NSW Trustee & Guardian v Reid

1. [1]

   HER HONOUR: By summons filed on 30 November 2020, the plaintiff (the NSW Trustee & Guardian), as executor of the Will dated 18 November 2011 of the late May Ethel Basham (to whom I will refer, intending no disrespect, as May), seeks declaratory relief as to the true construction of May’s Will. The issue for construction is as to whether a gift “of all my real estate” to the first defendant (Jennifer Reid) includes a property at Blair Athol (the Blair Athol Property) forming part of the residue of the estate of May’s sister, the late Florrie Doreen Hurley (to whom I will refer, again intending no disrespect, as Florrie), in respect of which the application proceeded on the basis that it was accepted that May held (at the time of her death) a vested remainder interest; or whether the proceeds of sale of the Blair Athol Property will fall into May’s residuary estate and pass to the second to sixth defendants (they being various relatives and a friend of May).

2. [2]

   Prior to commencement of the proceeding, the plaintiff wrote to each of the defendants on 24 August 2020 outlining the issue and seeking their agreement to the distribution of the proceeds of sale of the Blair Athol Property to Jennifer Reid (see Annexure J to Ms Papadopoulos’ affidavit). Each of the first and third to sixth defendants agreed to that course (see Annexure K to Ms Papadopoulos’ affidavit). The second defendant did not consent to that course, and has raised certain contentions as to the proper construction of the Will.

3. [3]

   The plaintiff then commenced the present proceeding. Each of the defendants has been served with the summons and with the affidavit in support (an affidavit affirmed on 26 November 2020 by the plaintiff’s solicitor, Ms Kay Sarah Papadopoulos. As noted above, the first and third to sixth defendants consent to the proposed distribution. The second defendant has filed a submitting appearance on 17 February 2021 but asked the plaintiff to place before the Court her contentions as to the proper construction of the Will (which the plaintiff has quite properly done). No criticism is made of the stance taken by the second defendant in this regard (and the plaintiff does not seek any costs order against her), in circumstances where the plaintiff considers that there is doubt as to the proper construction of the Will (for the reasons I will explain shortly) and where the course adopted by the second defendant has enabled the costs of the proceeding to be minimised.

4. [4]

   The upshot of the above is that there has been no contradictor on the present application. However, I am satisfied that all of the beneficiaries whose interests may be affected have been notified of the plaintiff’s application and have had the opportunity to make any submissions they wished as to the proper construction of the Will.

5. [5]

   As indicated above, the application proceeded before me on the basis that May’s interest in the residue had vested by the time of her death (see T 4.1) (and, by reason of the joint tenancy with John not having been severed before his death, May held the entire remainder interest in the residuary estate). The question for construction was simply as to the meaning of the gift of “all my real estate”. The plaintiff (consistent with the plaintiff’s duties as executor) has put before the Court the arguments both for and against the competing constructions of the Will (reflected in the alternative forms of declaration set out in the summons) and I will summarise those in due course. Counsel for the plaintiff is, on balance, of the opinion that the proper construction of the Will is that the Blair Athol Property does not form part of the residuary estate and the plaintiff therefore contends for a declaration to that effect. For the reasons set out below, I consider that the proper construction of the Will is that May’s vested remainder interest in Florrie’s estate, so far as it comprises the Blair Athol Property, falls within the gift to the first defendant of “all [the testator’s] real estate”.

Background

1. [6]

   It is convenient at the outset to give a brief outline of the family relationships in this matter. As with Florrie and May, I will generally refer to the family members by their first names.

2. [7]

   Florrie and May were sisters (being two of nine children of the late Phillip Henry Little and the late Alice Irene Cummins). Florrie’s husband, with whom Florrie had one son (David John Hurley), pre-deceased Florrie.

3. [8]

   May was married to John Charles Basham. The first defendant, Jennifer Anne Reid was one of John’s sisters (and hence May’s sister-in-law). John survived Florrie but pre-deceased May. The respective defendants are the residuary beneficiaries (other than David) of May’s estate: the second and fourth defendants are the children of May’s brother, Phillip; the third defendant is the son of John’s brother, Robert; the fifth defendant is one of Jennifer’s children; and the sixth defendant was a friend of May.

