Parkin v James (No 2) [1905] HCA 23; (1905) 2 CLR 565 (14 August 1905)

Parkin and Cowper Plaintiffs, Appellants; and James and Others Defendants (No. 2), Respondents.

Higgins K.C. and Irvine for the respondents Annie Watson Lister, May Lister and Harold Lister.

The testator by his will appointed his wife and A. H. Manton to be executor, executrix and trustees of his will, and in the event of the death of either appointed his son George to be executor and trustee with the survivor. He then gave, devised and bequeathed to his "said executor executrix and trustees" all his real and personal estate whatsoever "upon the trusts hereinafter declared of and concerning the same, that is to say, upon trust that my said executor executrix and trustees shall as soon as conveniently may be after my death pay all my just debts and funeral and testamentary expenses I bequeath" (then followed a specific bequest to his wife). The will proceeded: "I direct my said executor executrix and trustees to pay to my daughter Annie for her life or to such time as the payment of the said annuity shall be determined as hereinafter mentioned an annuity of £100 per annum by equal quarterly payments commencing from the date of my death for her sole and separate use free from all legacy duty." Then followed gifts of annuities of £100 each to his daughter May and his son Harold, expressed in the same terms as the gift to Annie. The will then went on: "I direct my said executor executrix and trustees to set aside a sum of £1000 free from legacy duty and invest the same" in certain specified securities "and to pay the income arising therefrom to Elizabeth Parkin wife of John Arthur Parkin for her sole and separate use as long as she shall live," and after her decease to pay the income to her husband for his life, "and after his death I direct my said executor executrix and trustees to divide the said principal sum of £1000 equally" amongst such of their children as should be living at the death of the survivor. Then followed directions to set aside and invest another sum of £1000 and a sum of £500, and to pay the income of the investments to named persons for life and after their death to divide the corpus. These gifts are in identical language, so far as material upon the question of construction, with the gift of the £1000 for the benefit of Mrs. Parkin and her children. The next clause in the will is in these terms: "I give and bequeath to my solicitor the said A. H. Manton the sum of £250 free of legacy duty," after which the will proceeds: "As to the rest and residue of the income of my trust estate after making the payments hereinbefore set forth I direct my executor executrix and trustees of this my will to pay the same to my wife for her life if she shall so long continue my widow and from and after her death or marriage again ... I direct my said executor executrix and trustees to convert the whole of my estate whether real or personal into money and to divide the same amongst my five children," naming them, with a direction to deduct from the shares of two of his sons advances which he had made to them in his lifetime. The testator then declared that it should be lawful for his executor executrix and trustees in their discretion to raise and apply in or towards the advancement in life of each of his children Annie, May, and Harold, the annuitants, a sum of £2000 each, and that upon such advancements being made their respective annuities of £100 should cease. He also empowered his executor executrix and trustees "notwithstanding anything hereinbefore contained to the contrary" to sell any of his real estate and invest the proceeds and "pay and apply the income arising therefrom in the same manner as if my said real estate had not been sold as hereinbefore appearing."

The personal estate having proved insufficient for the payment of debts and legacies, an originating summons was taken out for the determination (inter alia) of the question whether the corpus of the real estate was applicable to the payment of the three annuities of £100 and the three sums of £1000, £1000, and £500, with other incidental questions which would arise if that question were answered in the affirmative. The summons was heard by Hodges J., who decided that the corpus of the real estate was not applicable for the payment of the annuities and sums in question, and that they were to be paid only out of the income of the trust property. From this decision the persons entitled in respect of the sums of £1000, £1000, and £500 have appealed to this Court. The annuitants are respondents to the appeal, and have asked to be allowed to become themselves appellants if the Court should be of opinion that the annuities are charged on the corpus of the real estate.

In the reasons for the learned Judge's decision furnished to us, after referring to the residuary gift of income to the testator's wife, he points out that in order that there may be a residue of income there must have been a disposition of a portion of it, and the testator must be dealing with the remainder. From this he concludes that the testator meant the sums previously mentioned to be paid out of the income of his trust estate, and thinks that this provision and the direction to convert the whole of the estate at his wife's death taken together show that it was to remain intact until the death of his wife, and that those payments were consequently to be made out of the income, and that the corpus for that purpose was not to be touched. The view that the annuities and sums in question were only charged upon the income, and not upon the corpus, of the personal estate was not presented to us. Such a view would be quite inconsistent with the expressed intention of the testator that the beneficiaries should enjoy the income given to them for their lives. The residue of the income is only given to the widow during widowhood, and is followed by a direction for conversion and distribution of the whole corpus upon her death or marriage, so that on such a construction the continuance of the income of these beneficiaries would depend upon the continuance of her life interest. The language of the residuary gift of income, upon which the learned Judge mainly based his decision, appears to be susceptible, grammatically, of two constructions. The phrase "after making the payments hereinbefore set forth" is an adjectival expression which may be read as qualifying either the word "income" or the words "trust estate." If read in the latter sense, it is clear that the rule finally established by Greville v. Brown[1], that when, after a gift of legacies, there is a gift of the residue of real and personal estate the legacies are charged on the realty, would apply. Having regard to the whole scheme of the will there is, in our opinion, much to be said in favour of this construction. A more purely verbal criticism of the language of the will, however, tends rather to favour the former construction, which was adopted by the learned Judge. The words "after making the payments hereinbefore set forth" obviously refer to some preceding provisions of the will relating to payments. Now we find that all the preceding gifts, except the specific bequest to the testator's wife and the gift of the legacy of £250 to his executor, are expressed in directions to "pay." In the case of the gifts of the annuities the gifts are introduced by the words "I direct my executor executrix and trustees to pay." In the case of the gift of the three sums claimed by the appellants the direction to the same persons is to "set aside" and invest the sums and "to pay the income." Taking, then, the word "payments" in the residuary gift to refer to the antecedent directions "to pay," it would appear that the testator regarded the payments as payments made out of the income of his trust estate, and consequently that the estate, from the income whereof they were to be paid, would continue to be part of his trust estate. This view is quite consistent with the direction to "set aside" the specific sums mentioned, instead of paying them to new trustees for the beneficiaries.

