The Estate of Helen Selle, late of Kirribilli
[2015] NSWSC 399
•8 April 2015
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New South Wales |
Case Name: | The Estate of Helen Selle, late of Kirribilli |
Medium Neutral Citation: | [2015] NSWSC 399 |
Hearing Date(s): | 8 April 2015 |
Date of Orders: | 8 April 2015 |
Decision Date: | 8 April 2015 |
Jurisdiction: | Equity Division |
Before: | Slattery J |
Decision: | The Court refuses to give judicial advice, appoints new trustees and orders those trustees to indemnify the estate for the application |
Catchwords: | SUCCESSION – Wills, probate and administration – construction and effect of testamentary dispositions – request for judicial advice under Trustee Act s 63 – construction of will – whether will permitted new trustees to subtrust to be appointed – whether expedient to appoint new trustees under s 70 – whether new trustees could be ordered to indemnify estate for costs of application |
Legislation Cited: | Trustee Act 1925, ss 63, 70, 93 |
Category: | Consequential orders (other than Costs) |
Parties: | First Applicant: Michael William Winston-Smith |
Representation: | Counsel: |
File Number(s): | 2012/392441 |
Publication Restriction: | No |
EX TEMPORE JUDGMENT
By their amended summons dated 23 February 2015 the executors and trustees of the will of the late Helen Selle, Michael William Winston-Smith and David Charles Vickery Morgan, move the Court for judicial advice under Trustee Act 1925, s 63. In the alternative the plaintiff trustees seek relief for the appointment of new trustees under Trustee Act, s 70 to a trust created under the will for share of residue for a particular beneficiary.
Background
The relevant circumstances may be shortly stated. The deceased, Helen Selle, made her last will on 16 July 2009 (“the Will”) and died on 14 September 2012. Probate of her Will was granted to the plaintiffs on 6 February 2013. The estimated value of the deceased’s estate is substantial. The details of the estate administration and the size of the estate are not of particular relevance to the advice now sought.
Under the deceased's Will, the deceased appointed the plaintiffs as her executors and trustees. After a number of specific devises and bequests both to family members and to a number of charitable objects, the deceased disposed of the residue of her estate by the Will, clause 17, which relevantly provides as follows:
“I GIVE AND APPOINT the whole of the rest and residue of my estate both real and personal of whatsoever nature and kind and wheresoever situate [sic] to my Trustees UPON TRUST to pay thereout all my just debts, funeral and testamentary expenses and all duties payable in respect of my estate AND TO HOLD the balance of my estate then remaining (referred to as “my Residuary Estate”) UPON TRUST to divide into the necessary number of equal parts and to dispose of such parts, subject to the succeeding clause, as follows:
(a) Twenty percent (20%) of my Residuary Estate upon trust for my daughter DIANA RINGROSE absolutely provided my daughter DIANA RINGROSE survives me for the period of thirty (30) days and if not subject to paragraph 27 of this my Will then such part shall be held on the trusts set out in paragraph 17(b) of this my Will.
(b) Eight percent (80%) of my Residuary Estate divided into equal shares between each of the following of my grandchildren:
ANGUS GORDON
DOUGAL GORDON
JAMIE GORDON
WILLIAM WINSTON-SMITH
SARA WINSTON-SMITH
KATE WINSTON-SMITH and
SEAN MICHAEL RINGROSE who
(i) survive me by thirty (30) days; and
(ii) attain the age of twenty five (25) years;
shall be the Primary Beneficiary of a trust for one such part, the terms of which are set out in Part C of this my Will.”
As the terms of the Will infer, Sean Michael Ringrose is not sui juris. He is 13 years of age and is the son of a beneficiary, one of the deceased’s daughters, Diana Ringrose.
Both the statement of facts and evidence adduced before the Court make clear that William Winston-Smith and Dougal Gordon, the proposed clause 17(b) trustees for the prospective primary beneficiary, Sean Ringrose, have each indicated that they are “unwilling to accept the appointment” as trustee that clause 17(b) constitutes.
Issue
The issue now for the Court's opinion and advice is the plaintiffs’ power to appoint substitute trustees for William Winston-Smith and Dougal Gordon to act as trustees for Sean Ringrose's interest under the sub-trust that clause 17(b) creates for his benefit. The matter should be approached, in the first instance, by looking for powers under the Will to appoint substitute trustees for the two trustees who are unwilling to act in the sub-trust.
Those powers are in my view clear. The Will is structured to incorporate a standard set of powers and duties of trustees into any testamentary trust that the Will creates. The Will, clause 28 sets out these standard powers and duties in respect of what it calls "a Beneficiary Testamentary Trust", the name the Will gives to any trust it creates for a beneficiary.
It is sufficiently clear in my view from the Will, clause 17(b) that the testator intended William Winston-Smith and Dougal Gordon to hold Sean Ringrose’s share of residue “with the powers and on the terms of Trust as set out in this my Will”, namely the standard powers and terms described in the Will, clause 28, which identifies beneficiaries, and covers issues such as the replacement of a beneficiary trustee.
