Bernard Sullivan Smith ("the testator") died on 19 August 2016 leaving a handwritten will dated 4 February 1966. The testator's administratix, Dawn Smith, now seeks the opinion, advice and direction of the Court under Trustee Act 1925, s 63 as to: (1) whether she would be justified in distributing the testator's estate on the basis that gifts of 80% of the residue of the estate had failed; and (2) whether one half of a lapsed gifts of residue should go upon intestacy to the estate of a brother who survived the testator and the other half in equal shares to the issue of a sister of the deceased.
The testator nominated his wife, Joan Florence Smith, as his executrix. He left his entire estate to her with a gift over in the event of her death to his three siblings and his two in-laws. The gift over was in the following terms:
"I GIVE DEVISE AND BEQUEATH to my wife, Joan Florence Smith, of 14 Cumberland Street, Parramatta, all my real estate and personal property. In the event of my wife's death, I leave all my real estate and personal property to be divided in equal shares between my brothers and sister, namely Henry Denson Smith, Maxwell Smith and Patricia Maude Smith, (now Patricia Maude Earnly), and my wife's brother and sister, namely John Joseph Blinstroub, and Helen June Davies".
The testator's wife predeceased him by exactly 2 years: she died on 19 August 2014. She and the testator had no children.
Other than the testator's brother, Maxwell Smith, each of the beneficiaries named in the will predeceased the testator. The deceased had only three siblings, the two brothers and the sister named in the will. Only one of those siblings left issue, namely Patricia Maude Earnly. She left two daughters, Michele Carol Worthington and Diane Mary England ("the nieces").
For convenience the siblings and other family members will, without intending any disrespect to any family member, be referred to by their first names throughout these reasons, as was done during the hearing of the proceedings.
On 30 November 2016 administration (with the will annexed) of the testator's estate was granted to the deceased's surviving brother, Maxwell. He commenced these proceedings for judicial advice on 12 July 2017.
But Maxwell died on 16 August 2017. Probate of his will was granted to his wife and his executrix and sole beneficiary, Dawn Smith, on 6 November 2017. She became the administrator of the testator's estate. On 24 November 2017 the Summons was amended to substitute Dawn Smith as plaintiff.
The plaintiff contends that on the stated facts and upon the proper construction of the residuary gifts in the will as other than gift to a class, there is an intestacy as to 80% of the residuary gifts and that only 20% of those gifts now take effect. The plaintiff further contends that upon intestacy the nieces together share their mother Patricia's 40% share of the residuary estate (which should be divided equally between them under the Succession Act 2005) and that the plaintiff, Dawn Smith, in her capacity as executrix of Maxwell's estate, will receive the other half (or 40%) of residue together with the 20% of residue to which he was entitled under the will, such that she would receive a total distribution of 60% of the estate.
The hearing took place on 2 February 2018. Mr R. Tregenza of counsel appeared for the plaintiff. Ms L. Clarke of counsel appeared for the nieces.
The matter for judicial advice may be formulated as two questions: (1) whether the gift of residue under the will is a class gift and does not partially lapse, or whether it is a gift to five individuals and therefore partially lapses in respect of those who predeceased the testator; and (2) if the residuary gift partially lapses, what persons and in what proportions are then entitled upon the partial intestacy. These reasons deal with each of these questions in turn.
[2]
(1) Is the gift of residue a class gift?
The first question is whether the gift of residue under the will should be construed: (1) as a class gift; or (2) as a gift to five individuals. If the former, the gift will operate so that the whole of residue goes to the member of the class who survived the testator. If the latter, the valid gifts will operate according to their terms, and the invalid gifts will pass upon intestacy.
In my opinion the gifts of residue should not be construed as a class gift.
The Court applies the 10 canons of construction of wills that Isaac J stated in Fell v Fell (1922) 31 CLR 268: see also Arnott v Leong [2009] NSWSC 187.
Ordinarily a gift in trust to named persons and with a reference to their taking as tenants-in-common will not be construed as a gift to a class: Sykes v Sykes (1867) LR 4 Eq 200 at 204. Here, the testator does not refer to the five members as tenants-in-common. Nor does he refer to them as joint tenants. On ordinary canons of the construction of wills the five would be presumed to be tenants-in-common.
Generally, the court will prefer a tenancy in common over a joint tenancy where: (1) there is doubt as to whether beneficiaries under a will should take as tenants in common or as joint tenants; or (2) where the testator has given the beneficiaries a choice between the two: Booth v Alington (1858) 27 L J Ch 177; Oakley v Wood (1868) 37 L.J. Ch. 28; Theobald on Wills at [26-061].. Where a gift is given "jointly and equally" to beneficiaries under a will, the courts have held the gift as a tenancy in common: Ettricke v Ettricke (1767) Amb. 656; Perkins v Baynton (1781) 1 B.C.C. 118; Theobald on Wills at [26-061].
Moreover, it is not necessary for individuals to be described as tenants-in-common before, on ordinary canons of construction, a gift to them will be construed as to individuals and not to a class.
In Re-Selby (deceased); Cole v Cole [1952] VLR 273 a testator's will provided for gifts to nephews of the testator, where every intended beneficiary was named, where there was no reference to them taking as tenants-in-common, and where there was no contingency annexed to the gift. In those circumstances, Smith J found (at 276) that the named beneficiaries will take as individuals and not as a class in accordance with the prima facie rule of construction, even though all the individuals stood in a common relationship to the testator, and even though they were described by reference to that common relationship in addition to being individually named. Smith J recorded that rule of construction as being "well-established" by the mid-18th century and cited Cresswell v Cheslyn (1762) 2 Ed. 123 and Bain v Lescher 59 E.R. 926; (1840) 11 Sim. 397; John G Ross Martyn et al, Theobald on Wills (Sweet & Maxwell, 18th ed, 2016) at [20-015].
