Category ArchiveSuccession



Equity and Trusts &Succession rob on 15 Jul 2011

Gift in Will to “issue” limited to grandchildren

In Simpson v Simpson & Ors [2011] QSC 196 the great-grandson of the deceased unsuccessfully argued the expression “leaving issue” in his great-grandmother’s will means not just children but all other lineal descendants. The deceased’s son had died before her, and that share could not pass to her grandson because he had killed his father. The question then was should that share pass further down to the great-grandchild, or revert to be shared between the deceased’s living children.

The decision is significant because the wording in the will, or similar wording, is commonly used in Queensland.

“(c)  to stand possessed of the rest and residue of my estate UPON TRUST to divide the same equally between such of my children as shall survive me and attain the age of eighteen years PROVIDED ALWAYS that if any such child should die without having attained a vested interest hereunder leaving issue who shall survive to attain the age of eighteen (18) years such issue shall take and if more than one equally between them the share in my estate which his her or their parent would have taken had such parent survived to attain a vested interest hereunder.”

The executor’s position was that the deceased child’s share should revert to his surviving siblings, not to the great-grandchild, because, firstly, a proper reading of the above clause meant the gift over was limited to grandchildren, and secondly, the substitution gift was limited to death and not applicable to a disqualification for reason of criminal homicide. The executor succeeded on their first argument, leaving the second one moot.

In support of the broader, lineal descendant, meaning of the term “issue”, which is often used in Wills, the great-grandchild’s submissions referred to other decisions, the plain dictionary meaning, the meaning of the term as used in the Queensland Succession Act 1981, and that, in the context of the clause in the deceased’s will, the narrower interpretation could have been achieved by reusing the terms “child” and “children” and therefore the introduction of the term “issue” indicated a broader meaning.

Justice Peter Lyons took the approach that the determination must be based on the will-maker’s intention from the language of the will as a whole, rather than a rule of construction, noting the High Court in Matthews v Williams (1941) 65 CLR 639 at 650-651 had earlier accepted the prima facie legal meaning of “issue” is descendants or progeny, and not limited to children. He then analysed the words of the clause.

“The only people for whom provision is made for the attaining of a vested interest under the will, conditional on their survival, other than the issue to take in substitution, are the children of the testatrix; and these are referred to as the “parent” of issue who might take in those circumstances.  It is therefore clear that the language of the proviso contains a disposition only to issue of children of the deceased, who are themselves children of the deceased’s children, and accordingly, grandchildren of the testatrix. There is no other language in the will to lead to a different conclusion.”

On the other hand, the clause might be construed such that the gift to a child (or if predeceased, their children) passes wholly intact so that on the deaths of both child and grandchildren, the gift to the grandchild passes to their child, taking the share their parent, the grandchild, might have taken. If the decision is not surprising, it certainly is another reason to avoid legal forms and jargon and insist that all terminology and expressions used in a will are plain and ordinary. In hindsight, the lawyer for the will-maker might have drafted the gift-over proviso by continuing to use the terms “child” and “children” (rather than “issue”) but with offering the following endings to the proviso as alternatives: “and so on for remoter lineal descendants” or “but without substitution for any remoter lineal descendants”.

Equity and Trusts &Succession rob on 07 Jul 2011

family trust protects assets from spouse

re: FAMILY COURT OF AUSTRALIA decision in Keach & Keach and Ors [2011] FamCA 192 (9 March 2011)

Justice Strickland has excluded from the divisible pool of assets the matrimonial home which was owned by a discretionary family trust established and controlled by the father of a 42 year old man in a contest with his 33 year old wife. The wife alleged the trust was a ‘piece of machinery’ designed to keep the property ‘from the reach of the Family Court’ and the fact that her husband’s siblings were secondary beneficiaries of the trust was ‘camouflage’. In his evidence, the husband’s father admitted that one of his motivating factors in establishing the trust was to keep the property within those trusts as far away from the Family Court as possible. The trust purchased a residential property near the husband’s place of work for $920,000. It was rented out by the trust for nearly 4 years before the husband and wife took up residence there, at a lower rent, and carried out renovations. The husband conducted himself as though he was the owner of their home and the wife harboured that view.

Section 106B(1) of the Family Law Act 1975 provides that:

In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

Strickland J’s judgment peruses various judicial descriptions of a sham, most notably that:

“all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating” Snook v London and West Riding Investments Ltd [1967] All ER 518 Diplock LJ at 528

Strickland J noted that there is some uncertainty about whether a sham required, as an element, the deliberate deception of third parties, such as fraud. His analysis continued on the basis that the particular sham alleged was not as pejorative as fraud, “but still apt to deny the critical step in the appellant’s case”. The test for the Court being to compare the evidence of intention in the document against evidence of real intention. For this, Strickland cited Justice Kirby in Raftland Pty Ltd as Trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21; (2008) 246 ALR 406

“The key to a finding of sham is the demonstration, by evidence or available inference, of a disparity between the transaction evidenced in the documentation (and related conduct of the parties) and the reality disclosed elsewhere in the evidence.”

and

“Neither the complexity nor the artificiality of a transaction, nor any circularity evident in it, nor the apparent lack of commercial or economic sense will of themselves, alone or in combination, necessarily warrant a conclusion that a transaction constitutes a sham.”

Strickland J observed that:

“Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it.”

