In re Beck [1999] VSC 318 (3 September 1999)

Supreme Court of Victoria|1999-09-03|Before: Smith, J.

Wills - construction - "If the above trusts fail" - presumption against intestacy.

Questions have arisen concerning the construction of the will of the late Emil Beck made 2nd November 1989. Probate of the will was granted on 10 September 1996.

"hold the net proceeds of such sale calling in and conversion and my ready money upon the following trusts: -

(a) UPON TRUST to pay my debts, funeral and testamentary expenses.

(b) To invest the proceeds of such sale calling in and conversion and to use the income thereof in paying for the day to day care and needs of my wife MARY HAZEL BECK during her life time."

There then followed a clause (clause 4) which set out the powers of the trustee. These powers operated in addition to any statutory powers and included the following

(c) a power in his discretion to raise the whole or any part of the vested or presumptive share of any beneficiary under this my Will and apply the same as well as the income thereof (including any expended income from previous years) for his or her maintenance support advancement education benefit welfare in such manner as my Trustee may think fit with liberty to pay any sum so applied to any guardian for the time being of such beneficiary without being liable to see to the application thereof.

(e) in addition to the investments authorised by law for the investment of trust moneys by trustees to invest all or any part of my estate with power to transpose or vary such investment in: -

(i) the purchase of real property with power to sell or let the same:

(ii) the purchase of debenture stocks or shares of any public company the debenture stocks and shares of which are listed for quotation on the Melbourne Stock Exchange with power to sell any of the same and power to take up new issues;

(iii) the purchase of any shares or stocks in any company of which I may be a shareholder at the date of my death or any subsidiary thereof with power to sell the same;

(iv) fixed deposit with any trading or savings bank carrying on business in Australia;"

In clause 5 he directed his funeral arrangements. The final clause is clause 6

"6. IF the above trusts fail then I LEAVE the whole of my estate to my Trustee to use such estate for charitable purposes which in the discretion of my trustee will benefit needy members of the Jewish community or for any other purpose as my Trustee in his discretion shall consider fit."

Emil Beck died on 15 November 1994. He was survived by his wife. They had no immediate family. The deceased's family died during the Second World War. His wife Mary Hazel Beck had relatives in Australia.

Mr and Mrs Beck had executed wills on 25 September 1981 but it was later discovered that Emil Beck had executed both wills. At the time of the execution of her will, Mrs Beck was suffering advanced senile dementia and lacked testamentary capacity.

Shortly after the execution of his last will in 1989, an order was made by the Guardianship Board appointing the State Trustee to administer the affairs and assets of Mary Hazel Beck to the State Trustee. This order was made on 29 November 1989. At the time he executed his will, Mr Beck was aware that his wife had been incapable of executing her will and would, because of the problems with her 1981 will, die intestate. He was aware, therefore, that her estate would be distributed to her next of kin which included him, if he survived her.

Mary Hazel Beck survived the deceased and lived until 9 August 1997. The second defendant is the administrator of her estate. She was cared for in the Montefiore Homes for the aged. Her expenses at the Montefiore Home were largely covered by the income from her own resources. Some of the income of the estate of the late Emil Beck was also used for her care and needs but the plaintiff concedes that there was some $20,000 of income which was not used for her care and needs and which is currently held by the trustee of the estate of Emil Beck.

Issues have arisen in the circumstances as to the operation of cls 6 and 3(b) of the will. The following questions, as amended are said to arise

(a) Does cl 6 of the will of Emil Beck made the 2nd November 1989 effect a gift of the remainder interest in the estate of the deceased to the plaintiff on trust "to use such estate for such charitable purposes which in the discretion of my Trustee will benefit needy members of the Jewish community or for any other purpose as my Trustee in his discretion shall consider fit?"

(b) As a result of the operation of the will of Emil Beck deceased is there an intestacy in relation to the remainder interest of the deceased estate.

