McMillan HC Invercargill CP7/00

[2001] NZHC 254

IN THE HIGH COURT OF NEW ZEALAND
INVERCARGILL REGISTRY CP7/00

IN THE MATTER of the Estate of ALEXANDER THOMAS McMILLAN formerly of Wyndham, latterly of Gore, Retired Farmer, Deceased

AND IN THE MATTER of an application of JOHN LINDSAY McMIILLAN, KEVIN BARRY EARLY and WARWICK ALEXANDER CAMBRIDGE as trustees for the estate of ALEXANDER THOMAS McMILLAN for directions pursuant to Sections 66 and 71 of the Trustees Act 1956

Date of Hearing: 5 April 2001

Counsel: J N P Young for the Plaintiff (granted leave to withdraw)
J G French for the Anglican Church
C W Ward for Presbyterian Social Services

ORAL JUDGMENT OF YOUNG J

[1] These proceedings involve a short issue of interpretation as to the will of the late Alexander Thomas McMillan.

[2] The issue arises as to the disposition by Mr McMillan of the residue of his estate which was addressed in his will in the following terms:—

6. I GIVE AND BEQUEATH the rest and residue of my property both real and personal unto my Trustees UPON TRUST:—

(a) To pay all my debts funeral and testamentary expenses;

(b) To expend whatever monies may be necessary in putting my grave in order;

(c) To hold the rest and residue of my estate:—

(i) As to a one-fourth share for the SALVATION ARMY in Southland;

(ii) As to a one-fourth share for the PRESBYTERIAN SUPPORT SERVICES in Southland;

(iii) As to a one-fourth share for CALVARY HOSPITAL at Invercargill;

(iv) As to a one-fourth share for the ANGLICAN CHURCH in Southland for the benefit of Walmsley House and Takitimu Home at Invercargill;

AND I DIRECT that the above requests shall be expended by the above bodies on welfare work in Southland. The receipt of the secretary or treasurer for the time being of each of the residuary legatees shall be a full discharge to my Trustees.

[3] The present issue relates to the fourth quarter share which was bequeathed to the Anglican Church in Southland. The problem is that Walmsley House, which is one of the two institutions named as being intended to benefit, is not an Anglican institution but rather is owned and operated by Presbyterian Support Services.

[4] The primary contentions of the parties are as follows:—

1. The Anglican Church in Southland contends that it should take a full one-fourth share of the residue and use that for the benefit of Takatimu Home, which is operated by the Anglican Church, or generally for rest care work in Southland.

2. Presbyterian Support Services assert that they should take, for the benefit of Walmsley House, half of the one-quarter share.

[5] There is nothing in the way of extrinsic evidence which is of any assistance other than as to the ownership of the two rest homes which I have mentioned and the acknowledged fact that Calvary Hospital is owned and operated by the Roman Catholic Church.

[6] I accept that the scheme of the will points strongly to the testator having mistakenly assumed that Walmsley House was owned and operated by the Anglican Church. This is consistent with the scheme of clause 6 with the residue being divided into four denominational shares involving the Salvation Army, Presbyterian Support Services, the Catholic Church (which owns and operates Calvary Hospital), and the Anglican Church. As well, given the general scheme, there is no reason to think it likely that the testator would have left money to the Anglican Church with a direction that part of it should be spent on an organisation owned and operated by the Presbyterian Support Services.

[7] Mr French, for the Anglican Church, contended that the will ought to be interpreted in such a way as to overcome this mistake or, alternatively, that it should be rectified.

[8] There are many cases in which testamentary mistakes have been remedied by robust interpretative techniques. Usually these mistakes involve a misdescription either of beneficiaries (as in Re Redfern (1877) 6 Ch D 133, Re Waller (1899) 80 LT 701, British Home and Hospital for Incurables v Royal Hospital for Incurables (1904) 90 LT 601 and Re Hunter (1902) 4 GLR 247) or the property which is bequeathed (as in Re Jensen [1992] 2 NZLR 506). Sometimes other drafting errors have been corrected. In Re Haygarth [1913] 2 Ch 9 the erroneous omission of a hotchpotch provision from a particular clause was remedied. I refer, as well, to Re Doland(Deceased) [1969] 3 All ER 713 and Re Lourie [1968] NZLR 541.

[9] New Zealand authority indicates that these principles of robust interpretation can now be treated as being supplemented by a power of rectification see Jensen, supra and Re Talker (unreported, M 37/99, High Court, Wanganui Registry, judgment of Ellis J, delivered 21 July 2000).

[10] The common feature to all of these cases, including the rectification cases, is that the will as completed did not express the actual testamentary intentions of the testator.

[11] The mistake of the testator in this case was rather different from the mistakes which have customarily been corrected or rectified by the Courts. When Mr McMillan decided to leave a quarter share of his residue to the Anglican Church for the benefit of the two named institutions he acted on the assumption that both institutions were owned and operated by the Anglican Church. It is not that there was an error in translating his testamentary intentions into the will; it is rather the case that his testamentary intentions were, themselves, formed on the basis of a mistake of fact.

