Re Islik; Kimmer v Kaynak
[2018] VSC 59
•15 February 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S CI 2016 04716
IN THE MATTER of an application pursuant to Rule 54.02 of the of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) for the determination of questions arising in the administration of the estate of ADIL ISLIK deceased
BETWEEN
| MICHAEL KIMMER & ORS | Plaintiffs |
| v | |
| ILKAN KAYNAK and INGE GRETEL ELISABETH GANZEL (as executors of the Will and trustees of the estate of ADIL ISLIK deceased) and ZOFIJA AMBROZ (as the representative of the next of kin) | Defendants |
- and –
S CI 2017 00004
IN THE MATTER of an application pursuant to Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) for the determination of questions arising in the administration of the estate of ADIL ISLIK deceased
BETWEEN
| INGE GRETEL ELISABETH GANZEL and ILKAN KAYNAK (who sue as the executors of the Will and Estate of Adil lslik, deceased) | Plaintiffs |
| v | |
| MICHAEL KIMMER, SIGMUND SCHMIDMEIER, LENA CONSTRUCTIONS PTY LTD (ACN 004 651 021), INTERCITY HOMES PTY LTD (ACN 006 633 594), MAGDALENA INVESTMENTS PTY LTD (ACN 169 620 571) and ZOFIJA AMBROZ (as the representative of the next of kin) | Defendants |
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JUDGE: | RIORDAN J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 11 September, 19 October 2017 |
DATE OF JUDGMENT: | 15 February 2018 |
CASE MAY BE CITED AS: | Re Islik; Kimmer v Kaynak |
MEDIUM NEUTRAL CITATION: | [2018] VSC 59 |
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WILLS AND ESTATES – Multiple wills – Interpretation of home-made wills – Whether tontine – Whether absolute gift or life interest – Whether partial intestacy.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs in proceeding S CI 2017 0004 and the defendants in proceeding S CI 2016 4716 (the executors) | Mr R B Phillips and, in 2018, Ms C H Sparke QC | Goddard Elliott |
| For the first and second defendants in proceeding S CI 2017 0004 and the plaintiffs in proceeding S CI 2016 4716 (the beneficiaries) | Mr R R Boaden | Hicks Oakley Chessell Williams |
| For the third, fourth and fifth | Mr A Flower | Flower Lawyers |
| For the sixth defendant in proceeding S CI 2017 0004 | Ms U Stanisich | Somerswood Lawyers |
HIS HONOUR:
By originating motion filed 17 November 2016, the plaintiffs in proceeding S CI 2016 04716, being named beneficiaries (‘the beneficiaries’) under two wills, one dated 11 December 2014 (‘the 2014 Will’) and one dated 23 March 2015 (‘the 2015 Will’), of Adil Islik (‘the testator’) seek certain orders to facilitate the distribution of the estate of the testator.
By originating motion filed 4 January 2017, the plaintiffs in proceeding S CI 2017 00004, being the executors under both wills, seek relief under r 54.02 of the Supreme Court (General Procedure) Rules 2015 for the determination of twelve questions.
On 30 May 2017, McMillan J ordered that the two proceedings be set down for trial and heard together.
At the trial, the parties only sought determinations to questions 5 to 12, which related to the following issues:
(a) To which companies were the properties devised by the combined effect of the 2014 Will and 2015 Will?
(b) Who were the beneficiaries of the shares gifted by the 2014 Will and 2015 Will?
(c) What is the nature of the interests in the shares gifted to the beneficiaries?
(d) Whether the shares, which the testator directed to be held in an emergency fund, should be distributed, and if so how?
These questions raise the issue of whether there has been a partial intestacy. After the first day of hearing of the trial, I was concerned that the orders being sought could affect the interests of relatives of the testator. Accordingly, I adjourned the matter to 13 October 2017 on counsel for the plaintiff stating that:
(a) advertisements would be placed in The Australian newspaper;
(b) genealogical investigations would be conducted in countries other than Australia; and
(c) the Attorney-General would be notified of the issues in this proceeding and be provided with a copy of the transcript of the hearing of 11 September 2017, Transcript so that he may determine whether to seek leave to intervene on the basis of a possible intestacy.
The proceedings came on for further hearing on 19 October 2017, at which time:
(a) there had been no response to the advertisement in The Australian newspaper on 5 October 2017 seeking information about any relatives of the deceased;
(b) a genealogical service had suggested that enquiries should be made over a period of 12 months; and
(c) by letter dated 12 October 2017, the Victorian Government Solicitor had said that the Crown was not seeking to be heard and that ‘[t]he executors and beneficiaries named in the wills are in the best position to lead all relevant evidence and make appropriate submissions’.
By letter dated 25 October 2017 to the solicitors for the executors, Somerswood Lawyers stated that they had instructions from Ms Ludmilla Schaffer, a maternal first cousin of the testator living in Vienna, Austria, who claims an interest in the intestate part of the estate.
By 20 November 2017, Ludmilla Schafer, Zofija Ambroz, Anica Dimec and Adolf Cernec had been identified as persons who would take under a possible intestacy; and, pursuant to a direction made that day, they filed submissions on 18 December 2017.
On 19 December 2017, I ordered that Ms Zofija Ambroz be joined as a defendant to this proceeding as a representative of the next of kin of the deceased.
Background
The testator was born in Istanbul, Turkey, in 1923.
On 16 August 1962, he married Magdalena Truebswetter, who died on 18 September 2013.
On 24 January 2014, the testator made a will with respect to his overseas assets (‘the German Will’).
