Walsh, Jennifer-Jane Inez v Walsh, Brian and Ors (As Trustees of the Estate of James Walsh Deceased) and Ors
[1998] FCA 647
•8 MAY 1998
FEDERAL COURT OF AUSTRALIA
SUCCESSION - Construction of will - Gift of income of estate to children of named persons “in equal shares as tenants in common” with gift of capital to others after the death of the last to die of the said children - Proper destination of share of income taken by one child following his death and pending the death of all his siblings.
JENNIFER-JANE INEZ WALSH v BRIAN WALSH, TERENCE ALAN WALSH and BRYAN TERRENCE GERARD WALSH as Trustees of the Estate of JAMES WALSH (Deceased) and DAVID CHRISTOPHER WALSH and MICHELLE-ANNE WALSH
WAG124 OF 1997
JUDGES: WILCOX, COOPER and LINDGREN JJ
DATE: 8 MAY 1998
PLACE: SYDNEY (HEARD IN PERTH)
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG124 of 1997
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
BETWEEN:
JENNIFER-JANE INEZ WALSH
AppellantAND:
BRIAN WALSH, TERENCE ALAN WALSH AND BRYAN TERRENCE GERARD WALSH AS TRUSTEES OF THE ESTATE OF JAMES WALSH (DECEASED)
First respondentsDAVID CHRISTOPHER WALSH AND MICHELLE-ANNE WALSH
Second respondentsJUDGES:
WILCOX, COOPER and LINDGREN JJ
DATE OF ORDER:
8 MAY 1998
WHERE MADE:
SYDNEY (HEARD IN PERTH)
THE COURT ORDERS THAT:
The appeal be allowed.
The answers to question 2(a) and 2(c) set out in the Originating Summons that were given by Heerey J be amended so as to read “Yes” and “No” respectively.
The costs of all parties be paid out of the estate of the late James Walsh.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG124 of 1997
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
BETWEEN:
JENNIFER-JANE INEZ WALSH
AppellantAND:
BRIAN WALSH, TERENCE ALAN WALSH AND BRYAN TERRENCE GERARD WALSH AS TRUSTEES OF THE ESTATE OF JAMES WALSH (DECEASED)
First respondentsDAVID CHRISTOPHER WALSH AND MICHELLE-ANNE WALSH
Second respondents
JUDGES:
WILCOX, COOPER and LINDGREN JJ
DATE:
8 MAY 1998
PLACE:
SYDNEY (HEARD IN PERTH)
REASONS FOR JUDGMENT
THE COURT: This is an appeal against a decision of a Judge of the Court (Heerey J) in relation to an Originating Summons cross-vested to the Court from the Supreme Court of Western Australia. The Originating Summons was filed by the trustees of the estate of James Walsh. They are the first respondents to the appeal.
The Walsh family
The Originating Summons seeks construction by the Court of Mr Walsh’s will made on 6 October 1944. Mr Walsh died on 8 April 1945. On 7 September 1945 probate of his will was granted to one of two executors named therein, David Francis Walsh. David Francis Walsh was the nephew of the testator. At the time of the testator’s death, David Francis Walsh and his wife, Millicent Agnes Walsh, had four children: John Brian Walsh, born 16 July 1933, David Wilford Walsh, born 27 September 1934, Terence Alan Walsh, born 18 March 1936 and Deidre Mary Walsh, born 9 March 1938. David Francis Walsh died on 22 September 1961. He was survived by all four of his children. However, David Wilford Walsh died on 20 August 1994. He left two adult children, the second respondents, David Christopher Walsh and Michelle-Anne Walsh, and a wife, by his second marriage, the appellant, Jennifer-Jane Inez Walsh. The other three children of David Francis Walsh survive, two of them with (adult) children.
