Austin & Anor v Wells & Ors

Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (affirmed (1841) Cr & Ph 240; 41 ER 482). CPT Custodian Pty Ltd v Commisisoner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98 Gosling v Gosling (1859) Johns 265; 70 ER 423 Marks v Trustees Executors and Agency Co Ltd (1948) 77 CLR 497 Jenkins v Stewart (1906) 3 CLR 799 Fell v Fell (1922) 31 CLR 268 Re Butler [1980] Qd R 601 Bickersteth v Shanu [1936] AC 290 CASES CITED : re Blackwell [1926] Ch 223 Glanvill v Glanvill (1816) 2 Mer 38; 35 ER 855 re Francis [1905] 2 Ch 295 In re Boden [1907] 1 Ch 132 Commissioner of Pay-Roll Tax v R G Elsegood & Co Pty Ltd [1983] 1 NSWLR 223 Perpetual Trustee Co Ltd v Fenton (1940) 40 SR (NSW) 382 Fox v Fox (1875) LR 19 Eq 286 In re Ussher [1922] 2 Ch 321 In re Blackwell; In re Hume [1912] 1 Ch 693

Jarman on Wills, 8th ed 1951 TEXTS CITED : Haines, Construction of Wills in Australia (2007) Williams on Wills, 9th ed (2008)

Kenneth James Austin & Anor PARTIES : v John Hamson Wells & Ors

COUNSEL : Plaintiff: J van Aalst, M Giugni (11/8/08) Defendants: na

SOLICITORS : Plaintiff: Austin & Giugni Solicitors Defendants: na

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2560/08 Kenneth James Austin & Anor v John Hamson Wells & Ors JUDGMENT 1 HIS HONOUR: The plaintiffs are the executors and trustees of the will of James Frederick John Wells. Mr Wells died on 24 April 2007. By an amended summons filed on 22 August 2008, the plaintiffs seek the following declarations: " 1. A declaration that upon a proper construction of the trust created in clause 3 (c) of the Will made by the late James Frederick John Wells on 8 January 2007 ("the said Will") upon the completion of the administration of the estate of the Deceased by the Plaintiffs as executors, the trust thereupon conferred or shall confer upon Elizabeth Ruby Mathews a vested interest in the net proceeds of the sale and conversion of the real estate and investments comprised in the estate.

2. A declaration that upon a proper construction of the said Will the phrase in clause 3 (c) "ON TRUST for my niece Elizabeth Ruby Mathews such balance to vest in my said niece upon her attaining the age of thirty (30) years" was intended to mean that the Second Defendant was entitled to a vested interest in the said funds to vest in possession upon her attaining the age of 30 years.

3. A declaration that upon the Plaintiffs completing their administration of the said estate they may thereupon release to the Second Defendant the funds they shall hold upon trust pursuant to clause 3 (c) of the said Will and thereby terminate the trust as requested by the Second Defendant in her letter to the Plaintiffs dated 1 April 2008 a copy of which is annexure "J" to the Second Defendant's affidavit sworn herein on 29 April 2008.