On 11 December 2014, the testator made the 2014 Will, the terms of which are set out in full in Schedule 1 to these reasons. Reference to the full terms is critical for the purpose of determining the questions in these proceedings, but in summary, after the appointment of the executors and the direction to pay his debts, the testator provided that ‘the residue of [his] estate shall be dealt with as follows’:
(a) The following properties:
(i) 8 Evans Street, Rozelle, New South Wales (the Rozelle property);
(ii) 2 Weidemann Court, Reservoir, Victoria (the Reservoir property);
(iii) 16 Emu Parade, Jacana, Victoria (the Jacana property);
(iv) 62 Tennyson Street, Kew, Victoria (the Kew property);
(v) 2 Scott Street, Footscray [scil Seddon], Victoria (the Seddon property);
‘shall pass to Magdalena Investment Pty Ltd’.
(b) The following properties:
(i) 245 Alison Road, Randwick, NSW (the Randwick property);
(ii) 8a Eden Court, Ascot Vale, Victoria (the Ascot Vale property);
(iii) 54 Charles Street, Abbotsford, Victoria (the Abbotsford property);
(iv) 128 Victoria Street, Footscray, Victoria (the Footscray property);
‘shall pass to Intercity Homes Pty Ltd’.
(c) The following properties:
(i) 31 Albert Street, Windsor, Victoria (the Windsor property);
(ii) 90 Golden Way, Bulleen, Victoria (the Bulleen property);
(iii)31 Morrison Crescent, Sunshine West, Victoria (the Sunshine West property);
‘shall pass to Lena Constructions Pty Ltd’.
(d)‘All my shares in BHP, CBA, Arium, Medibank and Telstra, as well as all my cash investments shall pass to the company Intercity Homes Pty Ltd’.
(e)The properties at Kew and Randwick ‘may be sold within the stipulated 10‑year period if due to land tax the letting becomes uneconomical. Any cash proceeds from the sales are to go in equal parts to Magdalena Investment Pty Ltd, Lena Constructions Pty Ltd and Intercity Homes Pty Ltd’.[1]
[1]It is not apparent how this provision could be consistent with the direction that the Kew property shall pass to Magdalena Investment Pty Ltd and the Randwick property shall pass to Intercity Homes Pty Ltd.
(f)His shares in the companies Magdalena Investment Pty Ltd, Intercity Homes Pty Ltd and Lena Constructions Pty Ltd (together ‘the three companies’):
f. …
… are to be transferred in respect of each company to the following persons in the mentioned proportions, to be held during their lifetime:
Mr Michael Kimmer … 20%
Mr Vasco Kuronowski … 20%
Mr Gilbert Lovell … 10%
Mr Sigmund Schmidmeier … 10%
Ms Vicki Tsahouras … 5%
Mr Deso Erosy … 5%
Mr Ilyan Kaynak … 5%
The balance to 100% shall be held by the executor as an emergency fund.
If any of the beneficiaries is unable or unwilling to participate in this instruction his/her entitlement may be distributed among the remaining beneficiaries in accordance with the percentages mentioned above.
In case of the death of any beneficiaries his/her entitlement will be distributed to the surviving share holders in accordance to the percentages mentioned above. After the period of 10 years the surviving shareholders shall decide by majority vote about the future of the three companies.
g.The accrued net income from the companies Magdalena Investment Pty Ltd, Intercity Homes Pty Ltd and Lena Constructions Pty Ltd shall be distributed annually in accordance to the percentages listed in clause f for a period of 10 years.
h.All contents of my home at [Kew] shall be inherited by Ms Vicki Tsouhiras …’.
The testator made the 2015 Will on 23 March 2015, the terms of which are set out in full in Schedule 2. In summary, in the 2015 Will, after the appointment of the executors and the direction to pay his debts, the testator provided that ‘the residue of [his] estate shall be dealt with as follows’:
(a)The Rozelle, Reservoir, Jacana, Kew and Abbotsford properties ‘shall pass to Magdalena Investment Pty Ltd’.
(b)The Randwick, Ascot Vale and Seddon properties ‘shall pass to Intercity Homes Pty Ltd’.
(c)The Windsor, Bulleen and Sunshine West properties ‘shall pass to Lena Constructions Pty Ltd’.
(d)‘All my shares in BHP, CBA, Arium, Medibank and Telstra, as well as all my cash investments shall pass to the company Intercity Homes Pty Ltd’.
(e)The Kew and Randwick properties ‘[may] be sold earlier than th stipulatedterm of this will if due to land tax letting becomes uneconomical.Cash proceeds of this sale may go to Lena Constructions Pty Ltd [sic]’.[2]
[2]It is not apparent how this provision could be consistent with the direction that the Kew property shall pass to Magdalena Investment Pty Ltd and the Randwick property shall pass to Intercity Homes Pty Ltd.
(f)‘On my deth [sic] Mrs V. Tsahouras is immediately entitled to $45,000.- out of my current cheque account.’
(g)‘e. my shares in [the three companies] are to be transferred in respect of each company to the following persons in the mentioned proportions, to be held during their lifetime:
Mr Michael Kimmer … 18%
Mr Vasco Kuronowski … 18%
Mr Gilbert Lovell … 8%
Mr Sigmund Schmidmeier … 10%
Ms Vicki Tsahouras … 12%
Mr Deso Erosy … 6%
f.The balanca [sic] to 100% shall be held in the bank account of the companies as an emergency fund.
