Bassett v Bassett

• 14 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4628/02 ERNEST JOHN BASSETT & ORS V DAMIEN BASSETT & ANOR JUDGMENT Clearly the intellectual climate is unfavourable to the high technique of the common law to say nothing of strict logic. It is certainly not a time when many minds can be found to respond with lively animation to an encounter with a tolled entry upon a descent cast, or with a demurrer to a plea giving express colour on the ground of that, lacking a protestando, the plea confesses but does not avoid a count in trespass; or even with the acceleration of legal contingent remainder by the destruction of a prior contingent interest. We have turned in other directions . Sir Owen Dixon - Concerning Judicial Method Address at Yale University 19 September 1955 1 While the first and second of these matters might have passed into legal glory, it is the third of these exciting topics, less the contingencies, with which this judgment is concerned. Facts

2 Gladys Amy Bassett died on 10 July 1996. She left a will dated 1 September 1989, probate of which was granted to the plaintiffs, who are 3 grandchildren of the testatrix, on 22 August 1996. The relevant parts of her will insofar as these proceedings are concerned are as follows: 4. I GIVE DEVISE AND BEQUEATH to my trustee my residence UPON TRUST for the use and benefit of my said grandson Ernest John Bassett during his lifetime in the following manner:- Either (a) to permit the said Ernest John Bassett to reside therein during his lifetime, or (b) to rent the residence to a tenant the rental to be paid to the said Ernest John Bassett, or (c) to arrange a sale of the residence and the proceeds to be invested, the income thereon to be paid to the said Ernest John Bassett during his lifetime AND I DIRECT that the said Ernest John Bassett be responsible for paying rates taxes and outgoings levied on the said residence and keep the residence in good and habitable state or repair. AND I FURTHER DIRECT that on the death of the said Ernest John Bassett that the said residence together with fittings and fixtures shall pass to the children of the said Ernest John Bassett and if more than one as tenants in common in equal shares. … 6. I GIVE DEVISE AND BEQEATH [sic] the whole of my real and personal estate not otherwise disposed of by this will or any codicil thereto unto my trustees upon trust to pay thereout all my just debts funeral and testamentary expenses including any death duties payable I consequence of my death and subject thereto to hold the residue thereof upon the following trusts:- (a) To pay the income arising from one half share of my residuary estate to my grandson Ernest John Bassett during his lifetime and after his death to hold the capital and income on the one half share of my residuary estate for the children of my said grandson Ernest John Bassett and if more than one as tenants in common in equal shares, (b) At to a one quarter share of my residuary estate for my granddaughter Therese Louise Zell and, (c) As to the remaining one quarter share of my residuary estate for my granddaughter Bernadette Michelle Crombie

