Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd

Bowler v Hilda Pty Ltd (2001) 112 FCR 59; 183 ALR 81; [2001] FCA 342 CASES CITED : Ex parte Whelan [1986] 1 Qd R 500 Rattrays Wholesale Ltd v Meredyth-Young & A'Court Ltd [1997] 2 NZLR 363 Watson v Phipps (1985) 63 ALR 321; 60 ALJR 1

TEXTS CITED : Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (4th ed)

PARTIES : Saxby Soft Drinks Pty Ltd (plaintiff) George Saxby Beverages Pty Ltd (defendant)

SOLICITORS : Walker Legal & Conveyancing (plaintiff) Merrick Spicer & Associates (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST

4132/09 Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: On 30 June 1982 Oasis Industries Pty Limited, as trustee, executed a deed of trust constituting a unit trust named the Oasis Trust, the other parties being described as: The several persons who have executed or hereafter execute this deed or sign an application for units or a transfer of units, as hereinafter mentioned, containing an agreement with the trustee whereby any such applicant for or transferee of units agrees to be bound by the provisions of this deed. 2 George Murray Turner executed the deed. Although the other unit holders have varied from time to time since 1982, the only unit holder now is the defendant George Saxby Beverages Pty Limited. 3 In clause 1 of the trust deed, the "vesting day" is defined to mean: The day upon which shall expire the period of twenty-one years after the execution of this settlement or the death of the last survivor of the descendants now living of his late Majesty King George VI, which shall be the shorter [sic], or such earlier date as the trustees may at any time not earlier than one year after the execution of this settlement in writing or by oral declaration appoint. 4 Clause 19 of the trust deed provided that the trust should begin at the date of the deed and, unless previously determined, continue until the vesting date. Clause 20 provided that upon determination of the trust under clause 19, the trustees should, as soon as practicable, sell, call in and convert into money or cause to be sold, called in and converted into money, the investments of the trust fund and divide the proceeds of sale and all undistributed income less all profit, costs and charges and expenses among the registered holders in proportion to the number of units of which they are respectively registered as the holders. Subclause (c) gave the trustee power to postpone the sale, calling in and conversion of any part of the investments of the trust fund for such time as it thinks desirable so to do in the interests of the registered holders and not be responsible for any loss attributed to such postponement. 5 The Trust acquired the business of Saxby Soft Drinks, which the Saxby family have long operated from Taree on the New South Wales north coast. At least generally speaking, the unit holders were members of that and connected families. The Trust was established in circumstances in which it was sought to restructure the existing business via a merger with another business located in Grafton and to achieve tax advantages from the conduct of the business through the structure of a trading trust. 6 In 2001 or thereabouts, some concerns were expressed that the definition of "vesting day" referred to above might result in the trust vesting 21 years after execution of the deed, that is to say on 30 June 2003. Advice was obtained and steps taken to have the trust deed amended as a result as it was thought not to reflect the intent of the parties when the trust was constituted. However, for reasons which presently do not matter, those steps were not implemented prior to 30 June 2003. Since then, the banker for the business of Saxby Soft Drinks has expressed the view that the Trust may have vested, and this has occasioned difficulties for the business in securing finance. In those circumstances, by summons filed on 17 August 2009, the trustee Saxby Soft Drinks Pty Limited (as the former Oasis Industries Pty Limited is now known) seeks, in substance, a declaration that on the proper construction of the trust deed the vesting day is the later of 21 years after execution of the deed or 21 days after the death of the last survivor of the descendants now living of King George VI, and, alternatively, rectification of the trust deed to the same effect. 7 In my view, it is plain that there is an error in the definition of the "vesting day" and that the word "shorter" was used erroneously when the word "longer" or "later" ought to have been used. This is so for a number of reasons. The first is that in a trust deed, a King George VI clause is conventionally used to provide maximum flexibility and duration for the trust by selecting a wide class of reasonably identifiable persons as lives in being to which a period of 21 years is then conventionally added to define the perpetuity period of a life in being plus 21 years. 8 Secondly, if the definition had the effect that the vesting day was the earlier of the period of 21 years from the date of execution or the period of 21 years from the death of the last survivor of the descendants now living of King George VI, then the reference to the descendants of King George VI would serve no purpose at all, as it would not extend the perpetuity period beyond the 21 years otherwise fixed in any circumstances, and there would be no point in having any reference to anything other than the period of 21 years. 9 Thirdly, if one were not to read the period of 21 years as related both to the execution of the settlement and to the death of the last survivor of the descendants of King George VI, so that the alternative to 21 years after execution was simply the date of death of the last survivor of the descendants now living of the said King, then the effect of the King George VI clause would be, quite anomalously, to abridge or potentially abridge (in the unlikely event of an early Royal calamity) the otherwise fixed period of 21 years, for no apparent purpose or utility whatsoever. 10 In order to reach the conclusion that what was intended was the longer of a period of 21 years after the date of execution or a period of 21 years after the death of the last survivor of the descendants of the said King, I do not need to resort to extrinsic evidence of the intention of the parties at the time of entering into the trust deed. So much is manifest, I think, on the face of the deed itself, and from the ordinary purpose of including a King George VI clause in a trust deed. In those circumstances, I do not think it is necessary to resort to rectification. The result can be reached by a process of construction. In a passage which has been judicially approved (see Bowler v Hilda Pty Ltd (2001) 112 FCR 59; 183 ALR 81; [2001] FCA 342 (Drummond J)), the learned authors of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed) write (at [26-040]): Proceedings for rectification ought not be brought if whatever mistake appearing in the written instrument is of the kind that the true meaning of the document could be ascertained as a matter of construction without recourse to extrinsic evidence. Courts both of law and of equity regularly insert, delete, alter and interpret words in such a fashion as to make the document sensible, without necessary recourse to any doctrine of rectification. Thus, in Wilson v Wilson (1854) 5 HLC 40 at 67; 10 ER 811 at 822, Lord St Leonards had no difficulty in reading "Mary" for "John" and in St Edmundsbury Board of Finance v Clark [1973] 3 All ER 902 at 915; [1973] 1 WLR 1572 at 1585, Megarry J read "coloured blue and red" instead of "coloured blue". In Fitzgerald v Masters (1956) 95 CLR 420 the High Court of Australia was able to construe clause 8 of a contract for sale on a parcel of land reading: The usual conditions of sale in use or approved of by the Real Estate Institute of New South Wales relating to sales by approved contract of land held under the Crown Lands Act shall so far as they are inconsistent herewith be deemed to be embodied herein.

