Rhodes v Rhodes

SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - CONSTRUCTION GENERALLY - ASCERTAINMENT OF TESTATOR'S INTENTION - GENERALLY - where testator used a pro forma will - whether the testator, in a clause in his will, gifted the residue of his estate absolutely or whether a testamentary trust was created - where it was found that a testamentary trust was created

SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - CONSTRUCTION GENERALLY - ASCERTAINMENT OF TESTATOR'S INTENTION - TESTAMENTARY TRUSTS - where testator used a pro forma will - whether the testator's words created a testamentary trust or a condition enforceable in equity- where it was found that a testamentary trust was created

Succession Act 1981 (Qld) ss 33O, 33C(1)(a)

Lamb v Eames (1871) LR 6 Ch App 597, distinguished

Creagh v Murphy [1873] 7 IR 182, distinguished

Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381, distinguished

Mussoorie Bank v Raynor (1882) 7 App Cas 321, distinguished

Re Williams [1897] 2 Ch 12, cited

O'Brien v Condon [1905] 1 IR 51, cited

Sidle v Queensland Trustees Ltd [1915] HCA 48; (1915) 20 CLR 557, cited

Dean v Cole [1921] HCA 46; (1921) 30 CLR 1, distinguished

Fell v Fell [1922] HCA 55; (1922) 31 CLR 268, applied

Countess of Bective v FCT [1932] HCA 22; (1932) 47 CLR 417, cited

Re Johnson [1939] 2 All ER 458, followed

Kauter v Hilton[1953] HCA 95; (1953) 90 CLR 86, cited

Re O'Mullane [1955] VicLawRp 40; [1955] VLR 217, distinguished

Rayfield v Hands [1960] 1 Ch 1, cited

Hayes v National Heart Foundation of Australia [1976] 1 NSW LR 29, cited

Re the Will of Logan [1992] 1 Qd R 395, cited

Re Boning [1997] 2 Qd R 12, cited

Brown v Hill [2012] NSWSC 464, applied

[1] Cecil Ronald Rhodes died on 15 July 2011. His family are at odds as to the meaning of his pro forma will.

[2] In that will he indicated to whom he left his estate by writing:

"ALL MY WORLDLY GOODS TO MY EX WIFE WHO WILL DISTRIBUTE IT TO MY CHILDREN AS SHE SEES FIT."

[3] What do those words mean? Do they gift the residue of the estate to Cecil's ex-wife absolutely or do they create a testamentary trust of which Cecil's children are the beneficiaries?

[4] Cecil was survived by:

• (a) his former wife, Rita Clare Rhodes ("Rita"), from whom he divorced on 22 August 2004;
• (b) their children Colin Bruce Rhodes ("Colin"), Jason Lyle Rhodes, Nigel Paul Rhodes ("Nigel"), Matthew Noel Rhodes and Angela Naomi Agius; and
• (c) the deceased's child Stuart Stone ("Stuart").

[5] All those persons are parties in an application filed by Cecil's son Colin. Nigel is first respondent in his capacity as Executor of Cecil's will. Rita is the second and only active respondent in the application.

[6] Colin's application seeks orders, inter alia:

1. appointing him as administrator pending disposition of the application;
2. removing his brother Nigel as executor of the estate;
3. revoking the grant of probate in the estate of 17 September 2012;
4. declaring certain real properties, shortly described as Lots 41 and 42, were assets of the estate;
5. declaring the status upon which Rita held Lots 41 and 42 and holds another real property, shortly described as Lot 1;
6. removing Rita as trustee of the trust allegedly created by the will;
7. for accounts, enquiries or equitable compensation in respect of Rita's sale of Lot 41;
8. for accounts and enquiries in respect of Nigel's and Rita's dealings with Lots 1 and 42 and income and expenses related to those properties.

[7] The genesis of the controversy apparently provoking the application lies in part in Cecil and Rita not having fully implemented a Family Court consent order requiring Rita and Cecil to transfer certain properties, which had been jointly owned by each of them, to one or the other of them. The consent order was made on 29 August 2005, well before the date on which Cecil executed his will, 12 January 2010.[1]

[8] The consent order required Cecil to transfer to Rita all his right, title and interest in and to:

• (a) six shops at 42-44 Balaclava Road, Earlville;
• (b) a cane farm on two titles shortly described as Lot 3 and Lot 96 at Hall Road, Meringa; and
• (c) a house on the Bruce Highway at Gordonvale shortly described as Lot 3.