If any beneficiaries should die, her or his entitlement shall be distributed amongst the remaining beneficiaries in accordance to the percentages mentioned above.
g.The accrued income from the [three companies] shall be distributed annually in accordance to the percentages listed in clause e…
h.‘The contents of my home [Kew] shall be liquidated by Mr Korunowski and Ms Tsouhiras,The proceeds to be distributed 75% to Mr.Tsahours and 25% to Mr.Korunowski [sic].’
On 14 May 2015, the testator died.
On 5 January 2016, probate was granted of the 2014 Will and the 2015 Will.
The notable changes in the dispositions between the 2014 Will and the 2015 Will are that in the latter will:
(a)Magdalena Investments Pty Ltd received the Abbotsford property but no longer the Seddon property.
(b)Intercity Homes Pty Ltd received the Seddon property, but no longer the Abbotsford or Footscray properties (the latter was not referred to in the 2015 Will at all).
(c)Ms V Tsahouras received a legacy of $45,000 out of the testator’s current cheque account.
(d)Mr Kuronowski received 25 per cent of the contents of the Kew property, reducing Ms Tsahouras’s entitlement to 75 per cent.
(e)All of the percentage entitlements to the shares of the three companies were adjusted except:
(i) Mr Schmidmeier, whose interest stayed at 10 per cent; and
(ii) Mr Ilkan Kaynak, who was not referred to in the 2015 Will.
Other significant differences between the wills were:
(a) The 2015 Will had no reference to the ‘stipulated period’ of 10 years, or any stipulated period, after which the surviving shareholders ’shall decide by majority about the future of the three companies’. Accordingly, the provision for the distribution of the companies’ income was not limited ‘for a period of 10 years’. However, there is a provision in both wills that the Kew and Randwick properties may be sold, ‘within the stipulated 10-year period’ (2014 Will) or ‘earlier than the stipulated term’ (2015 Will), to avoid being uneconomical as a result of land tax.
(b) The 2015 Will had no direction that the entitlements of beneficiaries, who are ‘unable or unwilling to participate in this instruction’ are to be distributed to the other beneficiaries.
(c) The 2014 Will directed that ‘[t]he balance to 100% shall be held by the executor as an emergency fund’, while the 2015 Will directed that ‘[t]he balanca [sic] to 100% shall be held in the bank account of the companies as an emergency fund’.[3]
(d) The cash proceeds of the sale of the Kew and Randwick properties were to go to Lena Constructions Pty Ltd rather than to all three companies (i.e. Magdalena Investment Pty Ltd, Intercity Homes Pty Ltd and Lena Constructions Pty Ltd).
[3]Emphases added.
The inventory records the value of the testator’s estate as follows:
(a) Real estate $8,110,000.
Abbotsford $925,000 Ascot Vale $690,000 Jacana $240,000 Kew $1,675,000 Reservoir $540,000 Seddon $690,000 Randwick $1,800,000 Rozelle $1,550,000 The Windsor and Bulleen properties had been owned by his wife and devised to Lena Constructions Pty Ltd; and the Sunshine West property was already owned by Lena Constructions Pty Ltd.
(b) Shares in private companies $4,819,017.
Lena Constructions Pty Ltd $2,818,974 Intercity Homes Pty Ltd $1,590,000 Magdalena Investment Pty Ltd $ 11,662
(c) Funds in various bank accounts $3,217,355.
(d) Shares in public companies $297,976.
(e) Interest in the estate of Magdalena Islik $3,274,024.[4]
The total value of the estate was therefore $19,718,372.
To which companies were the properties devised by the combined effect of the 2014 Will and 2015 Will?
[4]The deceased’s interest in his wife’s estate consists of her shares in Lena Constructions Pty Ltd.
There is no dispute that the 2015 Will is a later will, which satisfies the requirement of s 12(2)(da) of the Wills Act 1997. However, because there is no revocation clause in the 2015 Will, the question is whether, from that instrument, it can be inferred that it was the intention of the testator that the provisions of the 2014 Will should remain in whole or in part operative.[5] Usually such an inference will be drawn ‘if a subsequent testamentary paper be partly inconsistent with one of an earlier date’.[6] Specifically, questions 5 and 6 were as follows:
[5]Dempsey v Lawson (1877) 2 PD 98, 107 (Sir James Hannen).
[6]In the Goods of Petchell (1874) 3 P&D 153, 156 (Sir James Hannen).
5.Do the two Wills operate together to make the following dispositions of real property:
(a)54 Charles Street, Abbotsford – Magdalena Investments Pty Ltd.
(b) 8A Eden Court, Ascot Vale – Intercity Homes Pty Ltd.
(c) 16 Emu Parade, Jacana – Magdalena Investments Pty Ltd.
(d) 62 Tennyson Street, Kew – Magdalena Investments Pty Ltd.
(e)2 Weideman Court, Reservoir – Magdalena Investments Pty Ltd.
(f) 2 Scott Street, Seddon – Intercity Homes Pty Ltd.
(g) 245 Alison Road, Randwick – Intercity Homes Pty Ltd.
(h) 108 Evans Street, Rozelle – Magdalena Investments Pty Ltd.
6.If not, to which company or to whom is each of those properties given?
The answer to Question 5 is yes and therefore the answer to Question 6 is not applicable.
The 2015 Will provides for the real property to be devised as set out in Question 5. Accordingly, to the extent that the 2014 Will provides for different dispositions (as noted above), it must be inferred that the testator intended the 2015 Will’s provisions to operate instead of the 2014 Will’s provisions.
Who were the beneficiaries of the shares gifted by the 2014 Will and 2015 Will?
