Pratt v Strathkyle Pty Limited

[2004] NSWSC 320

CITATION:	Pratt v Strathkyle Pty Limited [2004] NSWSC 320
HEARING DATE(S):	30 March 2004
JUDGMENT DATE:	22 April 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
DECISION:	Separate questions of construction determined
CATCHWORDS:	TRUSTS - beneficiaries - construction of deed of trust - meaning of word "issue" in the deed - whether meaning limited to "children" - significance of the term "per stirpes"
LEGISLATION CITED:	Trustee Act 1925 s81
CASES CITED:	Buick v Equity Trustees Executors & Agency Company Limited (1957) 97 CLR 599 In the Will of Moore [1963] VR 168 Matthews v Williams at pages 654 to 656 Perpetual Trustee Company Limited v Wright (1987) 9 NSWLR 18 Sibley v Perry [1802] 7 Ves 522; 32 ER 211 Sidney v Perpetual Trustee Estates and Agency Company of New Zealand Limited [1944] AC 194
PARTIES :	Helen Marion Pratt (Plaintiff) Strathkyle Pty Limited (First Defendant) Robert Macdonald Wass (Second Defendant) Geoffrey James Wass (Third Defendant) Ian Phillip Jefferson Wass (Fourth Defendant) Matthew Robert Wass (Fifth Defendant) Russell A.F. Stewart (Sixth Defendant)
FILE NUMBER(S):	SC 3689 of 2002
COUNSEL:	Mr N Perram with him Mr N C T Bilinsky (Plaintiff) Mr B W Walker SC with him Mr S A Goodman (First Defendant) Mr K L Andronos (Second and Third Defendants) No Appearance (Fourth Defendant) Ms K A Binnekamp (as agent for Fifth Defendant) Mr S G Finch SC with him Mr R S Holl (Sixth Defendant)
SOLICITORS:	Mallesons Stephen Jaques (Plaintiff) Clayton Utz (First Defendant) Lovett & Green (Second and Third Defendants) No Appearance (Fourth Defendant) Booth Brown Samuels & Olney (Fifth Defendant) Minter Ellison (Sixth Defendant)

5

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 22 APRIL 2004

3689/02 HELEN MARION PRATT V STRATHKYLE PTY LIMITED & ORS

JUDGMENT

Outline

1 These proceedings, so far as this judgment is concerned, relate to the proper construction of a deed of trust dated 26 November 1987 pursuant to which Mr Ian Stanley Wass, the father of the plaintiff, settled on trustees the sum of $100 to be held by the trustees on the trusts set out in that deed. Strathkyle Pty Limited is the present trustee of the settlement. The second, third and fourth defendants are brothers of the plaintiff. The fifth defendant, Matthew Robert Wass is a son of the second defendant, who has attained the age of 18 years. Apart from him none of the children of the plaintiff and second, third and fourth defendants has attained that age. The sixth defendant, Mr Stewart, has been appointed to represent the interests of possible beneficiaries in the trust who have not yet attained the age of 18 years, or who as yet may be unborn.

2 The trust is known as the “Georgina Wass Trust”. Mrs Georgina Wass is entitled to the income from the trust during her lifetime. She is not a party because no questions arise as to her interest.

