NSW Trustee and Guardian v Hirsch
[2013] NSWSC 1397
•24 September 2013
Supreme Court
New South Wales
Medium Neutral Citation: NSW Trustee and Guardian v Hirsch [2013] NSWSC 1397 Hearing dates: 11 September 2013 Decision date: 24 September 2013 Jurisdiction: Equity Division Before: White J Decision: Refer to para [41] of judgment.
Catchwords: SUCCESSION - wills, probate and administration - construction and effect of testamentary dispositions - testamentary note lacking express words of gift to first defendant - construction or rectification of statement that first defendant will "not receive" part of the estate despite indication of intention to benefit first defendant - validity of restraints on alienation - distinction between restraint on alienation by condition subsequent imposed on gift and by terms of trust Legislation Cited: Succession Act 2006 (NSW) Cases Cited: ANZ Trustees Limited v Hamlet [2010] VSC 207
Lockrey v Ferris [2011] NSWSC 179
Perrin v Morgan [1943] AC 399
Hatzantonis v Lawrence [2003] NSWSC 914
Public Trustee v Herbert [2009] NSWSC 366
Leader v Duffey (1888) 13 App Cas 294
Ward v Brown [1916] 2 AC 121
Kirby-Smith v Parnell [1903] 1 Ch 483
Fell v Fell (1922) 31 CLR 268
Towns v Wentworth (1858) 11 Moo PCC 526
Coorey v George (Powell J, 27 February 1986, unreported)
Perpetual Trustee Co Limited v Wright (1987) 9 NSWLR 18
Fairbairn v Varvaressos (2010) 78 NSWLR 577
Fitzgerald v Masters (1956) 95 CLR 420
Tatham v Huxtable (1950) 81 CLR 639
Russo v Russo [2009] VSC 491
Saunders v Vautier (1841) Cr & Ph 240; 41 ER 482
CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98
Nicholls v Public Trustee (SA) [1945] HCA 32; (1945) 72 CLR 86
James v Gard (1887) 13 VLR 908Texts Cited: Theobald on Wills, Sweet and Maxwell, 17th ed 2010
Hawkins on Wills, 2nd edCategory: Principal judgment Parties: NSW Trustee and Guardian (Plaintiff)
Sophia Hirsch (1st Defendant)
Attorney General of New South Wales (2nd Defendant)Representation: Counsel:
L Ellison SC with A Lloyd (Plaintiff)
M Pringle (1st Defendant)
Submitting Appearance (2nd Defendant)
Solicitors:
Bartier Perry (Plaintiff)
ProActive Legal Pty Ltd (1st Defendant)
File Number(s): 2012/245681
Judgment
HIS HONOUR: These proceedings concern the estate of Martha Amaryllis Terre-Blanche who died on 10 September 2008 aged 84. On 26 July 2011 the Court made a grant to the NSW Trustee and Guardian of letters of administration with the will of the deceased annexed. The will annexed to the grant is an informal will dated 27 June 2000. The grant was made pursuant to s 8 of the Succession Act 2006 (NSW). The estate has been realised and is presently valued at a little over $1 million subject to the costs of these proceedings and ongoing costs of administration.
The deceased was born in 1924 in Greece. The first defendant, Sophia Hirsch, was her first cousin. Sophia Hirsch was born in Romania in 1928. The deceased had another cousin, Melita Sommer, born in 1924 also in Romania. Melita Sommer changed her name to Melita Pecherskaya on marrying. Melita Pecherskaya had children and grandchildren.
The deceased's parents died in a Nazi concentration camp in World War II. The deceased fought as a partisan in Greece during the war and emigrated to England in 1947 and to Australia in 1950. She was married and divorced twice and had no children or surviving sibling. The will commences as follows:
"This is my last Will and Testament cancelling all previous Wills and Testaments, of me MARTHA AMARYLLIS TERRE-BLANCHE, of 26 Richard Road, St. Ives, N.S.W. 2075, divorced petitioner.