4. An order that the costs of the proceedings be paid out of the estate of the late James Frederick John Wells. " 2 The will contains the following relevant provisions: " 3. I GIVE the whole of my real and personal estate of whatsoever kind and nature and wheresoever situated to my Trustee UPON TRUST to sell call-in and convert into money as appropriate and necessary such part or parts thereof as may not consist of money and TO HOLD the nett proceeds of such sale calling-in and conversion together with such part or parts of my estate and property as aforesaid as may consist of money or may for the time being remain unconverted UPON THE FOLLOWING FURTHER TRUSTS namely:- (a) To pay thereout all my just debts funeral and testamentary expenses including any probate death and Estate duties payable in consequence of my death. (b) IN THE EVENT that my wife VALERIE JOAN WELLS survives me for a period of thirty (30) days I GIVE the balance then remaining to my said wife absolutely. (c) IN THE EVENT that my said wife fails to survive me for a period of thirty (30) days then I DIRECT my Trustee to hold the balance remaining ON TRUST for my niece ELIZABETH RUBY MATHEWS such balance to vest in my said niece upon her attaining the age of thirty (30) years. 4. I GIVE to my Trustee the following powers:- ... (c) To apply the whole or any part of the income of the vested expectant or contingent interest of any person or persons taking under this my Will while such person shall be under the age of thirty (30) years as my Trustee in my Trustee's absolute discretion shall think fit to or for the maintenance education advancement preferment or benefit of such person and the receipt of the guardian or guardians for the time being of such person shall be a sufficient discharge to my Trustee who shall not be bound to see to the application thereof. " 3 The testator's wife predeceased him. 4 The estate was valued for probate purposes at $1,204,102.83. It included realty, various investments and the testator's interest in his deceased wife's estate. The administration of the estate is virtually complete. 5 Ms Mathews is now 22. On 1 April 2008, she wrote to the executors asserting a vested interest in the net proceeds of sale which now form the estate. She contended that according to clause 3(c) of the will it was merely her right to possession of the trust fund that was not to vest until she attained 30 years. She requested and directed that the plaintiffs on completion of the administration of the estate transfer to her the net proceeds of the sale, calling-in and conversion of the estate, thereby terminating the trust. 6 Initially, the plaintiffs sought judicial advice under s 63(1) of the Trustee Act 1925 (NSW) as to whether they would be justified in releasing the funds held on trust to Ms Mathews upon their completing the administration of the estate. No defendant was joined as a party to that application. I directed that the summons be amended to seek a declaration as to the proper construction of the will and to join as defendants the persons who would take on an intestacy if Ms Mathews does not have a vested interest in the estate and if she were to die before she reaches the age of 30. The question of construction would then bind all affected parties. 7 The deceased was survived by his brother, Mr John Wells, and three nephews and nieces. The beneficiary, Ms Mathews, is Mr Wells' daughter. The third and fourth defendants, Mr Nathan Wells and Ms Tiffany Rae are the children of the testator's only other sibling, Mr Barry Wells, who died in 1991. Mr John Wells has filed a submitting appearance. Mr Nathan Wells is resident in the United Kingdom. I made orders permitting service of the amended summons on him by email. He was duly served but did not appear. In correspondence with the plaintiff's solicitor, he advised that if the issue were merely to contest whether Ms Mathews should receive any of the estate before she turned 30 then that was not an issue in which he had an interest. 8 The plaintiff's solicitors did not have an address for Ms Rae. She is aware of the proceedings. She wrote to the plaintiff's solicitors asking for the court papers to be sent to her mother's address which was also her mailing address. She advised that she did not have a current email address. The documents were delivered to the address she nominated. Although she was not personally served, I am satisfied that the steps taken to bring the document to her notice are sufficient to that end. Pursuant to r 10.14(3) of the Uniform Civil Procedure Rules I direct that the amended summons be taken to have been served on the fourth defendant on 4 September 2008. 9 Both Mr Nathan Wells and Ms Rae were advised by the plaintiff's solicitors of the nature of the issue and how their interests might be affected. They were also advised that the executors would not contest the payment out of the estate of reasonable legal fees if they chose to participate in the hearing. However, they did not choose to do so. The Issue: Vesting and the Rule in Saunders v Vautier

10 In effect, Ms Mathews seeks to invoke what is known as the rule in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (affirmed (1841) Cr & Ph 240; 41 ER 482). The formulation of that rule approved by the High Court in CPT Custodian Pty Ltd v Commisisoner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98 at 119 is as follows: " Under the rule in Saunders v Vautier , an adult beneficiary ... who has ... an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him ... and may terminate any accumulation. " 11 Thus in Gosling v Gosling (1859) Johns 265; 70 ER 423, Sir W Page Wood V-C said (at 272, 426): " The principle of this Court has always been to recognise the right of all persons who attain the age of twenty-one to enter upon the absolute use and enjoyment of the property given to them by a will, notwithstanding any directions by the testator to the effect that they are not to enjoy it until a later age - unless, during the interval, the property is given for the benefit of another. If the property is once theirs, it is useless for the testator to attempt to impose any fetter upon their enjoyment of it in full so soon as they attain 21. " 12 The point upon which this case turns is the requirement that the adult beneficiary have a vested interest. A person has a "vested" interest in property if he or she has a certain interest in the property even though the right to possession or enjoyment of the property is postponed. Such a person has an estate vested in interest. The estate is vested in possession where the person has a present right of enjoyment. If the person's interest depends upon a contingency which may or may not occur, he or she does not have a vested interest, but a contingent interest. 13 The question whether Ms Mathews is entitled to call for the estate to be paid to her now, or whether she must wait until she turns 30, depends on whether the estate is vested in her in interest. In Marks v Trustees Executors and Agency Co Ltd (1948) 77 CLR 497, Williams J said (at 507): " The weight of authority would appear to favour the view that in English law vesting means prima facie vesting in interest. But it is unnecessary to examine the authorities because the answer must in every case depend primarily on the context of the particular will ." The Presumption against Intestacy

14 The presumption against intestacy requires the Court to prefer a construction which is reasonably open that will avoid an intestacy (Jenkins v Stewart (1906) 3 CLR 799 at 804; Fell v Fell (1922) 31 CLR 268 at 275-276, 279 per Isaacs J).