7. I EMPOWER my Trustees during the minority of any infant beneficiary under this my will to apply the whole or any part of the income or capital of the presumptive share of such infant for or towards the maintenance education or advancement for the benefit of such infant child in such manner as my trustees in their absolute discretion shall think fit. 3 Ernest John Bassett, the third plaintiff, was born on 22 September 1958. He has two children, Damien Bassett born on 21 November 1979 and Benjamin Bassett born on 9 March 1981. Ernest wishes to surrender his interests under the will provided that if he does so his two children will become immediately entitled to the interests they would otherwise take on his death. Thus the trustees seek advice as to whether, in the event of surrender, they would be at liberty to and bound to pay to Damien and Benjamin those parts of the estate in which they are entitled to interests in remainder. 4 While in past times the court would have been reluctant to give such advice before the happening of the event making the advice necessary, a more relaxed and helpful approach is now taken so as to assist persons in the arrangement of their affairs by having a certain outcome. Church Property Trustees Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 per Dixon CJ at 400; Re Syme deceased [1980] VR 109; Collins v The Equity Trustees Executors and Agency Company Limited [1997] 2 VR 166. 5 An answer to the questions raised will of course bear upon the interests of any children of Ernest John Bassett born in the future. For that reason I directed that a person be appointed to represent any child or children unborn - meaning yet to be born - of Ernest. Mrs Patricia Madeline Bassett was joined as a defendant for this purpose. The proceedings then took the general nature of a construction summons with appropriate parties represented, albeit that the plaintiff trustees were arguing for a particular result. Issues 6 A surrender by Ernest of his interests under the will raises two questions for determination. The first of these is whether the remainder passes immediately to the children of Ernest upon his surrendering those interests, or do the children have to wait until the death of their father to take. That is to say is there an acceleration of the remainder. If it is found that there is an acceleration of the remainder then the question is at what time the class of eligible children closes. That is, does the class close when the remainders have been accelerated, so that the class will consist of Damien and Benjamin, or, does the class remain open until the death of Ernest, allowing other children that Ernest may have to come into the class and take. Acceleration 7 English and Australian courts have accepted for many years the concept that interests, whether for life or in remainder, may be accelerated by removal, destruction, disclaimer, surrender or failure of a prior interest or even power. Many of the early cases dealt with interests given by will being revoked by codicil such as a life estate to "A" with remainder to such of the children of "A" as survive "A" and attain the age of twenty-one years given by will with a codicil revoking the life interest of "A". Other cases have arisen where instead of the interest being revoked by a codicil the person entitled to the prior estate was an attesting witness of the will or the spouse of an attesting witness thus invalidating the gift by operation of law. In the usually cited case of Lainson v Lainson (1854) DeGM&G 754; 43 ER 1063 the testator by will devised certain land to his son for life and "from and immediately after his decease" to the son's son in fee tail. By codicil the gift to the son was revoked. It was held that the words "from and immediately after his decease" marked out a series of limitations or successive interests in the land, so that the grandson took upon the death of the deceased and not upon the death of his father. In theory there is a question of whether the words giving entitlement to successive interests indicate an intention as to the time of taking the interest or lay out the order of successive limitations one to take immediately upon cessation of the prior interest whether by death, disclaimer, surrender, revocation or otherwise but the prima facie rule, stated in Lainson, is that such expressions which might indicate either time of entry into the interest or order of succession or order of successive estates prima facie mark out the latter unless there is a clear provision otherwise and that "from and after the death" is not a clear provision if the intermediate interest comes to an end. 8 In Australia any doubt was put to an end by the decision of Dixon J, with whom Gavan Duffy CJ and McTiernan J agreed, in Tompkins v Simmons (1930) 44 CLR 546. That case concerned a gift by will to the testator's wife for life and after her death to pay income thereof equally "to and among all my children of whom there are six" and after the death of any one or more of such children a one sixth part of the trust fund was to be held "upon trust to pay and divide the same equally among such child's children who should attain twenty-one years or being daughters, marry". By a codicil to that will the testator revoked the interest in the income given to one of his daughter's. At pages 558-559 of his judgment Dixon J said: In a limitation to a donee for life and after his death upon trust for his children, or some other donee, the reference to his death whether expressed by the words "upon," or "after his death," or "from and after his decease," or otherwise, may have one of two imports. It may mean that the second donee shall take nothing until the death of the first, or it may merely show the order of the limitations through which the estate or interest is to pass. It is well established that, prima facie, these words are to be understood as denoting the order of succession of limitations. (See per Turner L.J., Lainson v. Lainson)

