Mcbride v Hudson
(1962) 107 CLR 604(Judgment by: Dixon CJ)
Mcbride
vHudson
Judges:
Dixon CJMctiernan J
Taylor J
Windeyer J
Case References:
Bond v Barrow Haematite Steel Co - (1902) 1 Ch 353
Bothamley v Sherson - (1875) LR 20 Eq 304
Boyd v Thornley - (1925) VLR 569
Clifford Mallam v McFie - (1912) 1 Ch 29
Dodd v Williams - (1921) 1 Ch 178
Evans v Powell - (1909) 1 Ch 784
Gage Crozier v Gutheridge - (1934) Ch 536
Hawkins Public Trustee v Shaw - (1922) 2 Ch 569
Hops v Daniell - (1911) 55 Sol Jo 633
Inglis v Gillins - (1909) 1 Ch 345
Jones v Palmer (No 2) - (1895) 2 Ch 657
Lady Langdale v Briggs - (1856) 8 De G, M
&
G 391; 44 ER 44; 126 LJ Ch 27
Leeming Turner v Leeming - (1912) 1 Ch 828
Little v O'Brien - (1946) 62 TLR 594; (1946) 175 LTR 406
M'Afee - (1909) 1 IR 124
Mallam v McFie - (1912) 1 Ch 29
McIntyre v McIntyre - (1914) 15 SR (NSW) 45; 31 WN 132
O'Connor Westminster Bank Ltd v O'Connor - (1948) 1 Ch 628
Paine v Countess of Warwick - (1914) 2 KB 486
Porter v Porter - (1930) 31 SR (NSW) 115; 48 WN 17
Ritchie v Trustees Executors and Agency Co Ltd - (1951) 84 CLR 553
Robinson v Addison - (1840) 2 Beav 515; 48 ER 1281
Rose Midland Bank Executor and Trustee Co Ltd v Rose - (1949) 1 Ch 78
Rose Rose v Inland Revenue Commissioners - (1952) 1 Ch 499
Thornley v Boyd - (1925) 36 CLR 526
Turner v Leeming - (1912) 1 Ch 828
Warwick v Willcocks - (1921) 2 Ch 327
Webb v Australian Deposit and Mortgage Bank Ltd - (1910) 11 CLR 223
Willcocks Warwick v Willcocks - (1921) 2 Ch 327
Judgment date: 9 February 1962
Judgment by:
Dixon CJ
This appeal is brought by a beneficiary under the will of the late Norman Harold McBride, who is also the surviving trustee under the will, against an order of the Supreme Court of South Australia (Brazel J). The order was made upon an originating summons and determines certain questions arising in the administration of the estate. The appellant is the son of the testator. The respondent Molly Hudson, who issued the summons as plaintiff, is a daughter of the testator and the other respondent, Katherine Mary Edwards, is her daughter. The testator died on 27th May 1946, leaving a widow and the son and daughter already mentioned. His last will was made on 29th July 1944. It appointed his widow and his son executors and trustees and they duly proved the will, together with a codicil which, as it happens, is immaterial to this case. At the testator's death a pastoral business was being conducted by him, or on his behalf. He left also specific assets which, except for a parcel of shares in Elder Smith & Co Ltd, do not concern the summons.
The will directed the trustees to carry on the pastoral business and expressed the testator's wish that, in carrying on the business, his son should be appointed manager thereof at such remuneration as the trustees should think proper, not being less than £4 a week with all reasonable expenses incurred by him in the performance of his duties as manager. The will directed that the remuneration should be in addition to any remuneration or reimbursement that the son should be entitled to as a trustee. The testator next directed his trustees to pay his daughter Molly out of the corpus during the life of his wife an annuity of £150 a year, provided that when the total amount paid reached £3,000 the annual payments should cease. The will then directed that the net profits derived from the carrying on of the pastoral business during the lifetime of the testator's wife should be divided between her and his son in equal shares. Upon the death of the testator's wife his will directed that the whole of his estate should be realized and converted into money and divided into two equal shares or parts, one such share or part to be paid to his son absolutely and the remaining equal share or part to be held in trust and the income thereof paid to his daughter during her life, and after her death her half-share should be divided between her children surviving her, in equal shares. In the event of the death of his daughter leaving no children surviving her, the capital was to be paid to his son.