Questions 7 and 8 were as follows:
7.Are the shares in the three private companies given in the following proportions to the following persons:
(a) Michael Kimmer 18%
(b) Vasco Kuronowski 18%
(c) Gilbert Lovell 8%
(d) Sigmund Schmidmeier 10%
(e) Vicki Tsahouras 12%
(f) Deso Erosy 6%
(g) Ilkan Kaynak 5%
77%
8.If not, to which persons, and in what proportions, are the shares in the three private companies given?
The 2014 Will and the 2015 Will, with respect to the disposition of the shares in the three companies, provided as follows:
2014 2015 Michael Kimmer 20% 18% Vasco Kuronowski 20% 18% Gilbert Lovell 10% 8% Sigmund Schmidmeier 10% 10% Vicki Tsahouras 5% 12% Deso Erosy 5% 6% Ilyan Kaynak 5%
The 2014 Will therefore provided that 75 per cent of the shares were allocated to particular individuals, while the 2015 Will provided that 72 per cent of the shares were allocated to particular individuals.
Both wills contained a provision whereby the balance ‘to 100%’ is provided ‘as an emergency fund’, with the respective provisions being:
(a)‘the balance to 100% shall be held by the executor as an emergency fund’ (2014 Will); and
(b)‘the balanca [sic] to 100% shall be held in the bank account of the companies as an emergency fund’ (2015 Will).
It was submitted on behalf of the beneficiaries that, although the gift of 5 per cent of the shares to Ilkan Kaynak in the 2014 Will was not repeated in the 2015 Will, it was not revoked. Accordingly, it was contended that the combined effect of the Wills should be a gift of 77 per cent of the shares calculated as follows:
Net result Michael Kimmer 18% Vasco Kuronowski 18% Gilbert Lovell 8% Sigmund Schmidmeier 10% Vicki Tsahouras 12% Deso Erosy 6% Ilkan Kaynak 5%
On behalf of the executors, it was submitted that a provision for Mr Kaynak is inconsistent with clause f in the 2015 Will; and the 2015 Will should prevail.
I do not accept the beneficiaries’ contention because, for the following reasons, in my opinion, a gift of 5 per cent of the shares to Ilkan Kaynak is inconsistent with the provisions of the 2015 Will:
(a) The effect of the 2015 Will was to gift 72 per cent of the shares to beneficiaries and provide for the balance ‘to 100%’ be held as an emergency fund. In my opinion, the specific provision as to the balance is a reference to all of the shares other than the 72 per cent of shares, which are the subject of specific dispositions; and it is therefore inconsistent with the maintenance of a 5 per cent disposition to Ilkan Kaynak.
(b) It cannot be said that the failure to mention the gift to Ilkan Kaynak in the 2015 Will is consistent with the testator intending to maintain the gift. This conclusion is supported by the fact that, although the gift to Sigmund Schmidmeier of 10 per cent was not changed in the 2015 Will, that gift was repeated in that will.
Accordingly, in my opinion, on a proper construction, the Wills provide for the shares to be disposed of to the six persons identified in the 2015 Will and for the balance of the shares to be held ‘as an emergency fund’.
What is the nature of the interests in shares gifted to the beneficiaries?
Question 9 is as follows:
9.Are the shares in the three private companies, instead of being given to the above persons in the said proportions, simply to be held on trust to pay the income to those persons in those proportions:
(a) for the lifetime of each of those persons;
(b)until the last one of the specified persons is the only person surviving, who then takes 100% of those shares absolutely;
(c)until the last one of the specified persons dies, and then fails and passes on intestacy and, if so, who are the testator’s next of kin for the purposes of Part 1 Division 6 of the Administrative and Probate Act 1958.
The relevant clauses of the 2014 Will provide:
f.My shares in the [three companies] are to be transferred … to the following persons in the mentioned proportions, to be held during their lifetime:
[the seven names and the proportions are set out.]
The balance to 100% shall be held by the executor as an emergency fund.
If any of the beneficiaries is unable or unwilling to participate in this instruction his/her entitlement may be distributed amongst the remaining beneficiaries in accordance with the percentages mentioned above.
In the case of the death of any beneficiaries his/her entitlement will be distributed to the surviving share holders in accordance to the percentages mentioned above. After the period of 10 years the surviving shareholders shall decide by majority vote about the future of the three companies.
g.The accrued net income from the [three companies] shall be distributed annually in accordance with the percentages listed in clause f for a period of 10 years.
The relevant clauses of the 2015 Will provide as follows:
e.my shares in the [three companies] are to be transferred … to the following persons in the mentioned proportions to be held during their lifetime:
[the six names (not including Ilkan Kaynak) and the proportions are set out.]
f.The balanca [sic] to 100% shall be held in the bank account of the companies as an emergency fund.
If any of the beneficiaries should die, her or his entitlement shall be distributed amongst the remaining beneficiaries in accordance with the the [sic] remaining beneficiaries in accordance with the percentaged [sic] mentioned above.
g.The accrued income from the [three companies] shall be distributed annually in iccordance [sic] with the percentages listed in clause e.
Beneficiaries’ submissions
The beneficiaries submit that the combined intention expressed by reading the two wills is that the gifts were intended to be immediately effective for the following reasons:
(a)Although clause f of the 2014 Will supports the proposition that the beneficiary entitlements were contingent upon them surviving for 10 years, the 2015 Will does not include this provision and it takes precedence where there is inconsistency.
(b)The absence to any reference to the 10-year period in the 2015 Will shows:
(i)the testator did not want to delay the vesting ownership of the shares, either for an indeterminate period or the 10-year period stipulated in the 2014 Will; and
(ii)the testator made the ‘classic mistake’ of trying to delay the vesting for a period of time without specifying where the property was to go if the beneficiary failed to survive to the end of the stipulated period.
