Hutchinson v Bank of Scotland Plc
[2012] QSC 28
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- Notable Unreported Decision
- Hutchinson v Bank of Scotland Plc[2012] QSC 28
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Hutchinson v Bank of Scotland Plc[2012] QSC 28
Hutchinson v Bank of Scotland Plc[2012] QSC 28
PARTIES: | |
FILE NO: | |
Trial Division | |
PROCEEDING: | Originating Application |
ORIGINATING COURT: | |
DELIVERED ON: | 9 February 2012 (ex tempore) |
DELIVERED AT: | Brisbane |
HEARING DATE: | 9 February 2012 |
JUDGE: | Applegarth J |
ORDER: | Minutes of order to be submitted by Counsel |
CATCHWORDS: | SUCCESSION – WILLS, PROBATE AND ADMINISTRATION – CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS – GENERALLY – GENERAL PRINCIPLES OF CONSTRUCTION – ASCERTAINMENT OF TESTATOR’S INTENTION AS EXPRESSED OR IMPLIED BY WORDS OF WILL – where testator drafted a codicil to his will in relation to the administration of assets in Australia and overseas – where executor brings application as to the meaning of the codicil PRIVATE INTERNATIONAL LAW – Jurisdiction – Proper Law – Construction and interpretation – Trusts (Hague Convention) Act 1991 (Cth) – where testator was domiciled in Australia – where assets situated in Australia and the United Kingdom to be held on trust – where trust to be administered by trustee resident in Scotland Convention on the Law Applicable to Trusts and on their Recognition, art 6, art 7 Succession Act 1981 (Qld), s 6, s 33C Trusts Act 1973 (Qld), s 96 Trusts (Hague Convention) Act 1991 (Cth) Ashton v Ashton [2010] QSC 326 cited Ballard v The Attorney-General for Victoria [2010] VSC 525 cited Berezovsky v Abramovich [2011] EWCA Civ 153 cited Crnjanin v Crnjanin [2011] QSC 295 cited His Beatitude Archbishop Torkom Manoogian, the Armenian Patriarch of Jerusalem v Yolande Sonsino & Ors [2002] EWHC 1304 cited Saliba v Falzon [1998] NSWSC 302 cited The Public Trustee of Queensland v Smith [2009] 1 Qd R 26 cited |
COUNSEL: | M R Hodge for the applicants E Goodwin for the respondent |
SOLICITORS: | Cooke & Hutchinson for the applicants Blake Dawson for the respondent |
SUPREME COURT OF QUEENSLAND
GARY JOHN HUTCHINSON and ELIZABETH MACKENZIE AS THE EXECUTORS OF THE ESTATE OF JAMES MACKENZIE | Applicants |
and | |
BANK OF SCOTLAND PLC | Respondent |
HIS HONOUR: The late James MacKenzie died on 8 September 2009 at Redcliffe Hospital in the State of Queensland. Mr MacKenzie was born in Burghead Moray, Scotland in 1916. He resided at Redcliffe at the time of his death. It seems that he lived in Australia for about 55 years before his death. He was a retired marine engineer who, by the time of his death at the age of 93, had accumulated over $11 million in assets, consisting of real estate in Queensland, shares listed in Australia and the United Kingdom, Australian dollars held with Australian financial institutions and pounds sterling held with the Bank of Scotland.
Mr MacKenzie made a will dated 19 April 2006 and two codicils to it, each dated 23 May 2009. The probate of the will and two codicils was granted to the applicant executors on 17 May 2010. The circumstances under which the codicils came into existence are more fully outlined in an affidavit relating to them. The two codicils appear to have been prepared by Mr MacKenzie acting alone and without legal advice.
The will dated 19 April 2006 was the product of legal advice and reflection by Mr MacKenzie, and was prepared by his lawyers. The codicil was prepared by Mr MacKenzie and given to his executor, Mr Gary Hutchinson, with an instruction that it not be opened. Mr MacKenzie was a frugal man and would not accept the provision of legal services unless he specifically requested them.