Nothing in the will rebuts the prima facie rule of construction in this case. Indeed, obstacles exist to inferring that the five persons named in the will constitute a single class. Three of the five are siblings of the testator. Two of the five have no blood relationship to the testator but were his in-laws. This composite set of relationships does not readily indicate a single class was intended to benefit.
Thus, prima facie all the gifts of residue fail apart from that to Maxwell, who survived the deceased. The next question is whether any applicable legislation saves the gifts of residue that might otherwise lapse.
Were it applicable, Succession Act 2006, s 42 would save these gifts of residue from lapsing. Succession Act, s 42(2) provides as follows:
"42 Construction of residuary dispositions
…
(2) If a part of a disposition in fractional parts of all, or the residue, of the testator's estate fails, the part that fails passes to the part that does not fail, and, if there is more than one part that does not fail, to all those parts proportionally.
…"
But this section is inapplicable to the testator's will. The Succession Act transitional provisions provide that s 42 only applies to wills made on or after the commencement of the Act: Succession Act, s 144, Schedule 1, clause 3. The transitional provisions commenced on 1 March 2008, well after the testator's 1966 will. So Succession Act, s 42 does not apply.
The Court will prefer a construction which leans against intestacy and will seek to preserve, rather than destroy, a gift: Gordon Salier v Robert Angius [2015] NSWSC 853 at [31]. But the application of established principles of construction produces a clear result, in this case: the testator did not make a class gift. This means that the gifts to each of the residuary beneficiaries named in the will, other than Maxwell, lapse and the shares that would otherwise have passed to them are subject to a partial intestacy; that is, a partial intestacy as to 80% of the testator's estate.
[3]
(2) Who takes and in what proportions upon any intestacy of residue?
The next question is who is entitled to the 80% of the testator's estate that is the subject of partial intestacy and in what proportions. The provisions of the Succession Act dealing with intestacy resolve this question.
Succession Act, s 129 provides:
"129 Brothers and sisters
(1) The brothers and sisters of an intestate are entitled to the whole of the intestate estate if the intestate leaves:
(a) no spouse, and
(b) no issue, and
(c) no parent.
(2) If no brother or sister predeceased the intestate leaving issue who survived the intestate, then:
(a) if only one survives--the entitlement vests in the surviving brother or sister, or
(b) if 2 or more survive--the entitlement vests in them in equal shares.
(3) If a brother or sister predeceased the intestate leaving issue who survived the intestate:
(a) allowance must be made in the division of the estate between brothers and sisters for the presumptive share of any such deceased brother or sister, and
(b) the presumptive share of any such deceased brother or sister is to be divided between the brother's or sister's children and, if any of these children predeceased the intestate leaving issue who survived the intestate, the deceased child's presumptive share is to be divided between the child's children (again allowing for the presumptive share of a grandchild who predeceased the intestate leaving issue who survived the intestate), and so on until the entitlement is exhausted."
Succession Act, s 129(1) is enlivened because the testator left no spouse, no issue and no parent. But Patricia Earnly predeceased the testator and left issue, namely the testator's two nieces, Diane Mary England and Michele Carolyn Worthington.
Succession Act, s 129(3) is directly applicable. Maxwell would be entitled under s 129 (1) and (2) "to the whole of the intestate estate" as he alone survived. But because Patricia, who predeceased the testator, was a sibling leaving issue, namely the nieces who survived the testator, "allowance must be made under s 129(3)(a) in the division of the estate between brothers and sisters for the presumptive share of any such deceased brother or sister". That means in this case that allowance must be made for Patricia's presumptive share in the division of the estate with Maxwell. And Succession Act, s 129 (2)(b) uses the words "if 2 or more survive the entitlement vests in them in equal shares", which indicates that the allowance for Patricia's presumptive share is an allowance for Patricia to receive a one half share with Maxwell on the intestacy. Patricia's presumptive entitlement is as to one half of the intestate estate. And that half in turn is required under Succession Act, s 129(3)(b) to be "divided between the child's children", such that the nieces should then take in equal shares their mother's half share of the intestate estate.
[4]
Conclusions and Orders
The Court advises that the plaintiff would be justified in distributing the testator's estate on the basis that 80% of the gifts of residue under the will lapse and that half of the gifts so lapsing will pass upon intestacy to the estate of the testator's brother Maxwell, and the other half will pass on intestacy to the testator's nieces in equal shares.
Ordinarily the plaintiff's costs of this application in her role as administrator of the estate should be paid out of the estate on the indemnity basis and the Court will so order. The nieces had an interest in appearing upon the application, and it was in the estate's interest that they did, so they would be bound by the advice given. The nieces' legal costs will be paid out of the estate on the ordinary basis.
The Court will therefore order as follows:
1. The Court advises that the plaintiff would be justified in distributing the testator's estate on the basis that 80% of the gift of residue lapses and that half of the gifts so lapsing will pass upon intestacy to the estate of the testator's brother Maxwell, and the other half will pass upon intestacy to the testator's nieces, Michele Carol Worthington and Diane Mary England, the daughters of the testator's sister Patricia Maude Earnly, in equal shares.
2. Order that the plaintiff's costs be paid out of the estate on the indemnity basis.
3. Order that the costs of the testator's nieces, Michele Carolyn Worthington and Diane Mary England, be paid out of the estate on the ordinary basis.
[5]
Amendments
23 April 2020 - [25] Succession Act, s 29(1) to Succession Act, s 129(1)
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Decision last updated: 23 April 2020