4. [9]

   Florrie died on 24 October 2005. Letters of Administration with Florrie’s Will dated 11 May 1990 annexed were granted to the (then) Public Trustee of NSW (now the plaintiff) on 10 January 2006 (see Annexure E to Ms Papadopoulos’ affidavit).

5. [10]

   Clause 3 of Florrie’s Will provided as follows:

6. [11]

   Both May and John (in whom the remainder interest in Florrie’s estate vested on Florrie’s death) survived Florrie but neither survived the life tenant (David). John died on 10 July 2012. (A copy of his Death Certificate is Annexure F to Ms Papadopoulos’ affidavit.) May died on 29 June 2019. David died on 7 July 2019 (less than 30 days after May died). (A copy of his Death Certificate is Annexure C to Ms Papadopoulos’ affidavit.)

7. [12]

   The assets remaining in Florrie’s estate as at 7 July 2019 (the date of David’s) comprised the Blair Athol Property (with an estimated value of $622,000) and funds on deposit of $211,473.78.

8. [13]

   As noted above, May died on 29 June 2019. Probate of May’s Will dated 18 November 2011 was granted to the plaintiff on 12 November 2019 (see Annexure B to Ms Papadopoulos’ affidavit).

9. [14]

   Clause 5 of May’s Will provides that “I give all my real estate to my husband’s sister JENNIFER REID if she survives me”. Pursuant to cl 9 of May’s Will her residuary estate was left to the respective defendants and David (who died on 7 July 2019) in equal shares.

10. [15]

    As noted above, David survived May, but not by 30 days. David died leaving no children. Again, as noted above, although May did not survive the life tenant (David), the application proceeded on the basis that her remainder interest (being the whole of the remainder interest in the residue of Florrie’s estate by reason of John’s earlier death) had already vested at the time of May’s death.

11. [16]

    Apart from the affidavit evidence read on the present application, and the formal documents annexed to Ms Papadopoulos’ affidavit, it is relevant to note that there was in evidence a copy of the Will Information Form which provided instructions for the drafting of May’s Will (see Annexure D to Ms Papadopoulos’ affidavit).

12. [17]

    The Will Information Form records May’s address as a residence in Port Macquarie. Under the heading “Real Estate” are the words “above”, “deeds at Laing & Symonds” and “JT” (by which the plaintiff understands this to be an instruction that May owned the Port Macquarie property as a joint tenant and that the deeds to the property were held by the real estate agency Laing + Simmons). There is no reference in the instruction form to any entitlement under Florrie’s Will.

13. [18]

    The plaintiff says that the essential question here for determination is whether the words “all my real estate” are broad enough to include the Blair Athol Property; noting that if they are not, then the Blair Athol Property falls to the residuary beneficiaries of May’s estate.

14. [19]

    There is no doubt that, on Florrie’s death, May’s entitlement was an entitlement to have Florrie’s estate administered, rather than an interest in any particular property in the estate (see Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; [1965] AC 694; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; [1990] HCA 45 (Schultz). The right to have an estate administered is a chose in action capable of assignment (Re Leigh’s Will Trusts [1970] Ch 277). Such a right is also property which would vest in the Official Receiver on Bankruptcy pursuant to the Bankruptcy Act 1966 (Cth) (see Schultz).

15. [20]

    Since Florrie’s death, the plaintiff has completed the executorial duties under Florrie’s Will and, as at the date of May’s death, the plaintiff held the assets from Florrie’s estate as trustee pursuant to the trusts in Florrie’s Will (see S Janes, D Liebhold & P Studdert, Wills, Probate and Administration Law in NSW second edition, Thompson Reuters, 2020 at [PAA.48.70] - [PAA.48.80]; J D Heydon & M J Leeming, Jacobs’ Law of Trusts in Australia eighth edition, LexisNexis Butterworths, 2016 at [2.40]-[2.45]).

16. [21]

    Section 4(3) of the Succession Act 2005 (NSW) (Succession Act) provides that a person may dispose by will of property to which the person’s personal representative becomes entitled, in the capacity of personal representative, after the person’s death; and s 4(4) of the Succession Act provides that sub-s (3) applies whether or not the entitlement existed at the time of the person’s death.