(c) Pursuant to cl 3(b) of the will of Emil Beck, deceased, was Mary Hazel Beck entitled to receive the whole of the income of the estate of the deceased during her life time?

(d) Pursuant to cl 3(b) of the will of Emil Beck, deceased, was Mary Hazel Beck entitled to receive only such of the income of the estate of the deceased as necessary to pay for the day to day needs of Mary Hazel Beck which she was unable to pay for out of her own income?

(e) Pursuant to cl 3(b), was the trustee directed to pay for all of Mary Hazel Beck's day to day care and needs out of the income of the estate?

It will have been noted that cl 6 of the will extends in its terms beyond a valid charitable gift. It was common ground that if cl 6 otherwise validly operated in the circumstances of the present case, it would be saved by s 131 Property Law Act 1958 and that in those circumstances a declaration should be made as to the validity of cl 6. It was also common ground that if cl 6 had the effect of passing the residuary estate to the plaintiff to be held on the trusts in cl 6 on the death of Mary Hazel Beck, that conclusion would affect the approach to the remaining questions. Accordingly it is appropriate to address first the issues raised in relation to cl 6.

Turning to that clause I note that it was also common ground that there was only one trust in the will that could fail and that was the trust pursuant to which the trustee was directed to use the income from the estate for "the day to day care and needs" of the deceased's wife.

The parties proceeded on the basis that the task is to construe the will to ascertain the testator's intention and that to do that one must look at the will as a whole and may also consider the circumstances touching the intention of the testator (S 22A Wills Act 1958). Those circumstances included the fact that in 1981 both Emil and Mary Beck had purported to make wills in which the residue was to pass to named charities and their next of kin were not to benefit. In addition, as was noted above, Emil Beck knew when making his 1989 will that his wife would die intestate. I am satisfied that he was also aware that she owned assets which were producing income and which could be used for her maintenance and support which would pass to her next of kin wholly or in part on an intestacy.

Counsel for the plaintiff submitted that the starting point was the presumption against intestacy. He referred to a passage from the judgment of Lord Esher M.R. in Re Harrison 1885 30 Ch. D 390, 393:

"Where a testator has executed a will in solemn form you must assume that he did not intend to make it a solemn farce - that he did not intend to die intestate when he had gone through the form of making a will. You ought, if possible, to read the will so as to lead to a testacy not an intestacy."

The learned authors Hardingham, Neave and Ford, in Wills and Intestacy, 1983, 294 commented after referring to this passage:

"Where the Court has a choice as to the construction of words in a will, it will lean it favour of the construction which avoids an intestacy. It has already been seen that the Court may be influenced by the bias against intestacy to omit, change, transpose or supply words in a will. If however there is an ambiguity or uncertainty which the Court cannot resolve with the assistance of admissible extrinsic evidence the bias against intestacy will not enable the Court to give the disposition meaning on the basis of mere speculation. Nor will the bias against intestacy enable the Court to overcome the clear words of the will."

Counsel for the plaintiff submitted that the phrase in the will

"in the event that the above trusts fail to operate . . . "

and that so construed were words that applied to a situation where the trust set out in cl 3(b) came to an end on the death of Mary Hazel Beck. In this he was supported by counsel for the Attorney-General.

Counsel for the second defendant submitted that such an interpretation is contrary to the clear words of the will and that, therefore, the Court cannot give effect to the presumption against intestacy (e.g. Re Follett (1955) 2 All E.R. 22). He submitted that the word "if" in the phrase was inconsistent with the notion of a gift over. It would normally be used to apply only to the situation where Mary Hazel Beck did not survive her husband. He submitted further that the use of the word "if" supported giving strict meaning to the word "fail" which he submitted should be used in the normal way when found in a will to mean a failure to operate rather than termination. My attention was drawn to the list of examples of failures of a gift set out in Williams on Wills, 7th Ed., p 502 where it was stated that a gift may fail because of

ú attestation of the will by the donee or his or her spouse

ú the existence of title paramount to that of the donee

ú the property may be the property of some other person.

