Cobcroft v Bruce

Judgment 1HIS HONOUR: These proceedings concern the true construction of the will of the late Gavin John Baxter Cobcroft, which was made and published on 27 July 2005. Probate was granted on 23 November 2005. The first defendant is the surviving executor of that will. 2The focus of the case is cl 9(v) of the will which reads as follows: I give to my wife DENISE ADELE COBCROFT: ... (v) my shares in public companies, to deal with as she in her absolute discretion sees fit, but otherwise on condition that she ultimately gives those shares, or the remainder thereof, to my nephews David Gavin Baxter Cobcroft and Nicklas William Baxter Cobcroft as tenants in common in equal shares or the survivor of them absolutely; 3The deceased died owning a considerable number of valuable shares in public companies which were transferred to his wife who was also one of his executors. 4The testator's widow Denise died on 13 May 2010 and probate of her last will dated 4 May 2010 was granted to the second defendants on 15 February 2011. 5During her lifetime, the widow disposed of a number of the shares but at her death there remains some $6 million or $7 million worth. However, there are some factors which mean this figure may need to be adjusted as I hope will subsequently appear. 6Under the widow's will it would seem that the shares would pass as part of her residuary estate to four charities. 7Accordingly, the contest really is between the two nephews and the four charities as to who is entitled to the shares that remained in the widow's hands at the date of her death. 8It does not require very much imagination from a lawyer to realise that as a matter of legal analysis there are a number of possibilities as to the true construction of clause 9 of Gavin Cobcroft's will. The principal possibilities are that: (1) the widow takes the shares absolutely and that the balance of the provision is repugnant to her gift and void; (2) the widow takes the shares absolutely but subject to an equitable condition which can be policed by an order for equitable compensation or specific performance. This analysis would require that shares remaining at the date of her death be given to her nephews; (3) the widow has a life estate only, coupled with a power to resort to capital, and that after her death the property passes to the nephews; or (4) the shares were a gift to the widow for life with a general power of appointment. 9I heard argument on the case on 31 May 2013 and was assisted by the arguments of Mr MS Willmott SC and Mr SJ Chapple of Counsel for the plaintiff, Mr J Whittle SC and Mr Bourke for the first defendant and Mr Blackburn-Hart SC for the second defendant. In addition, I received thorough written submissions from Messrs Willmott and Blackburn-Hart. 10Mr Willmott pointed to the words of Joyce J in re Sanford [1901] 1 Ch 939 at 941 where his Lordship said (referring to the decision of the English Court of Appeal in re Blantern [1891] WN (ENG) 54): It has been said by the Court of Appeal that the true way to construe a will is to form an opinion apart from the decided cases, and then to see whether these decisions require any modification of that opinion; not to begin by considering how far the will in question resembles other wills upon which decisions have been given. 11Mr Willmott suggested that I follow that advice and I consider I should. 12Mr Willmott pointed to the way in which the testator appeared to be very concerned the property remained in the family. He points to cls 3, 4 and 5 in which a specific legacy is given of a gold cigarette case, a Purdey shotgun engraved GWC, another Purdey shotgun engraved AJC, as well as gifts to his cousin and grandnephew of his wristwatches. He then recognises in cl 9 the need to provide for his wife and cl 9 gives her all that she could reasonably wish including his property at Ku-ring-gai (this was otiose as the parties were joint tenants but that is by the by), his residence in Paddington, three motor vehicles and his money in the bank. 13He gave his interest in his rural property to his brother Brian together with his interest in the business Parraweena Pastoral Co, with remainder interests to his wife and nephews and their children. 14Having done that exercise, I cannot really see a strong indication that the testator intended to keep all his possessions within the family. Certainly there appears to be some treasured items of his but a large number of shares in public companies hardly fits into this category. In any event, the flavour of the will indicates he wished to confer very great beneficence on his widow. 15One must always construe a will as a whole and look, if one can, to the scheme of the will to see if there is a clue as to how the particular provision under review fits in. As part of this exercise one looks to see how vital words in the provision under review occur in other parts of the will. When doing this exercise I noted that in cl 3 the gift of a cigarette case was given to nephew David Cobcroft "on condition that my nephew ultimately gives that cigarette case to his son Benjamin on his 21st birthday." So we see the words "on condition" and "ultimately." 