17. [22]

    For the purposes of the Probate and Administration Act 1898 (NSW), “real estate” is defined in s 3 of that Act as extending to “messuages, lands, rents, and hereditaments, of freehold or any other tenure, and whether corporeal, incorporeal or personal, and to any undivided share thereof, and to any estate, right, or interest (other than a chattel interest) therein” (and, in Pt 2, includes lands held under building leases or any lease for twenty-one years and upwards).

18. [23]

    The predecessor to s 4(3) of the Succession Act (s 5 of the Wills, Probate and Administration Act), expressly referred to “estates pur autre vie” (i.e., life estates) “whether or not there was an occupant thereof” and expressly referred to disposal of interests in the remainder. Mason and Handler, in Succession Law and Practice in New South Wales (looseleaf, LexisNexis Butterworths) at [4.4] have expressed the view that a testator’s disposable property includes (and s 4(3) permits a gift of) the balance of an estate where there is a subsisting life estate.

19. [24]

    Accordingly, in the plaintiff’s submission, the effect of s 4(3) is that May was able to make a gift of her interest in the remainder of Florrie’s estate (which included the Blair Athol Property) by her Will.

20. [25]

    The plaintiff notes that the effect of ss 45 and 47 of the Probate and Administration Act is that if, at the date of her death, May was entitled to any estate, right or interest in land, such an entitlement is held on the trusts and dispositions of the Will. Section 45 provides that all real estate held by any person in trust or by way of mortgage, and vesting as aforesaid under this part, shall as from the death of such person vest in the person’s executor or administrator, subject to the trusts and equities affecting the same. Section 47 provides that the real estate of every such deceased person devising such estate by the person’s will, shall be held by the person’s executor to whom probate has been granted, or the administrator with the will annexed, according to the trusts and dispositions of such will.

21. [26]

    The complication in the present case (and that which has led to the present application) arises by reference to s 30 of the Succession Act, which provides that a will takes effect, with respect to the property disposed of by the will, as if it had been executed immediately before the death of the testator. For completeness, it is noted that s 38 of the Succession Act provides that a disposition of real property without words of limitation is to be construed as passing the whole estate or interest of the testator in that property to that person.

22. [27]

    The complication seen as arising from s 30 is as to whether May’s interest in Florrie’s estate was a proprietary interest at the date of May’s death and hence falls within the gift of “all my real estate”.

23. [28]

    The plaintiff, referring to the reasoning in Schultz (at 312-314) to the effect that the beneficiary in an unadministered estate has an interest in the fruits of the chose in action, so as to compel the administration of the estate, submits that, at the date of her death, May had a right of some description in respect of the assets contained in Florrie’s estate, which right is broad enough to fit within the description of “real estate” in s 3 of the Probate and Administration Act.

24. [29]

    Further, as noted above, the administration of Florrie’s estate had been completed in the period of time between her death and May’s death (in the sense that the Public Trustee had brought in the assets, paid the debts and then, at some point in time, held the assets to Florrie’s estate on the trusts contained in the Will for the life tenant and for the remaindermen). Thus it is submitted that the authorities on the nature of an interest in an unadministered estate do not strictly apply.

25. [30]

    It is submitted that the purpose of s 30 is to provide a presumption that the property disposed of by a will is the property held immediately prior to death (rather than at the date of the will) but that the section does not fit neatly with the ability of testators to dispose of property acquired after death; and that the after-acquired property must be disposed of by the provisions of the Will one way or another. The plaintiff submits that it would be a false dichotomy to apply s 30 of the Succession Act to determine the present construction issue (i.e., to apply it to the question whether or not May’s interest in the Blair Athol property was a proprietary interest at the date of death).

26. [31]

    As to the general principles applicable on the construction of a will, reference is made to Perrin v Morgan [1943] AC 399; [1943] 1 All ER 187 (Perrin v Morgan) (at 190) where Viscount Simon LC said:

27. [32]

    Reference is also made to Marley v Rawlings [2014] UKSC 2; [2015] AC 129 where Lord Neuberger (with whom Lord Clarke, Lord Sumption and Lord Carnwath agreed) said (at [19]-[20]):

28. [33]

    It is noted that s 32 of the Succession Act provides:

29. [34]

    The plaintiff points out that a similar issue arose in Lewis v O’Loughlin (1971) 125 CLR 320; [1971] HCA 53, which concerned a gift of “the total sum of my monetary investments”, the question there being whether that gift included the testatrix’ interest in her niece’s unadministered estate (in circumstances where the niece had died one month before the testatrix made her Will and the testatrix knew that she had an entitlement to inherit from her niece on intestacy). The testatrix’ interest in her niece’s unadministered estate was held to pass with the gift of “my monetary investments”.