In an earlier paragraph of the will the testator made certain bequests. It is perhaps desirable to quote the paragraph in full:
"I give to my wife free of probate succession or estate duties:
- (a)
- all my jewellery and ornaments of my person
- (b)
- all moneys payable at my death under any and all insurance policies
- (c)
- 196 shares in Elder Smith & Co Ltd"
That paragraph was followed by a bequest of certain pecuniary legacies and then the next ensuing paragraph proceeded:
"I give devise and bequeath the whole of the residue of my estate to my trustees upon trust after payment of all debts duties and administration expenses to stand possessed of my residuary estate upon and subject to the following trusts."
The trusts for the management of the station follow.
The widow of the testator, Hilda McBride, died on 23rd February 1957. During her life the pastoral business had been carried on in pursuance of the provisions of the will and payments on account of income were made regularly to the widow and her son. By her last will, Hilda McBride, the widow of the testator, devised and bequeathed her estate upon trusts which included specific bequests to her daughter, Mary Hudson, and her grand-daughter, Katherine Mary Edwards. The only provisions of the will really material to the summons, however, are these. First, a bequest of the shares expressed as follows:
"as to my shares in Elder Smith and Co Ltd for such of them my grand-daughters" (proceeding to enumerate them) "living at my death who attain the age of eighteen years and if more than one in equal shares."
Second, a direction as to any net profits which the testatrix had not drawn under the provisions of her late husband's will as to the pastoral business during her life-time that she gave and bequeathed them to her son, the appellant, to whom she gave a sum equal to the share of the net profits to which she was or had been entitled since the death of her husband, to be ascertained by reference to the books of account. Third, a devise and bequest of the residue upon trust to pay thereout debts and testamentary expenses and subject thereto to stand possessed of the balance for her son, the appellant, for his own use and benefit absolutely.
The present appeal relates to two subjects of controversy which arose between the brother and sister, that is to say, between the appellant and the respondent Molly Hudson. The first concerns the shares in Elder Smith & Co Ltd. It appears that when the testator's will was penned and was executed by him he was the holder of 196 shares in Elder Smith & Co Ltd. The capital of that company at the date of the will stood subdivided in a manner that included shares of a denomination of £10 each paid up to £6. The shares held by the testator were of this description. Before the testator died, the capital of Elder Smith & Co Ltd was re-divided and the shares of the testator were divided into 1,960 shares of £1 each paid up to 12/-. Under the advice received by the trustees these shares, that is to say 1,960 £1 shares were transferred by the executors into the widow's name in pursuance of the bequest in the will. The advice apparently was that the bequest covered 1,960 £1 shares because they were the product of the 196 £10 shares when the will was drawn. The shares were in fact disposed of by the widow after she had made her own will in which she purported to dispose of them by a trust for her grandchildren at the date of her death. The result was, of course, that the bequest for the grandchildren was adeemed. If at her death she still held the proceeds of the shares, the proceeds would fall into residue which would pass to her son, the appellant. The respondent Molly Hudson controverted the view upon which the trustees had acted, namely, that her mother had been entitled to 1,960 £1 shares under the bequest of 196 shares even although at the date when the will of her father was written the shares were £10 shares.
The other source of controversy with which this appeal is concerned related to the profits, particularly from livestock during the widow's lifetime or, to state the matter from another point of view, what livestock should be considered capital passing in remainder and what, if any, should be considered to represent accumulated and undistributed profits. This controversy arose from the fact that the pastoral property with which we are concerned was at the time of the testator's death in a rundown condition and, in particular, the sheep pasturing upon it were far less than warranted by its true carrying capacity. In the management of the station after the testator's death flocks were built up, improvements were made and the capacity of the station was increased. It is needless to enter upon the details but the result was that if this was considered to have been done at the expense of the life tenants and the consequence was that the life tenants possessed an unrealized claim to undistributed income, then the amount of corpus passing under the will of the testator to those entitled in remainder would be far diminished. The provisions of the will of the widow already stated meant that her son, the appellant, would take her share of the accumulated income thus represented or indeed anything to which she was entitled from her husband's estate under whatever description it fell. On the other hand, if the improved condition of the station and the increase in the livestock are to be considered an affair of capital, the respondent Molly Hudson, and after her death her children surviving her, took one half-share in remainder thereof under her father's will, the other half-share passing to her brother, the appellant. One purpose of the originating summons issued by the respondent Molly Hudson, was to attack the view of the matter first set out above, namely, that there was an unrealized and undistributed fund of profit to which those representing the life tenants were entitled at the expense of those taking corpus: the summons sought to enforce the view giving the stock and other assets entirely the character of corpus. The questions thus raised under this head have been fully dealt with in the judgment of Taylor J, which I have had the advantage of reading, and I entirely agree with his conclusions and with the reasoning by which the conclusions are supported.
