Robertson v. Allen & Ors [2003] NSWSC 848

6090/01 ROBERTSON v. ALLEN & 2 ORS JUDGMENT 1 HIS HONOUR: These proceedings relate principally to the meaning and operation of the will and codicil of Dallis Robertson of West Albury New South Wales, Widow, who died on 7 September 1999, having made her last will dated 17 October 1996 and a codicil thereto dated 30 July 1999. The plaintiff is the surviving son of the testatrix. The first and second defendants Mr R.S. Allen, accountant, and Mr C.W. Welsh, solicitor, were appointed to be executors and trustees by cl.2 of her will, and they obtained a grant of probate of the will and codicil from this Court on 20 January 2000. 2 The third defendant Philrob Nominees Pty Ltd is a company formed in Victoria on 30 September 1975. At the time the testatrix died the only business or affairs of Philrob Nominees was that it held office as trustee of the Leith Trust. So far as appears from evidence Philrob Nominees has never had any other business. Its Memorandum of Association stated the objects for which the company was established at great length, and the very large number of businesses and activities referred to in cl.2 of the Memorandum of Association include in subcl.(vii) undertaking the office of and acting as a trustee, and transacting trust and agency business, and in subcl(viii) acting as custodian trustee and holding in its own name or in the name of any other person assets subject to trust. Its original directors and shareholders were two partners of a Melbourne legal firm and the plaintiff himself; the name of the company alludes to his names. After some time, the plaintiff and his wife Genevieve Robertson came to be the only shareholders, holding one share each, and also to be the only directors. The plaintiff resigned as a director and Mr R.S. Allen was appointed as a director on or about 23 July 1993. Mrs Genevieve Robertson resigned as a director on or about 10 July 1995, and the testatrix was then appointed director. Mrs Genevieve Robertson's share was transferred to a solicitor Mr A.N. Brandt in about July 1993. Multi Transit Company Pty Ltd. obtained an allotment of eight shares in 1996 upon an application dated 16 September 1996. When the testatrix died the directors were the first defendant Mr Allen and the testatrix herself. The shareholders were Mr Allen for one share, Mr Brandt for one share and Multi Transit for eight shares. Since the testatrix'death Philrob Nominees has adopted a new constitution. There have been transfers of shares in Philrob Nominees since the testatrix's death; at present Mr Allen continues to hold the share formerly owned by the plaintiff, while the other nine shares are registered in the names of the executors Mr Allen and Mr Welsh jointly. Philrob Nominees now has a sole director, Mr Allen. 3 Multi Transit Company Proprietary Ltd was incorporated in Victoria on 21 August 1967. The first object mentioned in its Memorandum of Association was "To carry on the business and industry of truck owners and operations" and there were many other objects. Multi Transit adopted a new constitution on 19 October 2001, after the death of the testatrix. At the date of the death of the testatrix 49,002 shares in Multi Transit had been issued and of these the testatrix was the registered owner of 48,002 shares and the first defendant Mr Allen was the registered owner of 1000 shares. Her shareholdings put the testatrix in a position to control all affairs of Multi Transit. Less directly but equally effectively she was in a position to control the affairs of Philrob Nominees. As Multi Transit held 80 percent of the shares the other two shareholders, who held one share each and were involved in the company's affairs only because they were professional advisers, were unlikely to oppose any wish of the testatrix who in turn was in a position to control all affairs of Multi Transit. After her death Multi Transit continued to control Philrob Nominees until its shareholding was transferred to the executors jointly. 4 The Leith Trust is a discretionary trust established on an unknown date in 1982 by settlement of the nominal sum of $20 made by Peter McPherson Robertson, a son of the testatrix who has since died, as settlor and Philrob Nominees as trustee. The evidence does not show what activities were carried on by Philrob Nominees in the interval between its formation in 1975 and its becoming trustee of the Leith Trust in 1982, if it had any activities at that time. In the Leith Trust the plaintiff was the first appointor; and he is still the appointor. Clause 3 of the Deed of Settlement contains a declaration of trust until the vesting day (which has not yet arrived) "… upon trust to distribute the net income thereof in each accounting period among the eligible beneficiaries …". "Eligible beneficiaries" is defined in cl.2.9 to mean the primary beneficiaries (further defined to mean the plaintiff together with his spouse from time to time and his issue) and associates of the primary beneficiaries. "Associates" is given an extensive definition in cl.2.4 and can extend to many relatives of the primary beneficiaries and other persons associated with them in various ways. Vested entitlements to capital and income can only arise upon exercise of discretionary powers given by the Deed of Settlement to the trustee, which until now has always been Philrob Nominees. By cl.16 of the Deed of Settlement the appointor has power to appoint a new or additional trustee or trustees, not including the appointor, and to remove any trustee; to date the plaintiff has not exercised this power. 