Rutledge v Sheridan

Roberts & Kane Solicitors for the beneficiaries under the will

[1] Mr Anthony Henry Houghton ("the deceased") died on 24 January 2009, leaving a will by which he made a number of specific bequests and divided the residuary estate among his nieces and nephews. The terms of the will are not in issue.

[2] What is in dispute, however, is whether money held in the deceased's name in an Australian Monthly Income Fund Account held with AXA Australia ("the AXA Account") is part of the residuary estate.

[3] The applicant, who is the sister of the deceased and one of the executors of his will, contends that the deceased made a gift of the AXA Account to her before he died and that, even though the funds in the AXA Account were not formally transferred into her name, the rule in Strong v Bird[1] operates so as to entitle her to a declaration that the AXA Account does not form part of the deceased's estate and an order that the respondents (the executors of the deceased's estate) formally transfer the AXA Account to her.

[4] All parties with an interest in the deceased's estate, including all of the beneficiaries, were represented at the hearing. The respondent executors support the applicant's position. The beneficiaries opposed the application, contending that the rule in Strong v Bird was not engaged on the facts of this case, and that the AXA Account accordingly formed part of the residuary estate.

[5] There was some skirmishing between the parties around the edges of the affidavit material and with respect to some peripheral matters, but the central facts of this matter were really largely uncontroversial. All of the evidence in chief in this matter was on affidavit. Only two witnesses were required for cross-examination; the other executor, Mr Sheridan, to whose evidence I will refer shortly, and the deceased's eldest niece, Toni Mary Baker. Ms Baker is one of the respondent residuary beneficiaries. Her evidence went to certain correspondence which passed between her and the applicant after the death of the deceased. That correspondence does not, however, impact on the resolution of this dispute.

[6] The deceased's wife, Margaret, had died in 1996. Margaret had inherited some money from her mother, who was a member of the Rutledge family. The applicant's father-in-law and Margaret's mother were first cousins. The deceased used part of the money he inherited from Margaret to purchase a unit in Darlinghurst, Sydney, and invested the balance initially in a St George Bank account and subsequently in the AXA Account.

- after the deceased purchased the Darlinghurst unit, he tried to give her the surplus of the funds he had inherited, but the applicant suggested that he retain it for his own needs. She told him that he did not know what needs he might have in the future. She said they were very casual in the way they discussed it;

- the deceased often said to her over the years words to the effect that the money he inherited through Margaret's estate was "Rutledge money" and that he wanted the applicant to have it "in the long run".

[8] In about 2007, the deceased sold his Darlinghurst unit and moved to Toowoomba, where he purchased a unit. The applicant and some other members of the deceased's wider family also live in and around Toowoomba. The deceased purchased a unit in Toowoomba with the proceeds of sale of the Darlinghurst unit. There was also a surplus after that sale, and those monies were also invested initially in the St George Bank account and subsequently in the AXA Account.

[9] The applicant said that she recalls an occasion in 2008 when the deceased was talking about the surplus money he had invested with AXA and said that he wanted "to make it over to" the applicant at that time. She deposed to the following:

"I said to him that he should get himself a new car. [The deceased] said that he didn't think he would need the money and it was time that it became mine. I said to [the deceased] that there was plenty of time if he wanted to make it over to me at a later time after he had got himself a car and whatever he needed himself."

[10] The applicant said that the deceased told her that he wanted the arrangements for the AXA Account finalised during his lifetime.

[11] The deceased was admitted to St Vincent's Hospital, Toowoomba on 7 January 2009. The following day, he was advised by his physician that he had an inoperable brain tumour. The applicant was present when the doctor advised the deceased that he had a terminal illness. She says that after the doctor had told the deceased about his state of health, the deceased told the applicant that "he needed to get things fixed up in relation to the AXA investment, that is transfer over to me [the applicant]". The deceased said that he would involve Michael Sheridan, the applicant's son-in-law, who had been helping the applicant with his affairs over a number of years.

[12] On 15 January 2009, the deceased sent Mr Sheridan a message to the effect that he wanted Mr Sheridan to visit him as soon as possible. Mr Sheridan is the other executor of the deceased's estate and, apart from being the applicant's son-in-law, was the deceased's attorney pursuant to an enduring power of attorney executed in late 2008.

[13] Mr Sheridan and his wife visited the deceased in hospital on the following day, 16 January 2009. The deceased told Mr Sheridan that he wanted Mr Sheridan "to arrange transfer of his AXA Account" to the applicant, and said that he had "wanted to do this for a while". The deceased asked Mr Sheridan to contact a particular officer at St George Bank to arrange the transfer of the AXA Account. Mr Sheridan suggested to the deceased that he should put these wishes in writing, and prepared a document for execution by the deceased and took it back to him the next day to be signed. This document, which was signed by the deceased on 17 January 2009 and witnessed by Mary Donnelly, stated:

"My AXA account TA05168653 Australian Monthly Income Fund

I, Anthony Henry Houghton wish to transfer the whole balance of the above account to my sister, Helen Mary Rutledge."