So that "inconsistent" was read as meaning "consistent". As their Honours, Dixon CJ and Fullagar J said in their joint judgment (at 426-7): There is a superficial difficulty in clause 8, because it purports to incorporate a set of conditions so far as they are inconsistent with what has been specifically agreed upon. No real difficulty, however, is created. Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency. Here it would be indeed absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specially agreed upon. What they must clearly have intended is to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon, and clause 8 must be read as if it is said "consistent" or "not inconsistent".

11 As those authors point out, the decision of the Privy Council in Watson v Phipps (1985) 63 ALR 321; 60 ALJR 1, is to similar effect; see also Ex parte Whelan [1986] 1 Qd R 500 and Rattrays Wholesale Ltd v Meredyth-Young & A'Court Ltd [1997] 2 NZLR 363. In my opinion, this case falls clearly within the territory described by Dixon CJ and Fullagar J in the passage quoted above. It would be absurd to suppose that the parties intended the Royal lives clause to operate as an actual or potential abridgement of the 21 year period otherwise fixed, as opposed to an extension of it. There would simply be no purpose in including it in that event. 12 Accordingly, I have no difficulty in concluding that, upon the proper construction of the trust deed, the "vesting day" is the day upon which shall expire the period of 21 years after the date of execution of the deed, or the period of 21 years after the death of the last survivor of the descendants living at that date of his late Majesty King George VI, whichever shall be the later, or such earlier date as the trustees may at any time not earlier than one year after the execution of the deed in writing or by oral declaration appoint. 13 I declare that upon the proper construction of the deed of trust of the Oasis Trust dated 30 June 1982, the Vesting Day defined in clause 1 of that deed is the day upon which shall expire the period of 21 years after the execution of the deed or the day upon which shall expire the period of 21 years after the death of the last survivor of the descendants living at the date of the deed of his late Majesty King George VI, whichever shall be the later, or such earlier date as the trustees may at any time not earlier than one year after the execution of the deed in writing or by oral declaration appoint.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.