I had [decided] long ago to bequeath all my property and investments to my cousin SOPHIA HIRSCH, residing since 4 years or so at Apartment 1.D. 8817 BAY PARKWAY, BROOKLYN, N.Y. 11214, U.S.A. with my other cousin MELITA PECHERSKAYA, who has been there over 7 years now. MELITA PECHERSKAYA was brought up in the house of SOPHIA HIRSCH' [sic] parents in RADAUTI, RUMANIA since being left an orphan aged 1 year old, with her elder sister Sylvia SOMMER, who until she was 14 years old, when she was taken by another uncle to America. This one escaped the war, MELITA was with my uncle's family until the trouble found them and my uncle, wife and son were killed in German captivity, which left their daughter aged 12, in a vulnerable situation and badly traumatised, in the hands of MELITA SOMMER. I am finding it difficult to make a straight-forward Will in favour of SOPHIA HIRSCH, spinster. She has fallen into very bad hands and all her life has been exploited and reduced to being the slave and servant of MELITA SOMMER - married name PECHERSKAYA and her children in Russia."
The will then continued at length making accusations against Melita Pecherskaya. The deceased accused Melita Pecherskaya of stealing money that the deceased had sent in 1967 that was intended to be for the benefit of both Melita Pecherskaya and Sophia Hirsch. She made accusations against Melita Pecherskaya's sister. The deceased wrote that Melita and her children left Russia after taking all the money that Sophia Hirsch had and leaving her there penniless and totally alone. The deceased made long and detailed accusations against Melita Pecherskaya accusing her of being a KGB operative. This passage of the will concluded by stating:
"Her children like all other Russians do not want to work, I am alone and in her opinion what I possess belongs to her. So, whoever will handle the Will, must see that no money will come to the Hands of SOPHIA HIRSCH THAT CAN BE TAKEN FROM HER BY FORCE, or THAT SHE WILL WITTINGLY GIVE TO OTHERS."
The will then continued:
"MELITA PECHERSKAYA is forcing herself upon me like a K.G.B. gangster, SHE DOES NOT TAKE NO FOR AN ANSWER. She and her children are not my respon-sability [sic], I have worked hard all my life for what I got and it does not belong to her. This is an evil person obsessed with ruling the whole world and seeking to possess everybody and all their possessions.
There is no humanity in her and no conscience either. I have here two small investments in trust for SOPHIA, on no account must money be sent to SOPHIA HIRSCH, as this is what they are waiting for. Whatever is invested here must remain here and she can get only the Dividends an not pass on any inheritance to the family of MELITA PECHERSKAYA."
The deceased then continued her disquisition against Melita Pecherskaya. This included an accusation that Melita Pecherskaya had taken from Sophia Hirsch all her earnings. This long passage concluded by the deceased's writing:
"I have no time for MELITA PECHERSKAYA or her family. Before I manage to finalise this Will, the truth has become known to me, as I knew it would be. She has tried to destroy me in many ways for a very long time now with a view to inheriting me, and no one can disabuse her peculiar fantastic ideas about the wealth that she imagines that I possess in Australia. There is insanity and blindness, that goes hand in hand with falsehood and evil."
After this long preamble the will contained dispositive provisions. The will provided:
"I leave bequests of $20,000 Australian to each of these people:-
1) FOTO MITSOU (Maiden Name) daughter of Ourania Mitsou, of the village of Neohorion, Nevroupolis, Thesaly, in the Agrapha Mountains of Greece, or her children.
2) JANNAKOS MITSOU (mentally retarded), son of Ourania Mitsou, same address as above. He is one year younger than myself.
If none of these people are alive, to please give this money to the school of the village of Neohorion. I spent some time there when a young partisan, the people there were good to me and took care of me when wounded. They were like my own family, they loved me and adopted me. The village was burned up several times.
3) ASIMO FRANGAKI (Maiden Name) of the village of Hostia, Domvrena Line, outside Thebes, Greece, or her children. She too was a friend the second time the communists sentenced me to death, Hostia.
Although Sophia Hirsch will not be left my house and the bulk of my estate, there must be still an alternative beneficiary and this is:-
4) PATRICIA de WOLFE (Maiden Name), daughter of Solicitor CLARENCES de WOLFE, of [xx xxxxxxxxx xxxxxx], W.1. LONDON, aged now in her early fifties, to be traced through the Salvation Army or Red Cross. Not in the London Directory at present anybody by the name of deWOLFE, but she may be married or practising a profession, or not living in England. Her parents were good friends of mine when I lived in England after the war. I would like the bulk of my jewellery to go to her, unless sold before I die.