[14] On the Monday after this document was signed, Mr Sheridan tried to telephone the St George Bank officer, but was unable to contact him. He spoke with the bank officer's assistant, and explained that the deceased wanted to transfer the AXA Account to his sister. She asked that Mr Sheridan email a copy of the document signed by the deceased to them. Mr Sheridan did so. By the Wednesday, when Mr Sheridan still had not heard from the St George Bank officer, Mr Sheridan phoned his office again, and spoke with the relevant officer. The St George Bank officer told Mr Sheridan that there "probably wasn't a lot he could do himself" and it would be best if Mr Sheridan made contact with AXA directly.

[15] Mr Sheridan says that he then went to the AXA website and completed an electronic enquiry form. That enquiry form was submitted in the name of the deceased by Mr Sheridan, referred to the specific AXA Account, and said:

"I wish to transfer the whole balance of the account to my sister, Helen Mary Rutledge (I do not want to withdraw funds - just change in ownership). My Nephew-in Law, Michael Sheridan has my Power of attorney. Please contact him at the above phone numbers/email to make arrangements for transfer. Your urgent attention would be appreciated."

[16] The deceased was admitted to the Toowoomba Hospice on 19 January 2009, and passed away on 24 January 2009.

[17] After lodging the online enquiry through the AXA website, Mr Sheridan followed up with a telephone call to AXA. He was advised by an AXA representative that appropriate correspondence would be forwarded. Documentation was received by Mr Sheridan from AXA a couple of days after the deceased died. Those documents included a form entitled "Transfer and Acceptance of Units".

[18] The beneficiaries have submitted that whilst it can be seen from the evidence that at all times up to his death it was the deceased's intention that the AXA Account should be transferred to the applicant, it went no further than that the funds "should be transferred", that there was no purported immediate gift of the fund to the applicant, and that steps to withdraw or transfer the fund were not taken with AXA prior to the deceased's death.

[19] Mr Sheridan was cross-examined before me. He said that he did not have any discussion with the deceased about the method of transfer of ownership of the AXA Account. When asked whether he understood that some form or documentation ought to have been required, he said that he did not give this any thought. He said further that, when the deceased called him to the hospital, Mr Sheridan thought a written request from the deceased would be sufficient to make an immediate transfer of ownership of the fund.

[20] The applicant contends that the document signed by the deceased on

17 January 2009 is evidence of the deceased thereby making an immediate gift of the AXA Account to the applicant. The applicant submitted that all that was deferred was the necessity for signing the transfer forms, and there was no suggestion that the gift to the applicant was contingent on some future event. The applicant further submitted that the only reason the gift had not been perfected was for want of compliance with the processes stipulated by AXA. It was contended that, as the gift was made shortly before the deceased's death, he obviously had the intention that the property should be treated as having been given to the applicant in accordance with his long term intention.

[21] The rule in Strong v Bird operates, in certain circumstances, to save an imperfect gift. In Cope v Keene[2], Kitto J stated the conditions for the application of the rule as:

"(1) that at some time in his lifetime the testator made a purported immediate gift of specific property to another person (or in the case of a debt a purported immediately operative voluntary release of it);

(2) that though the testator's intention at the time was that what he did should take effect by way of present gift, it failed to do so for want of compliance with the legal requisites for a complete divesting of the title from the intending donor in favour of the intended donee;

(3) that the testator still had when he died the intention that the property should be treated as having been effectually given to the intended donee;

(4) that the testator left a will appointing the intended donee as the executor or one of the executors of the testator."

"Where these conditions are satisfied the purported donee takes the property free from the dispositions of the will, as the testator intended it to be, and therefore holds it (as against the beneficiaries under the will) for his own benefit."

[23] The provenance and continued application of this "rule" has been the subject of some serious criticism.[3] In Blackett v Darcy[4], Young CJ in Equity, counselled strongly against an extension of the rule in Strong v Bird, and referred to authorities suggesting the probability that the High Court would review the rule. His Honour said: "I am bound to apply it, but as I say, it seems to me the prevailing view is that it is an anomalous rule and should not be extended."

[24] Even applying the rule as received, and applicable only on fulfilment of the conditions articulated by Kitto J, it is clear that it only operates in circumstances where the testator made a purported immediate gift of specific property. It is not enough that the testator intended that the gift take place some time in the future nor that the intention of the testator amounted to a promise to give in the future.