16We again see the words "on condition" and "ultimately" in cls 10(c)(iv)(A) and (B) where a percentage of the pastoral business and land is given to each of David and Nicklas Cobcroft "on condition that he applies out of such gifts sufficient funds to provide for the maintenance, education and wellbeing of his children". 17I now need to turn to the actual construction of cl 9(v). 18Mr Willmott puts that the condition stipulated in cl 9(v) is not a condition precedent to the gift vesting. This must be right. He went on to say that the condition sought to limit the right of the widow to dispose of the shares and required her to leave the remainder of the shares to her nephews upon her death. He says: "the meaning of the verb "give" is modified by the use of the adverb "ultimately", with the effect that "finally" or "in the end" (i.e. on her death), the shares are to pass to David and Nicklas. The fact that the gift is expressly made conditional points to the fact that the gift is not absolute and that it was intended by the testator for the rights of [the widow] in respect of the shares would be limited by the condition that any remaining shares would pass to David and Nicklas". 19He thus puts that there was no inconsistency that would require one to disregard the reference to David and Nicholas as repugnant to an absolute gift. 20Mr Willmott then contrasts the words used in connection with the benefaction to the widow with those used with respect to the nephews. The gift to the widow is "to deal with as she in her absolute discretion thinks fit, but otherwise on condition" whereas what it is intended to be benefaction to the nephews gives them the shares absolutely. 21Mr Willmott thus puts the proposition that the interest given to the widow was neither a life estate or an absolute interest, but something close to a defeasible absolute interest. 22There is the famous rule in Lassence v Tierney (1849) 1 Mac & G 551; 41 ER 1379, which is sometimes called the rule in Hancock v Watson [1902] AC 14, that where one finds an absolute gift and trusts are engrafted or imposed on that absolute interest which fail, then the absolute gift takes affect to the exclusion of the residuary donee. That rule is only of peripheral value in the instant case because there is no uncertainty as to the intended benefaction of the nephews. 23However, Lassence v Tierney is really just an illustration of a wider rule and that is that a clear gift in a will is not cut down by anything subsequent in the will which does not with reasonable certainty indicate the intention of the testator to cut it down. That is, an absolute interest is not cut down except by clear words (see Williams on Wills (2008, 9th edition, LexisNexis Butterworths) at [82.2] and cases there cited including Abbot v Middleton (1858) 7 HL Cas 68 at 84; 11 ER 28 at 35). The learned editors of Williams say also: "where personal property is given in terms which confer an absolute interest on a named donee, and then further interests are given merely on the termination of the donee's interests, and not in defeasance of it, the absolute interest is not cut down and the further interests fail, and an absolute interest is not cut down by a precatory trust unless the trust creates an imperative obligation." (see Hoare v Byng (1844) 10 Cl & FIN 508; Re Johnson [1939] 2 All ER 458.) 24The present benefaction to the nephews is not in defeasance of the gift nor is it a gift which takes effect on the termination of an absolute gift. It is to my mind an obligation imposed on the widow or alternatively some sort of precatory trust or even a proper trust imposed on the widow. 25Mr Blackburn-Hart stresses the word "deal." He puts that the widow has the shares "to deal with as she in her absolute discretion sees fit." That, he puts, is as absolute a gift as one can get. He says that the phrase "but otherwise on condition" does not qualify the power conferred. This is because the word "otherwise" is only to take effect after the widow's right to deal with the property has been exhausted. 26The words "deal with" constitutes a very wide expression, which covers not only dealings into vivos, but also a dealing in a will. The widow is given an absolute gift including a general power of appointment. In her will, the widow inserted a residuary clause. That residuary clause by virtue of the operation of s 37 of the Succession Act 2006 (NSW) is an execution of the general power of appointment which is given to the widow or which the widow has by virtue of her absolute interest and vests the shares in her executors on trust for the charities. 27That argument did not appeal to me when I first heard it as I must have intimated to Mr Blackburn-Hart by my reaction as he said (T28.12): "If your Honour is having any doubts about it I'd like to be able to discuss them" 28I replied (T28.15 - T28.26): "You are perfectly at liberty to do that, but really, with great respect you can't do much more than you have done already. That is to say that the word "deal" is a prominent word. The word "deal" is a word which has broad connotation. There is no reason why one should restrict it to a dealing which takes affect during life and the rest follows. I understand all that and that is a possible answer" but you have to look at other considerations as well. You say the other considerations are not sufficiently effective to read it down. I understand that submission too." 29That exchange came about because I put that the word "deal" may need to be read down to mean deal with in her lifetime. Mr Blackburn-Hart would not accept that but said that if it was right than the moment of death was also included within deal so that the will which took effect on the widow's death constituted a dealing. Whilst that is possible, it seems to me that the whole tone of the clause is that the widow is to get the most beneficent benefaction whilst she is alive, but the family is then to take what is left on her death. 