Watson v Ralph

[1982] HCA 35

HIGH COURT OF AUSTRALIA

Gibbs C.J., Mason, Aickin, Wilson and Brennan JJ.

WATSON v. RALPH

(1982) 148 CLR 646

8 June 1982

Wills

Wills—Construction—Devise—Testatrix and husband registered as joint proprietors of land—Land an asset of partnership between them—Devise to daughters "if at the time of my death I shall be the owner of the land owned at the date hereof jointly by my husband and myself"—Whether devise of testatrix's interest in land.

Decisions

June 8.
The following written judgments were delivered: -
GIBBS C.J. The appellants are the daughters of Lilian Ralph deceased ("the testatrix") who died on 23 September 1970, survived by her husband, three sons (the present respondents) and two daughters (the appellants), and having made, on 13 February 1958, her last will and testament. At the date of the will, and at the date of the death, the testatrix and her husband were registered as the proprietors of an estate in fee simple in land at Whittlesea in the State of Victoria. The testatrix had for many years conducted in partnership with her husband a farm on the land, sharing profits and losses equally. At the date of her death, the property of the partnership comprised the land and improvements thereon, together with money in a bank, cash on hand, stock, plant, machinery, equipment and furniture. The partnership property was of considerable value, and the testatrix left other assets also of considerable value. The husband of the testatrix died in 1977 and the appellants, as plaintiffs, later commenced proceedings in the Supreme Court of Victoria seeking the determination upon the proper construction of the will of the testatrix of certain questions as to the disposition of her interest in the partnership. (at p648)

2. The dispositive provisions of the will, which are contained in cl. 3, commence as follows:

"I GIVE DEVISE AND BEQUEATH unto my Trustees the whole of my real and personal estate of which I shall die possessed UPON TRUST (subject to the provisions hereinafter contained as to my freehold property at Whittlesea and the plant and other items and moneys associated therewith hereinafter mentioned) to sell call in collect and convert the same into money at such time or times and in such manner and upon such terms and conditions as to title credit or otherwise as my Trustees shall think fit . . . "

Then, after conferring certain powers on the trustees, including a power to postpone sale and conversion, the clause continues: "AND I DIRECT my Trustees out of the proceeds of such sale calling in and conversion to pay all my just debts funeral and testamentary expenses and all probate estate death and/or succession duties payable in respect of my estate or any part thereof and to stand possessed of the net proceeds therof UPON TRUST to invest the same in any of the securities hereinafter authorized and to hold the same and the securities representing the same and the part (if any) of my estate for the time being remaining uncoverted (hereinafter called 'my residuary estate') UPON TRUST to pay the income arising therefrom to my said husband during his lifetime and subject thereto to stand possessed of my residuary estate as to both capital and income UPON TRUST if at the time of my death I shall be the owner of the freehold property situate at Whittlesea in the State of Victoria owned at the date hereof jointly by my said husband and myself to transfer and/or to convey the same and any freehold property held in conjunction therewith to such of my daughters CORINNE FURNELL and JUDITH WATSON as shall be living at the death of the survivor of my said husband and myself as tenants in common in equal shares and to transfer and/or hand over to them the whole of the plant machinery implements stock and other items of personal property of whatsoever kind which shall be at or on the said property at the date of my death or which shall have been purchased or acquired either in addition to or in substitution for such items between the date of my death and the date of the death of my said husband and also all moneys upon deposit or in any bank or wherever the same shall be (if its identity can be established) deposited or banked or utilized or in any way appropriated for use in connection with such property and the conduct thereof and subject thereto my Trustees shall stand possessed of my residuary estate UPON TRUST as to both capital and income for such of my sons as shall be living at the death of the survivor of my said husband and myself as tenants in common in equal shares." (at p649)

3. The questions asked in the summons by which the proceedings were commenced are somewhat repetitious, but the question of substance that falls for decision is whether, in the events that have happened, the appellants became entitled to any interest in the property of the testatrix under the trusts of the will, or, in other words, whether the condition upon which the trust in favour of the appellants is made to depend was satisfied. That condition is expressed in the following words: "if at the time of my death I shall be the owner of the freehold property situate at Whittlesea in the State of Victoria owned at the date hereof jointly by my said husband and myself." (at p650)

