary Beneficiaries. Had it been intended to benefit only those two children – which seems in the highest degree unlikely – that could have been done by describing them by name. Had it been intended to benefit the children of only one child of an Ancestor – which seems equally unlikely – that could have been done by describing the relevant parent by name.
- submissions for the thirdnamed defendant
As to the submissions of Mr Garantziotis and Mr Maclean concerning the power in clause 6 to distribute capital among the Secondary Beneficiaries, Mr Elliott, for the thirdnamed defendant, submitted that Re Drummond was distinguishable on the ground that the potential entitlement of the Secondary Beneficiaries existed only until the “date of distribution”, at which time the criteria for distribution changed, so that distribution at that date would be in accordance with the provisions of clause 5, rather than with the definition of “Secondary Beneficiaries”. Until that time the entitlement of the “Secondary Beneficiaries” under clauses 3 and 6 was discretionary only. In Re Drummond the Court was concerned with a potentially unlimited period. Mr Elliott submitted that, on the face of it, the Deed of Settlement was clearly intended to take effect in respect of each income period, and thus the expression “Secondary Beneficiary” could be defined in respect of each income period, allowing for births and deaths since the previous income period.
I accept those submissions. I note also that the concern which gave rise to the proceeding in Re Drummond turned on the possible effect of the rule against perpetuities, and questions of perpetuity are not relevant to this matter, given the provisions of the Perpetuities and Accumulations Act 1968.
There is ample authority to the effect that a gift of income to the members of a class is usually to be construed as a gift to the members of that class in existence from time to time. See for example Re Wenmoth’s Estate (1888) 37 Ch D 266 at 270 (per Chitty J); Re Morley (1935) SR(NSW) 102 at 106 (per Jordan CJ with whom Long Innes CJ in Eq and Maxwell J agreed); Re Ward [1965] Ch 856 (per Russell LJ); Tidex v The Trustees Executors and Agency Company Ltd [1971] 2 NSWLR 453 at 462-464 (per Street J).
Making what I can of the Deed of Settlement, and noting the quality of the draftsmanship, I cannot find that the intention of Mrs Steinberg was that the class of “Secondary Beneficiaries” should close at the date of making of the document, when she would have been aware that there were only eighteen people in what was potentially a very large class. Nor can I find that Mrs Steinberg intended that that class should close at the date of her death. She would have realised that whenever that date was to occur, the number of members of the potentially very large class would still be growing. No submission was made as to any other possible time for the ascertainment of the members of that class, save the submission of Mr Elliott that they should be ascertained from time to time until the day of distribution. That submission permits the operation of clause 6 at any time after the making of the Deed of Settlement (see the submissions of Mr Garantziotis described in paragraph 11 above).
Conclusion
The proper conclusion, in my view, is that Mr Elliott’s submission reflects the intention of Mrs Steinberg (and of the nominal settlor), and that the Deed of Settlement should be interpreted in such a way as to give effect to that intention. It is apparent that that finding means that there are already a very large number of potential beneficiaries, and that number may be expected to increase. However, given that at the time of making of the Deed of Settlement there were sixteen children of the Ancestors, the potential for increase was already, as I have said, such that Mrs Steinberg could not but have been aware of it. The expression “Secondary Beneficiaries” is not relevant to the ascertainment of the persons to be benefited on the day of distribution in 2065, so whatever the date of ascertainment of the class of Secondary Beneficiaries, there are to be expected to be a very large number of people entitled to benefit on that day.
There was no suggestion in the arguments of counsel that the making of the Deed of Settlement had any purpose other than that which appears on its face; the benefit of certain descendants of Mrs Steinberg. No purpose related, for example, to taxation or social security legislation was put forward. It would seem to me to be entirely probable that, with an awareness of the potential number of beneficiaries and a desire that they should benefit equally, Mrs Steinberg, desiring simply to benefit the descendants in question, would have been aware of the prospect that the benefit to each one might not be very large, and that that would not have been a matter of concern to her. It is Mrs Steinberg’s desire to benefit certain of her descendants and her desire that benefits among those descendants shall be equal which are most apparent from the terms of the document.
Having considered the matter, I find that the answer to questions 1 and 2 is that the Secondary Beneficiaries are to be ascertained from time to time up to the day before the date of distribution.
As to question 3, counsel were in agreement, on the authority of Gartside v Inland Revenue Commissioners [1968] AC 553 and Chief Commissioner of Stamp Duties for New South Wales v Buckle (1998) 192 CLR 226, that the Secondary Beneficiaries were discretionary beneficiaries only and had no transmissible interest in the Trust Fund. On that basis I find the answer to question 3 to be that, upon the death of a Secondary Beneficiary, income distributions under clause 3 and capital distributions under clause 6 of the Deed of Settlement are to be made equally among surviving Secondary Beneficiaries.
There will be orders to that effect as well as the representative orders sought in part B of the Amended Originating Motion and an appropriate order as to costs.
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