In this case the limitation of the corpus of the trust fund is introduced by the words "and immediately after the decease of any one or more of my sons or daughters." There is nothing to rebut the prima facie rule that these words simply mark out the order of succession, and create an interest expectant upon the determination of the prior interest by whatever means that determination may be brought about. In such a case if the prior interest fail from the incapacity of the donee to take, as, for instance, if he attests the will, or if it be revoked, or for some other reason be abolished or abridged, the succeeding interest in the same property is accelerated and takes immediate effect in possession. 9 These two cases, and many others, dealt with interests taken away by successive testamentary instruments, or by operation of law, as in the case of a gift to an attesting witness or spouse of an attesting witness. There has been some discussion as to whether the same result is achieved by action by a person entitled to an interest. In Re Chartres [1927] 1 Ch 466 a power of appointment given by will was released by the donee. It was held this accelerated the gift over in default of appointment, even though it was clear enough that a power to appoint by will indicated that distribution was not intended until death of the donee. In Re Davies; Davies v Mackintosh [1957] 1 WLR 922 was a case where a stepdaughter life tenant of a testator disclaimed her interest - of which she had never entered into possession. It was held this accelerated the remainder interests and operated to close the class. While the decision in that case has not been followed in other cases to which I will come, it has been accepted as correct so far as acceleration is concerned, and this was extended to surrender and assignment in In Re Harker's Wills Trusts [1969] 1 WLR 1124 and was followed as to surrender in Re Syme deceased; Re Hartigan 2 QdR 401 and Collins v The Equity Trustees Executors and Agency Company Ltd. I will return to these cases. For the present I consider it clear that they establish that if Mr Ernest Bassett surrenders his life estate the remainder interests will be accelerated. The question remains whether or the class of person entitled would close on surrender. 10 As the remainder interest under the will of Mr Bassett is vested there is no need to discuss the question of delayed acceleration pending the satisfaction of a contingency under a contingent remainder, nor the question of whether acceleration can apply in the case of a contingent gift. In the event it was not argued by counsel for the class of unborn children that acceleration would not take place if Ernest surrendered his interest. When does the class close? 11 The more difficult question for decision is whether or not the class of children of Ernest entitled to the interest in remainder consequent upon the surrender of his life estate will close upon such surrender as Damien and Benjamin are of age and able to take their shares. 12 Strictly speaking this is not the case of a class gift upon a contingency to which the rule in Andrews v Partington [1791] 3 Bro CC 409; 29 ER 610 applies. It is rather a gift under a will postponed to a life interest where the class would ordinarily close on death of the life tenant provided a member of the class was in existence. But here as a result of acceleration the vested interests in remainder have advanced. The law as to closing of classes of beneficiaries entitled to take on a contingency is set out in Crane v Crane (1949) 80 CLR 327. This was a case where there was a gift by will to trustees to pay income for the maintenance education and support of the children of the testator's brother "A" during their minorities "and from and after "A's" son or sons respectively attaining twenty-one years and from and after "A's" daughter or daughters respectively attaining that age or marrying under that age in trust for them absolutely share and share alike. There was a discretion in the trustees to raise the whole or any part of the vested or presumptive shares of any nephew or niece of the testator and to apply the same for his or her advancement, preferment or benefit. At the date of the testator's death the brother "A" was a widower with three children, the eldest of whom attained the age of twenty-one years seven years later, namely 1939. In 1937 "A" remarried and in 1942 a child was born of this second marriage. It was held that the class of children entitled to take closed in 1939 when "A's" eldest child attained twenty-one years. Latham CJ referring to the rule of convenience, known as the rule in Andrews v Partington and explaining its application said at page 332: The application of the rule of convenience, however, is naturally excluded if the provisions of the will show that the testator intended the corpus to be withheld from distribution after the time when a member of the class had become entitled to call for his share. Thus if there is a provision for maintenance out of income which is such as to require the retention of the corpus in the hands of the trustees (in order to provide the income) during a period after a member of the class has attained twenty-one or married under that age, such a provision prevents the application of the rule of convenience. Similarly, a provision for advancement might be expressed in such terms as to show that the share of a donee was to be held in the hands of the trustees, notwithstanding that, apart from that circumstance, the class would have been fixed without possibility of extension under the rule. The appellant contends that provisions in the will relating to maintenance and advancement exclude in this case the application of the rule. 13 Latham CJ held that the direction for payment of income for education, maintenance and support with the discretion to raise vested or presumptive shares was not sufficient to displace the rule. Dixon J in discussing the rule in much the same way explained that the purpose of the rule was to find between two competing intentions, first that as many persons as possible should take, second that members qualified to take as their interests vested in possession should be entitled to be put into that position at once. He went on went on to say at page 336-337: It is a rule of convenience. But, it has been repeatedly pointed out, the rule resolves an inconsistency of intention disclosed by the testator's dispositions. He intends that every child who attains the given age shall have his share but he intends that he shall have it before, on the literal words of the limitation, it is possible