By an originating application filed on 15 November 2011, the applicant executors of the estate of Mr MacKenzie seek various declarations and also directions. The respondent to that application is the Bank of Scotland, which is the trustee of a testamentary trust created by the will.
The principal issues that the executors, and also the respondent, wish to have resolved are, first, the meaning of the second codicil to the will and, secondly, what law applies to the administration of the trust. There are other related matters about which I will give directions to the applicants.
I turn to the terms of the will. Clause 1 of the will stated that it was to affect his property and affairs in Australia, the United Kingdom and every other part of the world. Clause 2 appointed his niece, Elizabeth MacKenzie, and his solicitor, Gary James Hutchinson, to be his executors. Clause 3 gave his estate and interest in the land and residence in which he resided at Redcliffe and all the furniture and other articles and personal effects to his niece, Elizabeth MacKenzie.
Clause 4 relevantly provides:
" I give all my real and personal estate not otherwise disposed of by this will or any codicil ... to my executors with power to collect, sell, and convert, to pay all my debts funeral and administration expenses, all legacies (if any) given by this will or any other codicil, all death duties (if any) payable on any part of my estate unless specifically charged on a gift, any payments directed to be made out of residue, and to hold the balance then remaining ("my residuary estate") and to pay the same to the Governor and Company of the Bank of Scotland ... as Trustee upon the trusts hereinafter contained and I direct that my executors in paying my debts, funeral and administration expenses shall pay the same, as far as is possible, from my cash investments at present with Macquarie CMT Melbourne, Tower Trust Adelaide, National Australia Bank, AMP, Coles Myer and Woolworths and if necessary to then sell such shares as may be necessary to pay the balance of any further costs associated with the administration of my estate."
Clause 5 of the will provides:
"I give all my estate and interest in the land at Dakabin, Pine Rivers, if not previously disposed of, to my executors to sell the same by public auction and to thereafter pay the proceeds thereof to the trustee referred to in Clause 6 of this will."
Clause 6 of the will provides:
"The Bank of Scotland ("my trustee") shall hold the residuary estate entrusted to it pursuant to Clause 4 ("the Trust Fund") upon the following trust to be known as the MacKenzie 21 trust" and there follows a number of paragraphs defining, amongst other things, the beneficiaries, income distribution, dealing with income, capital distribution and other matters.
The first codicil to the will gave to each of certain identified family members a one-off payment of 50 thousand pounds sterling. The second codicil, which is of paramount importance upon this application, states as follows:
“Alteration to my will dated 19th day of April 2006:
Item 1 should state that my Australian assets and only my assets in Australia be administered in Australia.
All assets outside of Australia to be administered by the Bank of Scotland in charge of the trust."
It is dated 23 May 2009.
The assets of the estate, as at 3 February 2012, appear as Exhibit DEH2 to the affidavit of Daniel Hutchinson filed 8 February 2012. Of course, they do not precisely reflect the state or value of the assets at the time the codicil was granted and certain funds, which were held in the United Kingdom in cash accounts, apparently have been transferred to an account in Queensland.
Nevertheless, the statement of assets as at 3 February 2012 provides a useful guide to the apportionment of the estate. It indicates a total of Australian assets of a little over $11 million, UK assets of a little less than $800,000, assets in the USA consisting of shares of a little over $3,000, and Euro zone assets being shares with a total value of approximately $88,000, meaning the total value of the estate was a little under $12 million.
By way of general overview then, the will and the codicils provided for the administration of the estate by Australian based executors. Ms Elizabeth MacKenzie, the testator's niece, who is an executor, resides in Perth, Western Australia. She is also a beneficiary. All the other beneficiaries are located in Scotland. However, given where Mr Hutchinson resided for most of his life, the lawyers who he engaged, and obviously his trust in his niece, Elizabeth, it is unsurprising that he appointed Australian-based executors. Australia is where most of the assets of the estate are located.
