Perpetual Trustees WA Ltd v Macfarlane - [2009] WASC 61

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PERPETUAL TRUSTEES WA LTD -v- MACFARLANE [2009] WASC 61

CORAM: MASTER SANDERSON

HEARD: 25 FEBRUARY 2009

DELIVERED : 24 MARCH 2009

FILE NO/S: CIV 1491 of 2007

BETWEEN: PERPETUAL TRUSTEES WA LTD as trustee for WILLIAM THOMAS WOOD
Plaintiff
AND
IAN RUSS MACFARLANE
JULIE MAY GILL
THOMAS KEITH MACFARLANE
First Defendants
SHEILA MARY COOPER
BARBARA LESLEY BRACKEN
Second Defendants
HECTOR THOMAS WOOD as executor of the estate of HORACE CHARLES WOOD (dec)
BARRY JAMES WOOD,
NEIL WILLIAM WOOD and
MARGARET ANNE SEABROOK as executors of the estate of THORNTON JAMES WOOD (dec)
Third Defendants

Catchwords:

Wills - Application by trustee as to the proper interpretation of the will of deceased - Turns on own facts

Legislation:

Nil

Result:

Will interpreted

Category: B

Representation:

Counsel:

Plaintiff:        Mr P J Mugliston
First Defendants               :        Mr G R Hancy & Dr J J Hockley
First-named Second Defendant     :        No appearance
Second-named Second Defendant   :        Dr P R McMillan
Third Defendants               :        No appearance

Solicitors:

Plaintiff:        Kott Gunning
First Defendants               :        Lavan Legal
First-named Second Defendant     :        No appearance
Second-named Second Defendant   :        Marks & Sands
Third Defendants               :        No appearance

Case(s) referred to in judgment(s):

Hornsby v Playoust [2004] VSC 472
Lutheran Church of Australia South Australia District Inc v Farmers Co‑operative Executors & Trustee Ltd (1970) 121 CLR 628
Perrin v Morgan [1943] 1 All ER 187