[14] Because of the potentially determinative nature of the question as to how the will's residue clause ought to be interpreted I concluded it should be determined as a preliminary issue, ordering:

"The question whether the residuary estate of the late Cecil Ronald Rhodes ("the Deceased") was gifted to the Second Respondent absolutely or whether it was subject to a testamentary trust in favour of the Applicant and the Third Respondents pursuant to the Will of Deceased dated 12 January 2010 ("the Preliminary Issue") be determined separately from any other question in the proceedings and before any further trial of the proceedings."

[15] That question assumes there are two possible outcomes to which the words give rise, an absolute gift or a testamentary trust. There are theoretically more than two possibilities.[2] The present case was argued on the basis that if the disposition was not an absolute gift then it was subject to a testamentary trust or alternatively a condition enforceable in equity with the same effect as a testamentary trust.[3] I will for convenience postpone consideration of which of the latter alternative possibilities is apt and for the moment consider both as if coming within the reference to a testamentary trust in the question for determination.

[16] The whole of the will must be considered in interpreting the meaning of any part of it.[4]

[17] The sections of the pro forma will of potential relevance to interpreting its disposition of Cecil's estate have the headings "Gifts", "Residuary Estate" and "Incidental Beneficiaries". Nothing was inserted in the "Gifts" section of the pro forma. The only dispositive clause in the will is in the "Residuary Estate" clause.

[18] The "Residuary Estate" clause reads as follows (with pro forma entries appearing in normal type and the deceased's handwritten entries appearing in italic type):

I give the residue of my estate to such of the following beneficiary or beneficiaries as survive me and if more than one in equal shares[5]

ALL MY WORLDLY GOODS TO MY EX WIFE WHO WILL DISTRIBUTE IT TO MY CHILDREN AS SHE SEES FIT.

If all of the above beneficiaries and their incidental beneficiaries predecease me, I give the residue of my estate to such of the following beneficiary or beneficiaries as survive me and if more than one in equal shares:

[No handwriting inserted in the space provided beneath]"

[19] The "Residuary Estate" section is followed by the "Incidental Beneficiaries" section, which provided, without space for any handwriting to be inserted:

If any of the beneficiaries referred to do not survive me then that benefit which they would have received shall be divided equally amongst such children of theirs as survive them. If there are no such children, their share shall return to the residuary estate."

[20] Three points arising from the form and manner of completion of the pro forma will should be dispensed with at the outset. Firstly, notwithstanding Cecil's choice of the Residuary Estate clause as the location to insert the words in issue, it is obvious he intended his words to dispose of the whole of his estate. Bearing in mind there was no other dispositive clause written in by him it is uncontroversial his reference to "all my worldly goods" embraced all his property, both real and personal.[6]

[21] Secondly, it is clear Cecil's words do not flow on in neat completion of the sentence begun with the typewritten Residuary Estate clause commencing "I give". If they did his words would simply name the beneficiary or beneficiaries to whom the typewriting refers, rather than begin with the words "All my worldly goods" and continue with directions about distributing them. That they go beyond merely inserting a name or names dispenses with an argument that the first person mentioned in Cecil's handwriting - his ex-wife - was necessarily intended by him to be the beneficiary to whom the typewritten words referred. Given the words Cecil wrote after the typewritten commencement of the clause, their placement means no more than that Cecil meant to indicate which beneficiary or beneficiaries he was intending to gift his estate to. That is to say nothing of whether he intended to do so by the mechanism of an absolute gift or a trust.

[22] Thirdly, it is apparent Cecil's words did not use the word "trust" or use language of a kind which might be favoured by trained lawyers in setting up a trust. However, no special words are required to create a trust. As Lindley J observed in Re Williams:[7]

"Trusts - ie., equitable obligations to deal with property in a particular way - can be imposed by any language which is clear enough to shew an intention to impose them."

