Wyndham v Mackenzie [1918] HCA 46; (1918) 25 CLR 172 (23 August 1918)

HIGH COURT OF AUSTRALIA

Wyndham and Others Appellants; and Mackenzie and Others Respondents.

H C of A

On appeal from the Supreme Court of New South Wales.

23 August 1918

Isaacs, Gavan Duffy and Rich JJ.

Knox K.C. (with him R. K. Manning and Maughan), for the appellants.

Bethune, for the respondents.

Knox K.C., in reply.

The judgment of the Court, which was read by Isaacs J., was as follows:—

Aug. 23

Isaacs, Gavan Duffy and Rich JJ.

George William Harris died on 5th January 1917, leaving a will made in the previous September. After various pecuniary legacies, he devised and bequeathed the residue of his real and personal estate to trustees upon trusts, comprising, first, certain specific gifts both of real and personal property, and then said the testator: "as to all the rest residue and remainder of my real and personal estate including any lapsed legacies I direct my said trustees to sell call in and convert the same into money and after payment thereout of my just debts funeral and testamentary expenses and after payment of the legacies hereinbefore bequeathed in case there shall then be any surplus to pay and divide the same as follows"; and then followed directions. An originating summons was taken out to determine the order of priority in which certain moneys should be paid out of the real and personal estate not specifically devised and bequeathed. Those moneys included: (1) New South Wales stamp duty on the estate; (2) Perpetual Trustee Co.'s commission. As to both of these Harvey J. held that the direction as to "testamentary expenses" in the will should be construed as referring only to such proportion of the stamp duty and the commission as is referable to the personal estate.

The appellants contend that the words "testamentary expenses" there used include the whole duty and commission. Probate duty is, of course, a testamentary expense. The commission is chargeable by the Perpetual Trustee Co under its special Act of 1888 (sec. 13) "as executor," and the rate is a maximum of 2½ per cent. on corpus and 5 per cent. of annual income received by the Company, and is "in full satisfaction of any claim to remuneration for acting as such executor." It is also a "testamentary expense." See Sharp v. Lush[1] and In re Twigg's Estate[2]. Primâ facie, both these charges fall in their entirety within the terms of the special direction in the will. The foundation of the decision of the learned Judge, that they do not wholly come within it, is found in Perpetual Trustee Co. v. Tasker[3] In that case, decided in 1913, his Honor held that the commission on corpus is distributable, and so far as it is a commission on personal estate it is paid out of the assets in the ordinary order, but so far as it represents commission on realty it is thrown on the realty alone pro ratâ. No question as to stamp duties arose in Tasker's Case, and therefore the case of Carmichael v. Ryan[4] was not cited. In that case, decided in 1899 by A. H. Simpson C.J. in Eq., it was expressly held, under a direction to pay testamentary expenses out of residue, that the whole probate duty was included, notwithstanding specific gifts in the will. However, having determined in Tasker's Case that commission was distributable, the learned Judge in the present case thought that no difference in principle really existed between commission and probate duty, and that both are similarly distributable. In effect, that means that the words "testamentary expenses" as they stand unqualified otherwise, either by words or by context, are qualified by the context to this extent, that, there being both realty and personalty dealt with by the will, they are applicable only to personalty.

The basis of that conclusion is found in two English cases: In re Jones; Elgood v. Kinderley[5] and In re Betts; Doughty v. Walker[6]. Before examining those cases, reference should be made to sec. 56 of the Stamp Duties Act 1898, which deals with the incidence of the probate duty. That section, in the first paragraph, declares that the duty shall be deemed to be a debt of the testator to the Crown, and "shall be payable out of his personal estate." The second paragraph makes the real estate liable if the personal estate is insufficient for the purpose. The third paragraph is in these words: "Every executor or administrator may deduct from any property devised or bequeathed to any person an amount equal to the duty thereon, calculated at the same rate as is payable upon the estate under this Act, unless the testator has made a different disposition as to the payment of the said duty in his will."

Now, the effect of sec. 56 is that, as regards the Crown, the whole or any part of the estate is liable for the payment of the duty, though the order is first personalty, and, if that is insufficient, then realty in manner prescribed. No disposition by the testator can relieve any part of his property from that responsibility. But, the Crown being so secured, the section provides a ratable contribution to that payment as between beneficiaries, according to the relative value of the properties they receive, unless the testator makes "a different disposition" as to the payment of the duty. The words "any property" in par. 3 naturally include both real and personal property, and in this paragraph must mean it, because they are followed by the words "devised or bequeathed," and in the two previous paragraphs both "real" and "personal" estate are expressly mentioned. That is consonant with the general policy and rule of law established in New South Wales, and found embodied in secs. 44 to 61 of the Wills, Probate and Administration Act 1898. By sec. 61, when a testator dies and until probate, all his real and personal estate vests in the Chief Justice "in the same manner and to the same extent as aforetime the personal estate and effects vested in the Ordinary in England." On grant of probate (sec. 44) all real and personal estate vests in his executor, and (sec. 46) real as well as personal estate becomes assets for the payment of all duties and fees and debts in the ordinary course of administration.

Upon that state of affairs sec. 56 of the Stamp Duties Act operates; and the question is how in the case of a will dealing with the whole estate real and personal, and containing the express disposition as to testamentary expenses found in this will, there can arise the distinction and separation of realty and personalty laid down in Tasker's Case as to commission, and applied in this both to commission and to probate duty. The two English cases are thought to establish the principle. Those two cases were decided on the Land Transfer Act 1897. In his judgment in Tasker's Case Harvey J. says[7]: "No doubt sec. 2, sub-sec. 3, of the Land Transfer Act preserves the old liability for testamentary expenses, but I think the Probate Act 1890 and the present Wills, Probate and Administration Act must be interpreted in the same manner." The crux of the matter is contained in that sentence.