15 It is of particular significance in this case that the will does not provide for somebody else to inherit the estate if Ms Mathews dies before attaining 30 years. There is a presumption of early vesting of residuary bequests to avoid the possibility of intestacy (Jenkins v Stewart at 804; Re Butler [1980] Qd R 601 at 605).

16 In Bickersteth v Shanu [1936] AC 290 at 297-298, Lord Maugham (delivering the advice of the Privy Council) expressly disapproved of a passage in the 8th edition of Theobald on Wills in which the author stated that the Court did not lean in favour of early vesting of real estate in considering the true construction of a will, but gave effect to the intention expressed in the will without preconception as to what the testator ought to have or has intended. 17 A natural incident of these presumptions is that one should be slow to read the words of a will as importing a contingency. In Jarman on Wills, 8th ed 1951 at p 1409 it is put thus, quoting the first edition at page 767: " ... as Mr Jarman points out: 'it has been generally thought that a very clear intention must be indicated, in order to postpone the vesting under a residuary bequest, since intestacy is often the consequence of holding it to be contingent, or, at least (and this is the material consideration) such may be its effect; for, in construing wills, we must look indifferently at actual and possible events'. " 18 The authors of the 8th edition note that "The doctrine that the Court leans against an intestacy does not affect the construction of unambiguous provisions; per Romer LJ in Re Edwards [1906] 1 Ch 574" (at 1409 n h).

19 In re Blackwell [1926] Ch 223, Warrington LJ observed (at 233-234) that: " ... The question ... is unfettered by any general rule, and the task of the Court is to determine whether on the terms of the whole will fairly read the estate is vested or contingent. I say advisedly that we are unfettered by any general rule, but of course from that I except those rules which apply to all questions of construction, such as, for example, that words are to have their natural meaning unless there be a context which shows that they bear a different meaning. I think I may also refer to another rule as in the same category: That the Court is inclined rather to hold an estate to be vested than contingent if the words of the will allow it to do so. "

Words Importing a Contingency 20 In Glanvill v Glanvill (1816) 2 Mer 38; 35 ER 855, the gift was of the residue of the testator's real and personal estate to his son "to be a vested interest on his attaining the age of 21" with a gift over should he die before 21. The report says: " …the Master of the Rolls [Sir William Grant] considered that it would be difficult to get over the precise words of the will, directing that the legacy should vest at 21. There could not be two periods of vesting, and by fixing one the Testator must be taken to have excluded the other. The sentence itself was so worded, that the direction as to vesting formed a necessary part of it, and the remainder could not be construed without it. Besides, there was no evidence from any part of the will, that the Testator did not affix to the word its precise legal meaning. "

In that case there was no scope for it to be argued that "to be a vested interest on his attaining the age of 21" meant vest in possession. 21 In Re Butler the wording used was held to be unambiguously contingent. The will provided: " … As to the balance of such trust fund, being my residuary estate, I direct my trustee (i) to pay to my grandchild ... one-fifth thereof ... NOTWITHSTANDING the provisions hereinbefore contained in this my will I DIRECT that no infant beneficiary under this my will shall take any interest unless he or she attains the age of twenty one years ... "

Connolly J said (at 604): " … it is well established that a gift to a person at, if, as soon as, when, or provided that he attains a certain age, without further context to govern the meaning of the words is contingent this being a quality or description which the donee must possess in order to claim under the gift. ... A provision that a beneficiary shall not take any interest until he attains the prescribed age is obviously within the same principle. "

22 In re Blackwell, the devise was to the eldest of the testator's sons "who shall be living at the time of my death absolutely upon his attaining the age of twenty-one years" and failing such sum a gift to residue. The gift was held to be contingent. In re Francis [1905] 2 Ch 295, Swinfen Eady J held that a gift upon attaining the age of 21 years without more is a contingent gift according to its natural meaning. Again, the contingency in that case was protected from intestacy by a residuary clause.