Clause 28 is introduced by the following words, which label each of the Will’s trusts as a “Beneficiary Testamentary Trust”:
"IN RESPECT of each of the trusts established under this Will which nominate a nominated person to be the Primary Beneficiary ("the Beneficiary Testamentary Trust") I declare the following terms will apply: …”
Clause 28A describes a trustee of the Beneficiary Testamentary Trust, such as William Winston-Smith and Dougall Gordon, by the convenient shorthand "the beneficiary trustee".
It is evident that the trusts that the Will, clause 17(b) creates for Sean Ringrose's benefit, although they describe him as a “prospective primary beneficiary”, intend to constitute a Beneficiary Testamentary Trust, with him as the primary beneficiary: see clause 19.
The Will, clause 28D deals with the appointment or removal of a beneficiary trustee. It relevantly provides:
“THE BENEFICIARY TRUSTEE of the Beneficiary Testamentary Trust may be appointed or removed as follows:
(i) subject to paragraph (iii) of this subclause and paragraph 17(b), the Primary Beneficiary or the Specified Beneficiaries, or a person nominated by the Primary Beneficiary of the Specified Beneficiaries, will be the initial beneficiary trustee or trustees;
(ii) the Primary Beneficiary or the Specified Beneficiaries (other than an ineligible person) may exercise the power to appoint such other person as he, she or they choose to be an additional or replacement beneficiary trustee and may subsequently remove the person as a, or the, beneficiary trustee;
(iii) an ineligible person shall not be appointed as beneficiary trustee or shall be deemed to have resigned as beneficiary trustee (as the case may be), and:
(a) my Trustees (other than the ineligible person); or
(b) where the person is or was my sole Trustee shall be the beneficiary trustee, or one of the beneficiary trustees (as the case may be), in the ineligible person’s place and shall hold or share the power to appoint the beneficiary trustee in place of the ineligible person; …”
The scheme of clause 28D is reasonably clear. Clause 28D(iii) operates so that an “ineligible person”, as defined, shall “be deemed have resigned as beneficiary trustee”. But before the express power to appoint a new trustee springs up, a person must be able to be characterised as an “ineligible person” within the meaning of that term in the Will. Here a difficult arises.
Definition of ‘ineligible person’
“Ineligible person” is defined under the Will, clause 28D in the following terms:
“ineligible person” means a person who is:
(a) also a Primary Beneficiary or Specified Beneficiary or a company wholly or partly owned by a Primary Beneficiary or a Specified Beneficiary; and
(b) under a disability, is bankrupt, has been placed in liquidation, receivership or administration or is unable to act or to continue to act as trustee; and the person remains an ineligible person until such time this definition no longer applies; …”
Although this definition does not specifically include a person who is unwilling to act, in my view the definition’s words “unable to act” include the idea of a person who is unable to act because that person is unwilling to do so. Thus, subject to one matter to which I will come, the two proposed trustees William Winston-Smith and Dougal Gordon were “ineligible persons’ within Will, clause 28D.
But the definition of "ineligible person" is in other ways inelegantly drafted. The definition seems to make far better sense if one ignores the words in sub-clause (a). If those words are ignored, ”ineligible person” simply covers all persons who suffer a relevant disability that common sense would prevent from becoming trustees of a Beneficiary Testamentary Trust. It is difficult to see why they must also be a Primary Beneficiary to be an “ineligible person”. But as it turns out William Winston-Smith and Dougal Gordon are in fact Primary Beneficiaries under clause 17 and in any event meet this rather odd test to be an “ineligible person”.
Just why sub-clause (a) of the definition exists is obscure. If the definition of "ineligible person" is read without sub-clause (a), it seems to me that William Winston-Smith and Dougal Gordon also readily qualify as eligible persons because of their refusal to act. The application of clause 28D(iii) then means that they are deemed to have resigned as beneficiary trustees because of their continuing unwillingness, and therefore inability, to act.
Appointment and Removal of Beneficiary Trustees
In those circumstances clause 28D(iii) operates to give the estate’s trustees, the plaintiffs, the power to appoint a beneficiary trustee in the place of William Winston-Smith and Dougal Gordon. The plaintiffs shall then "hold or share the power to appoint the beneficiary trustee in place of the ineligible person ". That means that the plaintiffs have the power to appoint new beneficiary trustees. That is what they propose to do.
The issue that now brings the plaintiffs to the Court is that a solicitor acting on behalf of Diana Ringrose, Ms Colleen Burgoyne, has written a letter to the plaintiffs dated 20 June 2014 which relevantly says as follows:
“Generally speaking, you and Michael as the legal personal representatives hold the Estate upon the trusts contained in the Will subject to the powers and duties of the Trustee Act. On completion of the administration of the Estate you and Michael then become the trustee of those trusts. You and Michael only have that power if there is no contrary intention in the Will.