The learned Judge decided that the cases on which he relied applied not merely to the costs of administration suits, but that the principle approved of was of general application and extended to all the costs of administration to the estate. Let us assume, without deciding, that his Honor was correct in so holding. The learned Judge says that Jessel M.R. considered that the expenses incurred in selling the real estate were not testamentary expenses in the ordinary sense, so as to be payable out of the personal estate, that is, of course, under the special direction in the will. The cases referred to, however, when carefully examined, make the position clear. Before 1897 the executor in England had no concern with realty, and a practice was established by the Court of Chancery that when the aid of the Court was invoked in an administration suit, the costs of the suit in its discretion should be so apportioned as to throw upon the real estate—as a rule—such part of those costs as were exclusively caused by the real estate, that is, to the extent that the real estate increased the ordinary costs of administering the personal estate. That, as Jessel M.R. said, was done "as a rule." In other words, the Court of Appeal considered that at that date, in giving a general direction as to "testamentary expenses," the testator, in the absence of more specific direction, did not mean to override the general practice of the Court with regard to realty when the realty had to be administered under the direction of the Court.

In Betts' Case[8] Kekewich J. takes that view of the decision, and adds: "What I take the meaning of the decision to be is that the direction must be so plain as to show that the testator intended to depart from the general rule, otherwise when he says that the testamentary expenses are to be borne by the personal estate he only means such part of the testamentary expenses as in the ordinary course would be borne by the personal estate, and does not mean to defeat the rule of Court that in an administration action there is to be a fair distribution between the real and personal estate." The learned Judge goes on to hold that the Land Transfer Act 1897 had clearly the effect of making the costs of the Court proceedings before him in 1907 "testamentary expenses." The observation of Jessel M.R.[9], that "Testamentary expenses, I suppose, do not include the costs of the real estate," might or might not have been strictly correct in 1881, but in 1907, according to Kekewich J.[10], whose judgment is relied on, they had become testamentary expenses in the true sense. Then proceeded the learned Judge: "But, though they may be so, I think the Act does not otherwise assist the heir, because it is plainly decided by Buckley J. in the case of In re Jones1(1902) 1 Ch., 92. that no variation of the rules has been produced by the provisions of the Act." That throws us back on the reasons of Buckley J. in the case of In re Jones. In that case[12] that learned Judge makes it most manifest that, notwithstanding the earlier part of sub-sec. 3 of sec. 2 of the Land Transfer Act 1897 provides that the real estate shall be administered in the same manner and subject to the same liabilities for costs and expenses as if it were personal estate, the proviso at the end made a specific enactment, which had to be followed. It said: "Nothing herein" (that is, in the Act) "contained shall alter or affect the order in which real and personal assets respectively are now applicable in or towards the payment of ... testamentary expenses"; and the learned Judge goes on to add: "which include the costs of an administration action." On that proviso, and on that alone, it was held that the rule formerly established by Patching v. Barnett[13] and In re Middleton; Thompson v. Harris[14] must be followed.

In the absence of any corresponding provision in New South Wales legislation, the analogy fails, and the same full force must be given to the assimilation of administration enacted with regard to real and personal property as Buckley J. was prepared to give to the Land Transfer Act but for the proviso quoted. The change effected by the Legislature in enacting that assimilation was so deliberate, radical and sweeping, that nothing short of express or necessarily implied qualification by Parliament itself can cut down the natural effect of its language. This is what the Imperial Parliament thought in 1897, and took care to express.

The basis of reasoning in Tasker's Case[15] not being sustained, there remains nothing to cut down the natural effect of the testator's direction. He has thrown his testamentary expenses on the residue in exoneration of the rest of his estate. That is a "different disposition" within the meaning of sec. 56 of the Stamps Act. Mr. Bethune placed considerable reliance on that part of O'Grady v. Wilmot[16] which deals with the construction of the direction in the will to pay testamentary expenses. It was there held that the words "testamentary expenses" as used in that direction did not include estate duty on appointed property, because the common form used in the will was construed secundum subjectam materiam, and, so construed, it was taken to apply to what it ordinarily applies to, namely, testamentary expenses relating to the testator's own property. That decision does not assist the respondents here.

We were asked to give weight to the fact that Carmichael v. Ryan[17] was accepted as correct in New South Wales from 1899 to 1913, that is, fourteen years, and that it was probably acted on extensively during that period. Tasker's Case[18] has also been standing for about five years, and may have been acted on also. We do not find it necessary to rest our judgment at all on considerations of that nature. Regarding the question as res integra, we agree with the view taken in Carmichael v. Ryan, and are of opinion that Tasker's Case is not sustainable on the legislation in force in New South Wales.

The appeal should, in our judgment, be allowed.

Appeal allowed.

Solicitor, F. W. Barker.

[1] 10 Ch. D., 468, at p. 470.

[2] (1892) 1 Ch., at p. 582.

[3] 13 S.R. (N.S.W.), 322.

[4] 20 N.S.W.L.R. (Eq.), 137.

[5] (1902) 1 Ch., 92.

[6] (1907) 2 Ch., 149.

[7] 13 S.R. (N.S.W.), at p. 330.

[8] (1907) 2 Ch., at p. 153.

[9] (1907) 2 Ch., at p. 155.

[10] (1907) 2 Ch., at p. 153.

[11] (1902) 1 Ch., 92.

[12] (1902) 1 Ch., at p. 96.

[13] (1907) 2 Ch., 154 (n.).

[14] 19 Ch. D., 552.

[15] 13 S.R. (N.S.W.), 322.

[16] (1916) 2 A.C., 231.

[17] 20 N.S.W.L.R. (Eq.), 137.

[18] 13 S.R. (N.S.W.), 322.