5 The will of the testatrix dated 17 October 1996 contained seven clauses. I omit passages in the will which identify the testatrix and revoke earlier dispositions, and make a declaration about executors' charges; and set out passages in the will which may have some bearing on the issues in this litigation. 2 I APPOINT ROBERT SAMUEL ALLEN, Accountant, and CHRISTOPHER WILLIAM WELSH, Solicitor, (hereinafter called "my Executors") Executors and Trustees hereof PROVIDED that in the event of either of them being unable or unwilling to act as my Executor I APPOINT my son PHILIP MACPHERSON ROBERTSON as an additional Executor hereof. 3 I GIVE whatever interest I may have in shares in MULTI TRANSIT COMPANY PROPRIETARY LTD, VANCROFT PTY LTD and DEPPER NOMINEES PTY LTD to my Executors on trust for PHILROB NOMINEES PTY LTD and I DIRECT that on the tenth (10th) anniversary of my death, or such other earlier date as may be mutually agreed to by my Executors, my Executors, my Executors shall transfer the said shares to PHILROB NOMINEES PTY LTD. 4 I GIVE the residue of my Estate to my Executors upon the following trusts: (a) To specifically forgive my debts due by my children, their issue or any entities to me absolutely; (b) To my daughter ELIZABETH MACPHERSON.PLANTE the sum of One Hundred Thousand Dollars ($100,000.00) absolutely; (c) To my grand-daughter GEORGINA ELIZABETH THOMAS the sum of Ten Thousand Dollars ($10,000.00) absolutely; (d) To my grandson DAVID ERIC LORING DOWNEY the sum of Ten Thousand Dollars ($10,000.00) absolutely (e) To my grand-daughter ALEXANDRA LOUISE DOWNEY the sum of Ten Thousand Dollars ($10,000.00) (f) To my grandson RICHARD JOHN PLANTE the sum of Ten Thousand Dollars ($10,000.00) absolutely; (g) To my grandson EDWARD GREGORY MACPHERSON ROBERTSON the sum of Ten Thousand Dollars ($10,000.00) absolutely; (h) To my grandson WILLIAM PHILIP MACPHERSON ROBERTSON the sum of Ten Thousand Dollars ($10,000.00) absolutely; (i) To my grandson my grandson DAVID GEOFFREY MACHPHERSON ROBERTSON the sum of Ten Thousand Dollars ($10,000.00) absolutely; (j) As to the rest and residue of my Estate to PHILROB NOMINEES PTY LTD as Trustee of the LEITH TRUST to be held by it on the trusts of that settlement as an addition to the property already subject to those trusts. IN THE EVENT of any of the above beneficiaries predeceasing me the share to which they would have been entitled shall form part of my residuary Estate. I APPOINT MULTI TRANSIT COMPANY PROPRIETARY LIMITED as principle of any Trusts of which I may be Principal at the date of my death. 6 The provisions of the codicil dated 30 July 1999 which may have some bearing on the issues are as follows: 1. IN Clause 4 of my Will, change (j) to: " I GIVE my Norwich Union Life Australia Limited Policy No. 302908510 to PHILLIP MACPHERSON ROBERTSON. 2. ADD the following Clause 4(k): "As to the rest and residue of Estate to PHILROB NOMINEES PTY LTD as Trustee of the LEITH TRUST to be held by it on the trusts of that settlement as an addition to the property already subject to those trusts. 7 The property of the testatrix shown in the inventory filed in the Probate application was valued by the executors at $538,148.64 and included a unit in a retirement village, the contents of the unit and jewellery; the total values attributed to these was $374,400. The testatrix also had a number of accounts in a Building Society totalling $40,546.64, current accounts with the trustees of family settlements totalling $40,374, shares in Multi Transit the value of which was given by the executors as $62,000, and the insurance policy which she gave to the plaintiff, valued at $20,828. The testatrix' affairs were quite complex but they were involved in a number of trusts, settlements or family companies which did not, in the view of the executors, represent assets in her estate which were of value. 8 It will be seen that, although the plaintiff is referred to in cl.2 of the will as a possible additional executor, he was not given any benefits by that will, and by cl.4(j) introduced by the codicil he was given a life policy; a modest bequest. On the other hand the residue of the estate was given to Philrob Nominees as trustee of the Leith Trust and it must be taken that the testatrix knew of the association between the plaintiff and the Leith Trust. 