Phillips v Crawford
[2017] NZHC 1478
•30 June 2017
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2016-488-138 [2017] NZHC 1478
UNDER the Declaratory Judgments Act 1908 IN THE MATTER OF
the estate of KRUZO PHILLIPS
BETWEEN
DORIS PHILLIPS Plaintiff
AND
JOHN ERNEST CRAWFORD First Defendant
PHILIP SAMPSON WELLS Second Defendant
Hearing: 7 June 2017 Appearances:
A J Steele for the Defendants
D J Blaikie and T L Luders for the PlaintiffJudgment:
30 June 2017
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 30 June 2017 at 11:30am
pursuant to Rule 11.5 of the High Court Rules
………………………………………………….
Registrar/Deputy Registrar
Solicitors:
Douglas J Blaikie, Kaikohe, for the Plaintiff
Martelli McKegg (A J Steele), Auckland, for the Defendants
PHILLIPS v CRAWFORD [2017] NZHC 1478 [30 June 2017]
[1] This case concerns the distribution of the estate of the late Kruzo Phillips who died on 22 August 2009 in his 70th year. He survived his parents. He did not marry. Although he had been in a de facto relationship, that came to an end in the
1980s. He had no children. He had one sibling, John Yukich, who died on 25 July
2015.1
[2] Mrs Phillips, the plaintiff, is the administrator of John Yukich’s estate. She claims in Kruzo’s estate as the next-of-kin who would take under an intestacy under the Administration Act 1969. The defendants are the executors of Kruzo’s will dated 24 April 1995, for which probate was granted on 28 September 2009. The significant asset of the estate is Kruzo’s 184 hectare farm called “Onoke” on the estuary of the Whirinaki River in the south Hokianga. Kruzo was however no farmer. John Crawford, one of the defendants, managed the farm for Kruzo. Other farmers used Onoke for grazing, a Mrs Leigh and later Mr Stan Morley. In 1998
Mr Morley made an agreement with Kruzo under which he grazed cattle on the farm. That grazing arrangement has apparently continued until now.
[3] The relevant parts of Kruzo’s will of 24 April 1995 say:
3. I GIVE DEVISE AND BEQUEATH all the real property and chattels thereon comprising my farm situated in Opononi comprised and described within certificates of title 501/258 and 2D/364, North Auckland Land Registry or the estate or interest therein which I may possess at my decease (hereafter called “the property”) to my trustees UPON TRUST that my trustees shall permit the said JOHN CRAWFORD to use, occupy and enjoy the property, its improvements, chattels, equipment, machinery, live and dead stock, crops and produce, without impeachment of waste and all profits therefrom during his life time for so long as he shall elect he managing, farming and maintaining the property as he has done during my life time and paying all outgoings in connection therewith provided that and I EXPRESS THE WISH without creating a binding trust thereby that the property shall be kept in one unit and not subdivided or otherwise affected during the continuation of the said interest.
4. After the termination of such interest I DIRECT my trustees to dispose of the property in such manner as my trustees shall think most appropriate PROVIDED THAT and I EXPRESS THE WISH without creating a binding trust thereby that the property shall not be subdivided or otherwise affected but shall be maintained in one unit as far as is practicable.
1 While John kept his father’s surname, Kruzo changed his surname to his mother’s maiden name.
5. I GIVE DEVISE BEQUEATH AND APPOINT all the remainder of my property both real and personal whatever and wherever into my trustees upon trust to pay thereout all my just debts funeral testamentary and administration expenses and to stand possessed of the residue and of all assets and investments comprising the same (hereafter called “my residuary estate”) UPON TRUST to dispose of my residuary estate in such manner as my trustees think appropriate.
[4] Mrs Phillips says that Onoke and the residuary estate pass to Kruzo’s next-of- kin under intestacy because:
[a] the life interest in favour of John Crawford is determinable and was determined when he elected not to manage, farm and maintain the property; and
[b] clauses 4 and 5 of the will are void for uncertainty.
[5] The defendants say that those arguments cannot succeed. They have applied for summary judgment. The test applied on a defendants’ application for summary judgment is well-established. The principles stated by the Court of Appeal in Westpac Bank v M M Kembla New Zealand Ltd continue to apply.2
[6] Before dealing with the main questions, I note some non-issues. The executors’ evidence has speculative suggestions that John Yukich is not the only sibling of Kruzo Phillips. They offer no persuasive evidence that Kruzo had other brothers or sisters. The speculation is not enough to disprove Mrs Phillips’ standing to sue.
[7] There are assertions, especially from the executors, as to what Kruzo would have wanted. They are misdirected. This case is concerned with Kruzo’s intentions in his will, which is to be construed according to its text read in light of the circumstances in which it was made.
[8] In so far as the case concerns validity of dispositions under the will, the Wills
Act 2007 does not apply. Section 8(4), which allows for disposition of property by
2 Westpac Banking Corporation Ltd v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) [58]-[64].
creating a power or trust by will, applies only to wills made after 31 October 2007.3
The point is academic. For this case the law is the same, whenever the will was made.