30To take some other construction seems to me to remove altogether all the words that follow from "sees fit". Mr Blackburn-Hart's riposte is that those words are either precatory or repugnant to the absolute gift. 31The word "deal" has been considered in a number of the authorities, although mostly not in connection with wills. 32I have searched the word books in Australia, Britain, Canada and the United States to see whether there is any guidance in construing the word "deal" as a verb. As a noun it is clearly a word of wide meaning. There are not that many authorities which judicially define the word but in Washington State it was defined as making an arrangement to obtain a desired result by a combination of interested parties (see State v Johnson 148 P(2d) 320 (1944)). 33As far as I can see the only time the use of the verb "deal with" in a will has been judicially considered was in Ontario in re Armstrong (1904) 3 OWR 627. In that case the will provided that the trustees were to hold the remainder of the estate for the use and benefit of the testator's life during her life or widowhood and then to turn all into cash and divide the proceeds equally between the testator siblings. However, by codicil the testator removed the restriction as to widowhood and provided: "it is my will and wish that my wife so long as she lives may dispose and deal with the property as fully and effectually as I could if living." The question was what interest did the widow take. 34In re Armstrong, Master Boyd, C. said (at 628): "the main guide is to read will and codicil as one testamentary instrument, so as, if possible, to harmonize all parts and to give sufficient meaning to all words. The intention of the testator so ascertained must govern..." I whole-heartedly agree. 35Whilst it was argued during the hearing that the gift to the wife in the codicil gave the widow an absolute beneficial interest in all the property, Master Boyd doubted that that's what the testator intended or meant to express. He reasoned that the gift in remainder to the sisters would be destroyed and there would be an enlargement of the plainly expressed life estate by implication arriving out of a "dubiously expressed later clause". 36In the circumstances of that will the Master ruled that the widow continued to have a life estate, with a right to change the shape and character of the estate, but no right to diminish or reduce it. He said: "that method of construction will bring all the provisions into reasonable interaction, and will not expunge anything of material import." 37That case is not one that provides the solution to the present case but I mention it because it is the only authority dealing with the word "deal" in connection with a will. It is noteworthy that the word is not given a wide interpretation. 38Despite Mr Blackburn-Hart's earnest and clear submissions, it seems to me that in the context of this will the word "deal" must be read down to a dealing that took place before the widow's death. It is possible to read the words "but otherwise" as repugnant or alternatively as a mere expression of wish, however when one looks at the early part of the will dealing gifts which are ultimately to vest in younger family members it seems to me that in order to read the will as a whole one should give some meaning to the words that follow "but otherwise". Indeed the "but otherwise" itself seems to me to indicate that one must read down the word "deals" to "deals in her lifetime". 39This construction is consistent with the authorities. Of course it is not the proper course to govern one's self by construction of other wills as each will is different but it seems to me the trend of authority is to read down provisions such as the license given to the widow in the instant case to a power to be exercised only into vivos. In re Thomson's Estate (1879) 13 Ch D 144 (Hall VC), which was affirmed on appeal (1880) 14 Ch D 263, the will provided that the widow was to have all the testator's property: "for the term of her natural life, to be disposed of as she may think proper for her own use and benefit..." and "in the event of her decease, should there be anything remaining of the said property or any part thereof," there was then a gift to other people. 40Hall J said (at 147) that the words; "in the event of her decease should there be anything remaining" drew a line at the death of the widow so that what was remaining at that moment became the subject of the gift over. He said the word "remaining" is consistent with there being a power of disposition other than a testamentary power. On appeal James LJ (with whom Baggallay and Bramwell LJ agreed) concurred with that result. 