30. [35]

    The plaintiff submits that the following matters point in favour of the conclusion that the gift of “all my real estate” includes the Blair Athol Property.

31. [36]

    First, the natural and ordinary meaning of the words – it is submitted that the word “all” suggests May contemplated that the gift to Jennifer Reid would include additional or substitute real estate not expressly identified in the Will.

32. [37]

    Second, the purpose of May’s Will being presumed to be to dispose of property owned by her at the date of death as well as property to which her personal representative becomes entitled after her death (by reference to s 4(3) of the Succession Act).

33. [38]

    Third, that May had an interest in, and could dispose of, her (remainder) interest in the trust established by Florrie’s Will at the date of her death.

34. [39]

    Fourth, that (after the deaths of both the joint remainderman, John, and the life tenant, David), the plaintiff (as executor of May’s estate) is now entitled to the Blair Athol Property, even though the plaintiff was not entitled to call for a transfer of the property at the date of May’s death.

35. [40]

    Conversely, the plaintiff says that the following matters point to the conclusion that the Blair Athol Property falls to the residuary estate of May.

36. [41]

    First, that the Will Information Form refers only to one property, namely the Port Macquarie property (though in this regard the plaintiff submits that the fact that the Will Information Form does not refer to May’s interest in Florrie’s estate does not ultimately assist in determining whether the Blair Athol Property forms part of the gift of “all my real estate” or forms part of the gift of residue because the instructions do not specifically deal with May’s actual intention concerning that property).

37. [42]

    Second, that if David’s circumstances, or the administration of Florrie’s estate, had required it the Blair Athol Property could have been sold.

38. [43]

    Third, that May was not entitled to the Blair Athol Property immediately before her death; rather, May was entitled to a remainder interest in Florrie’s estate (which included the Blair Athol Property).

39. [44]

    Fourth, that (as explained above) s 30 of the Succession Act might have the effect that the gift of “all my real estate” does not include the Blair Athol Property (because there was not an entitlement to call for the property as at the date of death).

40. [45]

    However, the plaintiff submits that the matters which might be thought to point towards the alternative construction are not determinative for the following reasons: in the circumstances which have occurred, May’s estate is now entitled to the Blair Athol Property; May’s Will must dispose of her interest in the Blair Athol Property one way or another; and Florrie’s Will directs the plaintiff to “hold” the residue for the remainder beneficiaries, rather than to sell or realise the assets, there being no express power of sale in Florrie’s Will (although if it had become necessary in the administration of Florrie’s estate, sale could have been effected pursuant to either s 153(1) of the Conveyancing Act 1919 (NSW) or s 16(1)(g) of the NSW Trustee & Guardian Act 2009 (NSW). Thus, it is said that May had a remainder interest in the whole of the assets of the trust under Florrie’s Will, of which the Blair Athol Property formed part, and that she was able to dispose of that interest by her Will.

41. [46]

    The plaintiff says that the construction question falls to be determined on basic principles; as to what the written words mean in the particular case and what are the expressed intentions of the testatrix (in the Perrin v Morgan sense) in respect of the property which must pass pursuant to her Will and, the plaintiff advances the construction reflected in prayer 1 of the summons (namely, that the Blair Athol Property forms part of the gift of real estate to Jennifer Reid) because the property falls within the description of "all my real estate”. However, the declaratory relief is expressed in the alternative to encompass whichever of the postulated constructions be found to be correct. The plaintiff also seeks an order that its costs be paid out of the estate of the late May Ethel Basham on the indemnity basis.

Determination

1. [47]

   The general principles applicable to the construction of a Will have been referred to by the plaintiff as summarised above and need not here be repeated.