Facts
[9] Kruzo’s estate vested in the executors on his death. After probate was granted, a transmission was registered to show the executors as legal owners of Onoke. There is no dispute that under cl 3 of the will John Crawford took an equitable life interest in the farm. Mrs Phillips says that that is a determinable life interest, because it comes to an end if Mr Crawford elects not to manage, farm and maintain the property under cl 3 and he has so elected.
[10] Mr Crawford says that he was introduced to Kruzo Phillips around 1991.4 At the time, he was a stock agent and also had experience in managing farms through his former association with Leigh & Associates, a Far North stock and station business. Mr Crawford says that from around 1991 he assisted Kruzo in managing the farm. He has continued to manage the farm from then up until now, including since Kruzo’s death. As examples of his farm management he refers to hiring, managing and assisting a bulldozer operator to repair a site for cattle yards; arranging digger and bulldozer operators to clean and repair dams; repairing erosion and storm damage to a stopbank and maintaining farm tracks. He managed the repair of two major slips at different times. He repaired the house site and made six new dams, installed new culverts in appropriate places and planted trees to control erosion. He says that Kruzo had arrangements whereby he gave Mrs Leigh, associated with Leigh & Associates Ltd, grazing rights and later Mr Stan Morley. While he was alive, Kruzo Phillips never gave up occupation of the farm, and he lived on it up until his death. Mrs Leigh, and later Mr Morley, paid for the right to graze their cattle on the farm, but they were not otherwise asked to contribute
towards the maintenance of the farm. That lay with the land-owner, Kruzo.
3 Wills Act 2007, s 40(2)(a).
4 He initially said that was in 2001, but changed that to 1991. I accept that correction, given the
references to him in Kruzo’s 1995 will.
[11] Mr Crawford says that when times were going well, Mr Morley would put fertiliser on the farm, and Kruzo would contribute to half of those expenses. Sometimes Kruzo was absent from the farm and Mr Crawford looked after it while he was away. That included Kruzo giving him signing authority on his sole bank account. He says that Kruzo trusted him to make all the necessary decisions for managing the farm and paying all the farm expenses and rates. Mr Crawford says that he has continued to do that until now. He was paid to build the cattle yards and the concrete house, but he has never sought payment for any other work or assistance. He did it out of friendship for Kruzo.
[12] Mr Morley’s evidence is about the grazing arrangements. He says that originally Mrs Leigh grazed cattle on Kruzo’s farm and he later took over. He had a simple written agreement. The one in evidence is handwritten and dated
20 December 1998. He has put two versions in evidence. Under the grazing deal with Kruzo, Mr Morley was to pay $26,000 plus GST per annum on the basis of
$2.50 per week for 200 head to be paid at $2,437.50 per month, including GST, by automatic payment. Kruzo was to fertilise at least half the farm each year – the estimated cost was about $9,100. The payment was to be the same, regardless of the number of stock on the land. Kruzo was to shift the stock as required. The arrangement was to start from 1 March 1999. Each side was to give each other three months’ notice if they wished to discontinue grazing. Mr Morley says that that grazing arrangement has continued following Kruzo’s death. He regards Mr Crawford as generous in not increasing the grazing fees. He has spent money on fencing and fertiliser. He also says that before and after Kruzo’s death Mr Crawford supervised contractors and also did physical work himself. He reports to Mr Crawford as the farm’s manager and did so before Kruzo’s death.
[13] Mr Wells, the other executor, is an Auckland lawyer. He says that the grazing arrangements Kruzo made with Mr Morley have continued. He also says that Mr Crawford has continued to manage the farm, as he had before Kruzo’s death. Mr Crawford has personally paid the rates and other expenses of the farm. He confirms that Mr Crawford remains a life tenant and, as such, manages the farm just as he did as Kruzo’s farm manager. He also says that as a back-up arrangement, in case the court finds that Mr Crawford’s life interest has determined, he and
Mr Crawford as trustees and executors of the estate have resolved that Mr Crawford should have a life interest in the farm. Their resolution dated 19 December 2016 has been put in evidence.
[14] In opposition, Mrs Phillips describes the grazing arrangements with Mr Morley as a lease. She says that whenever she went to the farm while Kruzo was alive she did not see Mr Crawford. Kruzo originally owned cattle but sold them, leading to Mrs Leigh and later Mr Morley leasing the farm. The property deteriorated while Kruzo owned it: a wharf was removed, a farm house burned down, an historic jail was removed. The concrete block building to replace the original house was substandard accommodation. The farm now has no internal fencing to speak of.
[15] Mr Neil Phillips, Doris’s son, describes his dealings with Kruzo while he was alive. They were first cousins. The tenor of his evidence is to play down Mr Crawford’s assertions that he managed the farm.
Does Mr Crawford still hold a life tenancy?
[16] While Mrs Phillips accepts that cl 3 of the will gives Mr Crawford a life tenancy, she says that it has come to an end. Her case is that the way he has dealt with the property is inconsistent with the terms of cl 3. She relies in particular on these words:
for so long as he shall elect he managing, farming and maintaining the property as he has done during my life time and paying all outgoings in connection therewith
In the absence of submissions going the other way, I assume in favour of Mrs Phillips that cl 3 confers a determinable life estate (as opposed to a conditional estate) and that the words above specify the event which triggers termination of the estate.