4. The testatrix, at the time of her death, was neither the legal owner, nor the sole beneficial owner, of the freehold property at Whittlesea. The land was then part of the property of the partnership of which the testatrix and her husband were the members. The nature of a partner's interest in the assets of the partnership was described as follows by Kitto J. in Livingston v. Commissioner of Stamp Duties (Q.) (1960) 107 CLR 411, at p 453 :
"That he has a beneficial interest, which the law will recognize and enforce, in every piece of property which belongs to the partnership is clearly established . . . ; and none the less so because the nature of the interest is peculiar in that his share in the partnership, by virtue of which the interest in a given asset exists while the asset belongs to the partnership, consists not of a title to specific property but of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership . . . ; that is to say, not a 'definite' share or interest in a particular asset, no 'right to any part' of it, but an interest which 'can be finally ascertained only when the liquidation has been completed, and . . . consists of his share of the surplus'."
The testatrix accordingly had an equitable interest in every asset of the partnership, including the land: see also Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd. (1974) 131 CLR 321, at pp 327-328 ; and Federal Commissioner of Taxation v. Everett (1980) 143 CLR 440, at pp 446-447 . (at p650)

5. It was submitted on behalf of the appellants that when the testatrix used the words "the owner of the freehold property situate at Whittlesea" she meant to refer to the quitable interest which she, as a partner, had in that property. This submission was accepted in the Supreme Court by the learned trial judge, who held that the appellants took an undivided half share in equity in the Whittlesea property. On appeal the Full Court held that the appellants took no interest in the estate and allowed the appeal. (at p650)

6. The words of the condition, literally construed, were not satisfied. The testatrix was not "the owner" of the land at the time of her death. Counsel for the appellants submitted that the relevant words of the condition should be construed as meaning "if I shall still be the owner", or "if I shall be the owner of an interest", or "if I shall be the owner as a partner", or "if I shall be an owner". It is implicit in this submission that some departure from the natural meaning of the words of the condition must be made if the appellants are to succeed. In support of the contention on behalf of the appellants, counsel placed particular reliance on the words which appear in parenthesis near the commencement of cl. 3: "subject to the provisions hereinafter contained as to my freehold property at Whittlesea and the plant and other items and monies associated therewith hereinafter mentioned." It was submitted that when the testatrix referred to "my freehold property" she must have meant to refer to her equitable interest in the land, because otherwise the words would have been meaningless. Reference was made to Hendry v. Perpetual Executors and Trustees Association of Australia Ltd. (1961) 106 CLR 256 where a testator who owned no real estate and no livestock of his own, but who was a member of a partnership which owned both land and livestock, left a will disposing of "all my livestock" to one person, the proceeds of the conversion of "all my real estate" to a second person and the proceeds of the conversion "of the residue of my personal estate" to a third person, and it was held that the gifts to the first and second persons were apt to dispose of the testator's interest in the livestock and the land owned by the partnership at the testator's death. The court said that the question was what the testator meant when in the will he used the words "my livestock" and "my real estate" when he had none of his own but was a member of a partnership which had both (1961) 106 CLR, at p 266 . Their Honours continued (1961) 106 CLR, at p 267 :
"This question is not to be answered by any strict legal analysis of the rights of the testator as a partner during his life and certainly not by considering the rights of his personal representative after his death. What has to be done is to determine what the testator meant by his words in his will and when the will is looked at in the light of the circumstances as they existed immediately before his death the conclusion is inevitable that he was dividing what he had into three parts, and that he was disposing separately of whatever interest he had in livestock (which could only be his partnership interest), of the net proceeds of whatever interest he had in land (which again, could only be his partnership interest), and of the net proceeds of whatever interest he had in personalty other than livestock."
It was said that in the present case the words in parenthesis would be meaningless unless they referred to the equitable interest of the testatrix in the land, and that they therefore show that the testatrix regarded the land as belonging to her and in effect provide a dictionary by which the meaning of the words "the owner of the freehold property" in the conditional phrase can be determined. In other words, it was submitted that the testatrix, by describing her partnership interest in the land as "my freehold property", indicated that the words of the condition - "if . . . I shall be the owner of the freehold property" - would be satisfied if she had a partnership interest in the land. (at p652)

7. The difficulty in accepting this argument of the appellants lies not only in the fact that the words "the owner" are inapt to refer to one of the two partners, but also because the contrast between those words and the following words, "owned at the date hereof jointly by my said husband and myself", suggests that the testatrix was drawing a distinction between the actual situation at the date of the will and the possible situation at the date of her death. Further, the words "transfer and/or to convey the same" naturally appear to refer to a transfer of the freehold property, but even if they can be regarded as apt to refer to the transfer of an undivided interest in the land, the direction to "transfer and/or hand over" the plant and other personal property strongly suggests that what was intended was that there should be a physical delivery of actual chattels rather than a transfer of an equitable interest in chattels. Such a physical delivery could not be made by the trustees unless the testatrix had been the sole owner of the personal property, a situation which in all probability would only have arisen if she had become the sole owner of the land. (at p652)

