Phillips v McCabe
[2016] SASC 27
•24 February 2016
SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction: Civil)
PHILLIPS v MCCABE & ORS
[2016] SASC 27
Judgment of The Honourable Justice Gray
24 February 2016
SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - CONSTRUCTION GENERALLY - PRINCIPLES OR RULES OF CONSTRUCTION - GENERALLY
SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - PARTICULAR TESTAMENTARY DISPOSITIONS - CONTINGENCY INVOLVING DEATH - DEATH COUPLED WITH CONTINGENCY - DEATH OF PERSON IN TESTATOR'S LIFETIME AND SUBSTITUTION - GENERALLY
CHARITIES - NON-CHARITABLE PURPOSES - MONUMENTS AND MEMORIALS
Application for the determination of questions arising in relation to the administration of a deceased estate. The deceased had a large extended family. At the time of the making of her will, the deceased’s closest relatives were her first cousins. Some of the deceased’s first cousins were alive, while others had died with issue. By the deceased’s will, the residuary estate is left to the “children of the deceased brothers and sisters of both [the deceased’s] late mother and father who [survive the deceased]”. There is also a substitution of beneficiaries clause, which provides that if any beneficiary did not survive the deceased, any child of theirs living at the date of the deceased’s death should take their parent’s share of the deceased’s estate.
Whether the substitution of beneficiary clause applies to the clause which disposes of the residuary estate. Whether a clause directing the deceased’s trustees to maintain the family graves is void.
Held:
1. The residuary estate clause creates a class gift. The first cousins who predecease do not take a share of the class gift and, as such, are not beneficiaries to the will for the purpose of the substitution of beneficiaries clause.
2. The clause which directs the trustees to apply capital and income toward the upkeep and maintenance of family graves is void as it purports to create a non-charitable perpetual trust.
Supreme Court Civil Rules 2006 (SA) r 206, referred to.
Nicol v Chant (1909) 7 CLR 569; Fell v Fell (1922) 31 CLR 268; Ritchie v Magree (1964) 114 CLR 173; Boyes v Cook (1880) 14 Ch D 53; Sammut v Manzi [2009] 1 WLR 1834; In re Allsop, decd [1968] Ch 39; In re Redfern (1877) 6 Ch D 133; In the Will of Dyer deceased (1910) 12 WALR 155; Hill v Crook (1873) LR 6 HL 265; Fairbairn v Varvaressos (2010) 78 NSWLR 577; Kingsbury v Walter [1901] AC 187, considered.
PHILLIPS v MCCABE & ORS
[2016] SASC 27Civil
GRAY J.
This is an application for the determination of questions arising in relation to the administration of a deceased estate.[1]
[1] Supreme Court Civil Rules 2006 (SA) rule 206:
Actions for administration
(1)In an action related to a trust or deceased estate, the Court may (if it thinks fit) determine questions arising in the action without making an order for administration.
(2)In any such action, the Court may make orders for the protection of persons who may be interested in the trust or deceased estate (whether or not they are parties to the action).
Examples—
1The Court might make orders for the ascertainment of possible beneficiaries.
2The Court might order the trustees, executors or administrators to file accounts of their administration in the Court.
The deceased, Monica Gertrude Farrelly, was born on 16 April 1914. She died a spinster on 19 June 2012 at Mallala in South Australia, aged 98 years.
The deceased’s last will was made on 4 April 2003, just prior to her 89th birthday. On 2 November 2012, probate of the will was granted to the plaintiff, Vikki Marie Phillips, an executor named in the will. The deceased’s estate was substantial, valued at over $7,000,000.00 at the time probate was granted.
The deceased was one of two children of Daniel Thomas Farrelly and Helena Mary Farrelly, nee McCabe. The deceased’s sister Mary died a widow without issue in 1993. The deceased’s father died on 29 July 1965 and her mother died on 11 December 1983.
The deceased had a large extended family. The deceased’s father had six siblings, five of whom had issue. The deceased’s mother had 11 siblings, of whom four had issue. The deceased’s uncles and aunts had all died by the time that the deceased made her last will.
