Amundsen & Nargileh Pty Ltd, Re [1994] QSC 14

IN THE SUPREME COURT OF QUEENSLAND HELD AT BRISBANE No. 13 of 1994 CATCHWORDS: IN THE MATTER of Order 64 Rule lA of the Rules of the Supreme Court of Queensland -and- IN THE MATTER of a Deed of Settlement made 12 March 1981 between STEPHEN J AMES AMUNDSEN and NARGILEH PTY LTD REASONS FOR JUDGMENT - DERRINGTON I. Delivered the lOth day of February, 1994 Trusts - discretionary trust - construction. Vesting of trust property in beneficiaries. Date of vesting 20 years after last of present royal line "but no later than 1 January 2000". Incompatible limitations. Whether should read "no sooner than". Whether any influence in construction from general factual cases in which trust created or from contextual influences. Counsel: Mr A. Crowe for Applicant No appearance for Respondent Solicitors: Sly & Weigall Cannan & Peterson for Applicant Hearing date: 21st January, 1994 -- 1 of 7 -- IN THE SUPREME COURT OF QUEENSLAND HELD AT BRISBANE No. 13 of 1994 IN THE MATTER of Order 64 Rule lA of the Rules of the Supreme Court of Queensland -and- IN THE MATTER of a Deed of Settlement made 12 March 1981 between STEPHEN JAMES AMUNDSEN and NARGILEH PTY LTD JUDGMENT - DERRINGTON J. Delivered the lOth day of February, 1994 This is an application on the part of the above-named company for "a declaration that the proper construction of a deed of settlementmade 12 March 1981 between Stephen James Amundsen as settlor and Nargileh Pty Ltd as trustee is that the word 'later' where it appears in item four of the First Schedule should be read as the word 'sooner' and shall be taken to have been so for all purposes and at all times on and from execution of the said deed;" There is also a prayer for such further or other order as may be fit. The company is the trustee of a family trust of which Mr Amundsen is the settlor of the original nominal settlement. He was the solicitor who prepared the trust deed. He has not appeared in answer to this application, which is not surprising as he has no real interests in the result except perhaps indirectly. Supporting the application are the directors of the trustee company, which has the absolute discretion to appoint beneficiaries and to distribute the trust assets, and all of the named beneficiaries. With minor exceptions the range of possible -- 2 of 7 -- 2 beneficiaries nominated in the deed is unlimited, some being expressly referred to by name, others by class, and still others by the description, "Any other person or persons company or companies charity or charities not being .. the settlor, or (other possible nominees)". In the result the application is supported by all parties who can be personally identified. Most importantly, this includes the parties who have the power to appoint the beneficiaries. The difficulty to which the application is directed concerns the duration of the trust, which is expressed in Item 4 of the First Schedule as follows: "4. Vesting Date - The date 20 years after the death of the last survivor of all lineal descendants of Queen Elizabeth 11 alive at the date hereof but so that the Vesting Date shall occur no later than the first day of January in the year Two Thousand but subject in all respects to the powers granted hereby to the trustee to accelerate the termination of the trusts." It is the applicant's contention that the expression "no later than" is a draftsman's error and should read "no sooner than". It is said that this construction should be put on it because of the purpose of the deed and the reading of it as a whole. It is claimed that its termination by 1st January, 2000, would make it too short for its purpose, and further that such a construction is contrary to the effect of other parts of the deed and even of the clause in which it is contained. Consequently the primary prayer is for a declaration of a suitable construction. Alternatively, rectification is sought. The applicant has led evidence that when the trust deed was prepared by Mr Amundsen on the instruction of Mr Blowes, for whom the trust was created as a tax avoidance instrument, Mr Amundsen was instructed that it was intended to use it as a vehicle for such purposes in respect of substantial assets. It is said to be -- 3 of 7 -- 3 implied by this that the trust should have a long duration, but it is difficult to draw any serious inference from these facts that the period of almost nineteen years which is provided for on the literal reading of the document is contrary to such intention, even if it were correct to have regard to such extrinsic evidence. The most that can be said is that, although on its face the document refers only to a very small settlement of $50 by the original settlor, nevertheless, in its commercial context, it may be properly recognised as the usual form of family trust for tax avoidance purposes, implying that it would not have been intended to terminate in an unusually short period of time. However, the period allowed certainly does not contravene such an implication. It is not possible to have regard to later settlements on the trust as a means of construing its original terms. Nor is it appropriate to have regard to the loss of tax avoidance advantages or the incidence of stamp duties that might be present on the latest day for vesting referred to in the deed, even if they could be anticipated. Consequently there is nothing about the general nature or purpose of the transaction that would support the application. The first argument relating to the text itself has reference to the terms of paragraph 2 which