The terms of the will
After providing bequests to various charities and individuals, the testator devised and bequeathed the residue of his estate to his Trustee - initially, his executor David Francis Walsh - upon trust to sell, call in and convert to money, to invest the proceeds for three years and pay debts etc out of the income and, by clause 7 of the will, thereafter to hold the residuary estate upon the following trusts:
“(a) AS to one undivided fifth share thereof UPON TRUST
(i)TO pay the net income thereof to my nephew DAVID FRANCIS WALSH during his lifetime and
(ii)AFTER the death of the said David Francis Walsh and until the death of the last to die of the children of the said David Francis Walsh and Millicent Agnes Walsh who shall be living at my death (hereinafter called the said children of David Francis Walsh) to pay the net income thereof to the said children of David Francis Walsh in equal shares as tenants in common
(iii)UPON the death of the last to die of the said children of David Francis Walsh to hold the said one fifth share as to both capital and income UPON TRUST in equal shares as tenants in common for the grandchildren of the said David Francis Walsh living at the date of the death of the last to die of the said children of David Francis Walsh
(b)AS to the remaining four undivided fifth shares thereof UPON TRUST:
(i)UNTIL the youngest of the said children of David Francis Walsh attains the age of twentyone years to PAY AND APPLY the net income thereof without regard to the liability of the said David Francis Walsh or any other person in that behalf to for or towards the maintenance education including secondary school boarding school and university education training support advantage benefit establishment in life (including the purchase of a business professional practice or clientele or a share or partnership therein) of the said children of David Francis Walsh such income to be paid and applied for the purposes aforesaid between such of the children of David Francis Walsh who shall for the time being living in equal shares as tenants in common
(ii)UPON the youngest of the said children of David Francis Walsh attaining the age of Twentyone years and until the death of the last to die of such children to pay the income thereof to the said children in equal shares as tenants in common
(iii)UPON the death of the last to die of the said children of David Francis Walsh to hold the said four fifths share as to both capital and income UPON TRUST in equal shares as tenants in common for the grand children of the said David Francis Walsh living at the date of the death of the last to die of the said children of the said David Francis Walsh.”
Clause 8 of the will limits the term “grand children of the said David Francis Walsh” to “children of such of the children of David Francis Walsh and Millicent Agnes Walsh who shall be living at my death”. The testator was evidently concerned to ensure the estate would vest in interest within the time then fixed by the Rule against Perpetuities: a life in being and 21 years.
Clause 9 provides a gift over, to grandchildren of the testator’s nephew James Lawrence Walsh, in the event that no grandchild of David Francis Walsh attains a vested interest in the capital of the testator’s estate.
The remaining clauses in the will confer various powers on the Trustee. It is necessary only to mention clause 13(e) which was referred to in argument. That sub-clause confers on the Trustee power to apply towards the maintenance or education of any infant beneficiary such part as the Trustee shall determine of the income of the infant’s contingent share.
The primary Judge’s reasoning
The question that fell for determination by Heerey J was the proper destination, having regard to the terms of the will, of the stream of estate income that had been enjoyed during his lifetime by David Wilford Walsh. That stream consists of two elements: first, one quarter of the income earned by the one undivided fifth share referred to in cl 7(a) of the will (David Francis Walsh having predeceased David Wilford Walsh); and, second, one quarter of the income earned by the four undivided fifth shares referred to in cl 7(b) of the will (the youngest of the children of David Francis Walsh having long since attained the age of 21 years). Heerey J mentioned four competing contentions as to the destination of the income:
to the three surviving children of David Francis Walsh;
to the children of David Wilford Walsh;
to the estate of David Wilford Walsh; and
as on a partial intestacy.
Heerey J accepted a submission from all counsel that the Court should lean against a partial intestacy.