5) Bequest to Aborigines in Australia, to help women, children, shelters and education. Amount to be decided in consultation with the Executors.
6) World Wide Fund for Nature Australia, Level 1, 71 York Street, Sydney, N.S.W. 2000.
7) Southern Oceans Seabird Study Association (SOSSA) - ask Taronga Zoo about their address. They do [useful] work for Albatros[ses] and all sea-going birds and creatures. The sea being my element, I have an affinity with all these creatures in the waters and above in the skies, that are near ships. There is need to protect all of them from mankind.
8) Tibetan Welfare.
9) East Timorese Welfare.
10) Irian Jayan Welfare.
11) Cambodian Welfare.
12) Amnesty International.
13) Animal Liberation.
14) Albanian Welfare of refugees.
15) Urang-Utangs [sic] of Borneo & Indonesia Rehabilitation Programme.
16) Burma Welfare (for freedom fighters).
The amounts to each of the above to be discussed with Executors."
The deceased named an accountant, a Mr Crameri as an executor. He renounced probate. The only other relevant clause was as follows:
"The amounts of bequests must be discussed with Mr. Crameri because one of my small investments with B.T. Pacific Basin is thus far a dud but I cannot remove anything just now, so I will wait. The whole thing must be re-arranged when I sell my house, God willing."
The NSW Trustee and Guardian filed a summons in which it sought the following relief:
"1 A determination of the following questions arising under the Will of the late Martha Amaryllis Terre-Blanche (the deceased) dated 27 June 2000 (the Will):
(a) whether, on the true construction of the Will and in the events which have happened, the whole of the estate of the deceased, save for the legacies numbered 1, 2 and 3 on page 2 of the Will, is to be dealt with as on an intestacy;
(b) whether, on the true construction of the Will and in the events which have happened, if whether the answer to (a) is yes, whether the estate passes to the Crown pursuant to the Wills, Probate and Administration Act 1898 (NSW), s 61B(7);
(c) if the answer to (a) is no, then whether on the true construction of the Will and in the events which have happened, whether the whole estate of the deceased, save for the legacies numbered 1, 2 and 3 on page 2 of the Will, is to be held in a testamentary trust for the benefit of the first defendant;
(d) if the answer to (c) is yes, then what are the terms of the trust;
(e) if the answer to (c) is yes, then what is the identity of the property which constitutes the trust;
(f) if the answer to (a) is no, and taking to account the nature, terms and property forming the trust in (c), how is the balance of the estate to be dealt with."
Sophia Hirsch (who resides in New York) filed a cross-claim seeking the following relief:
"1. An order pursuant to section 27(3) of the Succession Act 2006 extending the time in which to apply for rectification of the Will dated 27 June 2000 and 23 August 2000 of Martha Amaryllis Terre-Blanche ('the Deceased') to the date of filing this cross-summons.
2. A declaration that the Deceased's Will does not express her true testamentary intentions for the cross-claimant.
3. An order pursuant to s 27(1)(a) of the Succession Act 2006 that paragraph 7 on page 2 of the Will of the Deceased be rectified by:
a. replacing the letter 't' in the word 'not' in line 1 of paragraph 7 with the letter 'w'; and
b. transposing the words 'be' and 'still' in line 2 of paragraph 7.
4. Further and in the alternative, a declaration that on the true construction of the Deceased's Will and in the events which have happened the whole of the estate of the Deceased, save for the legacies numbered 1, 2 and 3 on page 2 of the Will, is to be held in a testamentary trust for the benefit of the cross-claimant absolutely.
5. A declaration that the following assets held by the Deceased at the date of her death are the subjects of the express trusts for the cross-claimant contained in lines 2, 3 and 4 in paragraph 5 on page 1 of the Deceased's Will:
a. St George Bank account no. [xxx xxx xxx]; and
b. all BT Investment Fund units held in the Deceased's name by BT Financial Group.