It seems to have been assumed by the learned Judge that the word "payments" included the setting aside of the capital sums now in question. If this were so, it would be a strong reason for holding that the adjectival expression "after payment &c." qualifies "trust estate" and not "income." For otherwise no provision would have been made for the widow until these sums, amounting together to £2500, had been set aside out of income, besides providing £300 a year for the annuities. In our opinion the better construction is that the word "payments" does not include these capital sums, but refers only to the income of them. On this construction, the rule in Greville v. Brown[2], does not govern the case, and it is necessary to have recourse to other considerations.

The duty of the Court is to ascertain and declare the intention of the testator as expressed in the whole will. Now the scheme of the will is to create a common trust estate comprising the whole of the testator's real and personal property except the specific bequest, and to constitute one body of persons as his executors and trustees, to whom he confides the duty of carrying out all the directions in the will in favour of the objects of his bounty without distinction. There is nothing to suggest that one class was to be favoured rather than another. He hoped that it would not be necessary to convert the real estate until his wife's death or marriage, but provided for the contingency of such a necessity, adding a direction that the income of the proceeds of conversion should be applied as if the land had not been sold "as hereinbefore appearing," words which we construe as meaning "by applying it in making the payments hereinbefore directed." Those payments exhausted the whole income. Having regard to these intentions of the testator to be collected from the will, we proceed to refer to some cases which appear to supply a rule of construction sufficient to dispose of the question now before us.

In Nyssen v. Gretton[3], Lord Abinger C.B., after remarking that it had always appeared to him very idle to look at cases upon the construction of wills for the purpose of finding a precise precedent for that under discussion, and that all that can be done is to find what general principle of law is applicable, and then to determine how far that principle is to be illustrated in the particular case, went on to say[4]: "I have looked at the several cases, and I find only two rules which govern them which are not rules of construction, but of law. One is (what is familiar to every one), that, primâ facie, all legacies are paid out of the personal estate; the other is, that if it appears to be the intention of the testator, as collected from his will, that the legacies should be charged on real estate, then they should be charged on real estate. Whether the testator so intended depends on particular expressions of doubtful character appearing in the will, and the Judge determines the point according to the language of the will; not according to any rule of law, but as he would construe the intentions of the party from any other document laid before him." And, after referring to the instances of a gift of the real and personal estate of a testator to one individual subject to the payment of legacies, and of a bequest of legacies followed by a devise of the residue of the testator's real estate after payment of debts and legacies, in which case it is reasonable to suppose that the testator intended to give his real estate subject to the payment of legacies, he said[5]: "If a man left legacies generally, and then left his real and personal property to one individual, it would not from thence be inferred that he meant to charge them on his real estate; but if he left legacies, and devised his real and personal estate to his executor, and directed his executor to see the legacies paid, you would infer from that direction given to the person to whom he left all the real estate, that he meant to charge them on the real estate." The circumstance that the land is devised to the executor in trust for other persons does not make any difference: Dormay v. Borradaile[6]; In re Tanqueray-Willaume & Landau[7].

In Preston v. Preston[8], Stuart V.C. said that it had repeatedly been decided that where there was a mandatory direction that the executor, who was also a devisee of the real estate, should pay a sum of money, everything which he took under the will was subject to such direction. The doctrine, he said, had been established by a long line of cases commencing with Alcock v. Sparhawk[9], and the only case not reconcilable with it was Parker v. Fearnley[10], which, he said, was overruled by Henvell v. Whitaker[11], which was a decision of the same Judge, Sir J. Leach V.C., when Master of the Rolls.