Heerey J favoured the first contention; that is, the stream of income is divisible between the three surviving children of David Francis Walsh. He thought this contention to be “more consistent with the intention of the testator as disclosed by the text and structure of his will”. He explained:
“The testator’s scheme was to provide income for David Francis Walsh and his children while they were alive. There is a consistent theme to benefit the bloodline of David Francis Walsh. Moreover, the Walsh beneficiaries were to be those who were known, or whose parents were known, to the testator. Thus children of David Francis Walsh born after the testator’s death would not take (cl 7(a)(ii)) nor would the children of such children (cl 8). It would be quite inconsistent with that purpose to have, as contention (iii) would require, the intermediate income disposed of by will (or, it must follow, by assignment inter vivos) to persons or institutions unconnected with the Walsh family and unknown to the testator.
Counsel for the first respondent, the residuary beneficiary of David Wilford Walsh’s estate, relied strongly on the use of the term ‘tenants in common’. However, I think that expression has been used in the will not as a term of art but as an attempt (perhaps superfluous) to stress that beneficiaries were to take equally. This is strikingly illustrated by the concluding words of cl 7(b)(i). That clause provides for the maintenance and education of the children of David Francis Walsh until the youngest of them attains the age of twenty one years, the income to be -
‘paid and applied for the purposes aforesaid between such of the children of David Francis Walsh who shall for the time being living (sic - presumably “be living”) in equal shares as tenants in common.’
The literal meaning cannot have been intended. It would be absurd to contemplate that a beneficiary of a trust for maintenance and education could have a proprietary interest which could be disposed of by will or inter vivos.
There is ample precedent for not allowing the term ‘tenants in common’ to prevent the implication of cross-remainders where one of a number of beneficiaries of intermediate income dies.”
After referring to decided cases involving the term “tenants in common” and a passage in Theobald on Wills, 15th ed at 554, Heerey J went on:
“Turning to contention (ii), it is difficult to impute an intention that a grandchild of David Francis Walsh should take his or her parent’s share. That would run counter to the theme of the will that the generations are to wait their turn. The grandchildren of David Francis Walsh are not to benefit until all his children have died: cll 7(a)(iii), 7(b)(iii). Contention (ii) would give the children of the deceased child of David Francis Walsh an advantage by acceleration over their fellow grandchildren. Moreover, the children of David Francis Walsh were at the date of death of the testator aged between 12 and 6. The testator was not to know whether all or any of them would have children. The contention presently under consideration does not account for the contingency of one of the children of David Francis Walsh dying without issue. Associated with that point is the lack of the very common provision in wills for children to take in substitution a gift to a deceased parent.
The Court has also been asked to declare whether the residuary beneficiaries take per capita or per stirpes. The matter was not extensively debated and there was little opposition to the conclusion, which I think is correct, that they take per capita. That being so, it would be another inconsistency to have the children of one of the children of David Francis Walsh taking their parent’s share per stirpes.
Some reliance was put on cl 13(e) and (f) as indicating a contemplation of contingent expectant presumptive or vested share of an infant. However, I think in context that those sub-clauses bear all the appearance of having been inserted without a great deal of thought from a precedent book. I do not think they can stand against the more specific provisions of cll 7 and 8. The point is analogous to the rule applied in the construction of contracts. Where there is conflict between a printed term in a standard form contract and a typed or handwritten term, the latter prevails as being a more likely reflection of the actual intention of the parties.”
The arguments on appeal
Before Heerey J, the two children of David Wilford Walsh supported the second contention identified by his Honour and they were named as second respondents to the appeal. But they did not appeal against the rejection of their submission or participate in the hearing before us. The argument on appeal was limited to a contest between the first and third contentions noted by Heerey J.
Mr Michael Hotchkin, counsel for the appellant, argued in favour of the third contention; that is, the income goes to the estate of David Wilford Walsh. In doing so, he placed emphasis upon the use, in both cl 7(a)(ii) and cl 7(b)(ii), of the words “in equal shares as tenants in common”. He suggested these words are inconsistent with the notion that the testator intended that the share of each of the children of David Francis Walsh and Millicent Agnes Walsh would lapse on that child’s death and become divisible amongst his or her surviving siblings. If that had been the testator’s intention, counsel argued, it would have been appropriate for the paragraphs to provide for joint tenancies, rather than tenancies in common.