6. Further and in the alternative, a declaration as to which assets held by the Deceased at the date of her death form the subjects of the express trusts for the cross-claimant contained in lines 2, 3 and 4 in paragraph 5 on page 1 of the Deceased's Will."
On 16 July 2013 I ordered that the following issues be determined separately and in advance of the other issues to be determined in the proceedings, namely:
a) whether the first defendant is entitled to the relief sought in the cross-summons; and
b) the questions raised in paragraphs 1(c) and 1(d)-(f) of the summons.
Section 27 of the Succession Act provides:
"27 Court may rectify a will
(cf WPA 29A)
(1) The Court may make an order to rectify a will to carry out the intentions of the testator, if the Court is satisfied the will does not carry out the testator's intentions because:
(a) a clerical error was made, or
(b) the will does not give effect to the testator's instructions.
(2) A person who wishes to make an application for an order under this section must apply to the Court within 12 months after the date of the death of the testator.
(3) However, the Court may, at any time, extend the period of time for making an application specified in subsection (2) if:
(a) the Court considers it necessary, and
(b) the final distribution of the estate has not been made."
Because the power to rectify a will only arises if the Court is satisfied that the will does not carry out the testator's intentions by reason of either of the matters in s 27(1)(a) or (b), it is necessary first to construe the will to ascertain its effect (ANZ Trustees Limited v Hamlet [2010] VSC 207 at [3]; Lockrey v Ferris [2011] NSWSC 179 at [37]-[38]). Five principles relating to the construction of wills are relevant in this case.
First, the Court's task is to "put on the words used the meaning which, having regard to the terms of the will, the testator intended" (Perrin v Morgan [1943] AC 399 at 406), that is, to ascertain what the testator meant by the words used in the will (Hatzantonis v Lawrence [2003] NSWSC 914 at [6]; Public Trustee v Herbert [2009] NSWSC 366 at [27]; Theobald on Wills, Sweet and Maxwell, 17th ed 2010 at [15-003]).
Secondly, "the instrument ... must receive a construction according to the plain meaning of the words and sentences therein contained. But ... you must look to the whole instrument, and, in as much as there may be inaccuracy and inconsistency, you must, if you can, ascertain what is the meaning of the instrument taken as a whole in order to give it effect, if it be possible to do so, to the intention of the framer of it." (Lord Halsbury LC in Leader v Duffey (1888) 13 App Cas 294 at 301; Ward v Brown [1916] 2 AC 121; Buckley LJ in Kirby-Smith v Parnell [1903] 1 Ch 483 at 489, quoted from Fell v Fell (1922) 31 CLR 268 at 273-274).
Thirdly, "if the will shows that the testator must necessarily have intended an interest to be given which there are no words in the will expressly to devise, the Court is to supply the defect by implication, and thus to mould the language of the testator, so as to carry into effect, as far as possible, the intention which it is of opinion that the testator has on the whole will sufficiently declared" (Towns v Wentworth (1858) 11 Moo PCC 526 at 543; Hawkins on Wills, 2nd ed at 6 quoted in Fell v Fell at 274).
Fourthly, "one's task is, first, if it be possible, to ascertain, what was the basic scheme which the deceased had conceived for dealing with his estate, and, then, so to construe the will as, if it be possible, to give effect to the scheme so revealed." (Coorey v George (Powell J, 27 February 1986, unreported, at 14); Perpetual Trustee Co Limited v Wright (1987) 9 NSWLR 18 at 33; Fairbairn v Varvaressos (2010) 78 NSWLR 577 at [19], 581-582).
Fifthly, words may be supplied, omitted or corrected in an instrument (including a will) where it is clearly necessary in order to avoid absurdity or inconsistency (Fitzgerald v Masters (1956) 95 CLR 420 at 426-427; Tatham v Huxtable (1950) 81 CLR 639 at 645-651; Russo v Russo [2009] VSC 491 at [10]).
Parties' contentions: Construction of the Will
Mr Ellison SC who appeared for the NSW Trustee and Guardian submitted that if the will was not rectified then the words "Sophia Hirsch will not be left my house and the bulk of my estate" are unambiguous and unequivocal and those assets do not pass to Ms Hirsch.