The question, however, of the disposition of the shares in Elder Smith & Co Ltd I have found much more difficult. If one might lawfully place upon the paragraph of the will bequeathing 196 shares in Elder Smith & Co Ltd to the testator's wife a meaning designating the 196 shares in that company which the testator held at the date of the will, it would not be difficult, beginning with that gift, to treat the subsequent re-subdivision of the capital into £1 shares paid up to 12/- as an alteration in denomination and number which did not so change the property in substance as to affect what otherwise would have been the operation of the bequest. Thus where a testator specifically bequeathed shares that he held in a named company and after the date of the will and before the death of the testator the shares in the capital of the company were divided so that in exchange for each of the original shares four new shares were allotted of a quarter of the denomination, Swinfen Eady J found the "shares bequeathed by the will changed in name and form only, but substantially existing in their sub-divided form and each original share traceable into its four sub-divided shares.
The subject-matter of the bequest remains in substance, though changed in name and form. There is therefore no ademption": re Clifford; Mallam v McFie (1912) 1 Ch 29, at p 35. Neville J went somewhat farther in re Leeming; Turner v Leeming (1912) 1 Ch 828. That testator had bequeathed by his will 10 £4 fully paid shares in a company. Before he died the company was reconstructed; a new company was incorporated under the same name and took over the undertaking in exchange for shares distributed by the liquidator to the shareholders. For every £4 share in the old company the testator became the holder of 2 £5 preference shares and 2 £5 ordinary shares in the new company. Neville J said:
"I think that the shares in the new company are really in substance the same as the shares in the old company and represent the specific bequest. The subject-matter of the bequest remains, though changed in number and form . . . There has been a dissolution of that company and a new company has taken its place, but in substance it is the same company. It seems to me that the amount of the testator's interest in the old company remains and is represented by the shares in the new company and is practically the same, and is changed in name and form only. I think, therefore, that there has been no ademption, and that the legatee is entitled to the shares in the new company." (1912) 1 Ch, at p 830
To the like effect is the later decision of Roxburgh J in re O'Brien dec'd.; Little v O'Brien (1946) 62 TLR 594, at pp 595, 596; (1946) 175 LTR 406, at p 408. The foregoing, however, is all upon the postulate that the bequest of 196 shares expressed in the will refers to the particular shares the testator then held. But can that postulate be made good? If the question had arisen in England before the Wills Act, 1837 it may be supposed that the ordinary rules governing the interpretation of wills with respect to bequests of personal property would not have been regarded as standing in the way of the conclusion that the 1,960 shares stood in the place of the 196 shares and passed to the beneficiary to whom the latter had been bequeathed. That is because, as I understand it, there was nothing artificial about the principle by which, as the law then stood, a disposition of personal property might, according to its meaning, cover personal property which had been acquired after the will had been made but before the death of the testator.
So far as I am aware, it was all a question of ascertaining the meaning of the testator as expressed in the testamentary instrument. See per Jessel MR in Bothamley v Sherson (1875) LR 20 Eq 304, at p 310. Of course devises stood in a very different position. A fee simple acquired after the date of a will could not be carried by a devise contained in the will. But s 24 of the Wills Act, 1837, forming one of the provisions directed primarily at the reform of the law relating to disposition of realty by will, was expressed in terms governing both devises of realty and bequests of personalty. S 24 of the Wills Act, 1837, which is reproduced in s 27 of the South Australian Wills Act, 1936, in an attempt to bring real property and personal property under an identical rule in this respect, uses language which seems to require an artificial recourse to the death of the testator as the point of time at which the provisions of the will are to be construed. The section provides that every will shall be construed with reference to the real 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. If an instrument is literally and in all relevant respects construed as if it were written at a subsequent date, perhaps a date far removed from actual contemporary circumstances, it needs no argument to show that a strange and artificial meaning may be produced.