Mr Hotchkin recognised Heerey J considered the effect of the references to taking “in equal shares as tenants in common”. Heerey J referred in his reasons to Re Stanley’s Settlement; Maddocks v Andrews [1916] 2 Ch 50. In that case property was settled on trust for two sisters, M and R, “for and during the terms of their natural lives as tenants in common and not as joint tenants” and, after the death of the survivor of them, to the use of their respective children “share and share alike, as tenants in common and not as joint tenants”. M died, leaving four children. Many years later, R died childless. Sargant J held (at 55) that, upon the proper construction of the settlement, on M’s death R took a life interest in M’s share, “not on the ground that there was a joint tenancy, because that is expressly excluded, but following the rule of construction ... that a life interest is to be implied in favour of the survivor of the tenants in common”.
Mr Hotchkin said Stanley was distinguishable from the present case in that the gift to M and R was limited to a period described as “for and during the terms of their natural lives”; the tenancy in common was expressly limited to the period of their joint lives. In the present case, he said, there is nothing to suggest the interest of the beneficiaries as tenants in common was so limited. Mr Hotchkin pointed out that, where this testator wished to limit a benefit to a person’s lifetime, he plainly said so; for example, in cl 7(a)(i) “during his lifetime” and cl 7(b)(i) “who shall for the time being living”. Mr Hotchkin suggested Re Bassett [1961] VR 51 is closer to the present case. In that case the testator left his residuary estate upon trust to pay an annuity to his wife during her widowhood and divide the surplus income between his four children (a son and three daughters) in equal shares and, after the death or remarriage of the wife, to divide the net income equally between the four children. On the death of the last surviving child of the testator, the residuary estate was to be divided equally between all the then surviving grandchildren of the testator. The testator’s widow died shortly after the testator. Some years later, the son died. A question arose as to the destination of the stream of income previously taken by him, pending the death of all his sisters and the division of the estate amongst the grandchildren. Herring CJ of the Supreme Court of Victoria held this share of income passed to the son’s legal personal representatives. He said at 54:
“[sub-clause (f)] shews that the duration of the gift is limited to the period during which one or other of the four named children of the testator may survive. But pending such determination, there is nothing in the language of the will to cut down the interest given to each child to a life interest. As I say the interest is given to each indefinitely and had the testator wished to limit the interests given to life interests he could easily have done so, and it is not without significance that he has expressly limited a number of interests given in the will to life interests, so that it would seem fair to assume that where he has had nothing to say about the duration of an interest, he did not intend the interest given to be confined to a life interest.”
Mr Hotchkin criticised Heerey J’s reference to a “consistent theme to benefit the bloodline of David Francis Walsh” and his use of that general theme as a justification for limiting the tenancy in common to a life interest. He pointed out the “bloodline” of David Francis Walsh is limited only to the children who might be born to him with Millicent Agnes Walsh and might be living at the testator’s death and to such of those children’s children who might be living at the death of the four children. There might easily be other people within the “bloodline” of David Francis Walsh. They would miss out on any benefit. In any event, Mr Hotchkin said, there is nothing in the will to suggest the theme is limited to “bloodline” members directly taking benefits; it is equally consistent with a wish to benefit “bloodline” members that they should be empowered to provide income to others, such as members of their families. Mr Hotchkin suggested the true “theme” of the will is that relevant children and grandchildren will share equally, yet equality is diminished if the surviving children of David Francis Walsh take an ever increasing proportion of the income of the estate, to the advantage of those children’s immediate family and, possibly, their eventual estates, while the families of deceased children are excluded from any participation until the death of the last surviving child of David Francis Walsh.