Ms Pringle who appeared for Ms Hirsch submitted that there was a typographical mistake in the sentence "Sophia Hirsch will not be left my house and the bulk of my estate", and that either as a matter of construction or, if necessary, rectification, the word "not" should be understood as "now" so that the words read "Although Sophia Hirsch will now be left my house and the bulk of my estate there must be still an alternative beneficiary and this is ...". (Ms Pringle also contended that the grammar could be corrected by an order for rectification so that the relevant sentence read, "Although Sophia Hirsch will now be left my house and the bulk of my estate, there must still be an alternative beneficiary and this is ...".)
Determination of Issues of Construction of the Will
If the only choice were between those two constructions, I would prefer the construction advanced for Ms Hirsch. The word "not" could be corrected to read "now" as a matter of construction and without the need for rectification if to do so were necessary to avoid absurdity or inconsistency. There is a plain indication that Sophia Hirsch is to be entitled to the residue of the estate after payment of the three pecuniary legacies from the fact that the gifts to the organisations or purposes referred to in paragraphs 4-16 are expressed to be made to them as "alternative beneficiaries". In other words, they are substituted gifts as an alternative to the principal bequest. This is supported by the clause quoted at para [4] above that, "whoever will handle the will, must see that no money will come to the hands of Sophia Hirsch that can be taken from her by force or that she will wittingly give the others". That clause assumes that Sophia Hirsch would be entitled to money under the will and enjoins the administrator to ensure that the money is not paid to Sophia Hirsch in such a way that it could be taken from her or that she could give it to Melita Pecherskaya or Melita Pecherskaya's family. If Sophia Hirsch was not to inherit at all under the will, that question would not arise.
Mr Ellison submitted that the explanation as to why the organisations and purposes listed in the numbered paragraphs 4-12 were described as an alternative beneficiary was to be found in the long preamble. In that preamble the deceased commenced by referring to a decision made long ago to leave all her property to Sophia Hirsch, but then gave reasons as to why Sophia Hirsch should not receive her property, namely that in the deceased's view it would be taken from her by Melita Pecherskaya or members of her family. For this reason the deceased did not leave her estate to Sophia Hirsch and the named organisations and purposes were beneficiaries alternative to the beneficiary whom it had been the deceased's initial intention to nominate.
But this construction involves reading the relevant sentence as if it provided:
"Because Sophia Hirsch will not be left my house and the bulk of my estate there must be [............] an alternative beneficiary and this is:- ..."
I do not think the sentence can be read in that way. The use of the word "although" rather than "because" and the inclusion of the word "still" indicate that the alternative beneficiaries were named even though provision had already been made earlier in the will for the disposal of the estate. There was a need for such a nomination in case the gift to Sophia Hirsch failed. (There was already an alternative bequest in relation to the first two pecuniary legacies.)
It is true that there were no express words of gift to Sophia Hirsch. But it clearly appears that she was the intended principal beneficiary. The will assumes that the administrator will have the power to see that money to which Sophia Hirsch will be entitled under the will could not be taken from her and could not be given by her to members of Melita Pecherskaya's family. Where the testator necessarily intended an interest to be given for which there are no words of express gift, the Court is to supply the defect by implication so as to carry into effect as far as possible the testator's intention sufficiently declared from the whole of the will (see authority quoted at para [16] above).
It does not follow that the word "not" in the subject sentence is to be read as "now". When the will is read as a whole, the scheme that clearly appears is that the deceased wanted Sophia Hirsch to inherit her property but did not want there to be any possibility that the property given to Sophia Hirsch would be passed on by her to Melita Pecherskaya or members of Melita Pecherskaya's family. She did not intend that Sophia Hirsch would receive an absolute gift. Sophia Hirsch was not to receive the house (or its proceeds of sale) or the investments of the estate if she could give it away to Melita Pecherskaya or members of Melita Pecherskaya's family. As that was the deceased's intention, it is not clear that the word "not" in the phrase "although Sophia Hirsch will not be left my house and the bulk of my estate" was a mistake.