An important feature of the will is the creation of a testamentary trust to endure for the benefit of beneficiaries all of whom are located in Scotland, save for his niece, Elizabeth MacKenzie. The beneficiaries under the testamentary trust consist of family members and then a number of institutions: the Burghead Primary School, the Free Church Burghead, the Alves and Burghead Church, the St Aethan's Masonic Lodge Burghead, and the Community Hall at Burghead.
Another relevant feature is that the estate consisted of ample assets in Australia to meet debts, funeral and administration expenses, and legacies. Another feature, which appears from clause 4, is the direction given to the executors in paying debts, funeral and administration expenses so far as possible from cash investments which Mr MacKenzie identified and only, if necessary, to then sell such shares as may be necessary to pay the balance of any further costs associated with the administration of his estate.
It is notable that neither clause 4 nor any other provision in the will made provision for his substantial shareholdings to be converted into money and for the proceeds of sale of those securities to be transferred to the respondent as trustee pursuant to the testamentary trust after the payment of debts and administration expenses and legacies.
In that regard, I should refer to the fact that clause 4, after referring to certain payments, continues in respect of the residuary estate "and to pay the same to the Governor and Company of the Bank of Scotland". Taken out of context and literally, the word "pay" might be interpreted to mean pay in the form of a money payment. However, I do not consider that the word "pay" should be so interpreted.
The better view is that the testator intended his residuary estate to be transferred to the trustee and for it to be entrusted to the trustee upon the trusts to be known as The MacKenzie 21 Trust. The will does not make specific provision for all of the assets constituting his residuary estate to be liquidated so as to permit payment and I consider the word "pay" should be interpreted so as to mean transfer.
It is apparent that an estate of this size, consisting of property situated in various parts of the world, would involve some period of administration during which the executors would be required to obtain taxation and other advice. The second codicil centres upon issues of administration. If one was to have regard simply to the will itself without reference to the codicil, one would anticipate that the executors would be required to administer the assets of the estate wherever situated.
However, it is unlikely, and would have been unlikely at all relevant times, that the testator contemplated that overseas assets would be required to meet debts, funeral and administration expenses and the legacies that he intended to give. The Australian assets were more than sufficient to meet these and other obligations, including any death duties.
This assumes some importance because Mr MacKenzie contemplated that cash assets in Australia might well be sufficient to meet relevant debts, funeral and administration expenses, but if it was necessary then further shares held in Australia could meet those obligations. The reason why this aspect is important is that it seems likely that the assets of the estate, outside of Australia, would in the course of the administration of the estate fall into the testamentary trust.
In the course of such an administration there would be two periods of relevant administration. There would be a need for the assets, wherever situated, to be administered during the period of administration and before they were held by the Bank of Scotland pursuant to the testamentary trust. Next there would be a second period of administration whereby certain assets, or their proceeds, would be administered pursuant to the testamentary trust.
Those two periods may overlap depending upon the course of the administration. It may well be possible, and would have been contemplated, that assets outside of Australia, which I will refer to as the overseas assets might, depending upon a proper assessment being undertaken by the executors, be able to be transferred rather quickly to the trustee, with other assets forming part of the residuary estate to be transferred at a later date.
My observations so far relate to the contemplated administration of the estate and the testamentary trust without reference to the second codicil. The second codicil might be said to be ambiguous as to its impact upon the administration of the estate, the administration of the trust or both. The first limb of the second codicil states that Australian assets and only the testator's assets in Australia had to be "administered in Australia". It does not say by whom they were to be administered.
The second limb of the second codicil states "All assets outside of Australia to be administered by the Bank of Scotland in charge of the Trust". In both limbs, the word "administered" is used. As I have noted, that might be taken to refer simply to the administration of the estate, it might be taken to refer to the administration of the trust or it might be taken to refer both to the administration of the estate and the administration of the trust. In any of these senses, it is likely in my view that the testator was concerned with the practical administration of his Australian assets and the assets outside of Australia. In very helpful written and oral submissions, counsel for the applicants raises an argument to the effect that if this kind of meaning is attributed to the second codicil then one might ask what its purpose was since the kind of practical interpretation, which commends itself to me, can be derived from the will itself.