At the time of the making of her will, the deceased’s closest relatives were her first cousins. Some of the deceased’s first cousins were alive, while others had died with issue. There is limited evidence of the deceased’s state of knowledge of her extended family at the time of the making of her will, including whether she was aware of how many first cousins she had, their ages, whether they were still alive and, of those who had died, whether they had left issue.
Clause 3 of the deceased’s will provides for the division of the estate. It consists of 14 subclauses making various gifts. A number of subclauses require the intended recipients to survive the deceased. Other subclauses do not require the intended recipients to survive the deceased. One subclause requires the intended recipient to attain the age of 25 years prior to receiving a legacy.
Seven subclauses provide for a specific gift to a person or persons. Two of those subclauses provide for the vesting of the gift in another person in the event that the named recipient does not survive the deceased. Four subclauses provide gifts to institutions. Another subclause provides a sum for funeral expenses for a named friend should the friend survive the deceased.
Clause 3(h) provides for the upkeep and maintenance of the family graves:
I GIVE the whole of my estate to my trustees UPON TRUST to sell call in and convert the same into money with power in their discretion to postpone such sale calling in and conversion for so long as they in their discretion think fit and after paying all my debts funeral and testamentary expenses TO HOLD the balance as follows:
...
AS TO the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) to be invested by my trustees for the purpose of applying both the capital and income at the discretion of my trustees for the up keep and maintenance of the family graves at Pinkerton Plains
The residuary estate is disposed of by clauses 3(n):
all the rest and residue in equal shares as tenants in common per capita for those of the children of the deceased brothers and sisters of both my late mother and father who survive me.
Clause 4 of the will provides:
IF any beneficiary under my will does not survive me or if it should be uncertain as to whether such beneficiary did survive me but leaves surviving a child or children who shall be living at the date of my death and attain majority I DIRECT that such child or children shall take and if more than one in equal shares as tenants in common the share under this my will which his her or their parent otherwise would have taken.
The Application
On 19 May 2015, the executor filed a summons seeking the determination of the following questions:
(a)Do the substitution of beneficiary provisions contained in clause 4 of the will operate in respect of the gift by clause 3(n) of the will whereby the deceased provided that all the rest and residue of the balance of her estate, remaining after the gifts provided by sub-clauses (a) to (m) inclusive of clause 3 of the will (“the rest and residue”), was to be held by her trustees upon trust:
‘…in equal shares as tenants in common per capita for those of the children of the deceased brothers and sisters of both my late mother and father who survive me.’
(b) If the answer to question (a) is ‘No’:
(i) Does the class of beneficiaries under clause 3(n) of the will comprise only the first to eleventh named defendants to the proceedings (“First Group of Beneficiaries”)?; and
(ii) Should the plaintiff distribute the rest and residue under clause 3(n) of the will in ten equal shares to the ten members of the First Group of Beneficiaries?
(c) If the answer to question (a) is ‘Yes’:
(i) Is the rest and residue under clause 3(n) of the will to be divided into 25 equal shares?
(ii) If ‘Yes’, should the plaintiff distribute the rest and residue under clause 3(n) of the will:
(1)As to 10 shares, a share to each member of the First Group of Beneficiaries; and
(2)As to 15 shares, a share to each of the 15 groups of persons comprising ‘the Second Group of Beneficiaries’ (as defined in the accompanying Affidavit) and where each group comprises more than one person to those persons in equal shares as tenants in common?
(d)Should the plaintiff conduct any further investigation or enquiries to determine the person entitled thereto before distributing the rest and residue pursuant to clause 3(n) of the will?
(e)In relation to clause 3(h) of the will whereby the decease gave ‘the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) to be invested by my trustees for the purpose of applying both the capital and income at the discretion of my trustees for the up keep and maintenance of the family graves at Pinkerton Plains’ the following questions:
(i) Whether clause 3(h) of the will creates a trust in perpetuity for the purposes therein described?
(ii) Whether there is an obligation on the trustees to maintain a capital sum which the trustees estimate will be reasonable sufficient to enable the upkeep and maintenance of the family graves and Pinkerton Plains in perpetuity?
(iii) What is meant by the expression “the up keep and maintenance of the family graves as Pinkerton Plains”?