41The same construction was adopted in re Pounder (1886) 56 LJ Ch 113. There, a life estate to a widow was reworded in a codicil so that the widow took the property "for her own absolute use and benefit and disposal." The codicil provided that what "shall remain undisposed of by my said wife..." was to go to the testator's brother and Anne Williams. Kay J said that the expression "remains at her death" contemplated the moment of the widow's death. The word "remain" was explained with reference as at that date and the wife only had power to dispose of property inter vivos, not by will. 42There are cases going the other way on different wording, such as in re Sanford [1901] 1 Ch 939, though in that case the widow did not actually exercise any power. Another example is re Jones [1898] 1 Ch 438, where re Pounder was distinguished and the initial beneficiary was held to take an absolute interest. Also, it must be noted that in the instant case the words "on her death" do not actually appear in 9(v). However, it seems to me that the words "the remainder thereof" can only refer to the moment of death of the widow. Accordingly, the view that I have taken on the wording of the will itself is, I believe, justified by analogous authority. 43Hawkins on the Construction of Wills (Roger Kerridge, Hawkins on the Construction of Wills (2000, 5th edition, Sweet & Maxwell London)) says (in paragraph 4-20) that there are three possible constructions where a will contains a gift of property "to X" followed by a direction that on X's death "what remains" of the property (or words to that effect) is to go to Y. Hawkins says there are three possible constructions: (i) One construction is that X takes absolutely - the gift to Y is void; (ii) A second possible construction is that X takes a life interest, together with a power to dispose of capital. The power to dispose of capital may be construed as being inter vivos only, or it may be construed as being both inter vivos and by will; (iii) A third possible construction is that X takes a mere life interest and Y takes the remainder. Each of the cases turns on the particular wording in a particular will. And in each case the question is what did the testator intend? The problem is that the testator may not have been cleared about what he intended." 44Mr Willmott, and indeed Mr Blackburn-Hart and Mr Whittle as well, referred me to a number of cases in which similar words appeared in testator's wills with varying results. I will review a few of these. 45The first in point of time is Constable v Bull (1849) 3 De G & Sm 411; 64 ER 539; a decision of Sir Knight Bruce, a Vice-Chancellor as he then was. In this case, the will provided that the testator's wife Mary took the whole of his estate for her sole separate use and benefit. He then provided that: "I further give, will and direct that, at the decease of my said wife, whatever remains of my said estate and effects shall go to and be equally divided, share and share alike, between the following persons..." In a very short judgment, his Lordship held that the widow had a life interest only. 46In re Sanford (to which I have referred to earlier at [10]), the words were "a gift of property to the wife "so that she may have full possession of it and entire power and control over it, to deal with or act with regard to it as she may think proper." In the event of her dying "without having devised or appointed" any part of the property, then other benefactions took effect. It was held that the wife had a life estate, plus a power of appointment, which could be exercised inter vivos or by will. 47In re Last [1958] P 137; 1 All ER 316, a testatrix gave all of her property to her brother, but then said: "at his death anything that is left, that came from me to go to my late husband's grandchildren..." 48Karminski J held that the brother took a life estate and what was remaining at his death passed to the husband's grandchildren. 49In Australia, Sangster J in the South Australian Supreme Court in re Rollings (1974) 9 SASR 418 had to construe a will which gave the whole estate to the widow "for her personal use or disposal at her absolute discretion", and then continued: "if on her death there are still realisable assets left from my said estate"... then they shall be converted into cash and divided between his sisters. 50His Honour came to the conclusion (at 422) that the widow took a life interest in the whole of the estate with power to resort to the whole or any parts of the capital as she might choose to resort to during her lifetime and then the sisters took in remainder. 51The High Court considered this type of provision in Ritchie v Magree [1964] HCA 10; (1964) 114 CLR 173; 37 ALJR 376. There, the gift was a gift to the widow with a direction that she was "at liberty to dispose of any portion of my estate if he thinks it advisable..." Upon her death, the will provided that "all of that portion of my possessions remaining is to become the property of my daughter...". Although McLelland CJ in Eq had held that this gave the widow a life estate with the powers to dispose of any part of it for her own purposes during her life with what was left to go to the daughter, the majority of the High Court (Dixon CJ and Kitto J) held that the witness took an absolute interest. The case probably depends on the particular wording of that will. 52Mr Willmott urges that the proper construction is that the widow took only a life interest and thereafter the shares passed to the nephews David and Nicholas. 