[17] Mrs Phillips says that the arrangement under which Mr Morley grazes the property is a lease under which he has exclusive possession. That lease is inconsistent with the terms of Mr Crawford’s life interest, which is subject to
Mr Crawford “managing, farming and maintaining the property”, something he must elect to carry out. The argument runs that by allowing Mr Morley to graze the property under a lease Mr Crawford is not himself managing, farming and maintaining the property. He may be doing some maintenance but that alone is not enough. Mr Morley is farming the property.
[18] The words “managing, farming and maintaining the property” are to be read in context. “...[T]o use, occupy and enjoy the property…during his lifetime” confer a life interest. That is an interest under which its holder enjoys a range of rights almost as extensive as those of the owner of a freehold estate. There are limits: a life tenant may be liable for waste and cannot dispose of the remainder (unless additional powers are conferred). A life tenant has exclusive possession which includes the right to bar and to permit entry on the property. A life tenant may grant lesser interests in the property, including leaseholds, so long as the leases may not run past the death of the life tenant. In the ordinary case a life tenant is not required to occupy the property in person. His right to grant leases of the property entails that someone else, a lessee, may obtain exclusive possession which carries the right to exclude others from entry, including the life tenant as lessor.
[19] Under the will Mr Crawford took the property in its existing state as at Kruzo’s death. He is not required under the will to upgrade the property – to put it into a better state than at Kruzo’s death.
[20] “Without impeachment of waste” is the standard drafting by which a life tenant’s liability for waste at common law is excluded. In Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd the Court of Appeal said:5
[39] Waste is any act or omission by the lessee or tenant that causes enduring change to the nature of the thing demised, to the prejudice of the holder of the reversionary interest. It may be voluntary, meaning a positive act, or permissive, meaning an omission. An example of voluntary waste is damage done to the fabric of a building when removing a tenant’s fixtures on termination. The most common example of permissive waste is allowing fixtures to fall into disrepair.
5 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZCA 390, [2016] 2 NZLR 281 at [39], set aside on appeal, but not on this point: Mobil Oil New Zealand Ltd v Auckland Waterfront Development Agency Ltd [2016] NZSC 89, [2017] 1 NZLR 48 at [28].
[21] Section 70 of the Property Law Act 2007 removed liability for permissive waste. Kruzo died after the act came into force.
[22] The Court of Appeal referred to two categories of waste. There are others: ameliorating waste and equitable waste. The first involves altering the character of the land or buildings but so as to increase its value. It is not relevant here. Equitable waste deals with abuse of the immunity where a life tenant holds “without impeachment of waste”. At common law the life tenant was free to do anything with
the land but equity intervened in cases of wanton destruction.6 The ground for
intervention was the tenant’s unconscientious use of his powers, as by destroying the subject of the settlement.7 Accordingly under the will Mr Crawford cannot be liable for permissive waste and can be liable for voluntary waste only if the deliberate destruction of or damage to property or buildings amounts to an unconscientious use of his immunity at common law to a claim for waste. In short Kruzo did not intend Mr Crawford or his estate to be vexed with claims for waste except in the extreme
case of equitable waste. He is protected from claims that go only to criticism of his farm management.
[23] Now for the words Mrs Phillips relies on. Potentially they may apply to three aspects: use of the farm, Mr Crawford’s involvement and the quality of his management.
[a] As to use, Onoke was to be farmed. Other uses not consistent with “managing, farming and maintaining” are excluded. Living on the property in conjunction with a farming operation would be consistent, but subdividing the property and developing it for residential housing would not.
[b] As to involvement, the question goes to whether Mr Crawford is required to live on Onoke and carry on farming in person or whether he may live off the farm and make arrangements under which others
use the land for farming. “As he has done during my lifetime” is the
6 See Vane v Lord Barnard (1716) 2 Vern 738.
7 Baker v Sebright (1879) 13 Ch D 179 at 184-185.
pointer. While Kruzo was alive, Mr Crawford did not live on the farm but managed the property from off-site. Kruzo had arrangements with third parties under which the property was grazed, first Mrs Leigh and later Mr Morley. Mr Crawford managed the property without grazing his own cattle. The will anticipated that Mr Crawford would look after the property as he had before: from off- site and under arrangements under which others used the property for their farming operations.
[c] As to quality of management, the words must be read consistently with other parts of cl 3, especially “without impeachment of waste”. Cl 3 does not set any higher standard of management than to avoid liability for equitable waste. To require anything more would lead to inconsistency.
[24] “For so long as he shall elect” is to be read with “during his lifetime”. It allows Mr Crawford to surrender his life interest, for example, if he finds that the costs exceed the returns. Mrs Phillips says that the election goes to “managing, farming and maintaining the property” whereas the executors say that the clause is to be read as if there were a comma after “elect”. The executors’ submission makes the sentence more readable, but little turns on the point. “Managing, farming and maintaining the property” is still a matter of choice.