to ascertain the objects who fall within the class. "You must either sacrifice the direction that gives a right to distribution at twenty-one or sacrifice the intention that all the children shall take. The court has in such cases decided in favour of the eldest child taking at twenty-one as the will directs, and sacrificed the intention that children shall take" (per Wigram V.C., Mainwaring v. Beevor, at p. 268]). "When the rule is adopted the solution arrived at is the result of an endeavour by the court to reconcile two apparently inconsistent directions, the one that the whole class of children shall take and the other that the fund shall be divided at a moment when the whole class cannot be ascertained" (per Buckley J., In re Stephens; Kilby v. Betts, at p. 328: cf. per Astbury J., In re Chartres, at pp. 474, 475). But the rule cannot be applied if the will expresses an intention which is inconsistent with the idea of the first child who satisfies the conditions attached to the gift calling for his share. Such an inconsistent intention may be found in a provision postponing the distribution of any share until, for example, the youngest child for the time being attains twenty-one. It has been found in maintenance or advancement clauses framed in such a way as to show that the fund was to be kept together notwithstanding that the share or shares of a member or members of the class had vested in possession and maintenance or advancement was to be allowed thereout beyond that period (Bateman v. Gray; Re Courtenay). 14 In a way discussion of class closing seems a little artificial on the facts bearing upon this decision. In general where there is an immediate gift for a class such as the children of "B" the class closes on death of the testator, and as I have said where there is a postponed gift such as to children of "B" consequent upon the life estate of "A" the class closes on the death of "A". On the principle of acceleration therefore one would expect a class to close when the interest to which the later interest is subsequent comes to an end. Leaving aside the question of acceleration brought about by act of beneficiary, it has, I consider, been established that, unless there is a clear contrary contention expressed in the will, acceleration would close the class: Re Johnson (1893) 68 LT 20; Re Crother's Trusts [1915] 1 IR 53; In Re Davies. 15 In the case of In Re Kebty-Fletcher's Wills Trusts [1969] 1 Ch 339 Stamp J came to a different decision from that in In Re Davies as to class closure in a case where the life tenant nephew assigned and released to the trustee of the will "all his interests during the remainder of his life … to the intent that such income should henceforth be held by the trustee on the same trusts and subject to the same powers and provisions as would have applied had he been dead", namely "for the child or children of such nephew who shall attain the age of twenty-one years and if more than one in equal shares". On the question of whether as a result of such assignment, a child of the nephew who had so released and assigned his interest, and who had attained the age of twenty-one years, was entitled to have the share transferred to him, on the basis the class had closed, Stamp J refused to so order, refusing to extend the acceleration principles to cases where the prior interest was brought to an end not by the testator nor by operation of law, but by a person who would otherwise take under the will, considering that to hold otherwise would be contrary to the intentions of the testator. In doing so he was forced to doubt In Re Davies or to distinguish it saying that a disclaimer was different from a surrender or release. He did both. The basis for distinguishment was that with a disclaimer there had been no entry into possession. In short he held that to allow acceleration and closure was clearly contrary to the testator's intention at least in a case where the life tenant was the parent of those entitled in remainder. This case was followed in In Re Harker's Wills Trusts, a case where under a will the deceased gave her son a life estate with remainder to his children in equal shares upon their attaining 21 years. 16 In Australia the question was considered by Lush J in Re Syme deceased [1980] VR 109. There under the will of the deceased, four nephews and nieces who were entitled to estates for life wished to surrender their interests if this would result in immediate distribution to the remaindermen. The remainder interests at the date of distribution under the will (which was stated to be the date of death of the last survivor of the nephews and nieces), were to be held in equal shares per capita for the children of the nieces and nephews "as shall be living at the said date of distribution and shall attain or shall have attained the age of twenty-one years." At the date of hearing there were children within the remainder class ranging in age from fourteen to thirty-two years. It was held that the remainder interests would be accelerated, the will not indicating a contrary intention, and that the class of remainderman would close upon execution of surrenders. It could of course contract if any of the children in the class failed to attain twenty-one years. Lush J considered a great many cases and gave some consideration to the suggestion which had been made that successive limitations are put in place only to admit a life interest so that there is every reason to close the class upon cessation of the intermediate interest. If that is the position then in this case there might be some basis for considering that this will disclosed such an intention because the other children of the deceased took their shares absolutely whereas the share of Ernest was limited to an equitable life estate. I do not think it is really possible to take this matter too far. In Re Syme deceased the learned judge thought that as a result of the rather strange dispositions in the will the real intention was to benefit the nieces and nephews and not the children of the nieces and nephews and for that reason there was no ground to think that the testator wished to keep the class open as long as was possible to admit as many grand-nieces and grand-nephews as possible. In the instant case it would I think be impossible to tell one way or the other and a decision based on such matter would I think be more speculative than logical. Wyndham v Darby [1896] NSWR (Equity) 272 gives some support for Re Syme, although it could be said that the widow life tenant there never took, her interest being conditional upon retransfer of settled property, she