9 It will be seen that the gift of shares in cl.3 to the executors on trust for Philrob Nominees does not contain any express statement to the effect that Philrob Nominees was to hold the shares so given upon the trusts of the Leith Trust, whereas cl.4(j) in the will, and the identical cl.4(k) added by the codicil, refer to Philrob Nominees as trustee of the Leith Trust and expressly state that the rest and residue is to be held on the trusts of that settlement. The terms of the will raise for consideration the question whether Philrob Nominees was intended by the testatrix to hold the gift of Multi Transit shares as beneficial owner free of any trust, or was to hold those shares subject to the Leith Trust. This issue was referred to in para.4 of the Further Amended Statement of Claim and para.18 of the Defence. 10 In para.18 of the Defence the defendants did not admit (nor did they deny) that upon its proper construction the gift in para.3 was a gift to Philrob Nominees as trustee of the Leith Trust; but made this contention relating to the effect of the direction which forms the second part of cl.3: "… The gift does not vest until the 10th anniversary of the death of the late Dallis Robertson or sooner in the exercise of the absolute discretion of the first and second defendants as executors of the will." From the written and oral submissions of the defendants' counsel it was plain that the defendants did not maintain that Philrob Nominees was the beneficial owner of the Multi Transit shares; and indeed in correspondence before the hearing and before action there was not to my reading any indication that the defendants ever maintained that position and there was some indication, on the part of the first defendant, that he did not. In my opinion the will on its true construction supports the position thus taken at the hearing by both parties. It is as well that I state the reasons for this view. 11 Clause 3 of the will contains no express statement showing whether or not the testatrix intended that Philrob Nominees should hold the shares subject to the Leith Trust, or to any trust. Clause 3 refers to a trust, being the trust on which the executors are to hold the shares; it does not refer to any other trust in express terms. Ordinarily a gift in a will is understood to be a gift of an absolute interest in the property given, unless there is some expression of another intention in the will. At the only other places where Philrob Nominees is mentioned or any gift is given to Philrob Nominees, in cl.4(j) of the will and in cl.4(k) inserted by the codicil, an intention that Philrob Nominees hold property as trustee of the Leith Trust is expressly stated in full and clear terms. This provides some basis for the line of reasoning that the testatrix had the question of holding property in trust in her mind, that when she intended that property should be held in trust she clearly said so, and that when she did not say so it should be understood that the omission was deliberate and is an expression of her intention: expressio unius exclusio alterius. I do not regard this line of reasoning and the implication which it would suggest as to the testatrix' actual meaning as very strong, because there is only one instance of each usage, not enough to found a confident conclusion that the testatrix made a careful and significant choice of language between one formulation and the other. 12 There are other considerations which to my mind are powerfully adverse to the view that Philrob Nominees was intended to hold the shares as beneficial owner. One consideration is that when she died Philrob Nominees had, as the testatrix must have known, no business affairs or economic interest other than as trustee, and held nothing for the benefit or advantage of itself or its shareholders other than as trustee of the Leith Trust. The word "Nominees" in the company name alludes to this sole function. The will speaks from date of death - see s.21 of the Wills Probate Administration Act 1898. 13 In the circumstances which existed at the time of the testatrix' death it is extremely improbable that she intended to pick up this company which in economic terms was a cipher, enrich it to any extent, and by so doing completely to change its function. This is particularly unlikely as it is clear from later provisions that she knew that the company was trustee of the Leith Trust. The improbability is enhanced by consideration of the state of the shareholding as it was at the time of the testatrix' death. Multi Transit owned 80 percent of the shares in Philrob Nominees; if the controlling shares in Multi Transit were given to Philrob Nominees as beneficial owner the economic advantage would flow, as to 80 percent, to Multi Transit, and an attempt to identify individuals to whom the benefit flowed would pursue an unending circular course between the two companies. In argument I compared the exercise with searching for the end of a Mobius strip, an endless strip which has only one side. It is extremely unlikely that the testatrix intended that the words she used should produce that outcome. In saying this I attribute to her knowledge of facts