The codicil is open to a number of interpretations. Again, counsel for the applicants notes that a possible interpretation is that the second codicil is designed to provide for the Australian assets of the deceased to be administered separately in Australia after they are transferred to the trustee. That might involve the notion that the Australian assets were to remain in Australia once they were transferred to the trustee, with the income produced from those Australian assets being dealt with pursuant to the terms of the trust but the assets to remain in Australia and not be liquidated.
Some matters are pointed to as supporting that conclusion and it is said that that accords with the words of the second codicil. If that interpretation was to be adopted it would have a limiting effect in keeping Australian assets in Australia and it might be understood as requiring the trustee of the testamentary trust to not liquidate the Australian assets and transfer their proceeds overseas.
Another possibility is that the second codicil was intended to effectively transform the operation of the will so that there would be, in effect, two trusts; one comprised of the Australian assets and the other comprised of non-Australian assets. However, counsel for the applicants immediately points to the difficulty of such an interpretation in that it involves a potential substantial rewriting of the will and there would be obvious uncertainty as to how the two trusts with different assets, but otherwise identical terms, were to operate. I accept that it is not a plausible interpretation.
Counsel for the respondent favours an interpretation which treats the second codicil as being directed to practical matters and I favour that interpretation.
The principles governing the interpretation of wills and codicils are well-established. I need not delay to set out those principles. They are conveniently summarised in the judgment of Justice Atkinson in Public Trustee of Queensland v Smith [2009] 1 Qd R 26 at 31 - 33. Additional principles of relevance in the present case include the principle that in construing the words of the will the interpretive exercise must be done by construing the instrument as a whole and the same approach applies when construing the words of a codicil. Another principle is that effect is generally to be given to every word of the will.
Both in the judgment of Justice Atkinson in Smith's case and in the judgment which I gave in Crnjanin v Crnjanin [2011] QSC 295 at [12], reference was made to section 33C of the Succession Act 1981 (Qld) which allows evidence, including evidence of the testator's intention, to assist in interpreting the language of a will in certain circumstances, which include where the will is ambiguous on its face or ambiguous in the light of surrounding circumstances.
A codicil is to be construed in accordance with the same rules as a will: Ashton v Ashton [2010] QSC 326 at [13] – [16]. Although in this case the interpretation of the will and the codicil might permit resort to extrinsic evidence in accordance with section 33C, the task remains one of attempting to ascertain the objective intention of the testator. Although I accept that the ambiguity or ambiguities which arise by virtue of the second codicil would permit resort to evidence in accordance with section 33C, I do not consider that the evidence placed before me is of much assistance in interpreting the codicil as distinct from interpreting the will itself. As to the will itself, and particularly with reference to the term "to pay" in clause 4, I have regard to the evidence of Ms Hutchinson relating to the preparation of the will. She attended upon Mr MacKenzie and advised him on 27 March 2006 and there is a contemporaneous file note of Mr MacKenzie having stated that the shares should not be sold unless necessary.
For the purposes of interpretation, I also have regard to the fact that Mr MacKenzie was taken through the terms of the will. I also have regard to the fact that Mr MacKenzie appreciated that it was possible to execute a separate will prepared by a legal practitioner in the United Kingdom dealing with property in the United Kingdom and that he was adamant that he did not need a separate will in respect of property located in the United Kingdom.
Even without resort to that evidence, it is apparent that Mr MacKenzie chose to have one will. He chose not to create, as it were, two separate estates and I do not consider that it is appropriate in interpreting the second codicil to conclude that the testator was intending to, in effect, create two separate estates. Nor was he concerned with making a provision for one part of his estate, namely his Australian assets, to be administered in accordance with Australian law and the overseas assets to be administered in accordance with Scottish law.