(iv) Does the expression “the up keep and maintenance of the family graves as Pinkerton Plains” encompass only the upkeep and maintenance of the existing graves (including monuments or headstones erected above the graves) of family members or are the trustees empowered to expend monies:
(1)In relation to the graves of family members of the deceased who may in future be buried at Pinkerton Plains; or
(2)In relation to matters incidental to the upkeep and maintenance of the family graves such as in painting of the fence of the cemetery, or in installing new gates and paths in the cemetery at Pinkerton Plains?
It is to be understood that the “first group of beneficiaries” consists of the first cousins of the deceased whom were living at the date of her death. The “second group of potential beneficiaries” consists of the 55 surviving children of the first cousins of the deceased who predeceased her. Each member of the first group of beneficiaries was represented at the hearing of the application. On 1 July 2015, a Master of the Court appointed a representative of the second group of potential beneficiaries to represent the interests of that class of persons.
Construction of a Will – General Principles
When construing the will, the object of the court is to ascertain the intention of the testator, as expressed in the will.[2] The will must be read as a whole and in the light of the surrounding circumstances.[3] The “armchair principle” permits the court to receive evidence of the state of the testator’s family, property, friends and acquaintances so that the court may read the will from the position of the testator when making it, as if sitting in the testator’s armchair.[4] Prima facie, the words and phrases used in the will are to be given their ordinary meaning, unless doing so would give rise to a capricious result having regard to the obvious intention of the testator.[5]
[2] Nicol v Chant (1909) 7 CLR 569, 577; Fell v Fell (1922) 31 CLR 268.
[3] Ritchie v Magree (1964) 114 CLR 173, 182; Fell v Fell (1922) 31 CLR 268, 273-4.
[4] See Boyes v Cook (1880) 14 Ch D 53, 56.
[5] Sammut v Manzi [2009] 1 WLR 1834, 1838; In re Allsop, decd [1968] Ch 39, 47; In re Redfern (1877) 6 Ch D 133, 136, cited with approval in In the Will of Dyer deceased (1910) 12 WALR 155, 157.
In Nicol v Chant, Griffiths CJ set out the process of construing a will in the following terms:[6]
The question to be determined is purely one of construction. In construing a will the first duty of the Court is to examine it, and to discover the meaning of the language of the testator as applied to the circumstances existing at the date of the will, and to give effect to the intention so discovered unless some authoritative rule of law or construction requires a different conclusion. The inverse process, of first taking up a supposed rule assumed to be primâ facie applicable, and then inquiring whether the words of the will exclude the operation of the rule, is, as has often been said, likely to lead to erroneous conclusions. ...
[6] Nicol v Chant (1909) 7 CLR 569, 577.
In Sammut v Manzi, the Privy Council considered whether regard should be had to cases which considered similar wording to the clause before the court and said:[7]
… Little assistance in construing a will is likely to be gained by consideration of how other judges have interpreted similar wording in other cases. Counsel rightly recognised that the starting point must be to look at the natural meaning of the wording of the will to be construed without reference to other decisions or to prima facie principles of construction.
[7] Sammut v Manzi [2009] 1 WLR 1834, 1838.
In Hill v Crook, Lord Cairns addressed the testator’s knowledge of his family and said:[8]
... in order to interpret the words of the will, it is always not only allowable, but it is the duty of the Court to obtain, the knowledge which the testator had of the state of his family. ...
[8] Hill v Crook (1873) LR 6 HL 265, 283.
The New South Wales Court of Appeal has described the task of the Court in the following terms: [9]
As Powell J said in Coorey v George (Powell J, 27 February 1986, unreported) at 14, in a passage approved by Bryson J in Perpetual Trustee Co Ltd v Wright (1987) 9 NSWLR 18 at 33, in construing a will: “[O]ne’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.”
[9] Fairbairn v Varvaressos (2010) 78 NSWLR 577, 581-2.