which it is highly likely that she in fact knew: the state of the shareholding in the two companies, the existence of the Leith Trust and the part of her son in the Leith Trust. I do not attribute to her an understanding of s.259C of the Corporations Law, to which I will come. These considerations make it on the verge of the absurd, and highly improbable, that she should have intended that Philrob Nominees take the gift of Multi Transit shares as beneficial owner. In the circumstances in which she stood her disposition meant that she intended that Philrob Nominees should take the gift of shares in the only character which Philrob Nominees had, that is as trustee of the Leith Trust. For these reasons I regard the position put forward by both parties as correct. 14 The principal difference between the parties, and the principal contributor to this litigation (which also has other sources) is a difference of view about the effect of the direction in the second part of cl.3 relating to transfer of shares on or before the tenth anniversary of the testatrix' death. The parties debated many other matters, and led evidence extensively, little of which was of any use. In particular I found no assistance for the true meaning and effect of the will in evidence as to statements and expressions of wishes and intentions made by the testatrix in the course of or about the time of giving instructions for her testamentary documents, or at other times. None of this evidence appeared to me to be of any real assistance for the construction of the will. 15 There has been no mutual agreement of the executors establishing any earlier date at which they are to transfer the Multi Transit shares to Philrob Nominees. From expressions in correspondence and by their counsel at the hearing I understand that they were of the view that it was the wish of the testatrix that they should not transfer the shares to Philrob Nominees until the tenth anniversary of her death, and that this meant that they were unlikely to agree to transfer them earlier. On the other hand the plaintiff maintained that the trustee of the Leith Trust is in a position to call for transfer of the shares to it forthwith pursuant to the rule in Saunders v. Vautier (1841) 4 Beav 115, 49 ER 282. This might be thought academic as Philrob Nominees is under the control of the executors, who between them are the registered owners of all its shares; while Mr Allen is its sole director. However the plaintiff has referred to his entitlement as appointor by cl.27.1 of the Deed of Settlement to remove Philrob Nominees and bring about the appointment of some other person; and he proposes the appointment of Mr L.R. Boswell Chartered Accountant as the new trustee. He has not yet taken any such steps, there is no new trustee and there has been no exercise or purported exercise of the right to call for transfer under the rule in Saunders v. Vautier. The question whether a purported exercise of that right would be effectual is academic. It cannot be properly addressed or made the subject of any effectual declaratory order or other judicial decision except in the context of some facts which have not yet occurred in which there would be an appointment or purported appointment of a new trustee and the new trustee would allege that they entitled it to transfer of the shares. The gifts in the will are to Philrob Nominees, not to some new trustee and the rights which would arise in some hypothetical situation cannot be determined now; the Court would need to know what in detail did happen before determining the legal effect. Dealings between the persons concerned have been rather combative, and it does not seem to me to be prudent or appropriate to attempt to determine in advance entitlements among those persons which may be affected by what happens in detail. As the matter was argued by the parties I propose to express my view about the effect of attempted reliance on the rule in Saunders v. Vautier by Philrob Nominees. 16 If cl.3 of the will is divided into two parts there is tension and anomaly between what is indicated by the first part and what is indicated by the second part. The words in the first part quite clearly give the shares upon trust for Philrob Nominees; there is no qualification about the time when the gift is to take effect, and it is spoken of in terms appropriate for a gift which is presently operative and a trust which takes effect when the will takes effect. There is no question of deferring the time when Philrob Nominees becomes entitled to the shares, either for 10 years or for an indefinite period to be selected by the executors. It would be inconsistent with and indeed repugnant to the gift in the first part of cl.3 that the donee should not be entitled to have the shares actually transferred to it for another 10 years; that would qualify, in a way inconsistent with ownership of the shares, the right to a transfer of them. 17 A reading in which the second part of cl.3 defers the time at which the gift operates involves anomalies