[25] In summary cl 3 arguably limits Mr Crawford’s use of the property to farming and ancillary uses, but it does not require him to live on the property or to carry on a farming operation himself. He may make arrangements under which others may farm the property. He has no liability for waste except in the unusual case of equitable waste. His standard of management is no higher than that. He is required to meet all outgoings in connection with his use of the property. Subject to those matters he has all the rights and powers of a life tenant, including any income from the farm.
[26] On that interpretation, does Mrs Phillips have an arguable case that
Mr Crawford no longer holds an equitable life interest under the will? Care is
required here, given the Court of Appeal’s admonition that summary judgment is inappropriate where there are disputed issues of material fact.8 It is not a matter of choosing between competing versions of the facts. Instead I assume that at trial Mrs Phillips may be able to prove the facts she asserts. Her case is that Mr Morley has a lease of the farm under which he has taken responsibility for the maintenance of the farm and that is inconsistent with Mr Crawford managing, farming and maintaining
the property under cl 3 of the will.
[27] The grazing arrangement with Mr Morley is unlikely to be a lease. At common law a grazing contract is not a lease. In Grazing and Export Meat Co Ltd v Anderson Macarthur J cited old authority that an agistment contract was in the nature of a contract of bailment which confers no interest in the land.9 Under typical grazing arrangements, the owner of the cattle pays the landowner a certain rate per week per head of cattle, but other payment arrangements are possible. In Grazing and Export Meat Co Ltd v Anderson, the parties agreed on a basic rate of payment of
$16,000 per annum. Macarthur J rejected a submission that the contract was in truth a lease. He said:10
Although the contract in the present case comprises terms which may sometimes be found in leases, the contract does not grant to Gemco the right of exclusive possession of the land. It follows that the relationship of landlord and tenant is not created by the contract and therefore the defendants have no right to distrain for rent pursuant to the landlord’s right at common law.
[28] In this case, the agreement of December 1998 is called a “grazing deal”. Admittedly the label the parties put on a transaction is not determinative.11 But the provisions under which Kruzo was to fertilise the land and to shift the stock are
strong indicators that Mr Morley did not have exclusive possession of the land and
8 Westpac Banking Corporation Ltd v M M Kembla New Zealand Ltd, above n 2, at [62]
9 Grazing and Export Meat Co Ltd v Anderson [1976] 1 NZLR 187 (SC).
10 At 190.
11 Street v Mountford [1985] AC 809 (HL) at 819:
But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.
that the contract was in the nature of a bailment. Kruzo’s continued occupation of
the land is also inconsistent with his giving exclusive possession to Mr Morley.
[29] The case for the grazing arrangement to be no more than a bailment is strong, but it is not overwhelming. For Mrs Phillips it is arguable that that arrangement may have changed over time. At this stage she cannot be required to disprove the alleged bailment. Cross-examination of witnesses may show that the nature of the agreement has evolved since Kruzo’s death. I accordingly assume, contrary to the evidence given so far, that a full hearing may show that the arrangements under which Mr Morley grazes his cattle on “Onoke” are not just a bailment, but a lease under which he has exclusive possession of the land, as recognised by the Court of
Appeal’s decision in Fatac Ltd (in liquidation) v Commissioner of Inland Revenue.12
[30] But even if Mrs Phillips establishes that Mr Morley is occupying Onoke under a lease and that Mr Crawford is not involved in day-to-day management of the farm, that does not mean that his life tenancy has come to an end. The property is still being farmed. As Mr Crawford is not required personally to run the farm, a lease (a grant of a lesser interest in the land) to a tenant who farms it by grazing is within cl 3. There is no suggestion anywhere that Mr Crawford has committed equitable waste. He clearly intends to hold the property under his life tenancy. That intention is confirmed by the resolution of the executors for a fresh life tenancy, if the court finds for Mrs Phillips on this part of the case. Mrs Phillips does not have an arguable case that any provisions under which the life tenancy is determined have been triggered.
[31] I rely on the executors’ resolution only for a factual matter – proof that Mr Crawford has not abandoned his intestacy. I have not assumed that it is legally valid. In making their resolution the executors rely on cl 4. That leads to the next question.
Are clauses 4 and 5 of the will valid?
[32] Mrs Phillips says that the clauses fail because they do not satisfy the trust requirement for certainty of objects. She does not argue that the clauses fail for
12 Fatac Ltd (in liq) v Commissioner of Inland Revenue [2002] 3 NZLR 648 (CA) at [66]-[68].
invalid delegation of the power to make a will. Hoffmann J put paid to that supposed doctrine in Re Beatty’s Will Trusts.13 The executors on the other hand say that cl 4 is a general power of appointment, for which there is no requirement for certainty of objects. They did not address cl 5. They assume that there is no residuary estate, but that has not been established.