Instead I consider that the second codicil was concerned with the practical administration of his estate, including assets which were, in the due course of its administration, to be administered by the respondent as trustee. I consider that the codicil was intended to ensure that all of the initial administrative steps relating to assets situated in Australia were conducted in Australia. That would include whatever administrative steps had to be taken by the applicants in relation to the will and the transfer of assets to the trust.
Such a course had the advantage of containing costs because the applicants were based in Australia. The will ensured that the initial administration was conducted by individuals who are familiar with Australian conditions, procedures and Australian law. The second limb of the second codicil appears to be directed at sparing the applicants, who do not reside in the United Kingdom, from the difficulty of administering assets in the United Kingdom.
The respondent was, undoubtedly, better placed to administer those assets on a day to day basis, albeit subject to the initial control of the executors in their capacity as executors of the will. I do not interpret the second codicil and, in particular, the second limb of it, as supplanting the rights and responsibilities of the duly appointed executors during the period of the administration of the estate.
I consider that it is directed to practical aspects of administration and was intended to ensure that those practical aspects of the administration of those overseas assets were undertaken by the Bank of Scotland, subject to, as I have said, the control which the executors were entitled to apply until relevant assets were transferred to be held in the testamentary trust.
I interpret the second codicil as being intended to avoid the unnecessary and costly task of the executors appointing overseas agents, be they legal representatives or trustees, to administer the overseas assets during the period of the administration of the estate, followed by which those assets would be transferred to and administered by the Bank of Scotland.
In that sense, it was intended to avoid double-handling, to entrust at least the day to day administration of those assets to the Bank of Scotland and to facilitate the orderly transfer of those assets to the Bank of Scotland to be held upon the testamentary trust. The interpretation, which I favour, accords with the evidence in the case which is that the testator was a careful and prudent gentleman who was interested in containing costs.
He was obviously a practical man by reason of his training and, without indulging in a stereotypical view of Scottish folk, he seemed to be imbued with the same practical orientation that has made Scottish people famous over the centuries and has conferred upon the world great advances in science and engineering. This is not to overlook the great Scottish contributions to philosophy, arts and culture. For present purposes, and leaving aside any excessive reference to great Scottish qualities, the evidence before me indicates that the testator was practically minded, and I conclude that it was practical considerations which motivated him to make the alteration to his will that is contained in the second codicil.
I conclude that if he had intended some more dramatic consequence to flow, rather than simply address the practical administration of his estate, then he would have sought and obtained legal advice about that matter.
As I previously noted, the first limb of the second codicil does not say by whom the Australian assets were to be administered in Australia. It does not say that they were to be administered by the Bank of Scotland or by the executors. Perhaps it is implicit that the first limb was primarily directed to the period of administration of the estate. It was concerned with the administration of those assets in Australia by the executors during the period of their administration of the estate. However, it is also possible that the first limb of the second codicil was intended to additionally refer to the administration of the trust assets after Australian assets came to be held upon trust in accordance with clauses 4 and 6 of the will.
I consider that the first limb of the second codicil should be so interpreted. Again, that is consistent with an intention to achieve a practical result by which assets in Australia are administered on a day to day basis by people who are familiar with Australian conditions, Australian law and Australian customs, subject to, of course, the rights and responsibilities of the trustee which is based in the United Kingdom.
The view that I have just expressed would permit the testamentary trustee, who is the respondent in these proceedings, to appoint appropriate persons to administer the relevant trust assets in Australia. That might be persons who are employees or agents of the Bank of Scotland who are located in Australia or through the appointment of Australian representatives. The intent, however, is that any assets in Australia, held upon the testamentary trust, should be administered in Australia and not, as it were, administered by what might be referred to as an absentee landlord or, more precisely, an absentee trustee.