[23] Turning then to the language Cecil used, if he was intending to gift his estate to Rita absolutely it is curious he would add reference to his children and to Rita distributing the estate to them. In considering whether such additional language bespeaks an intention to create a trust the main question is "whether there is something imperative in the will, something which requires that something should be done".[8]

[24] Rita's counsel submits the additional words are not imperative and merely express hope or confidence. Particular reliance was placed upon Dean v Cole.[9] There the High Court considered whether a testator had created an absolute gift to his wife or created a trust by use of the words:

"I give all and every portion of my real and personal estate to my wife...trusting to her that she will at some time during her lifetime or at her death divide in fair, just and equal shares between my children...all such part and portion of my estate as she may be in the use and enjoyment of...".

[25] The High Court concluded those terms of the will ought not be construed as imposing a trust and rather gave rise to an absolute gift to the testator's wife. The plurality observed:

"In our opinion the words 'trusting to her' should be construed as an expression of the testator's confidence that his wife would make a just, fair and equal division of the property which he left her, and not as imposing on her a binding trust to make an equal division of that property between the named children."[10]

[26] There were other reasons influencing the interpretation of the above quoted passage but in any event the present case is quite different than Dean v Cole. Here the relevant words are unqualified by aspirational references such as "trusting to her" or distant temporal references such as "some time during her lifetime or at her death". Nor are the words qualified by similarly aspirational references in other cases cited by Rita's counsel, such as, "in any way she may think best",[11] "having every confidence",[12] "in such manner and to such parties as to them may appear just",[13] "feeling confident that she will act justly to our children",[14] and "in the fullest trust and confidence".[15]

[27] Cecil's choice of the words, "who will distribute it to my children" (emphasis added), is significant. Those words have an imperative quality. They are inconsistent with a mere indication of purpose or motive for benefiting Rita,[16] indeed they are inconsistent with an intention to benefit Rita at all. The word "will" in this context bespeaks obligation rather than choice.[17] It conveys that distribution is mandatory, so that Rita must distribute the residue to Cecil's children.

[28] What though of the words "as she sees fit"? Do they go only to the proportions in which Rita "sees fit" to distribute the estate which she must distribute to Cecil's children or do they qualify the apparent requirement that Rita "will" distribute, by empowering her to decide whether she ever "sees fit" to do so at all?

[29] In contending for the latter interpretation Rita's counsel placed reliance upon O'Brien v Condon.[18] There the testator's will relevantly stated:

"I do hereby will and bequeath any money I shall die possessed of to the Rev. Walter O'Brien, ... to be distributed as he thinks right."

In the result a secret trust was found but if it had not been the Master of the Rolls concluded the words used conferred an absolute gift, so that the words "to be distributed as he thinks right" made Reverend O'Brien complete dominus of the gift. A parallel is here sought to be drawn between the words "as she sees fit" and the words "as he thinks right" used in O'Brien v Condon. That comparison overlooks an obvious difference. In this case, unlike in O'Brien v Condon, there is not only specific reference to persons who are at least arguably beneficiaries, namely Cecil's children, there is also a requirement that Rita "will" distribute to them as she sees fit.

[30] The notion that the words used here empowered Rita to decide whether she ever "sees fit" to distribute at all ignores the significance of the word "will". Considered in context that word indicates Cecil was doing more than conferring a mere power upon Rita and rather was conferring a trust power Rita was obliged to execute.[19] The ordinary and natural meaning of the combination of words chosen by Cecil is that the words "as she sees fit" go to when and in what proportions Rita "sees fit" to distribute the estate to Cecil's children and do not override the mandatory requirement that she "will" distribute. They are unremarkable words in the context of the form of express trust sometimes described as a discretionary trust.[20]

[31] I find Cecil's words bespeak a requirement, not merely a hope, that Rita will distribute his estate to his children.

[32] The conclusion that Cecil's words were intended to gift his estate beneficially to his children is also consistent with the broader content of the will, specifically, the Incidental Beneficiaries clause. Its effect is that if Rita had not survived Cecil and if, as she argues, she was the beneficiary of the estate, then it would be divided equally amongst her surviving children. That would exclude one of Cecil's children, Stuart, who is not Rita's child. Such an outcome appears to be inconsistent with Cecil's use of the words "my children" in the Residuary Estate clause of the will. There would be no such inconsistency if Rita is merely a trustee and Cecil's children are the beneficiaries pursuant to the Residuary Estate clause.