8. Moreover, if the appellants are right, the words stating the condition are quite superfluous, at least so far as the land is concerned. If at the time of her death the testatrix had no interest in the freehold property, a gift of her equitable interest in that property would have been adeemed, and the appellants would not have become entitled to any interest in it. It is true that the condition relates only to the ownership of the land, whereas the trust that depends on the condition is not only of the land, but also of the personal property on the land and all moneys deposited, banked, utilized or appropriated for use in connexion with the land. It may therefore be said that the condition has some meaning, namely that the personal property and the money do not go to the appellants unless the testatrix at the time of her death had an interest in the freehold property. However, if the testatrix had no interest in the freehold property at her death, it is unlikely that the personal property on it, and the money appropriated for use in connexion with it, would have belonged to her, and it is hardly likely that the sole purpose of the condition was to prevent the personal property and the money for going to the appellants unless the testatrix had an interest in the land at her death. The natural effect of the words of the condition is to make the trust in favour of the appellants depend upon a contingency which had not occurred at the date of the will - namely, that she had become the sole owner of land which at the date of the will was held jointly. (at p653)

9. In support of the argument advanced on behalf of the appellants it was said that there were only two ways in which the testatrix could have become the sole owner of the land at her death - her husband might have predeceased her, or he might, during his lifetime, have assigned his interest to her. It was submitted that the testatrix could not have intended to refer to the first possibility. The trust was in favour of "such of my daughters . . . as shall be living at the death of the survivor of my said husband and myself" and the subject of the trust includes personal property "which shall have been purchased or acquired . . . between the date of my death and the date of the death of my said husband". Also, the trust was subject to the husband's life interest. These provisions indicate that the trust in favour of the appellants was intended to take effect even if the testatrix predeceased her husband. It was further submitted that the testatrix cannot have intended to refer to the second possibility, because it was remote and unlikely to occur. However, these arguments do not advance the case for the appellants. The fact that the testatrix made provision for the obvious possibility that her husband might survive her does not throw any light on the meaning of the conditional phrase, and the suggestion that it was unlikely that the testatrix would have become the sole owner of the partnership property by reason of an assignment inter vivos is purely speculative. (at p653)

10. The use of the words "my freehold property" may be explained if the testatrix was speaking proleptically. The words in parenthesis take out from the trust for sale and conversion the property the subject of the trust in favour of the appellants created by the provisions "hereinafter contained". Unless those later provisions take effect, there will of course be no need to except the property to which they relate from the trust for sale and conversion. The words in parenthesis appear to proceed on the assumption that the condition of the trust in favour of the appellants will have been satisfied, and, on that assumption, to refer to the land as "my freehold property" - a correct description if the testatrix has become the sole owner. In any case, the description of the land as "my freehold property" is not sufficient to show that the words the owner of the freehold property" mean "the owner of an equitable interest as partner in the freehold property", when those words are read in the light of the following phrase, "owned at the date hereof jointly by my said husband and myself". (at p654)

11. It is said that it would be a capricious result if under the will the appellants are entitled to the whole of the land if the testatrix was at the date of her death the sole owner, but take nothing if the testatrix then had an undivided half interest. The evidence does not exclude the possibility that the testatrix had reasons for making a provision of this kind. However, if the words of a will admit of only one construction, the fact that the result seems capricious does not entitle the court to depart from the words which the testatrix has used. The court must ascertain the expressed intention of the testatrix - what she meant by the words she used; it must construe the existing will, and cannot make a new one. (at p654)

12. It is unfortunate that the will should have been so carelessly drawn as to give rise to the very real difficulties which it has created. However, I do not feel at liberty to speculate as to the intention of the testatrix, and it seems to me that the intention revealed by the words of the will themselves is that the trust in favour of the appellants shall only come into effect if at the time of her death the testatrix is the sole beneficial owner of the freehold property situated at Whittlesea, an event which did not occur. (at p654)

13. I would accordingly dismiss the appeal. Since the difficulties of construction arise from the fact that the will is badly drawn, and since the appellants were encouraged to appeal by the acceptance of their arguments at first instance, I would feel justified in taking the rather exceptional course of ordering that the costs of all parties be paid out of the estate. (at p654)

MASON J. I am in agreement with the reasons for judgment prepared by the Chief Justice. I would dismiss the appeal and would order that the costs of the parties be paid out of the estate. (at p654)

AICKIN J. The terms of the will out of which this appeal arises and the material facts are set out in the judgment of the Chief Justice and I do not repeat them. (at p654)

2. The testatrix having been survived by her husband, the partnership would have been automatically dissolved upon her death. In the absence of an agreement between her executors and her husband for a new partnership to take over the assets of the old partnership, the latter would have had to be wound up on the death of the testatrix. Indeed, if there were a new partnership formed between her executors and her husband, the original partnership would still have had to be wound up. (at p655)

