Austin v Union Trustee Company of Australia Ltd [1934] HCA 30; (1934) 51 CLR 315 (10 August 1934)

HIGH COURT OF AUSTRALIA

Austin and Others Defendants, Appellants; and Union Trustee Company of Australia Limited and Others Plaintiff and Defendants, Respondents.

H C of A

On appeal from the Supreme Court of Queensland.

10 August 1934

Gavan Duffy C.J., Rich and McTiernan JJ.

Macgregor K.C. and Fahey, for the appellants.

McGill K.C. (with him G. L. Hart), for the respondent Cecile Viva Condamine Whittingham.

Macrossan, for the respondent The Union Trustee Co. of Australia Ltd.

Fahey, in reply.

The Court delivered the following written judgment:—

Aug. 10

Gavan Duffy C.J.,

Rich and McTiernan JJ.

This is an appeal from a judgment of the Full Court of the Supreme Court of Queensland, which was given upon the hearing of a special case stated for the opinion of that Court with regard to the will of the late A. H. Whittingham. The question is whether deficiencies in an annuity arising from a fall in the income of the fund appropriated to answer it are to be made good at the expense of other dispositions. After providing for certain legacies, gifts and bequests not necessary to be stated at length, the relevant parts of the will are as follows:—"8. Notwithstanding any of the provisions of my will as hereinbefore or hereinafter contained or the legacies gifts and bequests hereinbefore made the gift contained in paragraph (b) of clause 10 hereinafter contained or anything in my will expressed or implied I declare that the annuity of two thousand pounds hereinafter granted in favour of my said wife and in the event of her second marriage the reduced annuity of five hundred pounds shall, at all times irrespective of the said legacies gifts and bequests but subject to the payment of my just debts funeral and testamentary expenses and the duties payable out of my estate be a first charge and is hereby charged by me on the whole of my estate. I direct my trustees to provide in the manner indicated by clause 10 of this my will for the establishment of a fund to meet the said annuity of two thousand pounds. If after the establishment of the said fund there is any deficiency of assets for the purpose of the said gifts legacies and bequests the same shall all abate proportionately subject however that when the fund is liberated by the second marriage or death of my widow—and it is a condition hereby made by me—then any balance due by my said estate in respect of the said gifts legacies or bequests shall, with interest at the rate of six per cent computed from a period of one year after the date of my death, be paid to the beneficiaries or other persons bodies corporate or associations entitled under this my will to such gifts or bequests before any part of the residue of my estate is dealt with under the provisions of clause 11 of this my will. 9. I devise all my real estate and I bequeath all the residue of my personal estate as follows:—(a) As to any real estate unto and to the use of my trustees upon trust but subject to the conditions and directions hereinafter declared of and concerning the same. (b) As to the personal estate unto my trustees absolutely subject to the trusts conditions and directions also hereinafter declared of and concerning the same. And I direct my trustees to sell call in and convert into money all my said real and personal estate. 10. Subject to the payments of my said debts funeral and testamentary expenses and duties I direct that my trustees shall stand possessed of the proceeds of the said sale calling in and conversion (hereinafter called my trust fund) upon the following trusts:—(a) Upon trust thereout in the first place to pay to my wife an annuity of two thousand pounds during her life by equal quarterly payments the first of such payments to be made at the expiration of three calendar months from my decease I direct however that in the event of my wife marrying again such annuity of two thousand pounds shall be reduced to five hundred pounds such reduced annuity to be payable quarterly and the first reduced payment to be made on the first quarterly day of payment which shall happen next after the marriage of my widow. In the event of my said wife after such remarriage again becoming a widow the annuity of five hundred pounds shall not be increased I direct my trustees out of the same trust moneys to appropriate a sum sufficient at the period of appropriation as a fund for answering the said annuity to my wife by investing the same in any one or more forms of investment prescribed by clause 13 of this my will I declare that from and after such appropriation the residue of the same trust moneys shall be liberated from the trust for payment of the said annuity but the appropriated fund shall (without prejudice to the said annuity) be subject to the trusts hereinafter declared concerning the same trust moneys. (b) Upon further trust to pay to the trustees or board of control of the Geelong Church of England Grammar School at Corio in the State of Victoria a sum of money (hereinafter called the school fund) sufficient at the time of payment to return by the purchase as an investment of the stocks or funds of the Commonwealth of Australia or of any of the States of that Commonwealth an income approximately of two hundred pounds a year. ... 11. Subject to the express provisions of clauses 8 and 10 of this my will and the further provisions in this clause contained I give and bequeath the residue of my trust fund (hereinafter called my residuary trust fund) to the trustees or board of control of the said Geelong Church of England Grammar School at Corio aforesaid (hereinafter called the trustees of the Grammar School) upon the trusts and with and subject to the powers and provisions hereinafter appearing that is to say." These trusts, powers and provisions are set out, and the will then provides:—"I declare that the following provisions with regard to the distribution of the residue of the trust fund shall apply, that is to say:—(a) That part (if any) of my residuary trust fund remaining undistributed after my trustees have satisfied or have made due provision (within the true intent and meaning of this my will) for the annuities legacies gifts and bequests made under this my will shall as soon as my trustees are in a position so to do be paid over to the trustees of the Grammar School. (b) Should my wife remarry then (subject to the provisions of article 8 of this my will) so much of my residuary trust fund then remaining available for that purpose under the provisions hereof shall as soon as convenient after the remarriage of my wife be paid over to the trustees of the Grammar School. (c) Upon the death of my wife (subject also to the provisions of article 8 hereof) my trustees as soon as it is convenient to do so shall pay over the final balance of my residuary trust fund to the trustees of the Grammar School."