In Gallemore v. Gill[12], decided by the Court of Appeal in Chancery in the same year 1856, a testatrix had by her will given two specific bequests, and given all her real and personal estate to trustees upon trust to get in the personal estate, and out of it to pay a legacy of £10, and stand possessed of the residue of the proceeds and of all the real estate upon specified trusts. By a codicil she directed the trustees to pay to the legatee an additional sum of £40, and to pay an annuity of £100 to one of the specific legatees. Turner L.J., who delivered the judgment of the Court, said that they entertained no doubt on the question (whether the additional legacy and the annuity was charged on the real estate). After quoting the codicil, he said[13]: "It is necessary, therefore, to revert to the will to see how and from what source the trustees were to make these payments. The will vested in the trustees the residue of the personal estate and the whole of the freehold and leasehold estates, and the presumption is that it was out of the funds thus vested in the trustees that the payments directed by the codicil were to be made; primâ facie, therefore, they must be considered as charged upon the real estate." He then dealt with the argument that this presumption was rebutted by the circumstance that the legacy of £10 and the specific bequest came out of the personal estate only, and that it must be taken that the additional gifts must come out of the same funds, and said that a codicil might not only add to a legacy but also extend the fund out of which it was to be paid, and added[14]: "In this will and codicil I think that there is no doubt that that is the case. The codicil contains a direction that the trustees shall pay the legacy, and the testatrix by her will has blended real and personal funds in the hands of the trustees for the payment."

In Peacock v. Peacock[15], Wood V.C. said: "All the other cases" (i.e., the cases on the question whether legacies are charged on the real estate) "depended on two principles: first, that when there was a direction to an executor to pay debts or legacies, followed by a devise to the executor, the legacies were held to be charged on the real estate, because some force must be given to the direction to pay, and it was unnecessary for any purpose except to charge the debts or legacies on the real estate." He then mentioned the second principle, which is that shortly afterwards definitely established by the House of Lords in Greville v. Brown[16].

We are quite unable to see any distinction in principle between a direction to an executor to whom real estate is devised that he shall pay a legacy, and a direction to such an executor that he shall set aside and invest a sum of money and pay the income of it until the happening of a specified event, and then divide the capital. In our judgment, therefore, applying what appear to us to be settled rules of construction, the testator in the present case has expressed the intention that the real and personal estate shall form a blended fund from which the legacies in question were to be paid. Apart altogether from the authorities to which we have referred, we should come to the same conclusion. We can see no reason for thinking that the testator intended to make any distinction so far as regards recourse to his real estate between the several objects of his bounty. And the rule that a legacy is primâ facie payable out of personalty has, in our opinion, no application to a will such as that which we are called upon to construe.

The direction to convert the whole of his estate after the death of the testator's widow and divide it amongst his children cannot, of course, be literally carried out without rejecting the directions to set aside the several sums in question. We construe these latter directions as intended to be carried into effect immediately. It follows that, if these sums are charged on the real estate, the expression "the whole of my estate" in the direction for conversion must be read either as excluding the parts of the estate otherwise disposed of by the will, or as including them on the assumption that the testator still regarded them as parts of the trust estate until actual distribution. The result in either view will be the same. We are therefore of opinion that the legacies in question were charged upon the corpus of the real estate. It follows that the annuities, which are in the view of the Court legacies (Carmichael v. Gee[17]) are equally charged upon it. The payments of the annuities were directed to begin from the testator's death and to be paid quarterly. We think that interest upon them should be computed from the date when the first payment was due, i.e., three months after his death. Interest on the capital sums should be computed from the end of one year from his death.

The result is that the order of Hodges J. must be varied by omitting the order and declarations appealed from, and substituting a declaration that the real estate of the testator was applicable for the payment of the annuities and the three sums of £1000, £1000, and £500 in aid of the income of the general estate, and of the personalty not specifically bequeathed, with interest at the rate of 4 per cent. per annum from the respective dates above stated. The costs of all parties to this appeal (on the same basis as in the Supreme Court) should be paid out of the estate.

Formal leave to appeal will be given to the annuitants, and the judgment should be drawn up on that basis.

Solicitors for respondents, E. E. Dillon; Crawford, Ussher & Thompson, Melbourne.

[1] 7 H.L.C., 689.

[2] 7 H.L.C., 689.

[3] 2 Y. & C., 222.

[4] 2 Y. & C., 222, at p. 231.

[5] 2 Y. & C., 222, at p. 232.

[6] [1847] EngR 458; 10 Beav., 263.

[7] 20 Ch. D., 465.

[8] 2 Jur. N.S., 1040.

[9] [1691] EngR 43; 2 Vern., 228.

[10] [1826] EngR 993; 2 Sim. & St., 592.

[11] 3 Russ., 343.

[12] 8 DeG. M. & G., 567.

[13] 8 DeG. M. & G., 567, at p. 570.

[14] 8 DeG. M. & G., 567, at p. 571.

[15] 34 L.J. Ch., 315, at p. 316.

[16] 7 H.L.C., 689.

[17] 5 App. Cas., 588.

High Court of Australia

Parkin v James (No 2) [1905] HCA 23; (1905) 2 CLR 565 (14 August 1905)

HIGH COURT OF AUSTRALIA