[33] The basic rule is that a trust will fail if its beneficiaries or objects are uncertain, unless it is a charitable trust. It must be possible to ascertain the beneficiaries who have standing to enforce the trustee’s duties under the trust. In Morice v Bishop of Durham, Sir William Grant MR said:14
There can be no trust, over the exercise of which this Court will not assume a control; for an uncontrollable power of disposition would be ownership, and not trust. If there be a clear trust, but for uncertain objects, a property, that is to be subject to a trust, is undisposed of, and the benefit of such trust must result to those to whom the law gives ownership in default of disposition by the former owner. But this doctrine does not hold good with regard to trusts for charities. Every other trust must have a definite object. There must be somebody, in whose favour the Court can decree performance.
On appeal, Lord Eldon said: 15
If a testator expressly says, he gives on trust, and says no more, it has been long established, that the next of kin will take. Then, if he proceeds to express the trust, but does not sufficiently express it, or expresses a trust, that cannot be executed, it is exactly the same as if he had said, he gave upon trust, and stopped there.
And:16
As it is a maxim, that the execution of a trust shall be under the control of the Court, it must be of such a nature, that it can be under that control; so that the administration of it can be reviewed by the Court; or, if the trustee dies, the Court itself can execute the trust. A trust therefore, which in case of maladministration could be reformed; and a due administration directed; and then, unless the subject and the objects can be ascertained, upon principles, familiar in other cases, it must be decided, that the Court can neither reform maladministration nor direct a due administration.
[34] In Re Wood, Barton v Chilcott, Harman J said:17
13 Re Beatty’s Will Trusts [1990] 1 WLR 1503 (Ch).
14 Morice v Bishop of Durham (1804) 9 Ves Jun 399 at 404.
15 Morice v Bishop of Durham (1805) 10 Ves Jun 522 at 527.
16 At 539-540.
…a gift on trust must have a cestui que trust and there being here no cestui que rust the gift must fail. … A testator cannot simply say: “I give part of my estate to the British Broadcasting Corporation if and when they decide on any Sunday morning during the next twenty-one years to issue an appeal on behalf of some cause or another and I am willing to leave to them the entire discretion as to which cause it is.” There is no cestui que trust here, and gift must fail on that ground.
That case might be decided differently today in the light of Re Beatty,18 but the dictum remains sound.
[35] In Re Baden’s Deed Trusts, McPhail v Doulton Lord Hodson said:19
In a sentence there is no trust over which the court cannot assume control. If the inability arises from inability to ascertain the objects of the alleged trust, it is said to be void for uncertainty.
[36] A settlor or testator may establish a trust for particular persons. In that case the trustees must be able to draw up a complete list of all those intended to take under the trust. Instead the trust deed or will may provide for distributions among members of a class of beneficiaries. The certainty requirement there is that the trustees must be able to say whether a particular person is a member of the class but they are not required to make a complete list of all members of the class.20
[37] But (except in the case of charitable trusts) a trust deed cannot allow distributions to an undefined mass of people or for a non-charitable purpose. Such a trust could not be administered or enforced by the court. In the absence of any class of beneficiaries, the trust fails for lack of certainty of objects.
[38] In Re Pugh’s Will Trusts, Pennycuick J gave examples:21
[a] In Vezey v Jamson,22 the testator gave the residue of his estate to his
executors on trust “in default of appointment, to dispose of it at their
pleasure, either for charitable or public purposes or to any person or
17 Re Wood, Barton v Chilcott [1949] Ch, 498 (Ch) at 501.
18 Above n 13.
19 Re Baden’s Deed Trusts, McPhail v Doulton [1971] AC 424 (HL) at 440. Lord Hodson dissented but his dicta I cite in this decision have always been accepted as authoritative.
20 Above n 19.
21 Re Pugh’s Will Trusts [1967] 1 WLR 1262 (Ch).
22 Vezey v Jamson (1822) 1 Sim & St 69.
persons, in such shares, etc., as they in their discretion should think fit.” The trust was held to be too general and undefined to be executed by the court. The executors could not take because the estate was expressly given on trust. The next of kin were entitled.
[b] In Buckle v Bristow,23 under his will the testator gave the residue of his property upon trust for his executors to hold for such uses and purposes as he might by codicil or deed directly appoint and, in default, to be expended and appropriated within three years after his decease, in such way and manner and for such purposes as they or the majority of them might in their judgment and discretion agree upon. The gift in the will was held to be a trust, not a power including ownership. The trust was held void as being too uncertain for the court to act on. The next-of-kin took instead.
[c] In Yeap Cheah Neo v Ong Cheng Neo,24 the will directed the executors to hold the property in trust and to deal with the remainder as follows:
As regards the remainder of my real and personal property of what kind soever not already disposed of, I DIRECT that my executors shall receive and collect the same from all persons whatever, and in such manner as to them may seem proper, and I DIRECT that they, their heirs, successors, representatives, or descendants may apply and distribute the same, all circumstances duly considered, in such manner and to such parties as to them may appear just.
That was held not to be an absolute gift to the executors as individuals. Although a trust was intended to be created, it failed for want of adequate expression.
[d] In Re Chapman, Hales v Attorney-General,25 the codicil of the
testatrix desired that her residue should be “applied for charitable
purposes as I may in writing direct, or to be retained by my executor
23 Buckle v Bristow (1864) 10 Jur NS 1095.
24 Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381.
