Hennessey v Perpetual Trustees Queensland Ltd [2000] QSC 311

"11. MY trustees shall stand possessed of the residue UPON TRUST to pay from the income arising therefrom an annuity of Five hundred pounds to my grandson MICHAEL SAIDY and an annuity of Two hundred and fifty pounds to my granddaughter MICHELL SAIDY if and when they respectively attain the age of twentyone years conditional in the case of the said MICHAEL SAIDY on my trustees being satisfied that he has attained Queensland Senior Public Examination standard and in the case of the said MICHELL SAIDY on my trustees being satisfied that she has attained Queensland Junior Public Examination standard such annuities to be paid by equal quarterly payments the first whereof shall be made three calendar months after the date on which each grandchild respectively attains the age of twentyone years until my youngest surviving grandchild attains the age of twentyfive years.

12. ON my youngest surviving grandchild attaining the age of twentyfive years my trustees shall stand possessed of the residue and of any accumulated income thereon upon the following trusts -

(a) AS to two-thirds thereof to pay or transfer the same to my grandson MICHAEL SAIDY if he shall then be living and my trustees shall be satisfied that he has attained Queensland Senior Public Examination Standard and if my trustees shall not be so satisfied then my trustees shall pay the income to arise from such two-thirds share to my said grandson during his life and on his death shall pay or transfer such two-thirds share to such of his children as shall survive him and attain the age of twentyone years and if more than one in equal shares.

(b) AS to the remaining one-third thereof to pay or transfer the same to my grand-daughter MICHELL SAIDY if she shall then be living and my trustees shall be satisfied that she has attained Queensland Junior Public Examination Standard and if my trustees shall not be so satisfied then my trustees shall pay the income to arise from such one-third share to my said granddaughter during her life and on her death shall pay or transfer such one-third share to such of her children as shall survive her and attain the age of twentyone years and if more than one in equal shares.

If the trusts mentioned above terminated or failed there was a gift over to named charities.

[3] Michael Saidy was born on 15 May 1959. His sister Michelle (who is the "Michell" referred to in the will) was born on 18 June 1960. When the will was executed (including the codicil, which is not relevant for this application) they were respectively three years and two years of age. The testator died during the following year. Probate issued to the respondent under its former name, Queensland Trustees Limited on 29 January 1964, sealed on 12 May 1964. By order of this court the terms of the will were altered in ways not relevant to this application. Although not entirely clear on the material, it appears that maintenance payments were made in respect of Michael and Michelle Saidy between 1965 and 1985 and the payment of annuities from the age of 21 years as provided for by clause 11 of the will did not occur.

[4] The respondent distributed the residue of the estate in the amounts of $142,046.37 to Michael Saidy and $60,845.96 to Michelle Saidy on or about 18 June 1985 when Michelle became 25 years of age. Michael Saidy became bankrupt on 22 August 1997. He died in a work-related accident on 16 December 1997. The respondent paid Michelle a final distribution on 31 March 1999. A dispute has arisen as to whether the respondent should pay the balance of Michael Saidy's share in the remainder of the residuary estate to the Official Trustee in Bankruptcy or to Michael Saidy's infant children.

[5] The issue for these proceedings is whether, on a proper construction of the will and in the events which have occurred, the respondent is entitled to make the distribution to the Official Trustee. The answer will have implications for the funds already distributed although the court is not asked to make findings about the earlier distribution nor, if the will is construed against the course proposed to be taken by the respondent, is there is any application pursuant to s 76 of the Trust Act to relieve it from personal liability.

[6] The applicant on behalf of the infant children contends that Michael Saidy never attained Queensland Senior Public Examination standard, the condition which had to be satisfied under the will to entitle him to share in a distribution of the residue of his grandfather's estate and therefore his estate has no vested interest in it. Since Michael Saidy is deceased the applicant contends that the provisions of the will to hold two-thirds of the residue for his children ought to be given effected to.