3. The primary trust declared by the will was to sell call-in and convert her property but that direction was subject to the provisions "as to my freehold property at Whittlesea and the plant and other items and moneys associated therewith". There is then a life interest given to her husband in such proceeds of sale. (at p655)

4. The next direction is the critical one and is as follows:
"if at the time of my death I shall be the owner of the freehold property situate at Whittlesea in the State of Victoria owned at the date hereof jointly by my said husband and myself to transfer and/or to convey the same and any freehold property held in conjunction therewith to such of my daughters CORINNE FURNELL and JUDITH WATSON as shall be living at the death of the survivor of my said husband and myself". (at p655)

5. At the date of her death the testatrix was not the owner of the freehold property at Whittlesea. It was then partnership property and she had in it the same interest as in any other partnership property, i.e. upon the dissolution of the partnership a half interest in the proceeds of sale of all the partnership property after payment of partnership debts, subject to any agreement between the partners as to distribution in specie. (at p655)

6. She could not at the date of her death be the owner of the freehold property unless her husband's share in the partnership, or, after its dissolution his share in the assets, were transferred to her by will or by sale or by gift inter vivo. No doubt one possibility which was in the mind of the testatrix or her draftsman was that her husband might predecease her and bequeath to her his share in the partnership property as at the date of his death including the freehold property. If that had happened and if she retained the property at the date of her death then it would have gone to the daughters. (at p655)

7. That, however, was only one of the possible events which might have occurred and in the result it was an event which did not occur. In fact the testatrix predeceased her husband, and on that event occurring her husband became entitled to a life interest in the whole estate subject only to the possible operation of the critical clause. If that clause had operated he would have had only his half interest arising upon the dissolution of the partnership by reason of her death. (at p655)

8. The will expressly adverts to the difference between the situation prevailing at the date of the will, i.e. when there was a "freehold property . . . at Whittlesea . . . owned at the date hereof jointly by my said husband and myself", and the contingent situation for which she was providing, i.e. that at the time of her death she would be "the owner of the freehold property situate at Whittlesea". The draftsman clearly recognized the difference between the existing joint ownership and the possible future absolute ownership. It is true that the draftsman did not advert to the fact that the land was partnership property but, on the assumption that the testatrix would or might acquire, by will or gift, the husband's interest in the partnership land, rightly referred to that possible event as producing the result that the testatrix would be "the owner". (at p656)

9. It is not useful to speculate as to what was in the mind of the testatrix and of her draftsman or as to what misapprehensions they may have been under as to the facts or the nature of the rights of the partners. There are no doubt a number of possible misapprehensions under which they may individually or jointly have laboured. The court, however, can deal only with the words which the draftsman has used and the testatrix has adopted. We do not know and must not speculate about the contents of the husband's will or the arrangements, if any, between the members of the family, or the possible misapprehensions of the testatrix or her draftsman as to the nature of partnership property. (at p656)

10. Coming back to the words themselves, I am bound to say that I find them clear and unambiguous. To many they may seem curious but that is because we can look only at the words and cannot know or enquire as to the subjective intentions of the testatrix and her husband or as to what provision (if any) was made for the daughters by dispositions inter vivos or in the husband's will. It is unproductive and indeed dangerous to speculate about such matters for such speculation distracts the mind from the task of the court, i.e. the ascertainment of the meaning of the will. (at p656)

11. I have said that I find the words of the will clear and unambiguous. So far as material they deal with a contingency for which the testatrix desired to make provision, i.e. the contingency that she might become the "owner" of the freehold property then jointly held with her husband. The fact that it was then jointly held as an asset of the partnership between them does not detract from, but assists in, the conclusion that she was providing for the possibility that she might, by one means or another, acquire her husband's interest in the partnership and its assets or at least in the partnership land. This was obviously a possibility and would have occurred if, for example, her husband had predeceased her and left his interest in the partnership to her. Clearly enough that was the kind of possibility for which she wished to provide. Although there were other possibilities, this does not detract from the force of the fact that this is the only one for which she chose to provide. It was upon the happening of that possible event, and of her retaining the land until her death, that the words of the will directed that the land should go to the daughters. Other possibilities existed but she did not provide for them but made a residuary disposition to her sons which would operate upon whatever she had not specifically disposed of. (at p657)

12. The words of the will appear to me necessarily to require this conclusion and accordingly I think that the Full Court was correct in its construction of the will. (at p657)

13. I would dismiss the appeal. (at p657)

WILSON J. I would dismiss the appeal for the reasons given by the Chief Justice and Aickin J. (at p657)

BRENNAN J. For the reasons stated by the Chief Justice, with which I am in agreement, I would dismiss the appeal and order that the costs of the parties be paid out of the estate. (at p657)

Orders

Appeal dismissed.