25 Re Chapman, Hales v Attorney-General [1922] 2 Ch 479 (CA).
for such objects and such purposes as he may in his discretion select and to be at his own disposal.” It was held that no good charitable trust had been declared as the executor had a discretion to apply the residue to non-charitable objects and purposes and the trust for those objects and purposes was too indefinite for the court to execute. The executor did not take the residue beneficially, but held it as trustee for the next-of-kin.
[e] In Re Rees Will Trust, Williams v Hopkins,26 the testator left the whole of his property to his trustees absolutely: “they well knowing my wishes concerning the same”. He told his trustees when he made his will that he wished them to make certain payments out of his estate and retain the surplus for their own use. The trustees made the payments directed by the testator, but there remained a substantial balance. The trustees were held to have taken upon a trust. As the entire estate was not disposed of by the will, the residue passed on intestacy.
[39] Pennycuick J said that the effect of the authorities:27
…is that where one finds a gift upon trust to apply the subject matter in such manner or for such purposes, or whatever the words may be, as the donee may think fit, then that represents a trust for undefined objects such as the court cannot execute, and the trust is void, always of course in the absence of any further indication of intention.
[40] For Mrs Phillips it was submitted that this case fell within that line of authorities. The directions in cl 4 “to dispose of the property in such manner as my trustees shall think most appropriate” and in cl 5 “to dispose of my residuary estate in such manner as my trustees think appropriate” do not specify a class of beneficiaries and are not confined to charitable purposes. They cannot be enforced by the court and are void for uncertainty. That argument succeeds if these directions are “trust powers”. Under a trust power a trustee must make a distribution, but has a
discretion as to which beneficiaries in a class to distribute to and how much. A
26 Re Rees Will Trust, Williams v Hopkins [1950] Ch 204 (CA).
27 Above n 22 at 339.
beneficiary may enforce a failure to make any distribution at all under s 68 of the
Trustee Act 1956.
[41] The executors say that these are not trust powers, but “mere powers”. Such powers are discretionary rather than imperative; they need not be exercised. They are general powers because they may be exercised in favour of anyone, including the donee, and for most purposes they are tantamount to property.28 A class of beneficiaries is not required. Whereas a trustee is under a fiduciary duty when exercising a trust power, the donee of a power need not be.
[42] The significance of the distinction can be seen in Lord Eldon’s dictum in
Brown v Higgs:29
It is perfectly clear, that, where there is a mere power of disposing, and that power is not executed, this Court cannot execute it. It is equally clear, that, wherever a trust is created, and the execution fails by the death of the trustee, or by accident, this Court will execute the trust.
He went on:
But there are not only a mere trust and a mere power, but there is also known to the court a power which the party to whom it is given is intrusted and required to execute; and with regard to that species of power, the court considers it as partaking so much of the nature and qualities of a trust, that if the person who has that duty imposed on him does not discharge it, the court will to a certain extent discharge the duty in his room and place. The principle is that if the power is one which it is the duty of the donee to execute, made his duty by the requisition of the will, put upon him as such by the testator, who has given him an interest extensive enough to enable him to discharge it, he is a trustee for the exercise of the power, and has not a discretion whether he will exercise it or not. The court adopts the principle as to trusts, and will not permit his negligence, accident, or other circumstances to disappoint the interests of those for whose benefit he is called upon to execute it.
[43] Gresson J brought out the distinction between trust powers and mere powers in Re McEwen:30
Though there is a close resemblance between trusts and powers of appointment, the distinction must be recognized and borne in mind. There is, on the one hand, a trust properly so called, and, on the other hand, a mere
28 Re Churston Settled Estates [1954] Ch 334 (Ch) at 344, 346-7.
29 Brown v Higgs (1803) 8 Ves Jun 561 (HL) at 570.
30 Re McEwen [1955] NZLR 575 (SC) at 577.
power; and somewhere between is a power, which in terms is a power, but which is in the nature of a trust; where the power given is intended to be exercised, and the discretion relates only to the choice of objects. Such a case approximates to a trust; but there is no trust where what is given is a mere power which the donee may, or may not, exercise as he chooses. Whether a power of appointment merely authorizes the donee to dispose of property in a certain manner, or whether it imposes on him an obligation to do so, is sometimes a question of considerable difficulty.
[44] Similarly in Re Baden’s Deed Trusts McPhail v Doulton Lord Hodson said:31
The distinction between a trust and a mere power can be stated shortly although the short statement will require some explanation. It is that where there is a trust there is a duty imposed upon the trustees who can be controlled if necessary in the exercise of their duty. Whether the trust is discretionary or not the court must be in a position to control its execution in the interests of the objects of the trust. Where there is a mere power entirely different considerations arise. The objects have no right to complain. Where by the instrument creating the power the discretion is made absolute and uncontrollable the court cannot interfere … The trust in default controls and he to whom the trust results in default of exercise of the power is in practice the only one competent to object to a wrongful exercise of the power by the donee.