[7] In December 1984, Michael Saidy received a Board of Secondary School Studies Senior Certificate showing that he had obtained a grade of "1" in three subjects, English, Economics and Biological Science. The Certificate relevantly states:

"A candidate's grade of achievement in each subject is reported as a descending numerical rating 7 to 1 - outstanding achievement being assigned a rating of 7. In this way an individual candidate's achievement in a given subject is compared with the achievement of the other candidates who took that subject in the same year. A grade of achievement therefore has a relative significance only. There is no pass grade."

Michelle Saidy received her Junior Certificate in December 1984 with the same grades of "1" for the subjects for which she sat. They appear to have enrolled as mature age students at Corinda State High School during that year.

1. What meaning should be attributed to the words "my trustees shall be satisfied that he has attained Queensland Senior Public Examination Standard" in clause 12 of the will?

2. If the meaning attributed to those words is not that contended for by the respondent, should the court intervene in the exercise of the discretion conferred on the trustee by clause 12?

The meaning of the phrase "Queensland Senior Public Examination Standard"

[9] It was agreed by counsel for both parties that the phrase "Queensland Senior Public Examination Standard" had no ordinary meaning nor did it have a technical meaning in 1962 when the will of William Saidy was executed. The applicant contends that the use of the word "standard" implies that it was not sufficient for Michael Saidy merely to undertake "Senior" examinations but that he must also have attained a level of achievement in them. According to that submission the Senior Certificate which Michael received in 1984 showing that he had achieved the lowest possible grade in three subjects did not satisfy the condition in the will despite the fact that the Certificate as issued states that there is no pass grade.

[10] The applicant sought to introduce extrinsic material to evidence the intention of the testator in the form of a report by Mr Reg Allen of the Queensland Board of Senior Secondary Studies. Mr Allen expresses his opinion as to the meaning of the phrase and whether Michael's Senior Certificate meets his interpretation of it. The respondent claims that the whole of Mr Allen's report is inadmissible and that the only admissible extrinsic evidence is the certificate issued to Michael in 1984. While the opinions Mr Allen expresses in the report are inadmissible, he does provide information about the Queensland Public Examination in 1962. According to Mr Allen, the Queensland Senior Public Examination was an external examination and the means by which students matriculated to university. To matriculate a student needed to pass in four subjects. A student who passed one subject would receive a Senior Certificate. However, a student could still receive a certificate showing his or her results from the examination on completing at least one subject even if that result was a "fail grade". Matriculation for university entrance as understood in 1962 no longer existed in 1984 although entrance to a university undergraduate course was based on relevant achievement in the Senior examinations.

[11] The respondent concedes that in isolation the word "standard" may mean a degree of excellence required for a particular purpose. However, it submits that for the purposes of the will "standard" should not be construed as referring to a particular level of achievement in the examination. Indeed it is not possible to know what level would have been intended. Considering that Michael was three at the time his grandfather's will was executed, the respondent submits that the testator's intention was only to encourage his grandson to undertake Senior study and not to expect him to achieve a degree of academic achievement that may have been beyond his capabilities. Had that been his intention he may more likely have used the expression "matriculate." Since a student who undertook the examination was awarded a certificate even if he or she did not pass the examination and the testator could not be certain that Michael Saidy would have the ability to pass all or any subjects if attempted, I am not persuaded that the phrase "Senior Public Examination Standard" refers to any particular level of achievement in that examination. Rather, the interpretation which I would favour is that Michael needed only to complete his Senior studies regardless of his success or failure. In the circumstances, the Senior Certificate which he received in 1984 shows that he met the condition imposed by his grandfather's will.

The Court's jurisdiction to intervene in the exercise of a discretion by a trustee

[12] I will make some comment on the second aspect of the application, that is, if the construction contended for by the applicant did prevail, ought the court intervene in the exercise of the trustee's discretion. Traditionally courts have been reluctant to review the exercise of a discretion by a trustee. In Queensland, s8(1) of the Trusts Act provides a mechanism by which a person with an interest in trust property who is aggrieved by an actual or proposed decision of a trustee can have that decision reviewed by the court. The applicant has a sufficient interest in the trust property in that, as litigation guardian for her daughters, she has a contingent interest in the property or at the least a right of due administration in respect of the trust, Re Faulkner [1999] 2 Qd R 49 at 52-53.