Clause 3(n) – The Residuary Estate
On the hearing of the application, counsel for the executor and the first group of beneficiaries took a neutral position on the interpretation of clause 3(n). Counsel for the second group of potential beneficiaries argued that, by virtue of ordinary rules of grammar, clause 4 applied to clause 3(n). Counsel contended that clause 4 should be interpreted as applying to every person in the first group of beneficiaries whether alive or not at the date of the will or the date of the deceased’s death. Counsel submitted that the term “beneficiary” in clause 4 meant “any natural person named or described in [the] will as the intended recipient of a gift made by [the] will”. It was argued that, consequently, clause 4 should act to vest an interest in the children of any first cousins who had died before the deceased, being the second group of potential beneficiaries. It was submitted that the deceased would have wanted to benefit a broad group of her relatives.
Clause 3(n) of the will is expressed to provide a gift to a class of persons by reference to their relationship with the deceased, rather than to individuals. It is a class gift. In Kingsbury v Walter, Lord McNaghten explained:[10]
In my opinion the principle is clear enough. When there is a gift to a number of persons who are united or connected by some common tie, and you can see that the testator was looking to the body as a whole rather than to the members constituting the body as individuals, and so you can see that he intended that if one or more of that body died in his lifetime the survivors should take the gift between them, there is nothing to prevent your giving effect to the wishes of the testator.
It is clear that the membership of the class provided for by clause 3(n) is to be ascertained at the date of the deceased’s death.
[10] Kingsbury v Walter [1901] AC 187, 191.
It seems clear to me that clause 4 operates as a substitutional clause, rather than an independent or original gift. Under clause 4, any children are to take “the share … which his her or their parent otherwise would have taken”. The position may be different if clause 4 was worded such that the child took the place of his or her deceased parent for the purpose of distribution. However, the clause does not operate in this manner, rather it operates in respect of beneficiaries, being the original legatees.
The general position of substitutional gift provisions in respect of class members is described in Williams on Wills as follows:[11]
Gift to classes – in general. If the original gift is to class, a person who was dead at the date of the will is not included in it, and consequently no one can take in his place by way of substitution; for, in order to claim under the will, the substituted legatees must point out the original legatees in whose place they demand to stand, and the substitutional gift fails where the corresponding member of the primary class was dead at the date of the will, and therefore, could not have taken as a member of the class under the will. Thus, if the original donees are a class of parents, and there is a substitutional gift of each parent’s share to his children, the children of a parent dead at the date of the will cannot take.
[Footnotes omitted.]
[11] Francis Barlow et al (eds), Williams on Wills (LexisNexis Butterworths, 9th ed, 2008) 715 [68.6].
The phrase “who survive me” makes it clear that the deceased intended to create a class gift to all of her first cousins and, if any of them died in her lifetime, she intended that the survivors would take. The members of the class are “those of the children of the deceased brothers and sisters of both [the deceased’s] late mother and father who survive [the deceased]”. Clause 3(n) expressly recognises that the deceased’s mother and father have predeceased. Further, it recognises that their brothers and sisters have predeceased. The words “who survive me” can only refer to the children of the deceased brothers and sisters of the deceased’s mother and father. As a consequence, only those children who survive the deceased fall within the class for the purposes of clause 3(n) and thus the term “beneficiaries” in clause 4. The first cousins who predecease do not take a share of the class gift and, as such, are not beneficiaries to the will.
It is my view that this interpretation is the most likely to accord with the deceased’s intention. Given the size of the deceased’s family and, in particular, the second group of beneficiaries, it seems unlikely that the deceased would intend for her will to be extended to that second group without her, or her solicitors, considering the inherent difficulties with such a gift. There is no evidence of such consideration in the solicitors’ file. Further, there is no logical basis for the deceased to distinguish the children of first cousins who died prior to her making the will. If the deceased intended to provide equally for each cousin, or their issue in their stead, the deceased would likely have provided for the children of the first cousins who had died before she made her will.
In my view, the substitution of beneficiary provisions contained in clause 4 of the will do not operate in respect of the gift contained in clause 3(n).
Clause 3(h) – Maintenance of the Family Graves
On the hearing of the application, counsel for the executor submitted that there was a real doubt as to whether clause 3(h) of the will was valid. Counsel suggested that the clause may be void as a non-charitable purpose trust.