3 The terms of the trust are set out in Clause 2 of the document as follows:

2. TRUSTS OF SETTLED FUND
That in pursuance of the premises the Settlor hereby declares and directs that the Trustees shall and the Trustees do hereby acknowledge and declare that they do and will hold and stand possessed of the Settled Sum which has been paid to them (and the Settled Sum and any additions thereto at any time made by the Settlor or any other person as hereinafter provided and all accretions thereto investments money and property of every description for the time being and from time to time representing the same are all hereinafter collectively referred to as "the Settled Fund") upon the following trusts:
(a) As to the income arising from the Settled Fund for GEORGINA HELEN WASS a child of the marriage of Elwyn Arthur Coghlan late of Sydney, Company Director, and his late wife Joan Marion Coghlan living on 13 March 1937 PROVIDED ALWAYS that the trusts hereby declared so far as they relate to the said child of Elwyn Arthur Coghlan shall be protective trusts within the meaning of Section 45 of the Trustee Act 1925.
(b) On the death of the said child of Elwyn Arthur Coghlan and until the death of the survivor of Geoffrey Ross Jefferson Coghlan and Georgina Helen Wass, being the only surviving children of the marriage of Elwyn Arthur Coghlan late of Sydney, Company Director, and his late wife Joan Marion Coghlan living on 13 March 1937, the issue of GEORGINA HELEN WASS ("the Relevant Parent") shall be substituted for the said Georgina Helen Wass per stirpes in equal shares.
(c) Upon the death of the survivor of the said surviving children of Elwyn Arthur Coghlan and until the time of distribution hereinafter appointed in trust to divide the income arising from the Settled Fund amongst the issue of the Relevant Parent to the intent that such issue shall divide equally between them the income from the Settled Fund.
(d) Upon the happening of the time of distribution hereinafter appointed in trust absolutely for such of the issue of the Relevant Parent as shall have then attained the age of twenty-one years to the intent that such issue of the Relevant Parent shall divide equally between them the Settled Fund. In the event of none of the issue of the Relevant Parent attaining the age of twenty-one years before the said time of distribution then in trust for such of the issue of the late John Jefferson Coghlan, the said Geoffrey Ross Jefferson Coghlan, the late Jennifer Joan Hudson and being all of the children of the aforesaid marriage (other than the Relevant Parent) who were living on 13 March 1937, as shall have attained the age of twenty-one years before the said time of distribution per stirpes in equal shares.
(e) The time for distribution hereinbefore referred to shall be twenty-one years from the death of the survivor of the said Geoffrey Ross Jefferson Coghlan and the said Georgina Helen Wass being the only surviving children of the said Elwyn Arthur Coghlan, living on 13 March 1937.
(f) Payments for Maintenance etc.
The Trustees may pay or apply income for the maintenance, education, advancement in life, benefit or support of any Beneficiary entitled to income of the Settled Fund whether there is any other fund applicable for the same purpose or any person bound by law to provide for the maintenance, education, advancement in life, benefit or support of that Beneficiary or not and may so pay or apply such income in the case of such a Beneficiary who is for the time being an infant by paying the same to the parent or guardian, if any, of that Beneficiary or the person with whom that Beneficiary is for the time being residing without being in any way bound to see to the application thereof by such parent, guardian or other person as aforesaid and the receipt of such parent or guardian or other person shall be a good discharge to the Trustees for the moneys so paid.

(g) How Trustees to Deal with Income of Infant Beneficiary
In respect of any income to which a Beneficiary who is for the time being an infant is entitled by virtue of these presents, the Trustees may during such infancy in their absolute discretion pay or apply such income or part thereof as provided in sub-clause (f) hereof for the maintenance, education, advancement in life, benefit or support of the Beneficiary AND subject thereto the Trustees may during the infancy of the Beneficiary in their absolute discretion accumulate the residue of the said income by investing the same and the resulting income thereof from time to time in any of the investments authorised by this Deed (with power to vary or transpose such investments from time to time into other investments authorised by this Deed) and shall hold the said invested income and the income from such investments absolutely for the Beneficiary and may at any time during the infancy of the Beneficiary if the Trustees think fit apply the whole or any part of the invested income and the income from such investments as if the same were income arising in the then current year and for such purpose may sell or realise the whole or any part of the said investments and immediately upon the Beneficiary ceasing to be an infant the Trustees shall pay over or transfer to the Beneficiary or the legal personal representative of the Beneficiary, as the case may be, all such invested income and the unapplied income from the investments representing the same as shall not have been applied under this present sub-clause for the maintenance, education, advancement, benefit or support of the Beneficiary.

4 The trust deed contains a definition of vesting date but that is the same date as the time for distribution referred to in Clause 2(e).

5 By further amended summons filed in court on 30 March 2004, the plaintiff seeks declarations as to the true construction of certain words in the deed and in the alternative seeks rectification of the deed. An order has been made for the trial of the construction questions as a separate issue as that may make the claims for rectification unnecessary.

6 So far as the construction issues are concerned the plaintiff seeks the following:

A. A declaration that upon their true construction the words “the issue of Georgina Helen Wass” where appearing in sub-clause 2(b) of the deed of trust are to be read as meaning “the children of Georgina Helen Wass”.

B. A declaration that upon its true construction the word “issue” where appearing in sub-clause 2(c) of the deed is to be read as meaning “children”.

C. A declaration upon their true construction the words “the issue of the relevant parent” in sub-clause 2(d) of the deed are to be read as meaning “the children of Georgina Helen Wass”.

7 In the proceedings before me Mr Perram and Mr Bilinksy appeared for the plaintiff, Mr B.W. Walker SC and Miss Goodman appeared for the first defendant trustee, Mr Andronos for the second and third defendants, Miss Binnekamp for the fifth defendant and Mr S.D. Finch SC and Mr R.S. Hollo for the sixth defendant. There was no appearance for the fourth defendant who had been served.