MASTER SANDERSON: This case concerns the interpretation of a will, probate of which was granted in September 1937. The question of the proper interpretation of the will has been before the court before. The order made subsequent to the hearing before Dwyer CJ was dated 25 March 1938. This will probably be the last time the proper meaning of the deceased's will is in issue.
The plaintiff applies pursuant to s 92 of the Trustees Act 1962 (WA) for directions from the court in relation to the interpretation of the will of the late William Thomas Wood (the deceased).
Paragraphs 2 and 3 of cl 6 of the deceased's will establish a trust in relation to properties owned by the deceased that are located on the corner of Hay and Pier Streets, Perth (the trust). The plaintiff is a current trustee of the trust.
Paragraphs 2 and 3 of cl 6 of the deceased's will read as follows:
My property at the corner of Hay and Pier Streets six (6) shops my wife and four daughters to draw equal shares and should anyone of them die their share to go to the surviving three and so on until all the rents to be divided every month between them in equal shares but sufficient to be paid into the Bank to pay all rates and taxes and repairs
Not on any account is anyone of them to borrow any money on their share nor to sell nor to mortgage their share or their right but should there be any children of their own alive at their death their share is to go to their children.
Section 92 of the Trustees Act reads as follows:
92.Directions, trustee may ask Court for
(1)Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
(2)Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
There was no dispute between the parties as to the proper approach to be adopted in a case such as this. The object in construing a will is to give effect to the testator's intent. As Lord Simon LC said in Perrin v Morgan [1943] 1 All ER 187:
[T]he fundamental rule in construing the language of a will is to put upon the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case - what are the 'expressed intentions' of the testator (190).
A modern formulation of this approach is found in the decision of the Victorian Supreme Court in Hornsby v Playoust [2004] VSC 472:
[I]t must be recognised that a question as to the proper construction of a will, like any other instrument, is one about which reasonable minds might differ so that it will often be 'a matter of impression' which informs the Court’s judgment [49].
The difficulty in applying general guidelines for all probate actions was recognised in the judgment of Windeyer J in Lutheran Church of Australia South Australia District Inc v Farmers Co‑operative Executors & Trustee Ltd (1970) 121 CLR 628:
But we are not to decide this case by choosing among decisions by other judges as to what the testators meant by words used in other contexts. Those decisions may give some guidance. They may suggest the proper conclusion if the reasoning on which they were based be apposite and persuasive. But they cannot compel a conclusion or be treated as dictionaries (646).
It seems clear that when the interpretation of the will came before Dwyer CJ, argument was addressed to his Honour on the proper meaning of cl 6 including the clauses presently under consideration. Paragraph (b) of the extracted judgment is in the following terms:
What is the interest to the testators widow and his four daughters respectively in the Hay and Pier Streets shops devised by cl 6 of the will
(i)The testators widow takes an estate in fee simple in one undivided fifth share in the Hay and Pier Streets properties devised by clause 6 of the will
(ii)Each of the testators four daughters takes an estate for her life in a one undivided fifth share of the said property
(iii)In the event of any of the testators four daughters dying without leaving a child living at her death the surviving daughters or daughter of the testator (as the case may be) takes such deceased daughters share (including any accretion thereto) for life
(iv)In the event of any of the testators four daughters dying leaving a child or children alive at her death such child or children take an estate in fee simple in the one undivided fifth share of such daughter as joint tenants
(v)The ultimate devolution of the fee simple in remainder of the one undivided fifth share of any of the testators daughters who die without leaving a child living at her death is reserved for determination on the happening of such events or events.
The four daughters of the deceased were Mary Ethel, Dorothy, Evelyn and Marjorie. Mary Ethel was the first to die and she left a child. Dorothy was the next to die. She died without children. Evelyn and Marjorie having survived their two sisters, were entitled to receive, and did receive, the income less expenses of an undivided fifth share as well as half of the net income of Dorothy's share. Evelyn was survived by one child. When Evelyn died, Marjorie, the final surviving daughter, received the net income of both her own undivided fifth share and the income of Dorothy's share. The question then put by the plaintiff as trustee is, what now becomes of the fifth share which Dorothy held as a life interest? All parties agree that there are three possible interpretations of the relevant paragraphs of cl 6.
The first possible interpretation is that the whole of the estate is left to the children of the last surviving daughter of the deceased. The second possibility is that the estate is divided between the children of the four daughters of the deceased on a per stirpes basis. The third alternative is that there is a partial intestacy in relation to the estate and the remaining portion of the estate is distributed in accordance with the provisions of the Administration Act 1903 (WA) as at the date of the death of the deceased in 1937.
The second possible interpretation can immediately be put to one side. Counsel for the plaintiff, in his submissions, said that this interpretation had only been put forward on the basis that it was a possibility. While remaining largely neutral as to the proper interpretation of the will, counsel submitted that there was no real basis to favour the second interpretation. Counsel for the defendants agreed. Neither saw this as a reasonable interpretation of the intentions of the testator. I agree. It simply does not fit with the possible interpretations of the will and would not properly represent the testator's intentions.
On behalf of the first defendants it was submitted that cl 6 revealed the testator's intention to:
1.give to his widow and four daughters his property at the corner of Hay and Pier Streets. By necessary implication from the description of the property, the testator intended to gift the totality of the fee simple albeit in shares;
2.divide the totality of the fee simple interest into five shares;
3.give an equal undivided share to each of the widow and his daughters, but subject to the conditions in the case of the daughters;
4.make an unconditional gift to the widow;
5.make conditional gifts to the daughters;
6.gift the undivided share of a daughter with surviving children to the daughter for life and the fee simple to her children;