I believe that as the Deceased did in fact appoint separate Trustees for Sean’s Trust, you and Michael are not given any of the powers or duties contained in the Will in relation to that Trust. Accordingly, I do not believe you and Michael can exercise the powers given to the Trustees to appoint or remove the Beneficiary Trustee contained in Clause 28D(iii). Clause 17(b) of the Will specifically gives these powers to William and Dougal.
The Will does not deal with the situation where William and Dougal disclaim or refuse the appointment and as such, the provisions of the Trustee Act must be applied.”
Ms Burgoyne further suggests that on her construction of the Will the persons who are now able to appoint a new trustee are not the plaintiffs but William Winston-Smith and Dougal Gordon, the persons who have refused to act. And as they refuse to act, she says “there is no continuing trustee”. She says that her belief is that, “it must be up to the Court to appoint the trustees”.
I do not agree with Ms Burgoyne's construction that the Will, clause 17(b) specifically gives the powers to appoint a beneficiary trustee to William Winston-Smith and Dougal Gordon. Will, clause 28D governs the operation of Sean Ringrose’s Beneficiary Testamentary Trust, so created. But the position that Ms Burgoyne has taken is to a degree understandable because of the odd way that clause 28D(iii)(b) appears in the Will. It is displaced typographically so that the words commencing “shall be the beneficiary trustee” appear to have been tacked on to sub-clause (b), rather than to be words of common application to sub-clause (a) and (b). The printed form of this clause in the Will does not have a comma after the words “sole Trustee”. This typographical presentation makes the clause difficult to read and understand. These typographical faults have all been corrected in the way clause 28D has been reproduced earlier in these reasons.
No Judicial Advice and Appointment of Trustees
Were the definition of "ineligible person" entirely free from doubt, the Court would have no hesitation in advising the plaintiffs that they had the power to appoint the proposed trustees to Sean Ringrose's Beneficiary Testamentary Trust. But there is obscurity about the definition of “ineligible person”. This places the operation of clause 28D in doubt.
In my view in these circumstances the more prudent course rather than giving judicial advice is simply to appoint the proposed trustees under Trustee Act, s 70, because it is expedient to do so.
Trustee Act, s 70 relevantly provides as follows:
“70 New trustees
(1) The Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
(2) The appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court.
…”
The expediency arises here because of the difficulty that exists in the Will about the operation of the definition of “ineligible person”. The issue could conceivably attract later dispute. In those circumstances it is expedient for the Court to take the course which will eliminate any future dispute of this nature, by the exercise the power under Trustee Act, s 70.
The plaintiffs have nominated two persons to act as new trustees of Sean Ringrose's Beneficiary Testamentary Trust, Ms Janette Thompson and Louise Brogan, persons with financial management or accounting experience and qualifications.
Affidavits have been read attesting to the consent of the proposed trustees being duly signed. I am satisfied on the evidence adduced that they both consent to being trustees of Sean Ringrose’s Beneficiary Testamentary Trust and that they are both fit and proper persons to be appointed as trustees.
I am told from the bar table that both Ms Thompson and Ms Brogan are persons known to Diana Ringrose, Sean Ringrose’s mother and that she is willing for them to be appointed, another circumstance that attests to their fitness to be appointed.
Costs
This application was made entirely for the benefit of one beneficiary under the Will, Sean Ringrose, in relation to his Beneficiary Testamentary Trust. It would not be just for the costs of the application to be borne by the estate generally. The other beneficiaries’ shares of the deceased’s estate should not fairly be diminished by the costs of an application, which does not affect their shares of residue.
Trustee Act, s 93 gives the Court broad discretionary powers to direct the costs of applications made under the Act to be paid in particular ways:
“93 Costs
(2) The Court may order the costs charges and expenses of and incident to any application or any order under this Act to be paid or to be raised by sale or mortgage out of the property in respect whereof the same is made or out of the income thereof, or to be borne and paid in such manner and by such persons as to the Court may seem just.
(3) In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of a testator or intestate, or with respect to the interpretation of the trust instrument, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings.
(4) This section shall extend to any direction opinion or advice, any payment into or out of court, and any conveyance or transfer in pursuance of an order.
Under Trustee Act, s 93, I will therefore order that the newly appointed trustees of Sean Ringrose’s Beneficiary Testamentary Trust indemnify the deceased’s estate for the cost of this application out of the assets of Sean Ringrose’s Beneficiary Testamentary Trust and not out of the estate assets generally.
Conclusion and Orders
In those circumstances I will make the alternative order sought by the plaintiffs.
The Court:
(1)appoints Louise Brogan and Janette Thompson to be the beneficiary trustees of the Beneficiary Testamentary Trust created for Sean Michael Ringrose under clause 17(b) of the Will of the late Helen Selle of 16 July 2009 (“the Will”);
(2)orders that Louise Brogan and Janette Thompson, as the beneficiary trustees of the Beneficiary Testamentary Trust referred to in order (1) created for Sean Michael Ringrose, indemnify the deceased’s estate for the costs of this application out of the assets of the said Beneficiary Testamentary Trust.
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Amendments
14 April 2015 - delete repetition of catchwords
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