In responding to this argument, Mr E M Heenan QC and Mr J Lin, counsel for the trustees, adopted the reasoning of Heerey J. They referred particularly to the passage from Theobald on Wills mentioned by Heerey J. It reads:
“(v)Gift to several for their lives and gift over. If there is a gift to several for their lives as tenants in common, with a gift over of the whole after the death of the survivor, the question arises, what happens to the share of income of a deceased tenant for life until the death of the survivor? The cases on this topic are numerous and not easy to reconcile. It may be that the income goes to the estate of the deceased tenant for life, or is undisposed of: but the solutions most frequently adopted are (a) that the income goes equally to the surviving tenants for life, or (b) that the income (or a corresponding share of capital) goes at once to the remainderman.”
Counsel referred to three possible resolutions of the issue before the Court: that the income goes, one, to the deceased beneficiary’s estate; two, to the surviving beneficiaries; and, three, to the deceased beneficiary’s children. They cited cases in which each of these solutions was adopted. We have noted those cases but need not discuss them. As Mr Heenan himself emphasised, the critical question in any will construction case is the intention of the particular testator. That intention must be gleaned from a study of the particular will, reading it as a whole. To the extent they elucidate general principles, decided cases may be helpful; otherwise they are of minimal utility. It is, however, important to say that, in each of the cases to which we were referred in which a stream of income was given to “tenants in common”, yet it was decided that on the death of one tenant in common the share to which that person would otherwise have continued to be entitled went to the surviving tenant in common or tenants in common, there was present some express limitation as to time. Examples are: “for and during their several and respective natural lives” (Armstrong v Eldridge (1791) 3 Bro CC 215 (29 ER 497)); “during their respective natural lives” (Pearce v Edmeades (1838) 3 Y & C Ex 246 (160 ER 693)); “for and during the terms of their natural lives” (In re Stanley’s Settlement; Maddocks v Andrews [1916] 2 Ch 50); and “for and during his life” and “during her life” (In re Richerson [1893] 3 Ch 146). The limitations as to time were accepted as sufficiently indicating an intention which displaced the ordinary results of ownership “in common” of the stream of income.
Turning to the characteristics of this will, counsel for the trustees suggested two things are clear: first, the testator wished to postpone distribution of the capital of his estate as long as possible; second, he wished to benefit the Walsh bloodline and, particularly, the descendants of David Francis Walsh. If the estate of a deceased child of David Francis Walsh was entitled to income pending the death of the last child, income might be removed from the Walsh bloodline. Counsel for the trustees submitted the only way it can be ensured that income stays within the Walsh bloodline is to read cl 7(a)(ii) and 7(b)(ii) as providing for surviving children to take the share of income of a deceased child.
Counsel acknowledged the words “in equal shares as tenants in common” pose a difficulty for their argument, but they contended the general theme and structure of the will so clearly indicated the intention of the testator that they ought not deter the Court from adopting the view of Heerey J. It was clearly the testator’s intention, they said, to make each generation wait its turn. It would be inconsistent with that intention to allow income to be diverted away from the surviving members of one generation (children of David Francis Walsh) in favour of the estates of deceased members of that generation, and possibly the children of those deceased members. Counsel emphasised Heerey J’s view that the expression “tenants in common” was not used as a term of art but merely to stress that beneficiaries were to take equally.
Our view
As in many will construction cases, the present issue is simply stated but not without difficulty in resolution. However, we have concluded the will should be understood in the way urged by Mr Hotchkin on behalf of the appellant. We agree with each of the submissions he put to us, as summarised above. We mention an additional point. Clause 7(a)(ii) requires the Trustee “to pay the net income thereof to the said children of David Francis Walsh in equal shares as tenants in common”. The term “the said children of David Francis Walsh” is defined earlier in that paragraph; that is, as the children of David Francis Walsh and Millicent Agnes Walsh living at the testator’s death. The testator had in mind particular people; as it happened, four in number. He was directing himself to the period that would expire at the death of the last to die of those people. As it was highly unlikely they would die simultaneously, there would almost certainly be a time when some were dead and some still alive; yet in that period the income was to be paid to the said children, that is the four individuals, in equal shares as tenants in common. This could happen only if a share of income was paid to the estate of each deceased child. A similar situation arises under cl 7(b)(ii), where the testator refers to “the last to die of such children”; that is, the last to die of the said children of David Francis Walsh.