Counsel for the second group of potential beneficiaries argued that a gift to maintain a grave was valid so long as it did not contravene the perpetuity period. Counsel further contended that, by virtue of section 61 of the Law of Property Act 1936 (SA), there is no longer a rule against perpetuities in South Australia. Counsel relied on the English case of In re Hooper,[12] which held that although not a charitable gift, a trust established for the maintenance of graves was valid for a period of 21 years, being the relevant perpetuity period.
[12] In re Hooper [1932] 1 Ch 38.
The Catholic Church Endowment Society Incorporated is the registered proprietor of the Pinkerton Plains Cemetery. The cemetery contains the graves of many relatives of the deceased, some dating back to the 1870s. However, the cemetery has about 400 graves and most of those are of persons who have no relationship to the deceased. There was evidence that the deceased had contributed in the past to the cost of maintaining the family graves at the cemetery. There was also evidence that presently all of the graves were in reasonable condition but that some of the fences to the cemetery had been destroyed by a recent bushfire.
The purpose expressed in clause 3(h) is for “the up keep and maintenance of the family graves at Pinkerton Plains”, rather than broadly for the upkeep of the cemetery as a whole. In my view, the clause could not be considered to create a charitable purpose trust. There is no public benefit.
The question is then whether the trust, notwithstanding that it is not charitable in nature, is valid so long as it is limited to a period consonant with the rule against perpetuities. In Pedulla v Nasti,[13] Needham J reviewed the English case law on point, including In re Hooper. His Honour observed:[14]
[13] Pedulla v Nasti (1990) 20 NSWLR 720.
[14] Pedulla v Nasti (1990) 20 NSWLR 720, 721-23.
The first issue requires a consideration of what have been called “the tomb cases”, such as Pirbright v Salwey; Re Dean; Cooper-Dean v Stevens and Re Hooper.
In the first of these cases, Stirling J held that a gift to trustees of a legacy to be applied, “so long as the law permits”, in keeping up a churchyard enclosure, was valid for a period of twenty-one years. In Re Dean, North J held that a trust to erect a monument, even in unconsecrated ground, was valid. Further, a trust for the repair of such a monument would be valid provided the time for which that trust was to endure was limited to a period consonant with the rule against perpetuities. Jacobs, Law of Trusts in Australia, says that the invalidity of such trusts as are unlimited in time, is not an application of the rule against perpetuities, but of the rule restricting the duration of purpose trusts, analogous to the rule against perpetuities. As it has not been suggested, in this case, that the Perpetuities Act 1984 applies, the distinction is not presently relevant.
Maugham J, in Re Hooper, upheld a gift to trustees to provide “as far as they legally can do so” for the care and upkeep of certain graves, a vault, certain monuments, a tablet and a window, some in churches, some in the Torquay cemetery. His Lordship said that he would have had difficulty in deciding the case were it not for the decision in Pirbright v Salwey. Those objects which were not charitable, be held to be valid for a period of twenty-one years.
These cases ... have been described as anomalous and have come in for considerable criticism in England. In Leahy v Attorney-General for New South Wales, Viscount Simonds, speaking for the Judicial Committee, described them as “a deviation” from the fundamental rule that a trust, unless charitable, must have beneficiaries. He said that “attempts have been made to explain or justify such cases. ... But the rule as stated in Morice v Bishop of Durham ... continues to supply the guiding principle”.
Even more trenchant were the criticisms directed at such cases by Harman LJ in Re Endacott; Corpe v Endacott, where his Lordship said:
“... I applaud the orthodox sentiments expressed by Roxburgh J in the Astor case and I think, as I think he did, that though one knows there have been decisions at times which are not really to be satisfactorily classified, but are perhaps merely occasions when Homer has nodded, at any rate these cases stand by themselves and ought not to be increased in number, nor indeed followed, except where the one is exactly like another. Whether it would be better that some authority now should say these cases were wrong, this perhaps is not the moment to consider.”
I could, perhaps, be satisfied to accept Harman LJ's suggestion that the cases should not be followed, but I find, bearing in mind that the cases are not binding on me, that there are local decisions which are to the contrary.