[45] The will is to be construed to see if cl 4 and 5 are trust powers or general powers of appointment. It is important to focus on the words of the will in this case and not to be diverted by decisions on apparently similar wills with apparently similar words.32
[46] Under both clauses the executors hold assets on trust. Cl 5 is explicit. Cl 4 requires elaboration. Express words of trust are not required.33 Under cl 3 the executors hold the farm on trust. The trusteeship continues after the life tenancy comes to an end. While there are two clauses, the second reads as a continuation of the first. In an older drafting style they might have been one sentence. The executors hold the farm on trust first subject to the life tenancy and then subject to
cl 4. The trusteeship is inferentially recognised by the proviso, which states a matter on which there is no trust obligation, the exception proving the rule:
PROVIDED THAT and I EXPRESS THE WISH without creating a binding trust thereby…
31 Above n 19 at 440-441.
32 Re White [1963] NZLR 788 (SC), 789-790, citing Yeap Cheah Neo v Ong Cheng Neo, above n 24, at 389.
33 As an example, see Re Pugh’s Will Trusts, above n 21 at 341.
[47] “I direct” is imperative and inconsistent with a power, which is discretionary. The executors do not have the option of not disposing of the farm or the residue. In Re Baden’s Deed Trusts Lord Hodson said:34
There is no doubt that the primary trust here is expressed in a mandatory form. True that this is not necessarily conclusive: cf. In re Hain's Settlement [1961] 1 WLR 440, 443, per Lord Evershed M.R., but it is a powerful foundation for the argument that a trust so created in its inception is not converted into a power by the mere addition in a later clause of a power to accumulate surplus income.
[48] There is no gift over. In a number of cases finding a general power of appointment, the presence of provisions for others to take in default of any appointment has been taken as showing the optional nature of the power.35 For example, in Re Beatty’s Will Trusts Hoffmann J said:36
Clauses 3 and 4 do not impose any trusts to distribute the chattels or money over which they operated. That is shown by the gift over to residue of the property which has not been distributed within the two-year period.
In Re McEwen Gresson J said:37
The presence of a gift over in default of appointment precludes any implication of a trust; it shows that non-exercise of the power was contemplated.
The absence of a gift over shows Kruzo’s intention that disposition by the executors
in clauses 4 and 5 is mandatory.
[49] The combination of the executors’ holding assets under clauses 4 and 5 on trust, the imperative direction to dispose and the absence of a gift over make these clauses trust powers rather than general powers of appointment.
[50] Now for authorities cited by the executors. In their submissions, the executors were concerned to refute proleptically any argument based on invalid
delegation of the power to make a will. As noted above, Mrs Phillips did not run
34 Above n 19, at 438.
35 See Re McEwen, above n 30, at 577.
36 Above n 13, at 846.
37 Above n 30, at 577.
that argument. Some of the executors’ cases deal with the delegation question rather than distinguishing between trust powers and general powers of appointment.
[51] In Re McEwen38 the testator gave the residue of his estate:
Upon Trust for such person or persons (including the said Sydney Day of Wellington, Plasterer, and William John Stacey of Wellington, Solicitor, either jointly or severally for themselves personally and beneficially and absolutely free of any trust express or implied) as my Trustees may by any deed or deeds at any time or times within a period of ten years from the date of my death appoint AND in default of any such appointment or appointments and in so far as the same shall not extend UPON TRUST for my son Ronald Albert McEwen.
Gresson J found a general power of appointment because of the gift over. While I have drawn on Re McEwen for statements of principle, the will in that case is distinguishable.
[52] The executors referred to this dictum of Pennycuick J in Re Pugh’s Will
Trusts:39
If there had not been the primary direction to dispose of the residuary estate in accordance with letters or memoranda then I would agree with that contention, that is to say, if the gift had been “I give my residuary estate unto my trustee absolutely to dispose of the same in such manner as he may in his absolute discretion think fit” that would be construed as a beneficial gift to the plaintiff.
That turns on the particular provisions of the will in that case. The following dictum distinguishes that case:
One point in favour of counsel for the plaintiff’s argument is that the plaintiff is the sole trustee. It is much easier, I think, to infer an intention that a sole trustee should take beneficially than that two or more trustees shall do so, but that indication is not, I think, sufficient.
In that case, Pennycuick J did find a trust. His comments as to the absence of trust if the will had been drafted differently are obiter.
38 Above n 30.
39 Above n 21 at 341.
[53] The executors cited three Australian authorities: Tatham v Huxtable,40
Lutheran Church of Australia South Australia District Incorporated v Farmers’ Co- operative Executors and Trustees Ltd41and Calcino v Fletcher.42
[54] In Tatham v Huxtable, the home-made will authorised and empowered the executor:
… to distribute any balance of my real and personal estate which may at the time of my decease be possessed wholly or in part by me, to the beneficiaries of this my will and testament, in addition to parts already specified, or to others not otherwise provided for who, in my opinion, have rendered services meriting consideration by the testator.