This was seen by Mr Jarman who, after explaining the meaning and effect of the provision on realty, made this observation (2nd ed (1855) p 269):
"The application of the new principle of construction to specific bequests, however, is attended with more difficulty, and will, in all probability, give rise to much controversy and litigation, before its precise limits and effect are fully established."
The learned editors of the second edition, one of them being Mr Wolstenholme, refer (p 271) to the possibility of two constructions which may be put upon the 24th section,
"namely, whether we are first to transfer the date of the will to the day of the death, and then see what property the words refer to; or whether, on the contrary, we are first to see what property the words refer to (remembering that words of general description include in themselves after-acquired property) and then transfer the will to the date of the death. It is obvious that the first construction makes the words include not only a different interest in the same subject, but also a different subject answering the same description, while the latter makes the words include only a different interest in the same subject. The latter is conceived to be the true construction."
This distinction does not appear to have been taken up judicially and examined or applied in all the time that has elapsed, but if it represents the law it would bear upon the present case. It would mean that the words of the will are to be read as at the date when the testator wrote them in order to see to what property they refer, remembering that words of general description include in themselves after-acquired property. That having been done, the will so applied would then be transferred to the date of the death of the testator. So considering them, it would appear an obvious inference that the testator was referring specifically to 196 shares which he held.
He referred to them in language specifically descriptive of 196 shares as they then existed although he did not, by the use of the word "my" or any other expression, tie them specifically to the very parcel of shares which he held, but there can be no doubt that it was to that parcel he was referring. As a matter of ordinary interpretation it would seem the natural conclusion to draw from the fact that after dealing with the specific bequests, among which he included directions as to those particular shares, he goes on to speak of the whole of the residue of his estate. It would seem that he was making a specific bequest and not giving a general legacy to be possibly satisfied by the 196 shares in Elder Smith & Co Ltd. For such a general legacy would come out of what otherwise would be the residue, and plainly in his device and bequest of the whole of the residue he is speaking of what remains after the bequests with which he has already specifically dealt.
The foregoing approach to the present case finds less justification in the case law that has developed than it does in the views which Mr Jarman's editors adopted within a few years of the passing of the Act and I have entertained accordingly no little doubt as to the actual conclusion which it is now proper to reach. What seems at present to be the recognized and orthodox approach to such a question is to begin with the hypothesis that, unless a contrary intention can be found in the will, s 24 requires the construction of the bequest as speaking and taking effect as if it had been executed immediately before the death of the testator.
This means, of course, "with reference to the real estate and personal estate comprised in it": not for all purposes. Further, the interpretation of these words adopted by Turner LJ (as he afterwards became) in Lady Langdale v Briggs (1856) 8 De G, M & G 391, at p 436(44 ER 441, at pp 458,459); 26 LJ Ch 27, at p 50, is applied. They mean that, so far as the will comprises dispositions of real and personal estate, the dispositions are to be construed as speaking and taking effect as if the will had been executed immediately before the death of the testator. But all that operates only "unless a contrary intention shall appear by the will". What, therefore, is to be looked for is the indication of a contrary intention. If the bequest in question is seen to be specific it suffices as an indication of a contrary intention. But there is a traditional leaning to construing a bequest as a general legacy and not a specific legacy and this applies to a bequest of shares as well as to a bequest of stock and bonds. It has been called sometimes a presumption and there are instances where it has not been outweighed by the possession by the testator, at the time when the will was made, of the very quantity named by him, in the bequest, of the securities: cf Robinson v Addison (1840) 2 Beav 515(48 ER 1281); re Willcocks; Warwick v Willcocks (1921) 2 Ch 327; re Gage; Crozier v Gutheridge (1934) Ch 536. But it is a question of the meaning of the bequest and certainly the circumstance that the quantity of shares or other securities mentioned in the bequest coincides with the quantity then held by the testator must be a factor.