In Muir v Archdall, Harvey J held that a legacy to a trustee to keep the testator's grave in order was void. It was “a perpetuity for a non-charitable object”.
In Pooley v Royal Alexandra Hospital for Children, Long Innes J said:
“...A gift for building a monument or tomb, not forming part of the fabric or ornament of a church may be valid as a private trust, if not involving a perpetuity...”
Later, his Honour said:
“...it seems to me, as a matter of construction, impossible to avoid holding that the intention of the testatrix in the present case was that the monument in question should constitute a perpetual memorial to her son, and I have consequently held that the gift for the purposes of the erection of the monument, equally with that for the perpetual care of the ground, fails as a perpetuity, not being a charity.”
...
In my opinion, Pooley v Royal Alexandra Hospital for Children is a decision directly in point of a distinguished judge of this Court, and, bearing in mind the current dissatisfaction in England with these anomalous cases, I am content to follow it.
[References omitted.]
I agree with Needham J that the decision of In re Hooper should not be followed. In my view, clause 3(h) is void as it creates a perpetual trust.
I do not consider that the position in South Australia as to perpetual trusts is any different to the position in New South Wales by virtue of section 61 of the Law of Property Act. Section 61 provides:
(1) A disposition of property is not invalid—
(a) because of the remoteness from the date of the disposition of the time an interest will, or may, vest in pursuance of the disposition; or
(b) because, under the terms of the disposition, an interest is limited, for life, to a person who was unborn at the date of the disposition, with a remainder over to a child or other issue of that person; or
(c) because it provides for or permits the accumulation of income.
(2) A right or power in respect of property is not invalid because of the remoteness of the time it is to be, or may be, exercised.
(3) A purported exercise of a right or power in respect of property is not invalid because of its remoteness from the time the right or power was created.
In my view this provision has no application to the question of whether a trust for a non-charitable purpose of perpetual duration is void. As explained in Jacobs’ Law of Trusts, while the rules are analogous, the rule against perpetual trusts is not a direct application of the rule against perpetuities. There are different public policy considerations behind the two rules. The point is explained in Jacobs’ Law of Trusts as follows:[15]
In the second place, they must not endure for a period longer than that prescribed by the rule against perpetual trusts. This is not, as is commonly supposed, an application of the rule against perpetuities, as no question of remoteness of vesting arises. It is a rule restricting the duration, and not the vesting, of purpose trusts; it is analogous to the rule against perpetuities; and its justification is the public policy of fostering the freedom of circulation of property. If trustees are directed to maintain a grave ‘as long as the law allows’ or ‘so long as they can legally do so’, such trusts will be valid for 80 years in most jurisdictions; any purpose trust lasting longer is void to that extent.
Finally, purpose trusts, even where valid, are only upheld to a limited extent. Nobody can insist that they be performed. The trustees may or may not perform them at their option, but they can neither be compelled to perform them nor be prevented from doing so.
[Footnotes omitted.]
[15] J D Heydon and M J Leeming, Jacobs’ Law of Trusts (LexisNexis Butterworths, 7th ed, 2006) 232-3 [1108].
In this case, clause 3(h) expresses no limit and I would be reluctant to read one in terms such as “so long as the trustee can legally do so” in circumstances where there is no authority for doing so and no clear authority that a non-charitable purpose trust of non-perpetual duration is valid in any event.
On the hearing of the appeal, counsel noted that it may be possible for the holders of the residual estate, especially in circumstances where only the first group of potential beneficiaries were to take a share, to come to an agreement about the maintenance and upkeep of the family graves. I was asked to reserve judgment for some weeks in order to allow this to happen. I have not been advised that an agreement has been reached but I note that, notwithstanding my conclusion that clause 3(h) is void, there is no bar to the first to eleventh defendants coming to private understanding as to how their share of the additional $200,000.00 should be spent. The defendants may wish to consider whether some money is spent restoring the fences to the cemetery that were destroyed in the recent Pinery bush fire.
Conclusion
I would answer question (a) in the negative. I would answer questions (b)(i) and (ii) in the affirmative. Question (c) does not arise for consideration. I would answer question (d) in the negative. Question (e) does not arise as I find that clause 3(h) is void.
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