23 In Haines, Construction of Wills in Australia (2007), the author says (at 302): " A gift to A to take ' a vested interest on attaining 18 ' is contingent until A reaches that age is unambiguous and the Court must give effect to it. "

24 Likewise, in Jarman on Wills, at 1347, the authors discuss Farmer v Francis and conclude: " So a simple gift to A 'if' or 'when' he attains a certain age, confers on him a contingent and not a vested interest. " 25 Had the gift in clause 3(c) simply been to Ms Mathews "upon her attaining the age of 30 years" the gift would clearly have been contingent. By the same token the draftsman could have clearly indicated that the gift was to vest in interest immediately and in possession on her attaining the age of 30 by providing that the trustees were to hold the balance of the estate upon trust for Ms Mathews and pay such balance to her on her attaining the age of 30. But the ambiguity in the words used is not resolved by pointing to other ways the testator could have expressed himself. 26 I do not place any weight on the fact that if "vest" in clause 4(c) means vest in interest and not vest in possession, so that Ms Mathews has only a contingent interest until she turns thirty, that the words "such balance to vest in my said niece" are surplusage. It is a general principle of construction that: " The court does not as a rule import to the testator that he uses additional words without some additional purpose or without any purpose at all. "

However, additional and unnecessary words are often used to add emphasis ( In re Boden [1907] 1 Ch 132 at 143; Commissioner of Pay-Roll Tax v R G Elsegood & Co Pty Ltd [1983] 1 NSWLR 223 at 228). No Clause Dealing with Income

27 No clause in the will expressly deals with income. There would be no intestacy in respect of such income (provided of course that Ms Mathews has or obtains a vested interest) as it is well settled that the income will accumulate and pass with the corpus in circumstances such as these. The rule was stated by Jordan CJ in Perpetual Trustee Co Ltd v Fenton (1940) 40 SR (NSW) 382 at 389: " A vested specific bequest of personalty has always carried income as from the testator's death, notwithstanding that possession may be postponed… and so has a residuary bequest of personalty, notwithstanding that it may be future or contingent: Bective v Hodgson (1864) 10 HLC 656; In re Mellor [1922] 1 Ch 312. And where realty and personalty were combined in a common residuary gift, or given by way of residue upon identical trusts, it was presumed that the rule as to residuary bequests of personalty was intended to apply: Re Dumble (1883) 23 Ch D 360 ." Powers Conferred on Trustees 28 One must construe the will as a whole and the powers granted to trustees may be an important consideration. Clause 4(c) (extracted above) provides the trustees with the "absolute discretion" to apply income for the "maintenance education advancement preferment or benefit" of the plaintiff.

29 In Fox v Fox (1875) LR 19 Eq 286, Sir George Jessel MR held that where there is a direction (which is the equivalent of a trust power: In re Ussher [1922] 2 Ch 321) to the trustees to apply income for maintenance and advancement, then the Court can infer that the gift of capital was vested in interest. However, the same is not true of a mere discretionary power to apply income for maintenance and advancement (In re Blackwell; In re Hume [1912] 1 Ch 693). It is clear that the power for maintenance and advancement contained in clause 4(c) is in this latter category. 30 Clause 4(c) does not elucidate whether it is only the vesting in possession as distinct from the vesting in interest which is deferred until Ms Mathews turns 30. The power to apply income is not likely to have been intended to be used if the gift to the testator's wife took effect as she would take the estate after 30 days. The draftsman hedged his bets (assuming the clause was not simply lifted from a precedent) by characterising the interest as vested, or expected, or contingent.

Application of the Presumption against Intestacy 31 The presumption against intestacy can be given concrete expression by considering what the testator is likely to have intended were Ms Mathews to die shortly before her 30th birthday. She might then be married with a family of her own. If the gift has not vested in interest, the estate would pass on an intestacy either to Ms Mathews' father, if he is alive, or to the testator's other niece and nephew. If the gift is vested in interest, it will pass according to Ms Mathews' testamentary wishes if she has made a will or, if she has not, to those who would inherit on her intestacy. The presumption against intestacy entails that the testator is presumed to have intended that the estate should pass according to Ms Mathews' testamentary wishes if she dies before the age of 30. 32 The meaning of the word "vest" in clause 4(c) is ambiguous. Prima facie it means vesting in interest and if there were a gift over in the event of Ms Matthews' not attaining the age of 30, I would so construe it. However, in the absence of a gift over, to avoid the possibility of an intestacy, the word should be construed as meaning "vest in possession". That construction is reasonably open and is therefore to be preferred. 33 It follows that the estate is presently vested in interest in Ms Mathews. She is therefore able to terminate the trust pursuant to the rule in Saunders v Vautier. I make the declarations and order in paragraphs 1, 3 and 4 of the amended summons. The exhibit may be returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.