Adams v Perpetual Trustee Co (Ltd) [1964] HCA 31; (1964) 114 CLR 527 (15 May 1964)

HIGH COURT OF AUSTRALIA

ADAMS v. PERPETUAL TRUSTEE CO. (LTD.) [1964] HCA 31; (1964) 114 CLR 527

High Court of Australia
Kitto(1), Taylor(2), Menzies(3), Windeyer(4) and Owen(5) JJ.

Will - Construction - Gift over - Death of life tenant "without issue" - Issue predeceasing life tenant.

HEARING

Sydney, 1964, April 29, 30;
Melbourne, 1964, May 15. 15:5:1964
APPEAL from the Supreme Court of New South Wales in its Equitable Jurisdiction.

DECISION

May 15.
The following written judgments were delivered: -
KITTO J. These appeals, from a decretal order made by Jacobs J. in the will of one William Joseph Adams deceased. The will is a document of some length and no little complication, and it is modified by a codicil. The instruments were executed in December 1920 and February 1921 respectively, and the testator died in May 1921. He was survived by a son and three daughters. (at p530)

2. The will contains a devise of a specific parcel of land upon trust for the son for life and after his death for his child if only one or his children if more than one in equal shares, and a separate specific devise and bequest in trust for each daughter. There followed provisions affecting in several respects the simplicity of the scheme, and then there came a declaration subjecting the shares or share (original or accruing) of each daughter to a trust as to the income for the daughter and after the decease of the daughter as to the principal and future income for the daughter's child if only one or children if more than one in equal shares. That I may call the initial trust. It was followed immediately by a provision, which I shall call the gift over, in these terms: "But in case of the death of any daughter of mine without issue then as to the principal and future income to hold such daughter's share in trust for my other children in equal shares and the child or children of any children of mine who shall then be deceased". The codicil, after revoking a provision made by the will as to the residuary estate, devised and bequeathed the residue upon trust for the testator's four children, subject to certain provisions which need not be mentioned. In proceedings which reached this Court in 1924 it was declared that the provision in the will for the settlement of the daughters' shares applied both to the lands specifically devised to the daughters and to their interests in residue. (at p530)

3. The question which came before Jacobs J. and is now before us arises with respect to the operation of the settlement provisions upon both the share in residue of one of the daughters, Ranee Mary, and the land specifically devised to that daughter. Ranee Mary died in 1959 having had a child, Ranee Anne, and the question arises because that child predeceased her at the age of three years and no other child was born to her. The question is whether, upon Ranee Mary's death, the corpus passed to Ranee Anne's estate under the initial trust or went elsewhere under the gift over. Jacobs J. answered it in favour of Ranee Anne's estate. (at p530)

4. A contrary decision would obviously be necessary if the initial trust were to be read as subject to an implication that a daughter's child must survive the daughter in order to take upon her death; and one argument addressed to us was that such an implication should be read into the will. It is not possible, I think, to take that view. There is nothing in the will to provide a foothold for it, and the suggested intention is of a kind which, if held, is almost inevitably expressed, at least in a will prepared, as the will in this case was evidently prepared, with professional assistance. The fact that the gift over is conditional upon the daughter's dying "without issue" is the only circumstance that is or could be relied upon for the implication, and it falls far short of reflecting back upon the initial trust so as to make contingent a gift which in terms is absolute. The general rule applies which in Hickling v. Fair (1899) AC 15, at p 35 Lord Davey described as elementary, that a gift to a class after a life interest includes all persons within the description of the class who were alive at the testator's death or had come into being during the lifetime of the life tenant. (at p531)

5. The question therefore depends upon whether the intention of the gift over is, on the one hand, merely to provide for the event of a daughter's dying without having had any child who took a vested interest under the initial trust (i.e. who survived the testator), or, on the other hand, not only to provide for that event but to go so far as to defeat the initial trust by divesting any interests that have become vested thereunder, in the event of a daughter's dying without leaving any child her surviving. I speak of the gift over as if the expression "without issue" were replaced by "without any child", because that in my opinion is what it plainly means. It is, indeed, the normal conclusion, where a gift to "children" is followed by words denoting a failure of "issue", that a reference to the objects of the gift is intended: Jarman on Wills, 8th ed. (1951), pp. 1844, 1851. There is nothing here to suggest otherwise. (at p531)