8 The children of Mrs Wass who appeared supported the making of the declarations sought. Counsel for the trustee made helpful submissions putting forward the competing arguments. No separate submissions were made on behalf of the second, third and fifth defendants, who adopted the arguments of the plaintiff. In some ways the main contest was between counsel for the plaintiff and counsel for the sixth defendant who opposed the making of the declarations sought.

Family tree

9 Georgina Helen Wass, the life tenant under the settlement in question, is a daughter of Edwin Arthur Coghlan and Joan Marion Coghlan, both deceased. Mr and Mrs Coghlan had four children, namely Georgina Wass, Geoffrey Ross Jefferson Coghlan, Jennifer Joan Hudson and John Jefferson Coghlan. Both Mrs Hudson and Mr John Coghlan died before the date of the settlement in question in these proceedings. Mrs Wass is married to Mr Ian Wass. There are four children of that marriage, namely the plaintiff Helen Pratt, Robert Wass, Geoffrey Wass and Ian Wass. Each of those four children of Georgina has children, all of them infants other than Matthew, the fifth defendant. A family tree is set out overleaf:

13

PRATT v STRATHKYLE PTY LIMITED and ORS
EQUITY DIVISION PROCEEDING NO 3689 OF 2002
FAMILY TREE

ELWYN ARTHUR COGHLAN – JOAN MARION COGHLAN

Georgina Helen Coghlan – Ian Stanley Wass Geoffrey Ross Jefferson Coghlan Jennifer Joan Hudson John Jefferson Coghlan

(died before 26.11.87) (died before 26.11.87

Helen Pratt Robert Wass Geoffrey Wass Ian Philip Jefferson Wass

(Plaintiff) (Second Defendant) (Third Defendant) (Fourth Defendant)

Courtney Jane Mathew Robert Wass Tegan Lee Wass Georgina Myfanwy Wass

Coghlan Pratt (Fifth Defendant) b 7.2.1994 b 4.4.1989

b 28.4.1996 b. 7.5.1984

Alexander Ian Breanna Rebecca Amy Rebecca Wass Annabelle Alexandra Sixth Defendant

Nevil Pratt Katherine Wass b 18.8.1995 Louise Wass Russell Stewart of

b 10.2.1998 b 29.9.1989 b 16.11.1991 Minter Ellison represents

interests of possible

Jessica Katherine Melissa Elizabeth Wass Christopher Ian beneficiaries – minors or

Fawcett Pratt b 17.5.1998 James Wass as yet unborn

b 9.12.2001 b 25.6.1998

10 The rather strange wording of the Georgina Wass Trust can be explained by the provisions of an earlier trust, referred to as the L R Gale Trust, executed in 1937, clause 6 of which was as follows:

6. The Trustee shall stand possessed of the said trust fund upon the following trusts namely:-
(a) For the period of three months from the date hereof in trust to accumulate the income thereof and invest the same as hereinbefore provided to the intent that such accumulation shall become part of the capital of the trust fund.
(b) From and after the termination of the said period of three months in trust to divide the income arising from the trust fund in equal shares amongst such children living from time to time of the marriage of Elwyn Arthur Coghlan of Sydney aforesaid Company Director and his wife Joan Marion Coghlan as are now living or may be born before the expiration of twenty one years from the date of the death of the Settlor PROVIDED ALWAYS that the trusts hereby declared so far as they relate to the said children of Elwyn Arthur Coghlan shall be protective trusts within the meaning of Section 45 of the Trustee Act 1925.
(c) On the death of each of the said children of Elwyn Arthur Coghlan and until the death of the last survivor of such children the issue if any of any such child so dying shall be substituted for their respective parent per stirpes in equal shares.
(d) Upon the death of the last survivor of the said children of Elwyn Arthur Coghlan in trust to divide the trust fund equally into a number of parts equal to the number of the said children of Elwyn Arthur Coghlan who died leaving issue and until the time of distribution hereinafter appointed to divide the income arising from the trust fund amongst the issue of the said children of Elwyn Arthur Coghlan to the intent that the issue of each of the said children shall divide equally between them the income from one such part of the trust fund.
(e) Upon the happening of the time of distribution hereinafter appointed in trust absolutely for such of the issue of the said children of Elwyn Arthur Coghlan as shall have then attained the age of twenty one years to the intent that such issue of each of the said children of Elwyn Arthur Coghlan shall divide equally between them one of the parts of the trust fund referred to in Clause (d) hereof. In the event of none of the issue of any one of the said children of Elwyn Arthur Coghlan attaining the age of twenty one years before the said time of distribution then in trust as to the share to which such issue would otherwise have been entitled absolutely for the other persons entitled under this-clause-per stirpes in equal shares.
The time for distribution hereinbefore referred to shall be twenty one years from the death of the last surviving child of Elwyn Arthur Coghlan alive at the death of the Settlor.