If a requirement for a sham was to find a ‘common intention’ of the parties to the transaction to mislead others, such an finding would be practically ruled out in the typical situation of a family trust because the essential parties are a settlor (often accountant, or a solicitor as in the present case) and the trustee. Strickland J reviewed authorities finding it was possible for a unilateral sham to emerge over time by the transaction masking a departure from the original intent and without involving any party to the marriage. He also noted the narrow operation of the doctrine in New Zealand where the NZ Court of Appeal in Official Assignee in Bankruptcy in the Property of Reynolds v Wilson and Harvey and Anor[2008] NZCA 122 gave safe harbour from sham for any trust valid at its inception, except, possibly, only in relation to a portion of property subsequently transferred into the trust.

From this Strickland J deduced that regardless of the husband’s conduct, for there to be a sham, there must be ‘evidence of an intention on the part of the husband’s father’ to confuse the legal terms of the trust with the ‘actual entitlements of the husband’. Essentially, Strickland found that the wife did not have enough evidence to establish an intention on the part of the husband’s father that would amount to a sham.

This case highlights the enduring strength of family trusts in estate planning to achieve asset protection for a client’s bloodline. The message for family lawyers is that to set aside a properly established and administered family trust, which is not legally controlled by a party to the dispute, requires evidence close to fraud. Just how close, Strickland J did not say.

845 words

Leases &Property &Succession rob on 01 Feb 2011

Retirement Villas are not really owned after purchase – The Trust Company Limited & Anor v Zdilar & Ors [2011] QSC 5

Ann Mary Ashton (“the deceased”), a great grandmother, died aged 91 in 2009 while living in a self-contained retirement unit. She paid $312,000 for the unit 2 years earlier. As is typical, her land tenure to the retirement unit was not freehold, but a 99-year lease. 11 years earlier, she made a will that gave to her grandchildren the freehold, free-standing home at 18 Esma Street in which she was then living “or any substitute house property I shall own at the date of my death”. The deceased gave the residue of her estate to her great grandchildren.

The retirement unit operator paid an exit fee of $274,840 to the estate. The executors asked for advice from the Queensland Supreme Court as to whether that money was, on a proper reading of the will, for the grandchildren or great grandchildren.

On 31 January 2011 Justice Margaret Wilson delivered reasons for her decision that the retirement unit was not substitute house property owned at the date of death. After a concise review of similar decisions where plain meaning is always the starting point, Justice Wilson consulted the Oxford English and Macquarie Dictionaries, concluding her judgment as follows.

“Unlike the testatrix in Re Blake Dec’d, the testatrix in this case made her will when she was still living in her own home. She did not expressly contemplate that by the time she died she might not be living independently. She referred to “any substitute house property” rather than to “any other accommodation facility”. If the testatrix had been living in a home unit or town house bought with the proceeds of sale of 18 Esma Street when she died, then that property would have been within the description of a “substitute house property” owned by her within the meaning of her will. I doubt that the unit in the retirement village is embraced by the words “substitute house property”. But even if it is, it was not a property owned by her when she died.” [Paragraphs 39 to 40]

In essence, the decision turned on a finding that the plain meaning of “own” did not cover 99 year leasehold tenure, despite section 33I of the Succession Act 1981 (Qld) by which, subject to contrary intention in the will, provides a rule of construction that a “general disposition of land, or of land in a particular area, includes leasehold land, whether or not the testator owns freehold land”.

Re Purcell (1991) 103 FLR 271 was authority for a ‘house’ to include a ‘unit’ but –

“The real question is not what was the testatrix trying to achieve but, rather, what did she mean by the words used in her will when it took effect. It is relevant for this purpose to look at what she had intended to refer to by the words she used at the time the will was executed.” Re Purcell Higgins J at 279

Re Willis [1996] 2 Qd R 664 was also cited by the Court.

“The intention of the testatrix must be derived primarily from the words themselves, and an intention cannot be inferred if the words could not reasonably support such a meaning. However, a will should not be construed in a strictly technical or legalistic sense and the construction should be sensitive to the factual context of ordinary life and circumstances. So too if special personal circumstances of a testator have a bearing on the meaning of an expression that he may adopt, they should be accorded proper influence.”

Section 33C of the Succession Act 1981 (Qld) allows admission of evidence of a testator’s intention to interpret a will which is ‘ambiguous in light of surrounding circumstances’ but not to establish circumstances giving rise to the ambiguity.

The distinction drawn by the Court largely changed the previous substantive effect of the will. The difference may have been lost on Mrs. Ashton who paid the price of a home for her retirement unit tenure. Is it nonsense or plain language to consider she owned it?  Under the terms of the lease, it ended 14 days after death triggering the exit payment. The decision favours the utility of precise will drafting to avoid a post-mortem analysis of what the deceased might have wanted. Perhaps too far.

The Trust Company Limited & Anor v Zdilar & Ors [2011] QSC 5

High Court &Property &Succession rob on 27 Oct 2010

A personal cause of action sometimes dies with the person

In WORKCOVER QUEENSLAND v AMACA PTY LTD & ANOR [2010] HCA 34 the Australian High Court has clarified that Queensland legislation limiting the rights of a deceased estate to recover damages for pain and suffering and the like does not limit the liability of the wrongdoer. A worker died from a dust related condition, having previously received an insurance based compensation payment. The insurer sought to recover their loss from the employer. The Court of Appeal of the Supreme Court of Queensland (her Honour McMurdo P dissenting) held that section 66 of the Succession Act operated to reduce the insuer’s claim to that which would be available to the deceased estate. Allowing the appeal, the High Court held the statutory limit only applied to an action brought for the benefit of the estate on behalf of the deceased and did not restrict the insurer’s right of indemnity to recover against a wrongdoer.