Counsel submitted that we are not here dealing with a will drafted by a lay person but a will drafted by a solicitor and it was therefore difficult to avoid the conclusion that terms which tend to be used technically in wills were so used on this occasion (cf in Re Taylor [1923] 99, 105). He submitted that the argument advanced by the plaintiff was in effect that cl 6 was as close as one could get to an attempt to devise the remainder and therefore should be construed as such.

Counsel for the second defendant further submitted that the presumption against intestacy cannot be taken too far. He referred to statements of Romer, L.J. suggesting a somewhat reduced force for the presumption in Re Edwards [1906] 1 Ch. 570 at 574:

"It is said that the Court leans against intestacy. I do not know whether that expression at the present day means anything more than this, that in cases of ambiguity you may, at any rate in certain wills, gather an intention that the testator did not intend to die intestate, but it cannot be, that merely with a view to avoiding intestacy, you are to do otherwise than construe plain words according to their plain meaning."

In that case the testatrix gave her estate to trustees in trust for her children who attained 21 years or married and if more than one in equal shares. There was a gift over to other persons in the event of her death "without leaving any children surviving me". One child did survive the testatrix but that child died an infant. The Court of Appeal held that the operation of the will in the circumstances that occurred had the effect that the gift over did not take effect and that there was therefore an intestacy. The Court took the view that the words were:

"perfectly clear, simple, and free from doubt." (at 573)

Counsel also referred to the case of Re Edwards deceased [1981] VicRp 76; [1981] VR 794. In that case Kaye, J. commented (at 795)

"the gift would be void for uncertainty if, there were no person who answered accurately the description of the named beneficiary or if there were others to whom it might apply with equal degree of accuracy, so that the Court would be unable on the material properly before it to decide between them: Theobald on Wills 12 Ed., P. 251, par. 806. I adopt the comments concerning a similar situation made by Starke, J. in Re Newman [1967] VicRp 22; [1967] V.R. 201 at P. 203, as follows: `To be void for this reason it must be utterly impossible to put a meaning upon it. The Court is furthermore reluctant to hold a gift void for uncertainty, and adopts the benevolent rule that if there is ever so little reason in favour of one construction of an ambiguous gift more than another, the adoption of the construction so favoured is at least nearer the intention of an testator than that the whole disposition should be void and the person entitled on an intestacy let in'. See also Williams on Wills 5th Ed, (1980) Vol. 1, pp. 439-40."

That case concerned uncertainty arising as to the identity of the beneficiary. Thus as counsel said there was uncertainty and ambiguity which needed to be resolved. Counsel submitted that in this instance the drafter had selected words commonly used for particular purposes in wills, the drafting was clear and precise and had to be applied notwithstanding the presumption.

I accept that the word "fail" in a will, will normally be used to refer to the sort of situation referred to in the above list. (See Re Huntingdon's Settlement Trust [1949] Ch 414 and examples cited by counsel for the second defendant; Re Hubbard's Will Trust [1962] 2 All ER 917, re Buckton [1964] 2 All ER 487.)

There would in my view be considerable force in the argument advanced for the second defendant but for the fact that the drafting of the phrase in question in clause 6 is imprecise. The phrase in question "If the above trusts fail" refers in terms to more than one trust. It was common ground that there was only one trust that could on any view fail. Thus plainly in the drafting of the phrase in question there was a lack of care and precision. Another example of imprecision in the drafting of the will is clause 4 (c) which raises a number of issues which were not relevant to the will's provisions and their operation. Further, the presumption against intestacy is aided in my view by the illogicality, pointed to by counsel for the Attorney-General, in interpreting the provision in the way suggested for the second defendant. That interpretation involves the proposition that Emil Beck intended that there should be a residuary charitable gift in the event that his wife died before him but there should not be a residual charitable gift after his wife's death should she survive him in circumstances where it is clear that he did not intend to give her any vested interest in the estate. In the words of Lord Esher, it was suggested that that result would be a farce. Counsel for the Attorney-General also drew attention to the fact that there was nothing in the extrinsic evidence to suggest why there might have been any change of heart between his 1981 will and his 1989 will. In his 1989 will there was a gift over to two named charities and in the 1989 will the final provision of the will purported to leave the whole of the estate to charitable purposes.