[12] It is easy enough to postulate cases involving similar errors. A staunchly Roman Catholic testator with a particular antipathy to the Anglican Church leaves a substantial gift to a hospital which is associated with the Anglican Church. He did this because a close friend had been well treated in that hospital and had told him all about it, a reason which is recorded in his will. So there can be no question but that he intended to benefit that particular institution. But all the available evidence, intrinsic and extrinsic, makes it clear that he had erroneously assumed that the institution was operated by the Catholic Church and that he would not have contemplated the gift to it if he had appreciated the connection with the Anglican Church.

[13] The case I have just postulated is reasonably similar to the present case (at least in terms of general principle). In other words, I find it difficult to see how I could correct the error in this case unless the gift to the hospital, in the case which I have postulated, could be deleted from the will by the Court.

[14] If we begin to correct errors of that sort then we are, indeed, on a slippery slope. A testator leaves a substantial sum of money to a person who befriends him late in life. The will makes it clear that the testator regarded that person as being of good character and intrinsic and extrinsic evidence points to the probability that the gift would not have been made if the testator had believed that person to be of bad character. In such a case would it really be open to the residuary beneficiaries to challenge the gift by seeking to prove that if the testator had known all the facts about the friend no testamentary provision would have been made in favour of that friend. I think not. Yet if the gift to the Anglican hospital, I have postulated, could be deleted by the Court, could a Court really resist the residuary beneficiaries seeking to prove the bad character of the friend?

[15] As I have indicated, I am satisfied that there was no error translating the testamentary intentions of Mr McMillan into the will although I accept that in forming that testamentary intention he was mistaken as to the ownership and operation of Walmsley House.

[16] No cases were cited which establish the power of the Court to correct errors of fact on the part of the testator which merely influenced that testator in the decision to make a specific bequest. In my view there is no such power. So the result is that the primary submission of the Anglican Church fails.

[17] There is a downstream issue which I must address.

[18] Mr Ward contends that the effect of clause 6 (c) (iv) of the will is that Presbyterian Support Services is entitled to call for half the quarter share left to the Anglican Church.

[ 19] The steps in this reasoning are, I think, as follows.

1. The effect of clause 6 (c) (iv) is to create a trust pursuant to which the gift is to be applied for the purposes of the two institutions.

2. A gift which is expressed to be for the purposes of a particular institution should be construed as being to the owner for the time being of that institution and reference was made, perhaps inaptly, to Re Bowes: Earl of Strathmore v Vane [1896] 1 Ch 207.

3. The general rule of interpretation is that where gifts are to made to people named as individuals they are distributed equally. In support of this proposition, Mr Ward referred to Halsbury, Laws of England 4th Ed, Vol 50, para 572. The corresponding paragraph in the current reissue of Vol 50 is para 628. This paragraph addresses issues of interpretation as to whether particular gifts should be distributed per capita or per stirpes. I do, however, accept that a residuary provision leaving a share of the residue to the testator’s personal representatives for the benefit of A and B where A and B are separate individuals would normally be construed as involving an equal division of the relevant share of the residue between A and B.

4. On that basis clause 6 (c) (iv) should be construed as requiring half of the relevant one-quarter share to be paid to Presbyterian Support Services for the benefit of Walmsley House and the balance to be paid to the Anglican Church, for the benefit of Takatimu House.

[20] Mr French, in his submissions, did not really address this issue as one of interpretation. He was content to indicate that if his primary submission was rejected the Anglican Church would behave responsibly and would co-operate with Presbyterian Support Services. No doubt it will. But the interpretation issue must, I think, nonetheless be resolved.

[21] I accept some of what Mr Ward has contended for. In particular, I accept that the funds must be regarded as being held by the Anglican Church on trust for the benefit of the two named institutions. I cannot see any other way of giving effect to the language used in the will. I do not, however, accept Mr Ward’s argument that the Anglican Church is required to apportion the funds equally between the two institutions. I prefer the view that what has been created, in a sense inadvertently as it turns out, is a discretionary trust with the funds required to be applied as between the two institutions but as determined by the Anglican Church.

[22] My fundamental reason for this conclusion is that Mr Ward’s argument to the contrary does not allow for the fact that the testator assumed that both named institutions were owned and operated by the Anglican Church. Given that this plainly was his view, I think it most unlikely that he intended to hamstring the Anglican Church in the way in which it apportioned funds between the two institutions by requiring each institution to receive an equal share of the funds. He would have seen the Anglican Church as far better placed than he was to determine where money was needed as between the two institutions. Furthermore, because the testator assumed that both institutions were owned by the Anglican Church the situation I must deal with is not really analogous to a gift by the testator expressed to be for the benefit of two named separate individuals.

[23] Accordingly I hold the will means that a quarter share of the residue is to be held by the Anglican Church in Southland for the benefit of Walmsley House and Takatimu House with the Anglican Church in Southland to have a discretion as to how the funds are to be applied, as between those two institutions.

[24] [After brief discussion with counsel as to costs] I direct that costs of all parties should come from the quarter share of the residue in issue.

[25] I order accordingly.