"A general legacy has no reference to the actual state of the testator's property. It is a gift of something which, in the event of the testator leaving sufficient assets, must be raised by his executors out of his general personal estate . . . Whether or not anything forms part of the testator's personal estate is a pure question of fact, but whether or not it has been separated from the personal estate" (scil. so as to be specific)
"depends upon the construction of the will which is a question of mixed law and fact or a pure question of law. Provided it has been separated, anything which was the property of the testator at the time of his death is capable of being specifically bequeathed and thus becoming a specific legacy.": Williams on Wills (1952) Vol 1, p 148.
What marks a bequest as specific is that its subject-matter is designated as something that does at the time of the will, or shall at the time of the death of the testator, form an identifiable part of his property and is, so to speak, distinguished by the intention of the testator as ascertained from his will to separate it in his disposition from the rest of his property for the purpose of bequeathing it as the distinct subject of a testamentary disposition. In re Evans; Evans v Powell (1909) 1 Ch 784, Joyce J in a passage that has since been cited more than once, says:
"It is well settled that there may be such a specific description of the subject of a gift as to show that what was intended to pass, whether real or personal estate, was some particular thing in existence at the date of the will."
His Lordship distinguishes such a case from a description which is general and he then proceeds:
"and where there is such a particularity in the description of the subject of a gift as to show that it was some object in existence at the date of the will that was intended to pass, it is considered that there is sufficient evidence of a contrary intention to exclude the application of the provisions of s 24" (1909) 1 Ch, at p 786.
The difficulty arising here in the operation of this test lies in the "particularity of the description" showing "some object in existence". What is contended is that it describes no more than any 196 shares in Elder Smith & Co Ltd and that all that can be said about the possession by the testator at that date of 196 shares is that, had he died on the following day, they would have satisfied the legacy. For this support is found by the respondent in re Gillins; Inglis v Gillins (1909) 1 Ch 345. There a testator holding 360 shares in the Commercial Union Assurance Co bequeathed by his will to different legatees varying numbers of shares in that company, making a total of 275. After the date of the will and before his death, the shares of the company were re-subdivided into shares of smaller denomination. Warrington J held the legacies to be general and not specific so that the legatees took only the precise number bequeathed of shares of reduced denomination. Warrington J so decided on the footing that
"the provisions of s 24 make one read the will as speaking from the death; and therefore a gift of so many shares must be a gift of so many shares as they are found by the executor when he comes to administer the testamentary dispositions of his testator, and must therefore mean so many of the 10s. shares into which the capital of the Commercial Union Assurance Co is now divided" (1909) 1 Ch, at p 353.
It is an important circumstance in that case that the testator was not disposing of all the shares he held, and although the view taken by Warrington J must carry weight in considering the interpretation of the will in the present case, after all it is the meaning of the testator as expressed in his will that must be sought in each case. In re Nottage; Jones v Palmer (No 2)(1895) 2 Ch 657 a case in which similar questions were decided in favour of the specific nature of the bequests, Rigby LJ remarked:
"You have got a long way towards a specific gift if you come to the conclusion that he (the testator) is trying to describe something which he has" (1895) 2 Ch, at p 664 .
Later in his judgment, his Lordship speaks of
"expressions in the will which agree better with the hypothesis that the gifts are specific" (1895) 2 Ch, at p 665.
For myself I think that although in the present case there is not much context to the gift which is important, nevertheless it all squares with the hypothesis that the gifts are specific and that, to begin with, the inference is unavoidable that when the will speaks of the 196 shares the reference is to something the testator then holds. One is allowed to know that it is the very number he held. The inference arises, I think, from the mere enumeration and description of the shares, but it is supported by the place, namely cl 3, where the gift is expressed. The structure of the will has already been referred to. It is clear enough that the will is constructed to deal with specific bequests and pecuniary legacies and the vesting of the residue of the estate in trustees, the payment of liabilities and the creation of active trusts. I think that it is a justifiable conclusion that the bequest was specific.
For all these reasons I think that the appeal should be allowed. I agree in the declarations proposed by Taylor J.