at several levels. One is that, in literal terms, the second part of cl.3 only contains a direction about when the transfer of the shares is to take place, and does not deal at all with the question when an interest in the shares is given to the executors on trust for Philrob Nominees. On a literal view of the language used, the direction dealing only with the time at which the transfer of the shares is to take place has nothing to say about the time at which the beneficial ownership is to pass. If, departing somewhat from the literal words used, the second part of cl.3 is understood to mean that the gift of ownership of the shares was not to take effect until the tenth anniversary or an earlier decision of the executors. The anomaly presents itself that cl.3 and the will as a whole contain no express provision about what is to happen in the interval to the shares, and to ownership of the shares, or to any dividends or other advantages or disadvantages of ownership. Plaintiff's counsel directed attention to consideration of what would be the entitlement to benefits arising from the ownership of the shares before transfer of registered ownership was effected, such as dividends or distribution of the proceeds of winding-up the company. This was an illuminating observation. 18 One available conclusion would be that there is a partial intestacy and that the will says nothing about beneficial interest in the shares during the interim. Courts are reluctant to adopt construction of wills in which there is a partial intestacy, as they make the approach, realistically based on the probable intentions of testators, that a will was probably intended to deal with all interests in property owned by the testatrix. Another possible reading is that during the interim beneficial entitlement was intended by the testatrix to pass under cl.4(j) and later cl.4(k) to Philrob Nominees as trustee of the Leith Trust, because it was part of the ultimate residue. To my mind it is very unlikely that either of these curious and recondite readings represents something which the testatrix truly intended. If what I call the interim interest falls into ultimate residue and passes to Philrob Nominees under cl.4(k) it can be resorted to if necessary to raise money to pay pecuniary legacies, which are directed to be paid out of another fund referred to as residue but anterior to the ultimate residue in cl.4(k). If however the interim interest passes under the specific bequest in cl.3 it cannot be resorted to to raise money to pay pecuniary legacies. The distinction is not of practical importance as the assets of the estate stand, because there are sufficient assets otherwise in residue to pay the pecuniary legacies. 19 The discussion thus far has been undertaken to illustrate difficulties. It is not a correct method to divide cl.3 into two parts and address the meaning of each separately. The exercise for the Court is to try to ascertain the meaning of the whole of cl.3 in the context of the will. In my view there was no partial intestacy, and the testatrix did not intend to conceal some curious operation of cl.4(k) in what she intended to say in cl.3. In my mind the meaning of cl.3 is to be understood by taking the words in it literally; so understood the testatrix made a present gift of the Multi Transit shares to the executors on trust for Philrob Nominees; that gift took effect when the trust took effect and its effect was not deferred; and she also directed that the executors transfer the shares, meaning their transfer and registration of the shares in the company's share register. In making the direction for transfer the testatrix said nothing about beneficial ownership of the shares. She made a present gift of the shares; she directed her executors to consummate the gift by transferring the shares on the tenth anniversary, or earlier if they agreed. 20 On an altogether literal reading, the two parts of cl.3 of the will are not inconsistent with each other. A direction that the executors are to transfer the shares on the tenth anniversary does not, literally, say anything about what are to be the ownership rights to those shares in the interim, or about what effect a call by the donee for a transfer of the shares earlier than the tenth anniversary would have. Any interpretation in which the direction about the transfer of shares limits or qualifies the beneficial entitlement of the donee to the shares depends on implication. It would only be by implication that cl.3 could be understood to mean that the donee was not to be entitled to transfer before the tenth anniversary, and that implication would be inconsistent with the unqualified gift of "whatever interest I may have in shares" and the trust with which cl.3 opens upon which the executors are to hold whatever interest the testatrix may have. On the text of cl.3 and of the will, the grounds for an implication that if the testatrix intended that the donee was not to be entitled to call for transfer of the shares before the tenth anniversary are slight, and in my opinion they are altogether outweighed by the consideration that disentitling the donee to obtain a transfer would be inherently inconsistent with the gift with which cl.3 opens. 