[13] While the power conferred on the court by s8(1) should not be narrowly construed, the court is nonetheless reluctant to interfere in the exercise of a discretion by a trustee, Re Whitehouse [1982] Qd R 196 at 203. In Karger v Paul [1984] VicRp 13; [1984] VR 161 at 164, McGarvie J discussed the court's general jurisdiction to review the exercise of a discretion by a trustee.

"In my opinion the effect of the authorities is that, with one exception, the exercise of a discretion in these terms will not be examined or reviewed by the courts so long as the essential component parts of the exercise of the particular discretion are present. Those essential component parts are present if the discretion is exercised by the trustees in good faith, upon real and genuine considerations and in accordance with the purposes for which the discretion was conferred. The exception is that the validity of the trustees reasons will be examined and reviewed if the trustees choose to state their reasons for their exercise of discretion."

In Scott v National Trust for Places of Historic Interest [1998] EWHC 318; [1998] 2 All ER 705 at 717, Robert Walker J discussed the duties of trustees in making decisions in the exercise of their fiduciary functions.

"Certain points are clear beyond argument. Trustees must act in good faith, responsibly and reasonably. They must inform themselves, before making a decision, of matters which are relevant to the decision. These matters may not be limited to simple matters of fact but will, on occasion (indeed, quite often) include taking advice from appropriate experts, whether the experts are lawyers, accountants, actuaries, surveyors, scientists or whomsoever. It is however for advisers to advise and for trustees to decide..."

See also Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896 HL.

[14] While it is the decision of the respondent to transfer the remaining funds in the residuary estate to the Official Trustee in Bankruptcy which the applicant seeks to have reviewed, it is the 1985 decision to distribute his share of the fund to Michael Saidy which is the basis of that decision. There is no submission that the respondent did not act in good faith and none can be made. Nor is there any evidence that the respondent took into account irrelevant matters or failed to consider relevant matters. What it did do to inform itself is set out in the affidavit of Joanne Hazel O'Brien, senior private client manager of the respondent, who has examined the files. When the respondent received the respective certificates from Michael and Michelle Saidy the question was considered by three senior employees of the respondent, one of whom (now deceased) had the day to day conduct of the testator's trust and another of whom was the trust manager of the respondent. An internal memorandum (exhibit F) makes clear that the respondent was alive to the alternative constructions of the will, namely, "Does the wording raise the expectation that the trustees are to assess and be so satisfied with the results achieved or do the trustees need only be satisfied that Michelle undertook Junior level education and sat for the exams?" The memorandum concerns Michelle but a notation indicates that these comments are applicable to Michael. The memorandum continued:

"As there is no "pass" grade there is no prima facie evidence to assess satisfactory achievement. The results are of the lowest possible order and do not record she has attained any real understanding of the subjects attempted. Nevertheless, there has been an effort by Michelle to comply with the conditions of the Will. It could be submitted that the purpose of the will was to encourage her to undertake study to Junior level - the degree of success may not be relevant. She was only 2 or 3 years when the testator died. The use of the word "examination standard" would ensure that not only is it necessary for the beneficiary to undertake junior education but also to submit herself for examination. That is, she would not withdraw any time during the junior year and claim she had ....attained Junior standard. Corinda Centre where Michelle studied is closed until January 29. The Board of Secondary School Studies is not aware of the exact records kept by the Centre but would expect that it keeps rolls and students would be require[d] to meet attendance standards etc. Despite Michelle's poor results I consider she has complied with the requirements of the will. However, a check with the Corinda Centre may be prudent".

[15] Although more information might have been sought about the relationship between the examination undertaken by Michael in 1984 and the Queensland Senior Public Examination in 1962 it can be supposed, with some confidence, that the senior employees of the respondent would have had what would have been common knowledge for their age group about the senior Examination in 1962 and they had the information about the 1984 Senior Certificate on the certificate itself. In any event, the memorandum indicates that the trustee had sought information from the Board of Secondary Studies.

[16] In my view, the respondent acted responsibly upon an interpretation of the will reasonably open. Even had I adopted a construction of the will other than that contended for by the respondent, I can see no ground upon which the exercise of its discretion could be impugned.

[17] The application is dismissed. I will hear submissions as to costs.