53A problem with that submission is that cl 9(v) does not actually make a disposition of the shares to David and Nicklas. It imposes a condition on the wife that she ultimately gives those shares. It is the widow who is asked to give the shares the testator. The testator did not give them himself. It is thus a different sort of case to those which I have recently been discussing. 54Mr Willmott submits that if I should come to that conclusion then the situation is one where there is a mandatory obligation cast in equity on the widow to transfer the shares to the nephews which obligation can be enforced in a court of equity by a decree very similar to specific performance. 55The leading case in this area of the law is Gill v Gill (1921) 21 SR (NSW) 400. In that case, a farm and homestead was devised to a son "on condition that he keep the homestead as a home and provide board and residence for his sisters..." Harvey J (at 406) distinguished that condition from a condition precedent of forfeiture and also said that with the condition in the will in that case the requirements of certainty were not as strict. At 407, his Honour said that in some cases of this nature the court may think that the testator intended to attach a charge or trust upon the property and in other cases that a personal liability alone was intended. This will depend partly on the language used to describe the obligation, partly on the nature of the property given to the obligee and partly on the nature of the obligation. Where the obligation is merely personal then the court (even if it could not grant specific performance) would grant a relief by way of equitable damages or equitable compensation. 56Of course the words used in any particular will may not create such a condition, they may merely be words expressing the testator's desire, precatory words. 57Mr Whittle says that the existence of what I will call the Gill v Gill condition commenced in about 1821 with the decision of Lord Lyndhurst in Messenger v Andrews (1828) 4 Russ 478; 38 ER 885; [1824-1834] All ER Rep 651. Examples have appeared over the last two centuries over most of the common law world, including in Ireland (see re McMahon; McMahon v McMahon [1901] I IR 489) and in Canada (see re Trembaley (1920) 56 DLR 281; a decision Orde J in the Ontario Supreme Court). 58In my view, we are now getting close to a way of construing the will which will give effect to all words and respect the principle of res magis valeat quam pereat. 59However, when one gets to a Gill v Gill condition one may get a trust, one may get a charge, or one may get an equitable obligation. 60Mr Willmott cited the decision of Needham J in Hayes v National Heart Foundation of Australia [1976] 1 NSWLR 29 in which the will provided that the testator's daughter was to take the balance of his estate, including his shares; "these shares [are] to be retained by her as a source of income on the understanding that she write into her will that, at her death, these shares are to be sold and the capital received to be divided in equal parts between" three named charities. The learned judge considered that the words were sufficiently definite to make it clear that the limitation on the power of ownership was not merely a request, but a legal restriction. 61Although there was little in the will to guide the judge into deciding whether there was a trust, or a gift subject to a condition, he thought that the will indicated that full legal title vested in the daughter. She received the property pursuant to an obligation to hold them on trust after her death for the three charities. 62In the High Court, Dixon J had to consider an analogous situation in the income tax case of The Countess of Bective v Federal Commissioner of Taxation [1932] HCA 22; (1932) 47 CLR 417. He said that there were at least four different possibilities where one had a gift testamentary, or otherwise directing a payment to one person and expressing a purpose beneficial to another person. In summary these were: (a) the expression of the purpose may be taken merely as a statement of motive or expectation in which case the first person takes the gift absolutely and incurs no legal or equitable obligation to fulfil the purpose; (b) the purpose may be stated so as to amount to a condition, in which case by accepting the gift the donee incurs the equitable duty to perform a condition; (c) the first person may take the gift beneficially, but the statement of purpose may operate as an equitable charge in favour of the other; (d) the direction to pay the first person may be regarded as conferring no beneficial interest on him but means that he receives the gift strictly in the character of a trustee. 