[33] It is self evident from the above analysis that I do not regard the words in issue as ambiguous on the face of the will. I have only found it necessary to have regard to evidence beyond the will's words to identify who Cecil's references to his ex-wife and his children are meant to refer to.[21] Rita's counsel positively urged against broader recourse to extrinsic evidence. I record for completeness however that such extrinsic evidence as was before me, would not have assisted Rita's argument as to testamentary intention.

[34] It will be recalled Rita had received a substantial property settlement after her divorce from Cecil. Such a background would not ordinarily be thought to support an inference that Cecil intended to favour Rita ahead of the more natural beneficiaries of his remaining bounty, his children. Against this it is true that by the time of Cecil's will the transfer of certain property to which he was entitled pursuant to the Family Court consent order had not been effected. However, this is equally consistent with him having maintained a cordial relationship with Rita and having sufficient trust in her to act as trustee in distributing his estate to his children, including that component of his estate which had not hitherto been registered as transferred to him. That confidence in her is similarly consistent with Cecil's choice of her rather than a beneficiary such as the executor, Nigel, as the trustee charged with distributing the beneficial interest in his estate. The extrinsic evidence does not suggest a testamentary intention contrary to that which I have concluded from the language used in the will.

[38] It follows from the above reasons that the question before me ought be resolved in favour of the applicant. That is, the estate was not gifted to Rita absolutely and rather it was subject to a testamentary trust in favour of the applicant and third respondents.

[39] It will be necessary to hear the parties further as to costs and directions for the continued disposition of the application.

[40] My orders are:

1. The answer to the question on the preliminary issue is that the residuary estate of the late Cecil Ronald Rhodes was gifted to the second respondent subject to a testamentary trust in favour of the applicant and the third respondents pursuant to the will of Mr Rhodes dated 12 January 2010.
2. I will hear the parties further as to costs and directions for the continued disposition of the application at 9.15 am on 15 March 2017.
3. Liberty to apply in the meantime on the giving of two business days' notice in writing.

[1] There is an arguable but presently irrelevant prospect the execution date was 12 January 2011.

[2] See for example Countess of Bective v FCT [1932] HCA 22; (1932) 47 CLR 417 where Dixon CJ identified four theoretical possibilities where a gift expresses a purpose beneficial to others.

[4] Sidle v Queensland Trustees Ltd [1915] HCA 48; (1915) 20 CLR 557, 560-561; Fell v Fell [1922] HCA 55; (1922) 31 CLR 268, 273-274.

[5] A colon is not visible at the end of the first set of type written words in the exhibited photocopy of the will, probably because it exists but was obscured by an overlying tab when photocopied.

[6] See Brown v Hill [2012] NSWSC 464, [52]-[58]. Even were "goods" interpreted narrowly as a reference only to the personal estate, the absence of any other disposition would have the consequence, consistently with s 33O Succession Act 1981 (Qld) and the absence of a contrary intention, that it is a reference to both the real and personal estate.

[7] [1897] 2 Ch 12, 18-19.

[8] Re Johnson [1939] 2 All ER 458, 460; followed in Hayes v National Heart Foundation of Australia [1976] 1 NSW LR 29 and Re the Will of Logan [1992] 1 Qd R 395, 398.

[9] [1921] HCA 46; (1921) 30 CLR 1.

[11] Lamb v Eames (1871) LR 6 Ch App 597.

[12] Creagh v Murphy [1873] 7 IR 182.

[13] Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381.

[14] Mussoorie Bank v Raynor (1882) 7 App Cas 321.

[15] Re Williams [1897] 2 Ch 12.

[16] An interpretation urged by Rita's counsel, seeking to invoke a rule of construction discussed by Smith J in Re O'Mullane [1955] VicLawRp 40; [1955] VLR 217, 222.

[17] See for example Rayfield v Hands [1960] 1 Ch 1, 3.

[18] [1905] 1 IR 51.

[19] As to the distinction between a mere power and a trust power see D Ong, Trusts Law in Australia, 4th edition, 99-102.

[21] See s 33C(1)(a) Succession Act 1981 (Qld).

[22] [1953] HCA 95; (1953) 90 CLR 86, 97.

[23] Discussed by White J in Re Boning [1997] 2 Qd R 12, 22.