contains a number of definitions. Inter alia, the expression "the beneficiaries" includes any child of David Harris Blowes or any other dependent of him. He himself is a named beneficiary as are a number of his children. The argument is that because theoretically by the nominated vesting date according to the literal reading there may be children or other dependents of the said David Harris Blowes who are not yet born or dependent, it would not have been -- 4 of 7 -- 4 the intention of the settlor to have fixed a date for vesting where that result could come about. This argument fails in a number of respects. First, the settlor may have been satisfied that by his adopting a vesting date nineteen years away, all Mr Blowes' children would by then have been born; and that by then he would have been able to identify his dependents and to provide for them either by his power of appointment under the deed or by other arrangements of his own, particularly as he is a beneficiary himself. It is an open matter and no inference can reasonably be drawn in the way advanced. The second and most interesting argument relating to the text depends upon a conflict within the clause itself in the alternative definitions of the vesting date. It is correctly pointed out that if the present royal line were to have terminated immediately upon the execution of the deed, then the additional period of twenty years after that as provided for in the first part of the formula would mean that the earliest possible date under that part would be 12th March 2001. Yet the alternative part of the formula provides that it cannot be later than 1st January 2000. This makes the reference to the royal line meaningless or valueless. However the same argument applies with equal force against the proposal of the applicant, for it would be a nonsense to speak of a date which cannot be earlier than 12th March 2001, and then to add a proviso that it must not be sooner than 1st January 2000. It is difficult to identify the cause of error of the draftsman other than · perhaps that the conflict was not seen. This does not help to resolve the present issue, but it is useful to try to determine the purpose that lay behind the -- 5 of 7 -- 5 introduction of a specific date. The obvious answer is that because the first part of the formula refers to an indeterminate time which, at the time of the execution of the deed had prospects of virtual perpetuity, this called for the insertion of an alternative which imposed a finite limitation on that period. If that be the case then the literal reading is correct. The applicant's argument is to the effect that the reference to a specific date is designed to ensure that the trust would not vest before that date. Aside from the impossibility of that under the primary part of the formula, the early termination of the present royal line within the foreseeable future was of such a high degree of improbability that the insertion of an associated "not before" date would have been over-cautious. This argument is not nearly as convincing as the explanation that there was intention to set a precise limit to the otherwise indeterminate duration of the trust. It is argued for the applicant that "it would not have been the likely intention of the settlor to include reference to the lineal descendants of Queen Elizabeth 11 unless a vesting date beyond January 2000 was intended". On the contrary, it is a common device of draftsmen to refer to such a formula setting an indeterminate, and what is expected to be lengthy, period in the first instance but then providing for a fixed limitation within that period when the matter is to terminate. This form obviously requires a reference to the lineal descendants of Queen Elizabeth 11 in the present case and it is not in conflict with an intention that within that time there be some termination of the trust fixed without reference to the Queen's children. The applicant seeks to draw some comfort from the provision which enables Mr Blowes, as trustee, to vest the entire trust in any beneficiaries, including himself, -- 6 of 7 -- 6 at any time within the period of the trust. Accordingly, it is argued, there is no need for the establishment of a limit to the period of the trust for it is open to him to determine it should that be necessary or desirable. This is not a satisfactory answer for he may not terminate it in this way either because he is then content to allow it to be terminated as provided for by the trust without taking upon himself the decision to do so. Alternatively he may be prevented by death or incompetence from taking such a step. This is not a suitable substitute for a fixed termination date. It has not been necessary to venture into the reason why the draftsman chose this slightly complicated expression of the duration of the trust, nor is it necessary to do so. The applicant has not depended upon its complexity as part of its arguments. It is not an unfamiliar form where it is desired to avoid stating a fixed term for a trust in the first instance but where there is the desire or need to state a specific limit to avoid the notion of perpetuity or some statutory consequence. For a practical reason, it is usually adopted in one form or another in trust deeds of this kind. However there is no satisfactory argument which would persuade the Court that the clear words of the provision should be read otherwise than with their ordinary meaning, and similarly there is nothing to support any claim for rectification. Accordingly the application must be dismissed. -- 7 of 7 --