(c)A literal reading of clause f of the 2015 Will could support a construction that the shares are being held on trust for their survivors. However, ‘there is nothing to support a tontine’. To read the 2015 Will as creating a tontine is absurd.
(d)A literal reading of clause f of the 2015 Will could support a construction that, on the death of the last of the nominated persons, an intestacy could arise for the remainder interest in the shares. This is improbable because it is unlikely that the testator deliberately refrained from disposing of the remainder interest in the shares.
(e)The fact that no mere life or limited interest was intended is supported by the fact that the gifts were to be ‘transferred’ to the beneficiaries; and there is no reference to them being held on trust for the other beneficiaries or in remainder for someone else.
It was submitted that the testator
wanted to control from the grave, and wanted to delay the vesting in possession of certain of the entitlements which he gave by his Will. He has made the elementary drafting mistake of not including any gift-over, and so, by merely postponing of vesting in possession of an entitlement that he has already given, he has not achieved his goal of making the gifts operate only a decade after his death. His Will has given the shares to the named beneficiaries absolutely.
Accordingly, the attempt to subsequently restrict the rights was ineffectual.
The 2014 Will provided that, after the period of 10 years, the shareholders would then make a decision about the future of the companies. This recognised the possibility that they could liquidate the companies and share the surplus assets among themselves. This is ‘entirely inimical’ to a construction that the testator intended only to convey a life interest in the shares or the creation of a tontine.
Executors’ submissions
The executors submitted as follows:
(a)The words ‘to be held during their lifetime’ were a clear expression of an intention not to transfer absolute ownership to the beneficiaries; and that the beneficiaries would receive only a life interest.
(b)Clauses a to d of the 2015 Will demonstrate that the testator appreciated how to make an absolute gift. Those clauses are to be contrasted to the limited transfer in clause f.
(c)The provision that the entitlement of beneficiaries be distributed amongst remaining beneficiaries could refer to the circumstances before or after the testator died; but it should be read as providing for what should occur after the death of the testator.
(d)The fact that the accrued income was to be distributed annually was also indicative of the fact that the beneficiaries were not to have an absolute interest in the shares.
(e)The creation of an ‘emergency fund’ indicates that it was not intended to give the shares absolutely.
Accordingly, it was contended that the Court should find that the testator intended to create:
(a)a tontine whereby the interest of each beneficiary would pass on his or her death to the survivors until the entirety would vest in the last survivor absolutely; or
(b)life interests that, on the death of each beneficiary, would pass to the survivors and, on the death of the final survivor, there would be an intestacy; or
(c)a trust under which the executors held the shares on trust to pay the income, on an annual basis, to the survivors (from time to time) and ultimately for the trust to vest on the final survivor or on persons entitled on intestacy (as above).
Of the two possible interpretations of the effect of the limited transfer, it was submitted that an interpretation that avoided an intestacy should be preferred and therefore the clause should be read as the last survivor taking the shares absolutely (as in a tontine).
Submissions of the next of kin
On behalf of the next of kin, it was submitted as follows:
(a) Although there is a presumption that a testator did not intend to create an intestacy, it could not overcome the plain words of the will that the shares are ‘to be held during their lifetime’.
(b) Apart from the plain meaning of the words, the intention that the gift of the shares should be so limited is supported by the following:
(i) The testator did not use such words of limitation in other gifts he intended to be made absolutely.
(ii) The relevant words were used in the 2014 Will and repeated in the 2015 Will.
(iii) Any transfer of the shares was limited by the immediate context of ‘to be held during their lifetime’.
(iv)The creation of an emergency fund indicates an intention to convey only a life interest.
(c) Counsel for the next of kin adopt the beneficiaries’ submission that a tontine does not make sense.
Decision
The 2014 Will was prepared by Inge Ganzel on instruction from the testator. It is unknown who typed the 2015 Will. It is common ground that the wills are properly categorised as ‘home-made wills’ and that the testator should be treated as inops consilii.[7] In Construction of Wills in Australia,[8] David M Haines QC explains:
[I]t has been said that courts show the most ‘unbounded indulgence’ towards the ‘ignorance, unskilfulness and negligence’ of testators in interpreting their wills. The basis for this relaxation seems to be that the want of advice or learning may have caused the omission of legal or proper phrases or the misapplication of technical terms. It is unsound to place too much reliance on the precise meaning of particular or technical words or phrases in respect of a will prepared by an illiterate draftsman or woman as it will not assist in ascertaining the testator’s real intention.[9]
[7]Meaning, ‘without legal counsel’. Such wills are ‘more favoured in construction than formal deeds, which are presumed to be made with great caution, forethought, and advice’: William Blackstone, Commentaries on the Laws of England (Book II) (Strahan and Woodfall, 11th ed, 1791) 173.
[8]David Haines, Construction of Wills in Australia (LexisNexis, 2007).
[9]Ibid 25 [1.44].
It is common ground that the construction of a will requires the Court to ascertain the testator’s intention by interpreting the words used having regard to the whole of the will and the contextual circumstances in which the will was made.[10] As Kourakis CJ explains:
The intention of the actor must be discovered in the words of the testamentary disposition in the context of his or her circumstances and knowledge.[11]
[10]Perrin v Morgan [1943] AC 399, 406 (Viscount Simon LC); Marley v Rawlings [2014] 2 WLR 213, [20]-[21] (Lord Neuberger, with whom Lord Clarke, Lord Sumption and Lord Carnwath agreed).