[25] The necessity for there to have been an immediate gift, as opposed to an intention to make a gift, has been highlighted in numerous cases in which the rule in Strong v Bird has been examined and sought to be explained. In Matthews v Matthews,[5] Barton ACJ, with whom Gavan Duffy and Rich JJ agreed, said:

"Upon consideration of the cases it cannot be doubted that there must be an attempt to make an immediate gift, and not a mere expression of intention, and that there must be a continuous intention of giving, which, after the act of making what the testator supposes to be a gift, can only mean, I think, that he believes it to have operated, and continues to mean that it should operate, as a gift, although in effect it does not satisfy the legal or equitable requirements of a perfect gift."

[26] In reaching that view, Barton ACJ had regard to a number of authorities. For example, his Honour referred to the judgment of Neville J in In Re Stewart; Stewart v McLaughlin,[6] a case in which the testator had, prior to his death, purchased certain bonds, which he had recorded in his books of account as having been bought for his wife. He received from his broker a letter confirming the purchase together with a "bought note", and handed these in an envelope to his wife, saying, "I have bought these bonds for you". The bonds themselves, however, were undelivered as at the date of his death. In discussing the judgment of Neville J that the wife was entitled, inter alia, to these bonds, Barton ACJ said:[7]

"It is well to point out that although Neville J., in his statement of doctrine, does not expressly say that the intention of making a gift must be coupled with some act in that direction, the facts of the case he was deciding go far beyond any mere expression of intention. There was a manual delivery of the brokers' letter and the bought note, which was all the evidence the testator apparently had of his claim to the possession of the bonds then just purchased. Though, therefore, the words of the learned Judge may be open to misconstruction if taken alone, they are quite clear when applied to the facts he was weighing, and the facts are those of an attempted gift in execution of an intention which was not altered up to the testator's death."

[27] Barton ACJ also referred to the judgment of Parker J in In Re Innes; Innes v Innes,[8] and said:

"[Parker J] then pointed out that the case before him was an attempt to extend the doctrine of the previous cases, first to a gift of money not sufficiently identifiable to enable it to be separated from the rest of the estate; and next to a mere promise to give on a future occasion, not being an actual attempt at gift which as a matter of fact was imperfect. In his opinion the principle ought not to be so extended. "What is wanted," he said ..., "in order to make that principle applicable is certain definite property which a donor has attempted to give to a donee, but has not succeeded. There must be in every case a present intention of giving, the gift being imperfect for some reason at law, and then a subsequent perfection of that gift by the appointment of the donee to be executor of the donor, so that he takes the legal estate by virtue of the executorship conferred upon him. It seems to me that it would be exceedingly dangerous to try to give effect by the appointment of an executor to what is at most an announcement of what a man intends to do in the future, and is not intended by him as a gift in the present which though failing on technical considerations may be subsequently perfected." There could be no more distinct enunciation of the necessity of something much more than a mere expression of intention, however reiterated, in order that the testator's conduct may account to a gift, however imperfect. There must be some attempt to give - something which only the law prevents from being an effective gift."

[28] Reference was also made by Barton ACJ to the judgment of the Court of Appeal in In Re Pink; Pink v Pink,[9] including the statement by Farwell LJ, that:

"It is plain that a mere intention to give, not carried out during the lifetime, will not do, because that would in effect be to allow a man to dispose after his death of his property by a document not testamentary. It is plain also that a mere intention to give is not enough, because you want an immediate gift. If there is an immediate gift, then the resulting trust for the benefit of the beneficiaries is rebutted."

[29] In Matthews v Matthews, Isaacs and Powers JJ, who otherwise dissented in the application of the rule to the particular case, said:[10]

"An imperfect gift of property connotes that its owner has, contemporaneously or antecedently, done some act which couples itself with his communicated intention at some given moment, of immediately transferring his legal right to the property to another, who accepts it, the act done by the owner being, however, for some reason, insufficient in law to effect the intended transfer, which consequently remains incomplete."

[30] In In re Freeland; Jackson v Rodgers,[11], Evershed MR in reference to the rule in Strong v Bird said that:

"There must, for the application of this doctrine, be an intention of giving, as distinct from an intention to give."

[31] Apart from Cope v Keen, to which I have already referred, more recent cases which have emphasised the requirement that the gift be immediately operative include Benjamin v Leicher[12] and Blackett v Darcy.[13]

[32] As I have noted above, the applicant's contention is that the document dated

17 January 2009 is evidence of the deceased making an immediate gift of the AXA Account to the applicant.

[33] In the circumstances as I have outlined them, it is clear that the deceased's desire was that the AXA Account should pass to his sister - so much is clear not only from the comments made by the deceased prior to his hospitalisation, but also from the circumstance of asking his attorney, Mr Sheridan, to attend to the transfer of the funds. The respondents contend, however, that the document of 17 January 2009 was not, by its terms, operative as an immediate gift, but was a statement of the outcome which the deceased intended to achieve after completion of the forms required by AXA. Similarly, it was argued that the electronic instruction by

Mr Sheridan to AXA, which stated "I wish to transfer the whole balance of the above account to my sister", while being an action to effect a change in ownership of the property, was not evidence of an immediate gift having been made.

