Hendry v Perpetual Executors & Trustees Association of Australia Ltd [1961] HCA 44; (1961) 106 CLR 256 (2 August 1961)

HIGH COURT OF AUSTRALIA

HENDRY v. THE PERPETUAL EXECUTORS AND TRUSTEES ASSOCIATION OF AUSTRALIA LTD. [1961] HCA 44; (1961) 106 CLR 256

Will

High Court of Australia
Fullagar, Taylor(1) and Menzies(1) JJ.
(THE HONOURABLE MR. JUSTICE FULLAGAR died at Melbourne before judgment in this appeal was delivered.)

CATCHWORDS

Will - Construction - Disposition of "all my livestock" and "all my real estate" - Whether testator's interest in partnership assets included.

HEARING

Melbourne, 1961, March 1;
Sydney, 1961, August 2. 2:8:1961
APPEAL from the Supreme Court of Victoria.

DECISION

August 2.
TAYLOR J. This case was heard before the late Fullagar J., Menzies J. and myself. It is an appeal from the Supreme Court of Victoria constituted by a single judge and as, under s. 19 of the Judiciary Act, for the hearing of such an appeal a Full Court may consist of two Justices, Menzies J. and I will proceed to deliver our judgment. I should add that Fullagar J. had expressed his concurrence with the reasons I am about to publish:-
TAYLOR and MENZIES JJ. By deed dated 29th December 1911 a partnership for five years from 1st January 1912 was formed by the three children of Isabella Young Hendry deceased to whom she had given her estate - her sons George and John, and one of her daughters Catherine. The land given to them became partnership assets and other land was subsequently acquired by the partnership. The title to the partnership land was from time to time registered in the names of the existing partners as tenants in common in equal shares. The partnership continued after the expiration of the original term until the first change occurred on 16th July 1929 when John died intestate. At this time the affairs of Catherine Hendry, who had become insane in 1927, were being managed for her by the Master in Equity and that official represented Catherine in an arrangement whereby George and Catherine with the agreement of Isabella, who was the only other next-of-kin of John, took over his interest in the partnership in equal shares. Thereafter George and Catherine became partners in equal shares upon the terms of the original deed and the business was managed and controlled by George. George, with whose will and estate we are here concerned, died twenty-six years later on 11th September 1955 leaving a will dated 19th August 1929, i.e. a date shortly after the death of his brother John and when he was managing the partnership business. At all times the partnership assets included land and livestock and at no time did George himself own any land or livestock outside his interest in what belonged to the partnership. (at p264)

2. By his will George bequeathed "all my livestock" to a nephew who turns out to be the defendant Gordon Charles Young Hendry. The remainder of his estate which he described as "all my real estate" and "the residue of my personal estate" he devised and bequeathed to his trustee upon trust to sell and convert the same into money. The will then proceeded: "As to the monies to arise from the sale conversion and getting in of my said estate I direct my trustee thereout in the first place to pay or retain all the expenses incident to the execution of the preceding trusts and to stand possessed of the residue of the trust monies as and in manner following that is to say as to the monies to arise from the sale conversion and getting in of my real estate upon trust for the sons of my cousin William McDonald of Gairlock Ross-shire Scotland in equal shares and as to the monies to arise from the sale conversion and getting in of the residue of my personal estate upon trust for my sister Isabella Young Hendry". The defendant William John Macdonald is the only son of the testator's cousin described as William McDonald. The Perpetual Executors and Trustees Association of Australia Limited as the trustee of this will commenced proceedings by way of originating summons for the determination of a number of questions including the following: "Upon the proper construction of the will of the testator and in the events which have happened: (1) Is the defendant Gordon Charles Young Hendry, entitled to any and what interest in the estate of the testator by reason of the bequest in the testator's will of 'all my livestock to the eldest son of my cousin George Young Hendry of Toolamba in the said State who shall be living at my decease'? (2) Is the defendant William John Macdonald entitled to any and what interest in the estate of the testator by reason of the direction in the testator's will that the plaintiff is to hold 'the monies to arise from the sale conversion and getting in of my real estate upon trust for the sons of my cousin William McDonald of Gairloch Ross-shire Scotland in equal shares'?" The learned Chief Justice of the Supreme Court of Victoria answered both these questions affirmatively. It is against these answers that the defendant Isabella Young Hendry appeals contending that the testator had no livestock and no real estate and that therefore she is entitled to the whole of the estate by virtue of the gift to her of the moneys arising from the getting in of what the testator describes as "the residue of my personal estate". (at p264)