21 The true operation of the second part of cl.3 is that it provides machinery which will ensure that the executors will cease to hold the shares as trustees and will actually transfer them on the tenth anniversary if not earlier; the direction does not qualify the beneficial entitlement of the donee to the shares. If the donee does not call for transfer the executors will eventually come under the direction of the testatrix to transfer the shares. This provision says nothing about the right of the donee to call for a transfer at some earlier time. That right springs from the gift of the beneficial ownership of the shares; the gift is unqualified. The donee as the beneficial owner of the shares is entitled to call for transfer at any time after completion of executorial duties, of which payment of the pecuniary legacies is part. There have been no distributions and executorial duties are not completed notwithstanding that four years have passed since the death of the deceased; this time is unusually long but should I suppose be attributed to the present litigation and the dispute which led to it. The delay appears to have operated in a very unfortunate way on the beneficiaries of pecuniary legacies about whose entitlements there could be no doubt that I can see. 22 On what I have held to be the correct construction of cl.3 the second part of cl.3 does not postpone enjoyment by Philrob Nominees of beneficial ownership of the shares, by directing accumulation of income or in any other way. The direction to the trustees to transfer the shares on or by the tenth anniversary does not qualify or deal at all with their obligation to transfer them earlier if the donee chooses to call the transfer. However if this view were not right and the meaning of cl.3 were that no interest was given to Philrob Nominees by cl.3 until the time for transfer arrived there would be an intestacy as to ownership of the shares and entitlement to any income during the interim. That (curious) interim interest would pass to Philrob Nominees under cl.4(k); entitling Philrob Nominees to rely on the rule in Saunders v. Vautier (1841) 4 Beavan 115, 49 ER 282. 23 The rule in Saunders v. Vautier was stated by Lord Davey in these terms in Wharton and Warrick v. Masterman [1895] AC 186 at 198: This being so, the principal of Saunders v Vautier would at once be applicable if this were the case of a gift to an individual. That principle is this: that where there is an absolute vested gift made payable at a future event, with direction to accumulate the income in the meantime, and pay it with the principal, the Court will not enforce the trust for accumulation in which no person has any interest but the legatee, or (in other words) the Court holds that a legatee may put an end to an accumulation which is exclusively for his benefit. The principle is stated, as well as elsewhere, by Lord Hatherley in the passage from his judgment in Gosling v Gosling which was read by Lindley L.J. in the Court of Appeal. There is no condition precedent to happen or to be performed in order to perfect the title of the legatees, and there is no other person who has any interest in the execution of the trust for accumulation, or who can complain of its non-execution. The reason for the rule has been variously stated. It may be observed, however, that the Court of Chancery always leant against the postponement of vesting or possession or the imposition of restriction on the enjoyment of an absolute vested interest. 24 In the same case Lord Herschell LC at 192-193 set out the passage from Gosling v Gosling (1859) Johnson 265, 70ER 423 to which Lord Davey referred. (Wood VC, also Page Wood VC later became Lord Hatherley). Lord Herschell said: Wood V.C., in Gosling v Gosling , expounded the doctrine thus: "The principle of this Court has always been to recognise the rights of all persons who attain the age of twenty-one to enter upon the absolute use and enjoyment of the property given to them by a will, notwithstanding any directions by the testator to the effect that they are not to enjoy it until a later age:- unless during the interval the property is given for the benefit of another. If the property is once theirs, it is useless for the testator to attempt to impose any fetter upon their enjoyment of it in full so soon as they attain twenty-one. And upon that principle, unless there is in the will, or in some codicil to it, a clear indication of an intention on the part of the testator not only that his devisees are not to have the enjoyment of the property he has devised to them until they attain twenty-five, but that some other person is to have the enjoyment- or unless the property is so clearly taken away from the devisees up to the time of their attaining twenty-five as to induce the Court to hold that as to the previous rents and profits there has been an intestacy- the Court does not hesitate to strike out of the will any direction that the devisees shall not enjoy it in full until they attain the age of twenty-five years." 