[34] The central question, then, is whether the deceased, by signing the document on

17 January 2009 made an immediate gift, or merely, as the respondents would argue, signalled the end to which he aspired but did not achieve before his death.

[35] If the deceased, instead of saying "I ... wish to transfer ...", had used a legalistic formula such as "I hereby transfer", the matter would have been beyond doubt. The document of 17 January 2009 was not, however, drawn by lawyers. It was a layman's document, and needs to be construed as such, having regard to the circumstances in which it was prepared and signed.

[36] The primary meaning of the transitive verb "wish" with an infinitive as its object is "to want; desire; long for ..." (the Macquarie Dictionary), or "to have or feel a wish for; to desire" (OED). The OED also refers to "wish" with an infinitive as its object occasionally admixing the idea of intention or request for permission, as in "I wish to say a few words".

[37] Counsel did not refer me to any authorities on the meaning of the word "wish" in this context. I do not mean that as a criticism, because it would appear that the meaning of the word in a context similar to this has not been judicially considered in Australia or England. Indeed, the only arguably relevant curial consideration of the expression which I have found is the judgment of the Californian First District Court of Appeal in Berl v Rosenberg.[14] In that case, a customer had written to the stockbroker with whom he held various accounts stating "I wish to make a joint ownership account with Marion Clemens ... for sole survivor to receive all". The letter was delivered to the stockbroker prior to 8.30 am on 19 June 1956, and the customer committed suicide some time before 11.00 am on that same day. One of the questions for the Court was whether the letter operated inter vivos as a present transfer of the customer's account into a joint tenancy. Peters J, delivering the judgment of the Court, made the following observations:[15]

"The word "wish" can undoubtedly be interpreted to express a desire that something will happen in the future. But that is not its only interpretation. It can also be interpreted as intending a present transfer, synonymous with the words "I hereby grant," words that a lawyer would probably have used. How the word should be interpreted depends upon the language in the instrument itself and the circumstances surrounding the drawing of the instrument. ... The primary question is the donor's intent. Here the intent is obvious. Lack of preciseness in the use of terms should not be used to frustrate that intent."

[38] That case, of course, needs to be considered in its own context. A relevant point of distinction is that there was a specific act, in the form of direct communication with the stockbroker, which was able to be construed by that court as communication of an intention that the act in question be done immediately.

[39] It seems to me, however, that the document of 17 January 2009 in this case, when read in the context of its creation, is precatory in nature. In my view, the clear inference from the evidence is that the deceased knew that there were things to be done in order to make good that which he intended, namely the gift of the AXA Account to the applicant. After being advised of his terminal illness, the deceased spoke of needing "to get things fixed up in relation to the AXA investment". He requested his attorney "to arrange transfer" of the AXA Account, and directed Mr Sheridan to contact the St George Bank officer to arrange the transfer. In that context, the document signed on 17 January 2009, which was prepared and signed at

Mr Sheridan's suggestion, is seen to be that which it purports to be - a statement of the deceased's "wishes" as at that date, i.e. a statement of the outcome he wished to achieve. The deceased's agent, Mr Sheridan, then properly sought to carry those wishes into effect. The regrettable reality, however, is that death intervened to prevent the gift which the deceased undoubtedly intended to be made from being made.

[40] Accordingly, I find that the primary condition for the operation of the rule in

Strong v Bird is not satisfied in this case. It need hardly be said that it is unfortunate that an outcome which was so clearly desired during his life by the deceased is not to be realized. It could have been achieved, of course, if there had been a specific bequest of the AXA Account in the deceased's will. At the very least, this case might serve as a timely reminder of the pitfalls which can arise when one procrastinates in putting one's personal affairs in order.

[41] The application will be dismissed. I will hear the parties as to costs.

[1] (1874) LR 18 Eq 315.

[3] See, for example, the observations by the learned authors of Meagher, Gummow & Lehane's Equity Doctrines & Remedies (4th ed) at [29-040].

[4] [2005] NSWSC 65; (2005) 62 NSWLR 392 at 398.

[5] [1913] HCA 49; (1913) 17 CLR 8 at 19.

[6] (1908) 2 Ch 251.

[8] (1910) 1 Ch 188 at 17.

[9] (1912) 1 Ch 498 at 536.

[11] [1952] Ch 110 at 115.

[12] (1998) 45 NSWLR 389 per Cohen J at 401.

[14] (1959) 336 P.2d 975.