While I accept that the word "if" and "fails" tend to be used in wills in the way suggested by counsel for the second defendant they are words which are capable of being used in the way suggested by counsel for the plaintiff - that is, "if" can mean "in the event that" and the word "fails" can be used in the sense of "fails to operate" In so construing those words one would not be re-writing the will. In my view the will and circumstances are not such as to prevent the presumption against intestacy operating. It would be appropriate, therefore, to construe clause 6 in the manner suggested by counsel for the plaintiff and the Attorney-General.

Accordingly question 1 (a) should be answered in the affirmative and question 1(b) should be answered in the negative. I turn to clause 3(b) and the remaining three questions.

Counsel for the second defendant submitted, firstly, that clause 3 (b) should be construed to require the trustee to pay for Mary Hazel Beck day to day care and needs and to do so in priority to income derived from her own assets. He also submitted that if the income from the estate of Emil Beck exceeded the amount required to meet her day to day care and needs there was an intestacy as to such surplus because there was no provision in the will which enabled the accumulation of the income. Thus it is said, as to that income there would be a partial intestacy.

As to the first point, I can find nothing in the language of cl 3 (b) of the will to suggest that the testator intended that his trustee should step in and, in effect, assume primary responsibility for paying for the day to day care and needs of Mary Hazel Beck out of the income of the estate. The direction is merely "to use the income . . . in paying for the day to day care and needs of . . . Mary Hazel Beck." The trustee was required to exercise a judgement as to what was required for her day to day care and her needs (for example, over clothing). If others were paying for some or all of those matters then the trustee would not need to use the income. If there was a shortfall then the trustee was directed to use the income in paying for the day to day care and needs of Mary Hazel Beck if the trustee thought that appropriate. It seems to me that much stronger and clearer language would be needed to impose upon the trustee primary responsibility for payment for the day to day care and needs of Mary Hazel Beck.

Turning to the second issue, counsel for the second defendant submitted that there needed to be an express power to accumulate for the trustee to have the power to accumulate unspent income which could then, as a result form part of the residue and be subject to cl 6. He relied upon the case of Re Wragg deceased [1959] 2 All ER 717.

I accept the submissions of counsel for the Attorney General and the plaintiff that the authority of Re Wragg cannot be taken as far as counsel for the defendant wished. It is authority for the proposition that one must, in determining these questions, construe the will. Counsel for the Attorney General submitted that cl 4 (e) of the will was sufficient to enable the trustee to invest unspent income in various ways including fixed deposits with banks. This appears to me to be a valid construction. The income would be part of the estate and the result would be that income not expended on Mary Hazel Beck would be held by the trustee as part of the trust estate for the trusts and pursuant to the powers in the will. As a result, in the event of "the trusts" failing to operate, cl 6 would apply and the whole of the estate including any unspent income would be subject to the trust contained in cl 6 of the will.

Accordingly, I have come to the conclusion that clause 1 (c) should be answered in the negative, 1 (d) in the affirmative and 1 (e) in the negative.

I propose to declare by reason of s 131 of the Property Law Act 1958 that the trust contained in cl 6 will take effect as if the words "or for any other purpose as my trustee in his discretion shall consider fit" were deleted. I shall invite counsel to make submissions on the precise form of orders that are required including costs orders.

At a glance

Court

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Before

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Judgment (53 paragraphs)

Legislation Cited (1)