2. [48]

   As noted above, s 30 of the Succession Act, as noted above, provides that (in the absence of a contrary intention appearing in the will) a will takes effect “with respect to the property disposed of” by the will as if the will had been executed immediately before the testator’s death. When considering the original English provision from which the predecessor to s 30 was derived, Dixon CJ in McBride v Hudson (1962) 107 CLR 604; [1963] ALR 226 said (at 616):

3. [49]

   Section 30 thus does not apply for all purposes of construction of a will; rather it is limited to how the will is to be construed having regard to the property comprised in the will (see also the commentary in Mason and Handler, Succession Law and Practice in New South Wales at [30.5.2]).

4. [50]

   A generic gift of “all my real estate” (and having regard to the meaning of “real estate” in s 3 of the Probate and Administration Act as extending to any estate, right, or interest (other than a chattel interest) in such property) will be construed (absent a contrary intention under the will) as applying to all May’s interest in real property as at the date of her death, including any such interests acquired after the making of the Will. The use of the word “all” in this regard is apt to indicate an intention to dispose of property falling within that generic description in which the testator has an interest at the date of death, including after-acquired property (see S Janes, D Liebhold & P Studdert, Wills, Probate and Administration Law in New South Wales (at [SA.30.10]-[SA.30.20]).

5. [51]

   In Pohlner v Pfeiffer (1964) 112 CLR 52; [1964] HCA 8, Windeyer J (at 77 to 79) confirmed that generic gifts may be described specifically or generally:

6. [52]

   The authors of Dal Pont & Mackie’s Law of Succession (second edition, LexisNexis Butterworths, 2018) at [8.67] provide the following commentary on s 30 and its impact upon construction:

7. [53]

   In the present case, there is no contrary intention evident from the Will. Accordingly, the gift of “all my real estate” passes interests in real estate acquired between the date of the Will and the date of death.

8. [54]

   The relevant question, as identified by the plaintiff, is whether as at the date of May’s death it can be said that her remainder interest in the Blair Athol Property was an interest in real estate falling within the gift of “all her real estate” to the first defendant.

9. [55]

   There is no doubt that, as at May’s death, May could not have called for the transfer of the Blair Athol Property to her (because the life tenant, David, was still alive). However, she had a vested remainder interest in the residue of Florrie’s estate (which as that time included – and still does – the Blair Athol Property) and by that time Florrie’s Will had been administered such that the Blair Athol Property was held under the trusts provided for under Florrie’s Will (i.e., on trust for David for life and, on his death, for May).

10. [56]

    Reference has been made to the definition of “real estate” for the purposes of the Probate and Administration Act as including any right or interest in land. It is relevant, in the context of considering the property of which May could dispose under her Will, also to refer to the definition of “property” in s 21 of the Interpretation Act 1987 (NSW) as meaning “any legal or equitable estate or interest (whether present or future, vested or contingent) in real or personal property of any description including money, and including things in action”.

11. [57]

    Mason and Handler note that disposable property of a testator includes, not only the balance of an estate pur autre vie until the death of the person who is the measuring life (as noted by the plaintiff), but also contingent, executory and future interests including a contingent remainder (citing Fairbairn v Varvaressos [2010] NSWCA 234 at [98]-[123]).

12. [58]

    The remainder interest in Florrie’s estate (which included the Blair Athol Property and which had already vested in interest on the date of Florrie’s death) was undoubtedly an interest capable of being disposed of by May’s Will. To the extent that the remainder interest comprised a right (exercisable on the life tenant’s death) to call for the transfer of the Blair Athol Property, in my opinion it falls within the generic description “all my real estate”. Thus I have concluded that, on the proper construction of May’s Will, the gift to the first defendant of “all my real estate” includes the interest of May’s estate in the Blair Athol Property which is presently held on trust for May’s estate under the trusts the subject of Florrie’s Will; and does not fall into the residuary estate. I am therefore satisfied that a declaration to the effect of that sought in prayer 1 should be made.

Orders

1. [59]

   For the above reasons, I make the following declaration and order:

   1. (1)

      Declare that, on the true construction of the Will of the late May Ethel Basham dated 18 November 2011 in the events which have occurred, the gift of “all my real estate to my husband’s sister Jennifer Reid” in clause 5 of the Will of the late May Ethel Basham dated 18 November 2011 includes the property referred to in these reasons as the Blair Athol Property held by the plaintiff as trustee of the estate of the late Florrie Doreen Hurley.

   2. (2)

      Order that the plaintiff’s costs of the proceeding be paid out of the estate of the late May Ethel Basham on the indemnity basis.