[11]Fielder v Burgess [2014] SASC 98 [43].
For the following reasons, I accept the submissions of the beneficiaries that the intention expressed, by reading the two wills together, is that the gifts were to be effective immediately.
I do not accept that the testator intended, by the use of the words ‘to be held during their lifetime’, to only transfer a life interest for the following reasons:
(a)The testator used precisely the same words in the 2014 Will; and it is common ground that he did not intend to convey only a life interest in that will because it was inconsistent with the specific provision for the surviving shareholders to ‘decide by majority vote about the future of the three companies’ — after the stipulated period of 10 years. It is unlikely that the testator would have realised that, by removing that stipulated period from the 2015 Will, the words he repeated in clause f would convey only a life interest.
(b)Clause f specifically provides for the shares to be transferred to the beneficiaries.
(c)Lawyers recognise the effect of adding additional words such as ‘to be held during their lifetime’. However, this was a home-made will, and lay persons do not necessarily recognise the effect of such technical words. In Re Minchell’s Will Trusts,[12] the gift to the testator’s wife ‘for her lifetime’, under a home-made will, was found in the circumstances to convey an absolute interest in the estate and not to be words of limitation.[13] A layperson may well consider that for a thing ‘to be held during their lifetime’ is a description of time for as long as the recipient is capable of holding it, such that a gift for that duration is intended to be an absolute gift.
(d) In this case, the fact that no person is identified as entitled to the remainder interest supports a construction that the testator intended that the beneficiaries would be the ultimate owners. Further, the presumption against partial intestacy supports the interpretation of an absolute gift. The presumption against intestacy is even more readily available in the case of a home-made will.[14] In this case, the presumption is reinforced by the evidence that none of the named beneficiaries would be entitled in the event of an intestacy; and there is no evidence that the testator had unnamed close relatives, whom it may have been expected that he would intend to benefit.
(e) The fact that the 2015 Will had no direction that the entitlements of beneficiaries, who are ‘unable or unwilling to participate in this instruction’ are to be distributed to the other beneficiaries, is more consistent with the testator intending to remove the 10-year restraint on the beneficiaries; rather than limit the gift to a life interest.
[12](1964) 2 All ER 47 (Chancellor Salt QC).
[13]Ibid 49.
[14]Lewis v O’Loughlin (1971) 125 CLR 320, 330 (Menzies J, with whom Gibbs J agreed).
With respect to the submissions made on behalf of the executors, I should add the following:
(a)If accepted, the proposition that the 2015 Will created a tontine with respect to the shares in the three companies would avoid the creation of an inevitable partial intestacy. However, such an interpretation requires that will to create a life interest in the shares for everybody but the survivor of the beneficiaries. I can find no basis in the words used by the testator to support the proposition that the survivor should have a different interest to all of the other beneficiaries.
(b)The submission that the provision in the 2015 Will, which directed that the accrued income from the three companies ‘shall be distributed annually’ to the beneficiaries, supports an intention to establish a trust for the shares cannot be accepted for the following reasons:
(i)The words of the 2015 Will are that the shares are to be ‘transferred’ to the beneficiaries. This is inconsistent to a transfer to the executors to hold on trust.
(ii)To be effective, the direction would need to be to the directors of the three companies, because it must be the directors who would be responsible for dividend distributions by the companies. The directors of the companies would owe fiduciary duties to the three companies respectively. One could only speculate about how and by whom the testator intended these distributions were to be made.
(iii)The 2014 Will contemplated a role for the executors at least with respect to the emergency fund. However, the 2015 Will removed the executors’ role with respect to the emergency fund.
(c)The fact that the 2015 Will directed that accrued income from the three companies be distributed annually is consistent with the testator making provision for the distribution of income prior to liquidation of the companies.
Whether the shares, which the testator directed to be held in an emergency fund, should be distributed and, if so, how?
Questions 10, 11 and 12 were as follows:
10Are the private company shares not specifically bequeathed to the named beneficiaries 23%, or some other and if so what proportion, of the Testator’s shares in the three private companies?
11Is the direction to hold the remaining private company shares not specifically given to named persons as an ‘emergency fund’ an effective disposition of the 23% (or such other proportion as may be determined) to any person or persons. If so, how is the emergency fund to be administered?
12Is the direction to hold the remaining 23% (or such other proportion as may be determined) of the private company shares not specifically given to named persons as an ‘emergency fund’ an ineffective disposition so that those shares comprise property not disposed of by the Wills?
As a result of my decision about there being no gift to Mr Kaynak, 28 per cent of the shares have not been specifically bequeathed.
It is to be noted that, unlike the 2014 Will, the 2015 Will did not provide for the balance of the shares to be held by the executor as an emergency fund. Rather, the 2015 Will provided that the balance was to be ‘held in the bank account of the companies’, presumably under the control of the directors. For the balance to be held in the companies’ bank account, it appears that the testator intended that the executor would sell those shares; and the proceeds paid into the companies’ bank account.
In my opinion, in the 2015 Will, the clause creating the emergency fund is an effective gift of the proceeds of the sale of a 28 per cent interest in the shares to the three companies.
Conclusion
I propose to answer the parties’ questions as follows:
Question 5
Do the two Wills operate together to make the following dispositions of real property:
(a) 54 Charles Street, Abbotsford – Magdalena Investments Pty Ltd.
(b) 8A Eden Court, Ascot Vale – Intercity Homes Pty Ltd.
(c) 16 Emu Parade, Jacana – Magdalena Investments Pty Ltd.
(d) 62 Tennyson Street, Kew – Magdalena Investments Pty Ltd.
