Russell v Perpetual Trustee Co

[4]

The testator by his will dated 30th October 1936 directed his trustees to pay the income arising from his residuary estate to his widow during her life and after her death to stand possessed thereof upon trust for "such of the following persons namely such of my nephews and niece the said Harry N. Moss Victor Alfred Moss and Laura Woolf as shall be living at the death of my said wife also the children then living of any of my said nephews and niece who shall have predeceased my said wife also the brothers sisters nephews and nieces of my said wife who shall be living at the time of her death and also the children then living of any of the nephews and nieces of my said wife who shall have predeceased her as my said wife may by will or codicil appoint and in such shares subject to such restrictions and conditions and in such manner as my said wife may by any such will or codicil appoint" and in default or so far as such appointment should not extend upon the trusts therein mentioned. His widow by her will dated 22nd November 1946, after reciting the terms of this special power of appointment, expressed her intention to exercise it. She directed the trustees of the will of the testator to divide his residue into two hundred parts or shares and to hold the same upon the trusts that followed. These trusts consist of ten separate sets of trusts relating to various quotas into which the two hundred parts are divided for this purpose. The fourth of these sets of trusts, in which the appellants are interested, is the subject matter of this appeal. The trustees are directed to hold thirty-four of the two hundred parts upon trust: "(iv) As to a further thirty-four of such equal parts or shares upon trust (subject as hereinafter provided) for such of them Naida Russell Charles Russell and Lena Young (three of the children of my sister Rebecca Russell) as shall be living at the date of my death and if more than one as tenants in common in equal shares Provided that the share of each of the three named children of my said sister Rebecca Russell shall be held upon trust to pay the income of his or her share to him or her during his or her lifetime And upon the death of the same child to hold the said share upon trust for such of his or her children (living at the date of my death) as shall survive him or her and shall have attained or shall live to attain the age of twenty-one years and if more than one as tenants in common in equal shares".

[11]

Upon this inquiry the words in brackets are of course material. But they must be interpreted as part of the entire disposition. So interpreted their purpose seems to be to make it clear that the outright gift is qualified only so far as may be necessary to give effect to the desire of the testatrix that the shares appointed to the three children shall be settled. Except for that the gift is absolute. In a sense the interpretation of the words reinforces the operation of the rule. In so far as the limitations in the proviso do not extend the intention is that the gift should take effect. In terms they do no more than make the initial gift "subject as hereinafter provided" and all that is "hereinafter provided" is what is provided by the trusts which follow the initial trust and they are in terms trusts engrafted or imposed upon the shares of each appellant created by the initial trust. To the extent to which these trusts fail to take effect there is nothing "hereinafter provided" at all and the original absolute interests must remain. Some of the cases in which it was held that there was not an absolute gift in the first instance were discussed by Fullagar J. in Re Panter; Equity Trustees Co. v. Marshall [1] . In that case his Honour reached that conclusion, but in the will before him there were no words of trust corresponding to those contained in the first trust of the series now under discussion. Unfortunately the headnote in Re Panter; Equity Trustees Co. v. Marshall [1] is inaccurate. It states that the daughter of the testator by her will, in exercise of the power of appointment conferred upon her by his will, directed the trustees to hold the £5,000 in trust for her three daughters in equal shares, to appropriate one share to each daughter, etc. There was no such trust in the appointment but only a direction to the trustees to hold the £5,000 upon trust to divide it into three equal shares and appropriate one of such shares to each of three named daughters, and this was an appointment very different in terms to those of the present appointment.

[12]

In the present case there is plainly a gift which by its language is an absolute gift in the first instance. The trustees are directed by the will of the widow to hold the thirty-four parts in trust for the three appellants as tenants in common in equal shares. These are most definitely words of gift. They are appropriate and appropriate only to give the appellants absolute beneficial interests in the thirty-four parts. The ensuing trusts are trusts engrafted or imposed on these beneficial interests. The frame of the appointment, as Lord Tomlin expressed it in his speech in The Attorney-General v. Lloyds Bank Ltd. [2] , is such as to attract the rule in Lassence v. Tierney [3] . His Lordship pointed out that phrases such as the "share of each child" are phrases indicating ownership [4] . See also the remarks of Lord Romer in Fyfe v. Irwin [5] . See also Williamson v. Carter [6] . These remarks of Lord Tomlin were cited in In re Burton's Settlement Trusts; Public Trustee v. Montefiore [7] . In Trustees Executors & Agency Co. Ltd. v. Jenner [1] the testator by cl. 5 of his will directed his trustees to hold property on trust for such of his children as should attain twenty-five "but nevertheless subject to the declaration next hereinafter contained". He then by cl. 6 proceeded to declare that the shares bequeathed in trust for each daughter should be held by his trustees upon trust for her for life and after her death in trust for her children who should attain twenty-five. a'Beckett J. held that the gifts to the grandchildren were void for perpetuity and that the whole of the sixth clause was inoperative to restrict the gift already made to the daughters who therefore took absolute interests and not for life only. The words "but nevertheless subject to the declaration next hereinafter contained" raised a problem for his Honour very similar to the problem raised by the words in brackets in the present case. But a'Beckett J., it will be seen, came to the opposite conclusion to Myers J. He said: "Supposing cl. 5 had omitted the words, "but nevertheless subject to the declaration next hereinafter contained", the effect of cl. 6 would have been precisely the same so far as the intention of the testator was concerned. Without any necessity for using those words "but nevertheless subject to the declaration next hereinafter contained", it would appear, beyond all question, that it was the intention of the testator to reduce the daughter's share to a life interest, with remainder to her children; and according to the authorities there would be first an absolute gift, and then there would be a reduction of the gift by a void disposition, and the principle of the cases would apply" [2] . With this approach of a'Beckett J. we entirely agree and we are not alone because it has been adopted in at least four subsequent cases, two in Victoria and two in New Zealand. They are In re the Estate of Patrick O'Brien dec'd. [3] ; In re England [4] ; In re Antrobus; Henderson v. Shaw [5] and In re Loza (Dec'd.); Fernandez v. Hesketh [6] .