7.gift the undivided share of a daughter who died without children to the surviving daughter or daughters for life.
The first defendants submit that after Evelyn's death Dorothy's share passed to Marjorie unconditionally. Alternatively, they say that Dorothy's share passed to Marjorie's children unconditionally. They say this for the following reasons. Firstly, they say that the testator clearly intended to gift all of his estate in the city shops to his widow, daughters and children of his daughters and intended this to be done in the way set out above.
Secondly, the words 'should anyone of them die their share to go to the surviving three and so on' reveal an intention to pass a childless daughter's undivided fifth share to surviving daughters in diminishing succession.
Thirdly, the gift imposes no express limit as to time in the case of the last surviving daughter and her children.
Fourthly, in the event that a daughter died without children but was survived by one or more of her sisters, the benefit of the interest of the deceased daughter could only be a life interest to ensure fulfilment of the testator's wish and command that the share should be passed to the diminished group of surviving daughters. That limitation was removed once there was only one surviving daughter. There was no longer a requirement to pass the share to a diminished group of surviving daughters.
Fifthly, the conclusion is consistent with a rule that a gift of income without limitation as to time is gift of the capital. The gift to Marjorie of the net income of the 'share to go to the surviving three and so on' imposed no express limit as to time once there was no other surviving daughter to whom the benefit of that gift might pass upon Marjorie's death. There was a gift to her of a life interest in Dorothy's share of the capital.
Sixthly, there is no reason to impose an implied limitation as to time for receipt of net income from Dorothy's share in the case of the last surviving daughter. Such an implication is inconsistent with the testator's intention to gift the entire interest in the city shops. If the gift of the benefit of Dorothy's share is governed by any time limitation then it is the testator's wish and direction that 'but should there be any children of their own alive at their death their share is to go to their children'.
Finally, when interpreting a will, the court leans against an intestacy. It was agreed between the parties that if the third interpretation was accepted then there would be a partial intestacy.
On behalf of the second‑named second defendant it was submitted that the third interpretation should be adopted. Counsel submitted that the scheme of the will is that if one of the testator's daughters died with a child living at the date of her death she did not obtain an absolute interest in the property; equally, if one or more of the daughters died without a child living at the date of her death, similarly she did not obtain an absolute interest in the property. The implication then must be that the testator's daughters were not to receive an absolute interest in the corpus.
Counsel pointed out that the first defendants relied on the contention that where income is gifted and the instrument does not deal with the devolution of capital, the gift is of corpus also. However, it was submitted in this case the will made provision for the disposition of capital. The gift of the income from the share of a daughter, who dies leaving no child alive at her death, is to her surviving sisters or sister; there is, therefore, no clear gift of that income to anyone in particular.
It was further submitted that in this case there was a clear limitation on the gift of income in each relevant instance. A daughter who had a child alive at the date of her death has a limitation on her income in that her share of the corpus goes to her child or children. A daughter who died with no child alive at the date of her death similarly has a limitation on the income in that the income after her death goes to her surviving sister or sisters. The last surviving daughter receives an income from her undivided fifth share and the income from the undivided fifth share of any other daughter who has predeceased her without leaving a child. The survivors own share of income is subject to one or other of the two limitations set out above. The share of the income from a sister (without a child) who predeceased her has, at least in part been subject to limitation, if part of it came to the last surviving daughter through another of the sisters. This is not a case of devolution of income without limitation. Therefore, the rule of construction relied upon by the first defendants is not in the second‑named second defendant's submission applicable to this case.
It was counsel's submission that in the circumstances the third interpretation was to be preferred. Counsel submitted that the rule made provision for the distribution of capital. It did not, however, make provision for that portion of the capital which was the undivided fifth share of a daughter who died without a child living at the date of her death. Counsel illustrated this submission in the following way. The will expressly provides that the share of a daughter who dies without leaving a child is to go to those daughters or daughter who survived her. If the last surviving daughter herself dies without a child the will is silent as to the devolution of her fifth share of the corpus. It is similarly silent as to the devolution of the fifth share of the corpus of a daughter who predeceased the last survivor without leaving a child.
As to the presumption against intestacy, counsel submitted that it is not strong. He further submitted that it is inappropriate for the court to construe the will so as to run counter to the scheme of the will even if the result is an intestacy.
On balance, I prefer the first interpretation. The starting point in this case is the determination of Dwyer CJ in 1938. Order (iii) of the Chief Justice's orders means that when one of the daughters dies without issue, her life interest passes to the surviving daughter or daughters. It seems to me to follow logically, therefore, that the last surviving daughter entitled as she is to the life interest of a sister who has predeceased her must necessarily be entitled to an interest in the corpus. Thereafter the interest in that portion of the corpus must pass to the children of the last surviving daughter. In other words, the first interpretation is to be preferred.
It is true that there might potentially have been an intestacy given the terms of the will. If the last surviving daughter had died childless then the will is silent as to what would be the proper distribution of the estate and, it may well be that there would an intestacy. But that is not what happened. The last daughter to die did not die childless and, in my view, her children are entitled to not only the benefit of her interest but the benefit of the interest of the sister who died childless.
I will hear the parties as to the precise form of orders and as to costs.