6. Read as a whole, the provisions by which the share of a daughter is settled seem to me clearly to be intended to provide in the alternative for the two possible events, that a daughter may and that she may not have a child or children to take a vested interest or vested interests in the corpus. That is to say that the function of the gift over is not to divest interests which have become vested under the initial trust, but is to provide for the contingency that that trust may fail because no child has been born in whose favour the vesting under it could take effect. Only if the expression "death . . . without issue" be construed as meaning death without leaving issue (children) who survive her can the clause be considered to have, in addition, a divesting function in a case where vesting has occurred. The objection to that construction is not that the expression is incapable of such a meaning - in a different context it may even be the prima facie meaning - but that it results in the gift over contradicting the initial trust. A construction is to be preferred which leaves the interest of a child in remainder vested once it has become vested, and provides only for the case where no vested interest in remainder has arisen under the initial trust. (at p532)

7. In the general class of cases to which the present belongs there has been uniformity of decision over a long time, and a prima facie rule of construction has emerged in consequence. As applying in a case where the expression used is "dying without leaving children" - and the present case is a fortiori, for the word "leaving" is not used - the rule may be stated by reading a passage from the judgment of Romer L.J. in In re Cobbold (1903) 2 Ch 299, at p 304 with the verbal corrections which Morton J. (as he then was) read into it in In re Milling's Settlement (1944) Ch 263: "If you have a gift by will to A for life, and after A's death to his children in terms which would give them an absolute interest in A's lifetime, and then you have a gift over simply in these terms, 'if A dies without leaving children', you are to construe the expression 'leaving' so as not to destroy any prior vested interest. In other words, you construe it as meaning without having had a child who had attained a vested interest. That must now be treated as well settled" (1944) Ch, at pp 268, 269 See also Re MacAndrew's Will Trust (1963) 2 All ER 919 Perhaps the leading case on the subject is Treharne v. Layton (1875) LR 10 QB 459, where there was a gift to a woman for life and after her death to her children in equal parts, and then followed a provision that in case she should die "leaving no issue" the property should go over. In judgments of great authority in which earlier decisions were reviewed, the Court of Exchequer Chamber, affirming the Queen's Bench, held that "leaving no issue" meant "having had no issue". As the life tenant had had a child after the death of the testator, the decision was that the gift over did not take effect, although the child had died during the life tenant's lifetime and no other child had been born. It should be observed, in order to get the principle clear, that the life tenant had had no child who predeceased the testator. For that reason there was no need for a distinction to be observed in the judgments between "having had no issue" and "having had no issue who had attained a vested interest". But if, as in In re Cobbold (1903) 2 Ch 299, the life tenant had had a child who had predeceased the testator, it would have been necessary to make the distinction, as Romer L.J. made it in the passage I have quoted, in order to state accurately the result of the principle the Court was applying. (at p532)

8. As I have indicated, the justification of the rule is that its result "is to make the whole instrument consistent, to make a gift over fit in with the intention of the testator as previously expressed, and avoid divesting a previously vested gift": per North J. in In re Ball (1887) 36 Ch D 508, at p 514 Needless to say, the rule will yield in the face of a contrary intention disclosed in the instrument. Accordingly in the argument of the present case the will and codicil have been ransacked, and properly, for indications of an intention that the gift over was intended as a divesting provision. In particular reliance has been placed upon provisions by which gifts made in absolute terms are subjected to variation, adjustment or forfeiture in various events, as tending to show that the defeasance or divesting of vested gifts was not as unlikely in the case of this testator, with his unusual testamentary ideas, as in the general run of cases. I shall not go through the will in detail. It is enough to say that I can find no ground for departing from the settled general rule. On the contrary its application in this case seems to me much more likely to accord than to conflict with the testator's intention. Suppose, to take one illustration only, that Ranee Mary had had two children instead of only one, and that while Ranee Anne had died in her mother's lifetime the other child had not. If "without issue" meant "without leaving issue her surviving" the gift over could not have applied in those circumstances; but the odd result would have followed that after Ranee Anne's death her share of corpus, though remaining vested, would have been liable to be divested by an event having nothing to do with her, namely the event of the other child's predeceasing their mother. (at p533)