We accept the trustees’ submission that the testator intended to accumulate the capital of his estate as long as possible and to benefit the descendants of David Francis Walsh. It does not follow that he wished to confine that benefit to the receipt of money. For a child of David Francis Walsh to be able to ensure, through a will or assignment inter vivos, that a person important to him or her will receive future income from the estate is itself a significant benefit. As to the argument that it was a theme of the will that each generation must wait its turn, this is correct in relation to the children of David Francis Walsh, who had to wait for their father to die, and it is true of receipt of capital by grandchildren of David Francis Walsh. Whether it is also true of receipt of income by grandchildren is a question in issue in this case.
We think it is undesirable and unnecessary to embark upon what would inevitably be a lengthy discussion of the many reported decisions on the construction of other wills. We note only that an additional ground on which to distinguish Stanley is that in that case Sargant J relied on the presence of the words “the same or any part thereof” as pointing respectively to the times when both siblings were receiving the income, and, subsequently, when only one of them was receiving it.
We respectfully indicate inability to share Heerey J’s view about the use of the words “as tenants in common”. The will was witnessed by a solicitor. It bears all the hallmarks of professional preparation. The term “tenants in common” is well known to lawyers. It connotes exclusion of the right of survivorship; it is not synonymous with equality. Tenants in common frequently take property in unequal shares but joint tenants cannot do so. Furthermore, if only equality had been intended by the use of the expression “as tenants in common”, the words “in equal shares” would have been superfluous, as Heerey J acknowledged.
The trial Judge thought that the expression “in equal shares as tenants in common” in clause 7 (b)(i) of the will must signify nothing more than “equally” and could not bear its literal meaning because “[i]t would be absurd to contemplate that a beneficiary of a trust for maintenance and education could have a proprietary interest which could be disposed of by will or inter vivos.” While clause 7 (b)(i) may raise some questions, what is important for present purposes is that it is the presence of the words “between such of the children of David Francis Walsh who shall for the time being be living” (emphasis supplied) immediately before the words “in equal shares as tenants in common” that make plain the testator’s intention that a child of David Francis Walsh is to cease to be a beneficiary of the particular trust once he or she dies. It is not necessary for us to explore all aspects of the operation of the words “in equal shares as tenants in common” in that clause: it suffices to say they pose no difficulty for our construction of the words “to pay the net income thereof to the said children of David Francis Walsh in equal shares as tenants in common” in clauses 7 (a)(ii) and 7 (b)(ii). It is noteworthy in passing that a discretionary power of advancement for the maintenance and education of beneficiaries signifies a tenancy in common and excludes the possibility of a joint tenancy: L’Estrange v L’Estrange [1902] 1 IR 467; Megarry and Wade, The Law of Real Property (5th ed, 1984) at 426 and cases there cited; Bradbrook, MacCallum & Moore, Australian Real Property Law (Law Book Co, 1991) at [9.19]-[9.22] and cases there cited.
The preferable view is that the testator intended that, after the death of David Francis Walsh, and until the death of the last to die of the four persons who fell within the category called “the said children of David Francis Walsh”, the income of the estate should be divided into four segments, one segment being taken by each child or, after that child’s death, his or her estate. Only by interpreting the will in this way may effect be given to the testator’s dual requirements: that the income be taken in equal shares and that it be taken as tenants in common.
The appeal should be allowed. The answers to question 2(a) and 2(c) set out in the Originating Summons that were given by Heerey J should be amended so as to read “Yes” and “No” respectively. The costs of all parties to the appeal should be paid out of the estate.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Dated: 8 May 1998
Counsel for the Applicant: M C Hotchkin Solicitor for the Applicant: Hotchkin Hanly Counsel for the Respondent: E M Heenan QC and J Lin Solicitor for the Respondent: Jackson McDonald Date of Hearing: 25 March 1998
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