The material facts and the conflicting contentions of the parties are set out in the judgment under consideration as follows:—"All legacies bequeathed by the will have been paid in full except the legacy of £2,000 bequeathed to the Queensland Turf Club. The trustees have transferred to the trustees of the Geelong Church of England Grammar School Commonwealth Treasury Bonds to the face value of £4,000 carrying interest at 5 per cent per annum for the purpose of establishing the school fund mentioned in par. 10 (b) of the will. Pursuant to a request from the defendant, Cecile Viva Condamine Whittingham, the widow of the deceased, contained in a letter from her solicitors of the 15th February 1930, the trustees on or about the 20th March 1930, without any direction from the Court, allocated Commonwealth Government securities by the will authorized for the investment of the testator's trust funds to the face value of £46,170, the annual income from which then amounted to £2,527 9s. to provide for the establishment of the annuity fund, and thereupon opened a fresh ledger account in its books entitled A. H. Whittingham deceased Annuity Fund account. In or about the month of July 1931 the said securities were converted under the Commonwealth Debt Conversion Act 1931, the Debt Conversion Agreement Act 1931, and the Debt Conversion Agreement Acts 1931, and new Commonwealth Government securities were issued in lieu thereof. Owing to the reduction in interest effected by such legislation and conversion the annual income which will be usually yielded by such securities will amount to the sum of £1,962 12s. 11d. After such allocation and after making provision for the legacy of £2,000 to the Queensland Turf Club and any debts or other liabilities on the testator's estate and exclusive of commission on unrealized assets there remains a surplus of assets over liabilities based on valuations as at the date of the testator's death of the sum of about £92,839. The trustees have proposed conversion of the estate and the residue consists mainly of a pastoral leasehold from the Crown situated in Queensland. Under the provisions of sec. 22 of The Union Trustee Company of Australia Limited Acts Amendment Act of 1930 and sec. 19 of such company's Acts of 1890 and 1892 the plaintiff claims that it is entitled to commission at the rate of 5 per cent on all income collected by it in the estate including the income of the fund allocated by it to provide for the annuity. Mrs. Whittingham, the widow of the deceased, has been paid the full amount of the annuity of £2,000 given to her by the will. The difference between the sum actually received from the allocated fund and the sum paid by way of annuity has been paid out of surplus income yielded by the securities allocated to such fund. The plaintiff has also in each year deducted its commission from such surplus income. The balance of such surplus income remaining in the plaintiff's hands amounts to £644 9s. The defendant, Mrs. Whittingham, claims that the annuity given to her by the will is charged upon the whole of the real and personal estate of the testator. The trustees and Board of Control of the Geelong Church of England Grammar School at Corio claim that upon an appropriation of a sum sufficient at the time of the appropriation to answer the annuity of the widow the residue of the estate is released from the charge in respect of such annuity."