9. In support of the contention that the prima facie rule should not be applied we were referred to the cases of In re Ball (1887) 36 Ch D 508, affirmed (1888) 40 Ch D 11; Clay v. Coles (1887) 57 LT 682 and In re Hamlet (1888) 39 Ch D 426 These, however, were not cases in which the result of construing a reference to dying without children as a reference to dying without leaving children surviving would have been to turn a gift which according to its own terms was absolutely vested into a gift liable to be divested. No doubt where a gift to the children of a person is contingent (e.g. upon attaining a specified age or upon surviving their parent), or is liable to be divested in some event other than that upon which the gift over is to take effect, a gift over in the event of the person's dying without children is prima facie to be construed as taking effect upon his dying without leaving children him surviving. But it would be wrong to apply decisions in cases of that kind to the case of a vested gift which is not liable to be divested unless a gift over upon failure of objects be read as making it so; for the crucial feature of the latter kind of case is the very thing that is absent in the former, namely the apparent contradiction which would exist if, where words of gift confer an absolutely vested interest, words of gift over should be construed as undoing the absoluteness of the vesting. I should add that I have not overlooked a contention that the provisions made in the will and codicil for variations, adjustments and forfeitures in respect of beneficiaries' interests make this case one in which the general rule is inapplicable because the initial gift in remainder is not absolutely vested upon a child being born to a daughter. I think the contention should be rejected, for the reason that the provisions mentioned are not of a kind to lessen in the least degree the need for reading the gift over as merely supplementing and not as contradicting the terms of the initial gift. (at p534)

10. For these reasons I agree in the opinion of Jacobs J. that the lands and the share of residue which the will gave to Ranee Mary for life are now held upon trust for the estate of Ranee Anne absolutely. (at p534)

11. The appeals should be dismissed. I see no reason for departing from the prima facie rule as to costs. In each case the appellant should pay the costs, and the trustee should have its costs out of the estate so far as they are not recovered from the appellant. (at p534)

TAYLOR J. In my opinion these appeals should be dismissed and I have nothing to add to the reasons prepared by my brothers Kitto and Menzies which I have had the opportunity of considering. (at p534)

MENZIES J. By his will William Joseph Adams deceased directed his trustees to hold part of his real estate and part of his residuary estate in trust for each of his three daughters and provided that his trustees should hold the share of each daughter to pay the income to the daughter for life and then as follows: - ". . . after the decease of my same daughter then as to the principal with the future income upon trust for the child if only one or the children if more than one of my same daughter in equal shares but in case of the death of any daughter of mine without issue then as to the principal and future income to hold such daughter's share in trust for my other children in equal shares and the child or children of any children of mine who shall then be deceased". (at p534)

2. One daughter, Ranee Mary Gertrude Flynn, died in 1959, having married and given birth to one child, a daughter Ranee Anne James Flynn, who died in 1933 when three years of age. The question here is whether, upon the death of the mother, the trustees held her share for the estate of her daughter or for the other children of the testator. Jacobs J. decided that they held the share in trust for the estate of the daughter and we are here concerned with three appeals against that decision. (at p535)

3. The provision in the will that the trustees, after the decease of a daughter, should hold her share upon trust for the child of that daughter gave Ranee Anne James Flynn upon her birth a vested interest in her mother's share. I have found no basis for introducing a contingency into this provision and confining it to a child living at the date of the death of the mother. From this it seems to me to follow inevitably that the later provision prefaced by the words "but in the case of the death of any daughter of mine without issue" must refer to the contingency of death without having had a child and not to death without leaving a living child. The latter is an alternative provision. The argument of the appellants that the phrase "without issue" means "without living issue" finds no support in the will and runs directly counter to the decision of the Exchequer Chamber in Treharne v. Layton (1875) LR 10 QB 459 There, for instance, Cleasby B. said that the authorities applicable to the case then under consideration laid down the position "that where an estate is vested in children after a gift to a parent, then the gift over in case of the parent dying 'without leaving issue' must be read 'having had no issue' in order to carry into effect the intention of the testator" (1875) LR 10 QB, at p 461 This principle, which was adopted by the four other members of the Court, was applied in In re Cobbold (1903) 2 Ch 299 where Romer L.J. said: "If you have a gift by will to A for life, and after A's death to his children in terms which would give them an absolute interest in A's lifetime, and then you have a gift over simply in these terms, 'if A dies without leaving children', you are to construe the expression 'leaving' so as not to destroy any prior vested interest" (1903) 2 Ch, at p 304 Here where the words in question are not "without leaving issue" but "without issue", the case for the application of the principle is even stronger. (at p535)

4. I am of the opinion that the judgment appealed from was right and that the appeals should be dismissed with costs. (at p535)

WINDEYER J. I agree that these appeals must be dismissed for the reasons given in the judgments that have been delivered. (at p535)

OWEN J. I agree with the reasons of my brother Kitto and with the orders which he proposes. (at p536)

ORDER

Appeal dismissed with costs. Costs of the respondent Perpetual Trustee Company (Limited), so far as not recovered from the appellant, to be paid out of the estate of the testator.