[55] The majority held that the provision failed for uncertainty. Fullagar J held that power was in the nature of a trust and a class of possible beneficiaries was not defined with sufficient certainty.43 Kitto J held that the clause gave a special power of appointment which failed because the testator had not provided a definite criterion to ascertain the beneficiaries.44 On an alternative construction, he would have found that the provision also failed for uncertainty.45 The judgments contain discussions as to delegation of the power of testamentary disposition, but they are not relevant to this case. Tatham v Huxtable does not assist the executors.
[56] The executors relied on Lutheran Church46 as a case of a mere power where there was no gift over. The absence of a gift over was not fatal in that case, because the will made it clear to whom the executors could distribute. It did not fail for lack of certainty.47
[57] In Calcino v Fletcher,48 the will said “Any residue or other interests I may now have or shall stand possessed of shall be distributed at the discretion of my said
trustees.” Hoare J discussed the provision with regard to the rule against delegation
40 Tatham v Huxtable (1950) 81 CLR 639.
41 Lutheran Church of Australia South Australia District Incorporated v Farmers’ Co-operative
Executors and Trustees Ltd [1970] HCA 12, (1970) 121 CLR 628.
42 Calcino v Fletcher [1969] Qd R 8.
43 Above n 40, at 650.
44 At 656.
45 At 658.
46 Above n 41.
47 See Barwick CJ at [12] and [16] and Windeyer J at [14] and [15].
48 Above n 42.
of the power to make a will, and held that this case fell within the exception for general powers of appointment. He held that this was a case of a general power. It does not, however, appear that there was any argument as to the distinction between a general power and a trust power. The decision is therefore not helpful for present purposes.
[58] The executors referred to Re Nicholls.49 The will in that case provided:
I direct my executor to follow the dictates and directions given to him from time to time by Carson Cowan as to the distribution of the rest and residue of my estate. Should the said Carson Cowan predecease me, I appoint John Richards to give directions as to the distribution of my estate. Should John Richards predecease me, I appoint Carson Wallace to give directions as to the distribution of my estate.
The Ontario Court of Appeal upheld that provision. It referred to academic commentary, Commonwealth case law (including Re McEwen) and the rule against non-delegation of testamentary powers. While some of the Canadian first instance decisions the court referred to dealt with the distinction between a trust power and a general power of appointment, the Ontario Court of Appeal did not address the point. The judgment says:
I conclude from the preceding discussion that the authorities, in which term I include the decisions, dicta and scholarly commentaries, are in such a state of uncertainty that this appeal should be decided on the basis of principle or policy. Would any contemporary societal interest be prejudiced by permitting a general power of appointment created by will to be treated by the law in the same way as a general power of appointment created by an inter vivos instrument. I am unable to see how that question can be answered in the affirmative.
The judgment accordingly assumes that a general power of appointment had been created without first addressing the question of trust power. The decision is accordingly not authority for the point now under consideration.
[59] The executors also referred to the principle of construction that the court should, if possible, try to uphold a will.50 While that principle is undoubtedly sound, it has not stood in the way of courts finding an intestacy when a trust fails for
uncertainty of objects.
49 Re Nicholls (1987) 34 DLR (4th) 321.
50 Citing Lord Esher MR in Re Harrison, Turner v Hellard (1885) 30 Ch D 390 (CA) at 393-394.
[60] The authorities cited by the executors do not give grounds for changing my judgment. On their true construction, clauses 4 and 5 are trust powers which fail for uncertainty of objects. This part of the executor’s case fails.
[61] I come back to a point I left above at [31] – the executors’ decision to grant Mr Crawford a life interest. The matter is academic, because I have held that Mr Crawford’s life interest has not determined, but given the invalidity of clauses 4 and 5, the resolution would not have been effective to confer a fresh life tenancy, if the original life tenancy had already determined.
Result
[62] The parties have had divided success. The executors have shown that Mrs Phillips will fail in her claim that Mr Crawford’s life interest has determined. But they have not shown that her arguments as to the invalidity of clauses 4 and 5 of the will cannot succeed. In a defendant’s summary judgment application, the defendant succeeds if it shows that none of the causes of action in the plaintiff’s statement of claim can succeed. In this case, the statement of claim is set out as a single cause of action, but the matters covered in this judgment are distinct. They are, in truth, two causes of action, one for determination of the life interest and the other for invalidity of clauses 4 and 5. I cannot give the executors summary judgment because that would bar Mrs Phillips from maintaining now or in a future proceeding her arguable case that clauses 4 and 5 are invalid.
[63] I make these orders:
[a] The application for summary judgment is dismissed.
[b] Mrs Phillips is to continue only that part of her claim directed against clauses 4 and 5 of the will. She can no longer assert that Mr Crawford’s life interest had determined when she started this proceeding.
[c] Clauses 6 and 9 of the statement of claim are accordingly struck out.
[64] I direct a telephone case management conference for Monday 17 July 2017 at 12.30 pm. I invite counsel to confer as to further steps, including pleadings, discovery and hearing directions.
[65] I invite submissions as to costs. I will deal with costs at the case management conference.
……………………………….
Associate Judge R M Bell
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