[14]

It appears to us that Myers J. fell into error because he considered the words in brackets required the initial trust to be read in a different sense to that in which it would be read if the words were not there. Effect must of course be given if possible to every word in the series of trusts. But the words in brackets do not say expressly or by implication that the words of the initial trust are not to have their natural meaning. The expression "subject as hereinafter provided" would have the same operation whether it appears as it does towards the commencement of the initial trust or at the end of it. If it appeared at the end of it the initial trust would require the trustees to hold the thirty-four parts on trust for the appellants as tenants in common in equal shares "subject as hereinafter provided"; it is then provided that the shares of each of the three named children of her sister Rebecca Russell should be held upon trust to pay etc. All that the words in brackets do is to subject something to something and when the whole of the trusts of the thirty-four parts are read together the former something clearly emerges as the beneficial interests created by the initial trust and the latter something as what Lord Evershed in Burton's Case [1] described as "the detailed and more limited trusts which follow". His Honour has in effect construed the initial trust as though it had been reduced by the words in brackets to mere arithmetic for dividing the thirty-four parts into as many shares as there should be survivors of the appellants at the death of the widow with the consequence that the beneficial dispositions of the thirty-four parts only commence with the creation of the life estates. But the initial direction to the trustees to hold the thirty-four shares on trust for the appellants cannot be so construed. Imperative words of trust must be given their full beneficial and not a mere administrative operation. The words in brackets accept the position that absolute beneficial interests, that is absolute equal shares, are created in the thirty-four parts in the first instance and proceed to subject these very shares to the subsequent limitations. The initial absolute gift is of course defeasible only to the extent to which the subsequent limitations to which it is subjected are valid: see In re Edwards' Will Trusts; Dalgleish v. Leighton [2] ; Macpherson v. Maund [3] .

[22]

After full consideration, however, I have come to the conclusion that this is not the end of the matter. It has seemed to me that the correct approach is not made by taking a selected statement of a rule and inquiring whether the particular case falls within the literal terms of that statement. The so-called rule is only a rule of construction, designed, like all such rules, to assist in the interpretation of wills. It is based on presumed intention. Even in a case where the conditions laid down by Lord Davey are literally fulfilled, we may find indications which compel us to say that, although there is in terms an absolute gift in the first instance, the testator did not intend it to take effect as such on the failure of an engrafted trust: he may, for example, have expressly provided for what is to happen if the engrafted trust cannot take effect. Conversely, the gift in the first instance may not be in terms absolute, and yet it may be proper to infer that the testator intended it to take effect as an absolute gift if a subsequently imposed trust failed. As I said in Re Panter; Equity Trustees Co. v. Marshall [1] (in which the headnote, as has been pointed out, is incorrect in a vital respect), I think that the best statement and analysis of the "rule" is to be found in the judgment of Page Wood V.-C. in Rucker v. Scholefield [2] . The Vice-Chancellor said: - "In all cases of this kind the question turns upon the language in which the appointment is attempted to be made. If you find a clear and definite gift of the property to be appointed, and then, engrafted upon that, subsequent provisions directing the fund to be settled, so as to shew that the purpose was first to make the gift to and for the benefit of the person named, and then to have the fund settled; in a case of that kind, if the limitations of the proposed settlement are such as cannot become operative, the first absolute gift is held to take effect without restriction. So, if you find a clear gift followed by words which affect to divest it, and the limitations over are inoperative, then the Court will uphold the gift, striking out the limitations which cannot have any legal effect" [3] (The italics are mine). It is true that the Vice-Chancellor uses the words "absolute gift", but I think he uses the adjective proleptically. In any case, the same prominence is not given to the word as is given in Lord Davey's formulation.

Russell v Perpetual Trustee Co - [1956] HCA 44 - HCA 1956 case summary — Zoe

At a glance

Court

Decision date

Before

Source

Judgment (35 paragraphs)

Parties