Validity of Restraint on Alienation
The next question is whether effect can be given to the deceased's intention. Neither party contended that the attempted restraint on alienation was illegal or contrary to public policy and I see no reason why it should be. The rule in Saunders v Vautier (1841) Cr & Ph 240; 41 ER 482 is that an adult beneficiary having an absolute, vested and indefeasible interest in the capital and income of property may require the trustee to transfer the property to him or her (or them if more than one) (CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98 at [47]). But the interest of Sophia Hirsch under the will so construed is not absolute and indefeasible.
Ms Pringle submitted that the stipulation "whoever will handle this will must see that no money will come into the hands of Sophia Hirsch that may be taken from her by force or which she may wittingly pay to others" was a condition subsequent to the gift that could not be enforced. Once moneys were paid to Sophia Hirsch in accordance with the will, there could be no control over how she might dispose of the moneys. Ms Pringle submitted that the condition was a condition subsequent that failed and therefore the gift to the first defendant was absolute (Nicholls v Public Trustee (SA) [1945] HCA 32; (1945) 72 CLR 86 at 91-92, 96-97).
If the will did require the administrator to pay the estate to Ms Hirsch, then it would be correct to say that the restraint on alienation was ineffective. In James v Gard (1887) 13 VLR 908, a'Beckett J said (at 913):
"There is no doubt that a testator may lawfully direct trustees to pay the income of property to a person until he shall do what would amount to an act of alienation if the fund belonged to him unconditionally, and may effectually declare that on his doing that act the property shall pass to another. Though a testator can do this, and can control the fund in the hands of trustees, he cannot give property to the beneficiary directly or absolutely, with a valid condition that it shall cease to belong to him if he attempt to give it away or sell it. In this respect the validity or invalidity of an intended restriction upon alienation depends upon the character of the enjoyment permitted to the donee ..."
In my view, when the will is read as a whole the testator's intention is that the administrator of the estate will hold the deceased's estate after payment of the pecuniary legacies on trust for Sophia Hirsch, but the terms of the trust are that the funds, whether income or capital, are to be applied for her benefit in such a way that the funds do not come into her hands. The funds could thus be applied in the purchase of property for Sophia Hirsch's use or in the payment of her expenses. Sophia Hirsch has an interest in the estate which is transmissible by will or on intestacy, but her interest is defeasible if her interest in the deceased's estate would pass to Melita Pecherskaya or members of her family on Sophia Hirsch's death either pursuant to a will or on intestacy. Neither party submitted that a trust on those terms would not be valid.
Rectification
If this is the correct construction of the will, as I think it is, I do not understand Ms Pringle to have contended that the will should nonetheless be rectified as sought in the summons. Indeed, rectification of the subject sentence in the way sought in the summons would not change the substance of the gift as the restraints on alienation would remain. In any event, the only evidence of the deceased's testamentary intentions, other than what can be gleaned from the will itself, was evidence from Ms Hirsch that "Martha was very kind to me. Martha often wrote that she would 'leave me everything [she] owned'. I believe that Martha thought I needed her help." Ms Hirsch had only kept one of the letters written by the deceased, being a letter dated 10 November 1995. In that letter the deceased expressed her intention to leave all her estate to Ms Hirsch. But that does not take the matter further. In the will itself, the deceased acknowledged that she had made a decision long ago to leave all her property to Sophia Hirsch. But the deceased then went on to make the stipulations that Sophia Hirsch should not receive money from her estate that could be passed on by her to Melita Pecherskaya or Melita Pecherskaya's family. In other words, the additional evidence that is admissible on the rectification claim does not show that the deceased's testamentary intention was other than expressed in her will.
Inter Vivos Trust of Investments
The remaining claim concerns the statement in the will that:
"I have here two small investments in trust for Sophia, on no account must money be sent to Sophia Hirsch, as this is what they are waiting for. Whatever is invested here must remain here and she can get only the Dividends and not pass on any inheritance to the family of Melita Pecherskaya."