3. Some question arose as to the admissibility of the evidence that when he made his will the testator had no livestock and no real estate outside his interest in the partnership assets but this difficulty can be disregarded because the position was exactly the same immediately before the death of the testator and there is no doubt that it was necessary to ascertain what real estate and what personal estate the testator could be said to have at that time because the Wills Act s. 22 provides as follows: "Every will shall be construed, with reference to the real estate and personal estate comprised in it, to speak and take effect as if it had been executed immediately before the death of the testator, unless a contrary intention shall appear by the will." Moreover it is only by looking to the partnership that the testator's ownership of land as a tenant in common appears as something less than an entirely beneficial interest. The circumstances are therefore that a farmer who owned no livestock or real estate of his own but was a member of a partnership which owned both land and livestock left a will disposing of his livestock and the proceeds of his real estate and the question is whether those gifts are just meaningless or refer to his interests in the livestock and land of the partnership. This question would seem to admit of but one answer unless the law prevents the testator's words from having attributed to them the meaning that they would naturally bear in the circumstances stated, viz. that he was disposing of his partnership interests. (at p265)

4. To establish that they bore a different meaning in law it was first of all argued quite correctly that when the partnership was dissolved by the death of George the rights both of his personal representative and of the surviving partner were to have an account taken and the property of the partnership applied in payment of partnership liabilities and the surplus applied in payment of what was due to each of them (Partnership Act, s. 43 and cl. 9 of the partnership deed) subject to the right of the surviving partner to take over the partnership assets in the manner provided by cll. 7 and 8 of the partnership deed. It was then contended that the rights of partners arising under the deed and the Act could not be affected by the provisions of the will of a partner who dies: a proposition that can be accepted with the rider, immaterial for present purposes, that by his will a deceased partner can of course give up his rights against a surviving partner. It was also argued correctly enough in a sense that the conglomerate right of the personal representative of the deceased partner was personalty as was the partner's own right during his life. At this point, however, some reservation is necessary because prior to the winding up of a dissolved partnership each partner or his estate does, as was decided in Burdett-Coutts v. Inland Revenue Commissioners (1960) 1 WLR 1027 retain an interest in every single asset of the former partnership. In that case Buckley J. applying Manley v. Sartori (1927) 1 Ch 157 and Perpetual Executors and Trustees Association of Australia Ltd. v. Federal Commissioner of Taxation [1954] UKPCHCA 1; (1954) AC 114; (1954) 88 CLR 434 said: "No doubt it is true to say that, when a partnership is dissolved and to be wound up, the ultimate rights of the former partners (including legal personal representatives of deceased former partners) inter se are to receive the amounts which turn out to be due to them respectively on the final account. No doubt it is also true that (apart from some exceptional agreement) none of them has any exclusive interest in any asset of the partnership or, at any rate until all the liabilities of the partnership have been paid, any definite share or interest in any one partnership asset capable of being realized and got in otherwise than in the liquidation of the partnership: Rodriguez v. Speyer Bros. (1919) AC 59, 68 . But this is not to say that they have no interest in the assets of the partnership pending the final liquidation" (1960) 1 WLR, at pp 1034, 1035 . Referring to Manley v. Sartori (1927) 1 Ch 157 his Lordship said: "This case is authority for the view that, when a dissolved partnership is to be, or is in course of being, wound up, each partner or his estate retains an interest in every single asset of the former partnership which remains unrealized or unappropriated, and that that interest is proportionate to his share in the totality of the surplus assets of the partnership" (1960) 1 WLR, at p 1035 . Returning however to the argument for the appellant it was said in substance that because after the death of the testator the right of the personal representative was no more than the right to an account and payment of what was found due the testator's phrases "my livestock" and "my real estate" could not relate to any interest in the partnership since after his death his personal representative would have no right except to the ascertainment and payment of a share of the surplus, i.e. to a sum of money. Even if this argument would not oversimplify the rights of the personal representative of a deceased partner (vide Burdett-Coutts v. Inland Revenue Commissioners (1960) 1 WLR 1027 ) it would not warrant the conclusion that it was sought to deduce because the enquiry is not what rights did the plaintiff have by virtue of the partnership upon the death of the testator nor even what were the testator's rights as a partner but what did he mean when in his will he used the words "my livestock" and "my real estate" when he had none of his own but he was a member of a partnership which had both livestock and real estate. This question is not to be answered by any strict legal analysis of the rights of the testator as a partner during his life and certainly not by considering the rights of his personal representative after his death. What has to be done is to determine what the testator meant by his words in his will and when the will is looked at in the light of the circumstances as they existed immediately before his death the conclusion is inevitable that he was dividing what he had into three parts, and that he was disposing separately of whatever interest he had in livestock (which could only be his partnership interest), of the net proceeds of whatever interest he had in land (which, again, could only be his partnership interest), and of the net proceeds of whatever interest he had in personalty other than livestock. It may well be that there are difficulties in determining the net proceeds of the testator's real estate and of the residue of his personalty in this sense, but these difficulties afford no reason whatever for construing the will as effecting no division of his estate and as disposing of the whole of his property to his sister under the phrase "the residue of my personal estate". To do so would simply be to defeat the testator's manifest intention. (at p267)

5. The judgment appealed from is right and this appeal should be dismissed. (at p267)

ORDER

Appeal dismissed with costs.