11 By deed dated in April 1938 the date of distribution was altered to read “twenty one years from the death of the last survivor of the children of Elwyn Arthur Coghlan now living”.

12 The L R Gale Trust was one which had all the children of Elwyn Arthur Coghlan as income beneficiaries and their issue as income and corpus beneficiaries with separate parts of the fund being established for each of the four families on the death of the last child.

13 The Georgina Helen Wass Trust came into existence as a result of an order made under s81 of the Trustee Act 1925 authorizing the resettlement of the trust funds in the L R Gale settlement in equal portions upon four separate trusts for the four separate families representing the children of Mr and Mrs Coghlan. The trust funds are obviously of considerable value, although the evidence does not disclose the figures.

14 The four separate trusts are each in similar terms apart from the names of the children and in the case of those for the Hudson and John Coghlan families deleting the provisions for life estates for Mrs Hudson and Mr J J Coghlan, as they had died before the orders authorizing resettlement were obtained.

15 One further matter which may be of some significance is that the original summons seeking the s81 orders sought approval for resettlement on the basis of four separate trusts in terms annexed to the summons. These draft deeds did not include the words “the relevant parent” where such words appear in Clause 2(b), (c) and (d) of the Georgina Wass Trust. In (b) they were not included. In (c) and (d) the words “Georgina Helen Wass” were in the place of “the relevant parent”. In an amended summons two alternative proposals for new deeds were put forward. One was as previously with the four separate deeds with appropriate names rather than the words “the relevant parent”. The other was a more lengthy document, not following the precise words of the 1937 deed, as more provisions were included but following that deed as to the terms of the trusts on which the settled funds were held, but which included the words now in Clause 2 in a form which could be adjusted for the separate trusts for each branch of the family and which introduced the concept of relevant parent. The terms of the four trusts upon which the resettlements went forward coincided with the draft which had the reference to the relevant parent.

16 The factual matrix and surrounding circumstances in which the Wass Trust came into existence may become relevant if the meaning of the words used is not apparent from a plain reading of the document.

17 I now turn to the questions for determination.

The Clause 2 (b) question

18 It is not necessary or desirable once again to write a lengthy judgment on the interpretation of the word “issue”. Mathews v Williams (1941) 65 CLR 634 is clear authority determining that the ordinary meaning of “issue” is “descendants or progeny” not just children, and that the word ought not to be given a restricted meaning “unless, upon a consideration of the whole document, it satisfactorily appears that it was so intended”. See page 651.

19 So far as Clause 2(b) is concerned there is, I consider, nothing in the trust provisions which could justify a limited meaning being given to the word “issue”. More significantly unless the words “per stirpes” are meaningless the extended meaning must apply. See Buick v Equity Trustees Executors & Agency Company Limited (1957) 97 CLR 599 at 620. A stirpital distribution has the consequence that children never take with their parents. They cannot be in competition with them, whether the trust is for the descendants per stirpes or issue per stirpes. In a stirpital distribution in equal shares it is stocks which first take in equal shares.

20 It is of course clear enough in the Gale Trust Clause 6(c) that the stirpes are the children of Mr and Mrs Coghlan. That cannot be the position in the Wass Trust. Counsel for the plaintiff argued that there were no stirpes unlike the position under Clause 6(c) of the Gale Trust where the stirpes were the children. Counsel for the sixth defendant seemed to suggest that Mrs Wass was a single stirp. That is, I think, not the position and in general not a possible position. Jarman, in discussing the identity of the stirpes says in the 8th Edition at page 1579:

Where the distribution is to be per stirpes, the principle of representation will be applied through all degrees, children never taking concurrently with their parents. When the gift is to the descendants of several persons per stirpes the question arises whether those several persons are the stirpes, or whether each of their respective children forms a stirps; that is to say, whether the stocks of descent, are to be found among the takers or among their ancestors. This question has led to much controversy and is still one of considerable difficulty.