electing to take under the settlement not under the will. In that case the fund in question upon the death or remarriage of the widow was to be divided among the children of a brother of the testator. The case was considered as one of acceleration with the class of nieces and nephews closing when the widow elected against the will. 17 The question is whether I should follow Re Syme or the more recent English decisions. I have come to the conclusion I should follow Re Syme. I am aware that in doing so I am acting contrary to the opinion in Theobald on Wills 15th Ed pages 389 and 393, although in accordance with the opinion expressed in Hawkins and Ryder on the Construction of Wills, page 113. The facts that the remainder interests are vested and not contingent on age or survival and there is no gift over support a finding that closing of class is not contrary to intention. Interests contingent upon surviving a life tenant or subject to defeasance on failure to attain an age more readily point to an intention to postpone entitlement to possession: In Re Flower's Settled Trust [1957] 1 WLR 401; In Re Taylor [1957] 1 WLR 1043. 18 I should say that I have found this case extremely difficult and I should acknowledge the assistance I have had from two articles in the Cambridge Law Journal, namely Bailey: Class Closing Accumulation and Acceleration [1958] CLJ 39 and Pritchard: Acceleration and Contingent Remainders [1973] CLJ 246. After much consideration I have come to the conclusion that it is somewhat artificial to treat acceleration separately from class closing. If an event accelerates an interest then it seems to me that the closing rule should be applied on the basis of non-existence of the interest revoked, forfeited, disclaimed, surrendered or otherwise brought to an end. The task then is to see whether the language of the will demands or leads to a finding against closure. It is not, I think, possible to distinguish cases where acceleration occurs through act of beneficiary from those cases where it occurs by act of testator or operation of law. For instance in the case of forfeiture a beneficiary who murders a testator forfeits the benefit, but this by operation of law. A beneficiary life tenant who commits suicide advances the subsequent interest; a life tenant whose interest is postponed to a prior life interest may lose his interest if he kills the prior life tenant: Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147 at 157 thus causing acceleration. It is difficult to see why a different rule should apply in such cases of destruction of a prior interest brought about by a beneficiary than apply in a case of action of a testator. There remains a conflict between early distribution and possibility of a larger class but in the former a case it might be possible to more easily find an intention against early distribution. Re Chartres seems to have been accepted by Dixon J in the passage quoted from Crane v Crane. The attempts to distinguish it do not seem to me to be very convincing, but in any event as was pointed out in In Re Harker's Wills Trusts, the interests as there were vested but liable to defeasance upon exercise of the power. In considering the English authorities such as In Re Kebty-Fletchers Will Trusts and Re Harker's Wills Trusts it must be born in mind there seems a tendency there to look with disfavour on the rule in Andrews v Partington and to find reasons for finding a contrary intention which might not have been found in past years, and I think in doing so to overlook the instruction given by the Court of Appeal in England in In Re Bleckly deceased [1951] Ch 740 as to adherence to the rule. It is important in this case to remember the interests are vested. They are not subject to some age or surviving contingency. Nor are they interests vested but liable to be divested as is sometimes the case with gifts payable on attaining majority. The class closing rules are clear in the case of vested interests. 19 Finally it is necessary to deal with the argument of Mr Townsend, counsel for the unborn children, on divestment. As I understood it this argument was that the two children now entitled would take immediately vested interests in possession, which would be subject to partial divestment if further children were born. The argument proceeded on the basis they would be entitled to distribution, but be subject to defeasance by way of a claim for return of part of the distribution if a further child was born. 20 This would of course be a complete abrogation of the class closing rules. It would impose a condition subsequent upon an interest which could not possibly apply in the case of personalty nor I think could it apply in the case of the real estate referred to in Clause 4 upon the wording of that clause. The distinction between fees simple absolute, determinable fees and conditional fees is a very difficult area of law but it is not necessary to go into this here. Whatever the effect of a condition subsequent it does not re-open a class which has closed. However, I think Mr Townsend probably mistook the cases where the court refused to hold that acceleration brought about a closing of class. In those cases while the interests may have been vested the fund remained in the hands of the trustees until the class closed so that a beneficiary of age could not call for payment. See In Re Taylor deceased.

Result 21 The questions in paragraph 8 of the statement of facts should be amended by substituting the word "surrendering" for the word "disclaiming". 22 I answer the questions in paragraph 8 of the statement of facts as follows:

(a) Will the property which is the subject of life interests provided for in clauses 4 and 6(a) of the testator's will pass to the children of the first plaintiff immediately upon the first plaintiff's surrendering those life interests? Answer: Yes

(b) If the answer to (a) is, "yes", has the class of beneficiaries that will take upon the first plaintiff's surrendering the life interests granted pursuant to clauses 4 and 6(a) of the testator's will closed? Answer: It will close on the date of surrender.

(c) If the answers to (a) and (b) are each, "yes", would the first, second and third plaintiffs be justified in making a distribution of the bequests made in clauses 4 and 6(a) of the testator's will to the first and second defendants immediately upon the first plaintiff's surrendering those life interests? Answer: Yes. 23 Order the costs of all parties to be paid out of the estate of the deceased, those of the trustees on the indemnity basis.

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