25 Lord Davey left open the reason for the rule. The reason was stated in Weatherall v. Thornburgh [1878] 8 Ch.D 261 at 270 by Cotton LJ in these terms: "This is not like the case of Saunders v. Vautier. That case simply decided that if property is given to a person of full age any restriction on his enjoyment of it is inconsistent with his absolute interest." Some courts in the United States have not accepted this principle, which may have the result that the actual intentions of the testator are not carried out, or are not fully carried out; see Jacobs Law of Trusts in Australia 6th ed at [2314]. 26 The operation of the rule in Saunders v. Vautier is illustrated by consideration given to it in the judgment of Kearney J in Sir Moses Montefiore Jewish Home v. Howell & Co. (No. 7) Pty Ltd [1984] 2 NSWLR 406. It was common ground in that case that the rule in Saunders v. Vautier is applicable in New South Wales and I know of no reason to doubt that it is. Kearney J said, at 420 "Before the rule in Saunders v. Vautier can be successfully applied, it must be ascertained upon the construction of the trust instrument whether or not the object of the trust is entitled to it [that is, to the trust property] indefeasibly and absolutely." The objects of a discretionary trust created by the trust instrument are not in that position, as Kearney J's decision shows. 27 The plaintiff himself is concerned in the Leith Trust firstly an appointor, secondly as an object, but has no higher interest until and in accordance with some discretionary decision to be made by the trustee. So far as appears from evidence he has no such interest now; he does not have such standing as a person with a beneficial interest in a trust would have to claim remedies in respect of its affairs. Unless and until some new trustee is appointed or purportedly appointed, either by Mr Robertson as appointor, or in some other way, the rights that a hypothetical new trustee might have, in competition with Philrob Nominees, to call for the Multi Transit shares or to influence decisions over them, are an academic subject, not in a sufficiently mature state for an effectual judicial decision. See Gartside v. Inland Revenue Commissioners [1968] AC 553, and discussion, with reference to that decision, of the entitlement of the object of a discretionary trust by Kearney J in Montefiori Home v. Howell at 411. 28 Counsel for the defendants presented an argument against the applicability of the rule in Saunders v. Vautier based on the provisions of the Leith Trust, the nature of the interests of the many persons who are objects of the discretionary trust, the possible inclusion among those objects of persons who are not of full age, and the need for all persons beneficially interested to join in a demand for transfer of title. 29 In my opinion cl.3 placed Philrob Nominees in a position where it is clearly entitled, if it were so minded, to rely on the rule in Saunders v. Vautier and call for and enforce transfer of the shares to it forthwith. No other person than Philrob Nominees has a present or contingent interest in the shares under the will. Philrob Nominees' entitlement is unqualified: it is entitled to the shares indefeasibly and absolutely under the trust created by cl.3 of the will. The case falls squarely within the principle in Saunders v. Vautier. The circumstance to which defendants' counsel referred that Philrob Nominees is itself a trustee under the Leith Trust, and that the objects of that trust are a wide and an unascertained class has no impact on its entitlements under the rule of Saunders v. Vautier; Philrob Nominees is the absolute owner of the shares under the trust created by cl.3 of the will, and this is no less so because Philrob Nominees is in its turn subject to a further and different trust of the property. 30 The plaintiff contended that the gift of Multi Transit shares to Philrob Nominees in cl.3 of the will is void having regard to the provisions of s.259C of the Corporations Law, which was in force at the time of the death of the testatrix; a corresponding provision now appears in s.259C of the Corporations Act 2001. It is not necessary for the plaintiff's success that this argument should be successful, because a transfer on trust is excepted from the avoidance, and I have earlier held that Philrob Nominees received its interest in the Multi Transit shares on trust. Since the testatrix' death the shares formerly owned by Multi Transit have been transferred to the executors, so that a transfer of registration from them to Philrob Nominees, if it took place now, would not be avoided by s.259C of the Corporations Act. The avoidance argument relates to the gift in the will and to the time of the testatrix' death. 31 Section 259C provided: Issuing or transferring shares to controlled entity.