(e) 2 Weideman Court, Reservoir – Magdalena Investments Pty Ltd.
(f) 2 Scott Street, Seddon – Intercity Homes Pty Ltd.
(g) 245 Alison Road, Randwick – Intercity Homes Pty Ltd.
(h) 108 Evans Street, Rozelle – Magdalena Investments Pty Ltd.
Answer 5
Yes.
Question 6
If not, to which company or to whom is each of those properties given?
Answer 6
Not applicable.
Question 7
Are the shares in the three private companies given in the following proportions to the following persons:
(a) Michael Kimmer 18%
(b) Vasco Kuronowski 18%
(c) Gilbert Lovell 8%
(d) Sigmund Schmidmeier 10%
(e) Vicki Tsahouras 12%
(f) Deso Erosy 6%
(g) Ilkan Kaynak 5%
77%
Answer 7
No.
Question 8
If not, to which persons, and in what proportions, are the shares in the three private companies given?
Answer 8
To the following:
(a) Michael Kimmer 18%
(b) Vasco Kuronowski 18%
(c) Gilbert Lovell 8%
(d) Sigmund Schmidmeier 10%
(e) Vicki Tsahouras 12%
(f) Deso Erosy 6%
Question 9
Are the shares in the three private companies, instead of being given to the above persons in the said proportions, simply to be held on trust to pay the income to those persons in those proportions:
(a) for the lifetime of each of those persons;
(b)until the last one of the specified persons is the only person surviving, who then takes 100% of those shares absolutely;
(c)until the last one of the specified persons dies, and then fails and passes on intestacy and, if so, who are the testator’s next of kin for the purposes of Part 1 Division 6 of the Administrative and Probate Act 1958.
Answer 9
No, the gifts of the shares to the beneficiaries were intended to be effective immediately.
Questions 10, 11 and 12
Are the private company shares not specifically bequeathed to the named beneficiaries 23%, or some other and if so what proportion, of the Testator’s shares in the three private companies?
Is the direction to hold the remaining private company shares not specifically given to named persons as an ‘emergency fund’ an effective disposition of the 23% (or such other proportion as may be determined) to any person or persons. If so, how is the emergency fund to be administered?
Is the direction to hold the remaining 23% (or such other proportion as may be determined) of the private company shares not specifically given to named persons as an ‘emergency fund’ an ineffective disposition so that those shares comprise property not disposed of by the Wills?
Answers 10, 11 and 12
The 2015 Will gifts the proceeds of the sale of a 28 per cent interest in the shares to the three companies.
Schedule 1
Will dated 11 December 2014
This is the beginning of my Will
Last Will
This is the last will of me, ADIL ISLIK of 62 Tennyson Street, KEW, 3101 In the state of Victoria, Australia, which commences on this page and concludes where the words “This is the end of my Will” appear.
By this Will, I revoke all previous Wills and testamentary acts and dispositions.
Executrix
I appoint Inge Elisabeth Gretel GANZEL of … to be the Executor of my Will and Trustee of my estate, but if she does not outlive me or is unwilling to act or incapable of acting, then I appoint Hans ROLEFF of … to be the Executor of my Will and Trustee of my estate. If Hans Roleff is unable or unwilling to be the Executor of my will, then I appoint Ilyan Kaynak of … to be the Executor of my Will.
The Executor of my Will and Trustee of my Estate is to be re-imbursed for work done by an hourly rate of $50.00, with a premium of 5.000,00 per year. This rate is to be increased by 5% yearly. Any administrative and travel expenses are to be refunded.
Residuary/ Residue of my Estate
I direct my Executor to pay all my debts and then the residue of my estate shall be dealt with as follows:
a.My real estate property situated at 8 Evans Street, Rozelle, NSW; 2 Weidemann Court, Reservoir, VIC; 16 Emu Parade, Jacana, VIC; 62 Tennyson Street, Kew, VIC and 2 Scott Street, Footscray, VIC shall pass to MAGDALENA INVESTMENT PTY LTD, ACN 169 620 571 of 62 Tennyson Street, KEW, VIC. The Executor is to arrange for the appropriate title certificates to be issued.
b.My real estate property situated at 245 Alison Road, Randwick, NSW; 8a Eden Court, Ascot Vale, VIC; 54 Charles Street, Abbotsford, VIC and 128 Victoria Street, Footscray, VIC shall pass to INTERCITY HOMES PTY LTD, ACN 006 633 594 of 62 Tennyson Street, Kew, VIC. The Executor is to arrange for the appropriate title certificates to be issued.
c.My real estate property situated at 31 Albert Street, Windsor, VIC; 90 Golden Way, Bulleen, VIC; and 31 Morrison Crescent, Sunshine West, VIC shall pass to LENA CONSTRUCTIONS PTY LTD, ACN 004 651 021 of 62 Tennyson Street, Kew, VIC. The Executor is to arrange for the appropriate title certificates to be issued.
d.All my shares in BHP, CBA, Arrium, Medibank and Telstra, as well as all my cash investments shall pass to the company Intercity Homes Pty Ltd, ACN 006 633 594. The Executor is to make the appropriate arrangements.
e.The properties at 62 Tennyson Street, Kew, 3101 and 245 Alison Road, Randwick, 2031, NSW may be sold within the stipulated 10 year period if due to land tax the letting becomes uneconomical. Any cash proceeds from the sales are to go in equal parts to Magdalena Investment Pty Ltd, Lena Constructions Pty Ltd and Intercity Homes Pty Ltd.
f.My shares in the companies Magdalena Investment Pty Ltd, Intercity Homes Pty Ltd and Lena Constructions Pty Ltd, all situated at 62 Tennyson Street, Kew are to be transferred in respect of each company to the following persons in the mentioned proportions, to be held during their lifetime:
Mr. Michael Kimmer … 20%
Mr. Vasco Kuronowski … 20%
Mr. Gilbert Lovell … 10%
Mr. Sigmund Schmidmeier … 10%
Ms. Vicki Tsahouras … 5%
Mr. Deso Erosy … 5%
Mr. Ilyan Kaynak … 5%
The balance to 100 % shall be held by the executor as an emergency fund.