In a case Robinson v Shepherd 32 Beav 665 where the gift was "to the descendants of A and B per stirpes", Romilly, M.R., thought A and B were the stirpes in the first instance to be considered, so that the primary division should be into two parts. But Lord Westbury held that you must look to the number of families or stirpes descended either from A or B and existing at the testator's death, and divide the fund primarily into a corresponding number of parts. However, in a subsequent case the M.R. acted on his own opinion Gibson v Fisher LR 5 Eq 57 . If the gift were to the descendants of one person, per stirpes, it must necessarily be dealt with on Lord Westbury's principle.

21 If this last sentence is correct, and I consider it is, then the stirpes must be the children of Mrs Wass. Sidney v Perpetual Trustee Estates and Agency Company of New Zealand Limited [1944] AC 194 which decided that there was no rule of construction to determine the beginning of a stirpital generation, which must instead be determined by the language used, cannot I think bear on this conclusion. If that is so then of course for a stirpital distribution to be brought about issue could not be restricted to children.

Clauses 2(c) and 2(d).

22 If “issue” where it appears in these sub-clauses means all descendants then it is clear they take per capita in equal shares. There are many cases which establish this. See for example In the Will of Moore [1963] VR 168, which notes many of the cases at p 171. It was not really argued otherwise.

23 What was argued however was that equity looks with disfavour on competition between parents and children so that in cases where there is a close juxtaposition in the relevant provisions between parent and issue then issue will be taken to mean children. In other words where the expression is “issue of parent” or “parent of issue” the context may indicate that issue means children unless “parent” and “issue” have a “sliding meaning”. This is the so-called rule or statement in Sibley v Perry [1802] 7 Ves 522; 32 ER 211. Its application is limited as explained in Matthews v Williams at pages 654 to 656 and by Bryson J in Perpetual Trustee Company Limited v Wright (1987) 9 NSWLR 18 at 26-33.

24 Counsel for the plaintiff placed emphasis on the words “the relevant parent” where they appear in each of Clause 2 (b), (c) and (d). But first issue can be far more readily read as children in ordinary substitution clauses; only 2(b) is a substitution clause and the words “per stirpes” are redundant if issue means children. Secondly, the words “the relevant parent” are, I think, clearly words of description for Mrs Wass. Wherever they appear in 2(c) and (d) they could be deleted and the words “Georgina Helen Wass” put in their place. I do not think they have significance particularly as the word “children” appears in each of 2(b), (c) and (d) as does the word “issue”. It is not necessarily to be thought that the draftsman thought they meant or intended to mean the same thing. Third, each of the children of Mrs Wass, presently born, was over the age of 21 years in 1987, so that there would be no purpose in the first stated requirement of 21 years in clause 2(d). Fourth clause 2(f) and Clause 2(g) which provide for application of income for maintenance and benefit of beneficiaries and accumulation of income of infant beneficiaries would have no purpose or effect if issue were confined to children. Payment to a parent of a beneficiary must assume the beneficiary is more remote than a child of Mrs Wass.

25 I should add to this that if my construction of the Wass Trust is correct its provisions co-incide with those of the Gale Trust so far as Mrs Wass and her family are concerned. The Gale Trust does not have the words “the relevant parent”. As I have said I think they have no bearing on the matter. But if it is necessary to consider the surrounding circumstances so far as the resettlement is concerned I think that it is clear that the four new trusts were intended to provide for the same beneficiaries in the same interests as were provided for by the Gale Trust. The words “the relevant parent” are more likely than not to have been used so that the one document could be easily adapted for each of the four families involved.

26 It follows that I consider the word “issue” wherever it appears in the Clauses in question means “all descendants”. Orders should be made accordingly. It would follow that the declarations sought in paragraphs 9, 10 and 11 of the second further amended summons would not be made unless the questions arose again if the rectification claim succeeds.

27 So far as costs are concerned, as the sixth defendant has been appointed to represent the interests of infant children or unborn children it seems to me that this is an appropriate case where his costs ought to be paid out of the fund on the indemnity basis.

28 The orders on the separate issues are there as follows:

1. Order that the claims paragraphs 1, 3 and 8 of the second further amended summons be dismissed.

2. Declare the words “the issue of” in Clauses 2(b), 2(c) and 2(d) of the Georgina Wass Trust mean “all descendants of”.

3. Order that the costs of the plaintiff and the first, second, third, fifth and sixth defendants of the separate issue be paid out of the assets of the Georgina Wass Trust, those of the first and sixth defendants on the indemnity basis.

Directions will be given for the determination of the remaining issues.

**********

Last Modified: 04/30/2004