In support of the widow's contention that, notwithstanding the appropriation of a trust fund to answer her annuity, the residue of the testator's estate remains charged with the annuity, reliance was placed on the words in clause 8, "Notwithstanding ... estate." And it was contended that these words were unlimited in their application, and were apt words to charge the annuity on the whole of the estate including the residue. This construction was fortified, it was said, by the words of clause 11: "Subject to the express provisions of clauses 8 and 10 of this my will and the further provisions in this clause contained I give and bequeath the residue of my trust fund."

The Supreme Court decided the question in favour of the widow, and answered the questions in the special case in accordance with that opinion. We are unable to agree with this opinion. The question is one of the construction of the precise words of the will under consideration.

Dealing with the relevant clauses of the will, we think that the declaration in clause 8 that the annuity to the widow shall be a first charge on the whole estate means that it is to be a prior charge. The words "at all times irrespective of the said legacies gifts and bequests" are directed to the continuance of the priority, notwithstanding the effect the expression may have in deferring full payment of the pecuniary legacies and specific bequests. Particular directions for securing the annuity really do no more than define the character of the charge, and prescribe the mode of giving effect to the priority. This priority is to be worked out by such annuity being chargeable upon and payable out of the whole estate in priority to any other beneficial disposition, until such time as a fund should be appropriated, and by providing that upon such appropriation the annuity is to be satisfied out of the appropriated fund, and the residue of the estate is thereafter liberated from the payment of the annuity. The words do not mean that the balance is to remain charged in the hands of legatees and devisees when the fund has been appropriated. The sentence "if after the establishment of the said fund there is any deficiency," &c., is not referring to time, but to priority. "After" does not mean "at any time subsequently," but "after deducting," i.e., by reason of deducting.

The declaration at the end of clause 10 (a) as to the liberation of the residue of the trust moneys refers to their liberation from the trust for the payment of the annuity directed by clause 10 (a) which, by virtue of clause 8, continues to charge every item of the estate at all times up to the constitution of the annuity fund.

We agree with the following statement contained in the judgment under appeal. "The trustees did appropriate under the will a fund for answering the annuity, and consequently the residue of the trust moneys has been liberated from the trust for payment of the annuity." But we cannot agree in either of the two grounds upon which the Court considered it was not a necessary consequence of the view so stated that recourse could no longer be had to the liberated fund. As we understand the first of these grounds, the Court distinguished between liberation from payment of the annuity and liberation from all liability as a security to make good the annuity. We think this distinction cannot be supported, and is not contemplated by the clauses of the will. The second ground—an alternative—was that the words "notwithstanding any of the provisions of my will as hereinbefore or hereinafter contained," by which clause 8 is introduced, operate to override the express provisions of clause 10 which otherwise accomplished the liberation. The effect of this view is, in our opinion, completely to nullify the material words in clause 10 and to deny them all effect. They are particular and, as we think, unambiguous, and to give such an annihilating force to the overriding words introducing clause 8 is a strong thing. The true reconciliation between the two clauses lies, we think, in understanding clause 10 as explaining and specifying the kind of charge meant by clause 8, and as supplying the machinery calculated, in the testator's opinion, sufficiently to effectuate it.

For these reasons we think that the appeal should be allowed, and the order of the Supreme Court varied by answering the questions in the special case as follows:—1. (a) At first only. (b) No. (c) On the appropriation of the fund to answer the annuity. 2. (a) Yes. (b) Yes. 3. (a) See answer to 2. 4. Yes. 5. (a) Except in respect of the capital and income of the annuity fund, No. (b) Does not arise. (c) The deficiency is payable first out of the arrears of surplus income and next out of the capital of the fund. (d) Subject to the answer to (c), No. (e) Accumulated it and paid thereout any deficiency in the subsequent income to answer the annuity. 6. (a) Yes. (b) No order of the Court is required so far as the interests of the respondent Cecile Viva Condamine Whittingham under clauses 8 and 10 (a) are concerned. 7. Was not pressed. 8. Out of the residuary estate.

Appeal allowed. Order of the Supreme Court varied by answering the questions in the special case in the manner above stated. Costs of all parties as between solicitor and client out of the residuary estate.

Solicitors for the appellants, Thynne & Macartney.

Solicitors for the respondent Cecile Viva Condamine Whittingham, Flower & Hart.

Solicitors for the respondent The Union Trustee Co. of Australia Ltd., Morris, Fletcher & Cross.