If any of the beneficiaries is unable or unwilling to participate in this instruction his/her entitlement may be distributed amongst the remaining beneficiaries in accordance with the percentages mentioned above.
In case of the death of any beneficiaries his/her entitlement will be distributed to the surviving share holders in accordance to the percentages mentioned above. After the period of 10 years the surviving shareholders shall decide by majority vote about the future of the three companies.
g.The accrued net income from the companies Magdalena Investment Pty Ltd, Intercity Homes Pty Ltd and Lena Constructions Pty Ltd shall be distributed annually in accordance to the percentages listed in clause f for a period of 10 years.
h.All contents of my home at 62 Tennyson Street, Kew, VIC shall be inherited by Ms. Vicki Tsouhiras … The contents must be disposed and liquidated within 12 weeks from the point of gaining probate.
Funeral Directions
…
Other
If my Executors are holding any part of my estate in trust for any beneficiary, my Executors will have all the powers given to executors or trustees by the legislation in any of the Australian States or Territories (not just the State or Territory where my estate is being administered) — free (where permitted) of any limitations expressed in terms of time or money.
Schedule 2
Will dated 23 March 2015
LAST WILL
This is the last will of mw, ADIL ISLIK of 62 Tennyson St,Kew 3101 in the State of Victoria Australia,
Executrix: I appoint Inge Elisabeth GANZEL of … and Ilhan Kaynak of … to be the executors of my Will and Trustee of my estate.
The executors will act in tandem or each separare in accordance with their knowledge, especially investment details of the deceased.
The executors as abovementioned are to be re-imbursed for work done by an hourly rate of $ 50.- with a premium of $ 2.500.- per year. This rate increases by 2½% per year.
Residue of my Estate: I direct my executors to pay all my debts and the the residue of the estate shall be dealt as follows:
a.My real estate property situated at 8 Evans St, Rozlle NSW, 2 Weideman Court Reservoir Vic,
16 Emu parade Jacana Vic 3047, 62 Tennyson St, Kew 3101 Vic, and 54 Charles St Abbotsford
3067 Vic shall pass to Magdalena Investment Pty Ltd ACN 169 620 571 of 62 Tennyson St,Kew 3101. The executor is to arrange for the appropriate Title Certificates to be issued.
b.My real estate property situated at 245 Ailson Road,Randwick NSW 2031, 2 Scott St,Footscray £012 Vic, 8 A Eden Court Ascot Vale Vic 3032, shall pass to Intercity Homes Pty Ltd ACN 006
633 594 of 62 Tennyson St, Kew 3101. Vic
c.my real estate property situated 31 Albert St, Windsor Vic 3181, 90 Golden Way Bulleen Vic 3105, and 31 Morrison Crescent Wesst Sunshine Vic and shall pass to Lena Constructions Pty Ltd ACN 004 651 021 of 62 Tennyson St kew 3101. The executor is to arrange for the appropriate title certificates to be issued.
d.All my shares in BHP .CBA , Arrium, Medibank & Telstra as well as all my cash investments shal, pss to the company Intercity Hokes Pty Ltd ACN 006 633 594
The properties 62 Tennyson St,Kew 3101 and 245 Alison Road Randwick NS W 2031 be sold earlier than th stipulatedterm of this will if due to land tax letting becomes uneconomical.Cash proceeds of this sale may go to Lena Constructions Pty Ltd
On my deth Mrs V.Tsahouras is immediately entitled to$ 45,000.- out of my current cheque account.
e.my shares in the company Lena Constructions and Magdalena Investment and Intercity Homes are to be transferred in respect of each company to the following persons in the mentioned proportions to be held during their lifetime:
1.Mr Michael Kimmer … 18%
2.Mr Vasco Korunowski … 18%
3.Mr Gilbert Lovell … 8%
4.Sigmund Schmidmeier … 10%
5.Ms Vicki Tsahouras … 12%
6.Mr Deso Erosy … 6%
f.The balanca to 100% shall be held in the bank account of the companies as an emergency fund.
If any of the beneficiaries should die, her or his entitlement shall be distributed amongst the the remaining beneficiaries in accordance with the percentaged mentioned above.
g.The accrued income from the companies Magdalena Invstnent P/L Intercity Homes P/L and
Lena Constructions P/L shall be distributed annually in iccordance with the percentages listed in clause e
Mr. Vasco Korunoski … shall co-operate with the executors in the administration of the companies and be in touch with the directors and assist withnecessary repairs and maintenance of property for a fee to be negotiated between the executors and himself.
h.The contents of my home 62 Tennyson St.Kewshall be liquidated by Mr Korunowski and Mrs Tsahouris,The proceeds to be distributd to 75% to Mr.Tsahours and 25 % to Mr.Korunowski.
FUNERAL DIRECTIONS: ...
If my Executors are holding any part of my estate in trust for any beneficiary , my Executors will have all the powers given to executors or trustees by the legislation in any of the Australian States or Territories free of any limitations expressed in terms of time or money.
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