Sophia Hirsch seeks a declaration that a St George bank account held by the deceased at her death and units held by the deceased in a fund known as the BT Investment Fund was the subject of that trust. The statement in the will appears to be not a declaration of trust of the "two small investments" but a memorandum that such a trust existed. The terms of the trust can be inferred from the note. The difficulty lies in identifying the two small investments that are the subject of the trust. At her death in 2008 the deceased had four bank accounts with credit balances totalling $35,351.11. One of those accounts was an account with the St George Bank with a credit balance of $33,527.67. The deceased owned units in the BT Investment Fund that had a value of $64,502.01. The deceased also held units in a unit trust of which the responsible entity (or the trustee or the manager - it is not clear which) was Macquarie Investment Management Limited. These units had a value of $623.43. Unless these assets were subject of a trust declared by the deceased during her lifetime in favour of Sophia Hirsch, they will pass as part of her residuary estate for the benefit of Sophia Hirsch, but subject to the restriction on alienation referred to earlier. If any of these accounts could be identified as the investments the subject of a declaration of trust made by the deceased during the deceased's lifetime, then Sophia Hirsch would be entitled to the "dividends" from the investments. The restriction against alienation of income would be ineffective. She would be entitled to call on the NSW Trustee to pay the "dividends" to her during her life.
There is no reason to think that the money in the St George account was one of the "two small investments". Interest would have been payable on that account but that interest could not plausibly have been described as dividends.
There was no evidence as to what investments the deceased had in 2000 when she made her will. If the only investments the deceased then had (other than bank accounts paying interest) were investments in the same funds as those in which she had investments at her death, then I would conclude that the deceased had declared a trust over those units during her lifetime on the terms of the trust described in her will, namely, that income (described by the deceased as dividends) should be paid to Sophia Hirsch, but the capital should not be paid to her during her lifetime; but that the capital of the investments could be disposed of by Sophia Hirsch by her will or could pass on her intestacy provided that the persons who would so inherit should not be Melita Pecherskaya or members of Melita Pecherskaya's family.
There is insufficient evidence to establish that the "two small investments" referred to by the deceased in her will were the same investments in unit trusts which she held at her death. I do not think that I should simply dismiss the claim made by Ms Hirsch in her cross-summons because of the absence of evidence about her investments in 2000. I propose to stand over the further hearing of that part of the cross-summons and to direct the NSW Trustee and Guardian to provide any evidence that it might have as to what investments the deceased owned in 2000. If the NSW Trustee and Guardian does not have evidence about that, then that part of the cross-claim will fail.
Subject to the determination of whether any of the investments owned by the deceased at her death were subject to a declaration of trust in favour of Sophia Hirsch during the deceased's lifetime, the appropriate order is to declare that on the true construction of the deceased's will and in the events which have happened, the whole of the estate of the deceased, save for the legacies numbered 1, 2 and 3 on page two of the will, is held by the plaintiff on trust for the cross-claimant on terms that the income and capital of the trust property may be applied for the benefit of the cross-claimant, but that no payment is to be made to the cross-claimant and no property is to be transferred to her if such money or property could be transferred by the cross-claimant to Melita Pecherskaya or any member of the family of Melita Pecherskaya; and that any income or capital held on trust for the cross-claimant at her death will form part of the cross-claimant's estate if, but only if, that part of the cross-claimant's estate would not pass on the cross-claimant's death to Melita Pecherskaya or any member of Melita Pecherskaya's family.
It will be unnecessary to decide the balance of the claims in the summons unless on Sophia Hirsch's death there is property still held by the NSW Trustee and Guardian on trust for her and under her will or the applicable laws of intestacy the property would pass to Melita Pecherskaya or any member of Melita Pecherskaya's family, in which event, the condition of divestment would operate. As that position may not become clear for many years the balance of the claims for relief in the summons should be dismissed as being inappropriate for answer at this time.
I will hear submissions from counsel as to the appropriate form of the declaration.
The costs of the plaintiff should be paid out of the estate on the indemnity basis. The costs of Sophia Hirsch should also be paid out of the estate on the indemnity basis as she is the sole residuary beneficiary and such a payment would be consistent with the terms of the trust. Any costs of the Attorney-General (if sought) should be payable out of the estate on the ordinary basis.
I will stand the proceedings over to a convenient date in order for the NSW Trustee and Guardian to provide evidence as might be available to it in relation to the investments held by the deceased in 2000 that might be the subject of the declaration of trust made by the deceased in favour of Sophia Hirsch during her lifetime and in order to make declarations and orders consistent with these reasons.
Decision last updated: 24 September 2013
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