It is plain that, within the meaning of s.259E of the Corporations Law then in force, Philrob Nominees was, in the language of that section an entity which Multi Transit controlled; this is plainly so because Multi Transit had the capacity to determine the outcome of decisions about Philrob Nominees' financial and operating policies. 34 "Issue" of shares and "transfer" of shares are not defined expressions. "Transfer" is a word which it is apt to use to refer to the transfer of ownership of shares in a company by a transfer in writing, and registration of the transfer of ownership in the company's share register; this process was regulated by s1091D the Corporations Law. However the context in which the word "transfer" appears makes it clear, in my opinion, that its meaning in s.259C is not limited to such a transfer; it cannot be so limited because "transfer" is made applicable to units of shares as defined, and formal processes of transfer cannot, in usual circumstances, be applied to units of shares. "Transfer" is used in my opinion in a sense which extends to any process by which equitable ownership of shares in a company may pass from one owner to another; and a bequest of shares in a will is one such process. In cl.3 of the will the transfer which the executors are directed to the effect is distinguished from the gift of the shares on trust for Philrob Nominees which occurred earlier. In cl.3 "transfer" does not refer to the passing of beneficial ownership, but to the formal process of transferring registered ownership of the shares in the company's share register. This usage serves to draw a contrast with the way in which the word is used in s.259C. 35 I am unable to see any purpose which the legislature may have had in view in enacting s.259C but limiting its operation to formal transfers in registers of shares or equitable interests in shares. It is far easier to see a purpose of discouraging and disabling distorted patterns of economic behaviour and of conduct with respect to controlled entities by avoiding all changes of ownership however effected. If it is good policy for s.259C to avoid transfers of registered ownership, it is good policy to avoid changes of ownership in other ways. 36 Counsel for the defendant referred me to the decision of Needham J in Bond Corporation Pty Ltd v. White Industries Ltd [1980] 2 NSWLR 351, and the passages addressing the meaning of the word "transfer," particularly at p360 and following, and to discussion of the meaning and effect of s.17(1) of the Companies Act 1961, leading to his Honour's holding at p363 (42): "My opinion is that s.17(1) refers to registered interest, and does not attack contracts, or unregistered transfers." In my opinion s.17 of the Companies Act 1961 is not a predecessor of s.259C. Both on the text of the two sections when compared and on the part taken by s.259C in the more complex scheme of regulation of the subject matter in the Corporations Law, Needham J's conclusions are not a guide to the meaning of s.259C. 37 If the will had not imposed a trust on the Multi Transit shares, in my opinion s.259C would have operated to avoid the gift; with the consequence that the shares would have fallen into residue and passed to Philrob Nominees under cl.4(k) inserted by the codicil. 38 The plaintiff claimed to be entitled to the benefit of an estoppel which it was said prevented the defendants and the estate from taking the position that the gift of Multi Transit shares in cl.3 passed to Philrob Nominees as beneficial owner. The defendants were not entitled to take that position for reasons more profound than an estoppel, as that position did not accord with the true meaning and effect of the will. Further they did not, at the hearing, take that position. Upon the facts put forward I was of the opinion that there was no relevant estoppel; but it is not necessary to dispose of any issue in the proceedings on this ground. 39 Rather than make a declaration which would establish whether or not the rules in Saunders v. Vautier would apply in some hypothetical situation. I propose to make a declaration which will establish, in accordance with my opinion, the true meaning and effect of cl.3. I will reserve further consideration of the claims which at present appear to be hypothetical, so that they can be raised again in this litigation if they ever became actual. 40 My Orders are: 1. Declare that upon the true meaning and effect of the will and codicil of the late Dallis Robertson, Philrob Nominees Pty Ltd is the equitable owner as against the executors and trustees and all other persons interested in the assets of the testatrix of the shares in Multi Transit Company Pty Ltd formerly owned by the testatrix and forming part of the estate and further declare that Philrob Nominees Pty Ltd holds those shares as trustee of the Leith Trust.

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Decision date

Before

Source

Judgment (11 paragraphs)

Cited By (3)