63In my view, the commands that the widow took her benefaction on condition that she gave the shares to the testator's nephew is a Gill v Gill condition imposing an equitable obligation on the widow to either; give the shares during her life, or alternatively, to make provisions on her death for the shares to pass to the nephews. The wills says that the nephews are to take as tenants in common. That is not possible. At least, it is not possible that a chose in action, such as shares, can be held as tenants in common at common law (see re McKerrell [1912] 2 Ch 648, 653). However this is a minor wrinkle in the case. 64Accordingly, in my view the plaintiffs are entitled to obtain "the shares." I put that expression in quotation marks because I now need to consider what is included in that expression. Prima facie, the order would seem to be an order allied to an order for specific performance that the second defendants transfer the shares to the plaintiffs, but I will stand the matter over for short minutes to be brought in. Any problems with this sort of relief can be discussed at this time. 65I now turn to the question as to what is included in the expression "the shares". 66Mr Willmott puts that there are four categories of shares involved in this case. The first category is the shares that the widow received which were still held by her at the date of her death. These would appear to be: (a) 137,763 shares in BHP Billiton Ltd; (b) 15,900 shares in Boral Limited; (c) 24,600 shares in National Australia Bank Limited; (d) 16,678 shares in Onesteel Limited; (e) 18,550 shares in Origin Energy Limited; (f) 46,600 shares in Westpac Banking Corporation Limited; 67The second category relates to the Westpac shares acquired following the bank's merger with St George and the Bluescope shares obtained pursuant to a one for one renounceable rights issue. 68At the date of his death, the testator owned 15,010 shares in St George Bank Ltd. These were exchanged for 19,663 shares in Westpac on 24 November 2008, following the merger. 69Mr Willmott virtually concedes that if the rules as to ademption of specific legacies were applied, these Westpac shares would not be considered to be the same as the St George shares that were the subject of the gift (see, for example, re Slater [1907] 1 Ch 665). Mr Willmott says that what one has to do is to look to see what is the property covered by the words "those shares". However, it seems to me that the words "those shares" relate back to the words "my shares in public companies," which to my mind mean the shares in public companies with the testator held at his desk and which passed to his widow. These Westpac shares were not in that category. Furthermore, had the widow voluntarily accepted a merger bid by Westpac (there's no evidence whether she did or did not) then I would have thought that that would come fairly and squarely between a dealing with the shares as the widow thought appropriate. It seems to me that once the shares have gone (even if they are exchanged in a merger or takeover situation) the result in shares are not "those shares" which were given by the testator to the widow. 70A similar case arises with respect to the Bluescope Shares. The evidence shows that Bluescope had a one for one renounceable issue the widow took advantage of this deal acquired a fresh 27553 shares but sold the original shares. They were later consolidated so that at the date of her death she held 4861 shares. Once the original shares were sold I cannot see what the widow then had came within the words "those shares". 71The third category are comprised of additional shares acquired by the widow from the proceeds of sale of shares received from the testator or from any dividends distributed on those shares and shares obtained under any dividend reinvestment schemes. Mr Willmott says that because any shares acquired by the widow in accordance with her right to deal with the testator's shares are captured by the reference to "those shares". With the greatest respect I cannot see that. The dividends belonged to the widow. I cannot see how they can be said to be part of the capital. How the dividends were applied by the widow was purely her business. Likewise, if there are bonus shares. Bonus shares are just another form of dividend in most cases and would not normally accrete to the capital in any sense of the word at all (see, for example, re Tetsall [1961] 2 All ER 801; [1961] 1 WLR 938. 72Mr Willmott's fourth category is the dividends on shares in the previous three categories that have been declared since the date of the widow's death. Certainly the dividends in the first category must flow through probably by way of equitable damages or equitable compensation, but not on the other two classes. 73Accordingly, I publish my reasons these indicate that the widow and hence the second defendants hold the shares that their testatrix held as at the date of her death which were the same shares as she inherited from her husband are subject to an equitable obligation that they be conveyed to the plaintiffs. The plaintiffs are also entitled to the dividends on such shares since the date of the testatrix's death. I will stand the matter over until a date convenient to counsel in late July for the purposes of making orders and direct that the plaintiff bring in draft short minutes of order. 74I should add that there was no actual evidence that the widow knew that she was taking on condition, but as she was an executor of the testator's estate it would seem in the absence of any material to the opposite effect to be quite obvious.