It is also important to note in this context that the first limb of the second codicil does not provide that the Australian assets should remain in Australia. The first limb of the second codicil, just like the second limb of the same codicil, is concerned with the administration of assets in a particular location. It is concerned with their administration for so long as they remain in Australia. It would have required, in my view, clear words, or at least clearer words, to reach the conclusion that the first limb of the second codicil requires the Australian assets to remain in Australia throughout the course of the administration of the estate and throughout the term of the testamentary trust.
In my view, clearer words would have been required instead of the word "administered". A word such as "retained" would have been used or the clause simply would have read:
"Item 1 should state that my Australian assets, namely my assets in Australia, remain in Australia." That is not the form of words that were used.
I do not interpret the codicil, and particularly the first limb of it, as a provision directing either the executors or the trustee to ensure that the testator's Australian assets remain in Australia. Nor, as I have said, is it a direction that they must be sold and the proceeds transferred to the overseas testamentary trustee.
I consider that having regard to the will and the codicils read as a whole that the will provided for Australian assets, and only Australian assets, to be administered in Australia in the first instance by the testator's Australian based executors and then by either the respondent or its duly appointed agents in Australia.
Next after any period of administration of the estate and upon the assets remaining in Australia, they were to be administered in Australia. The will and the codicil did not require either the executors or the trustees to retain those Australian assets in Australia. However, whilst they remained in Australia, they were to be administered in Australia.
The next salient point is that the executors were, in accordance with clause 4, to pay the residuary estate in the sense of transferring it to the respondent to be held on the trust so created and the term "pay" should be used in that sense. The word "pay" was meant to refer to a transfer into the control of and into the name of the trust. The executors were not required by clause 4, or any other provision of the will and its codicils, to liquidate all of the Australian assets prior to their being transferred to the trustee to be held in accordance with the testamentary trusts.
The will and the codicil left it open to the respondent as trustee to decide to continue to hold those Australian assets in Australia. Decisions in that regard would be made in accordance with the trustee's obligations as a trustee. I do not consider that there is anything in the terms of the will and the codicil, or in the context in which they came to be made, that requires the executors to sell what was, in effect, the product of a lifetime's investment in Australian shares, particularly if that required them to sell them at a time which was not prudent.
It seems entirely consistent with the terms of the will, and the extrinsic evidence, about it not being necessary for shares to be sold that the executors might transfer the Australian securities to the trustee in accordance with the proper administration of the will.
By way of summary, I regard the second codicil as one that was concerned with the practical administration of the estate during the period of its administration and also the practical administration of the testamentary trust that was created by it.
It would permit the relatively quick transfer of overseas assets to the Bank of Scotland, if this was thought appropriate in the light of an assessment by the executors of debts and other obligations, such that those overseas assets would be held by the Bank of Scotland upon the testamentary trust.
If, however, certain overseas assets were not so transferred to the respondent to be held promptly in its capacity as a trustee, it was to be the Bank of Scotland which would administer those overseas assets and it would do so in the interests of a practical and cost effective administration of the relevant assets.
In addition to seeking a declaration as to the meaning of the second codicil, the applicants seek, pursuant to section 6(4) of the Succession Act 1981 (Qld), section 96 of the Trusts Act 1973 (Qld) or the Court's inherent jurisdiction, directions as to the manner in which they are to effect the transfer of the residuary estate to be held by the respondent as trustee of The MacKenzie 21 Trust.
Some things that I have already said will give some form of direction. However, for completeness, I should state by way of direction that the applicants are not required to liquidate either the Australian assets or the overseas assets in order to effect a transfer of the residuary estate to the respondent.
They should administer the estate and effect the required transfer by means of whatever form of transfer is appropriate and the word "pay", to which I've already alluded, should be interpreted so that it, in effect, means transfer. As a consequence, the manner in which the applicants effect the transfer depends upon a number of circumstances, including the asset in question.
So far as the transfer of shares is concerned, the manner in which that could be effected would be by an appropriate form of transfer with appropriate entries in the register of shares. It is sufficient for me to say that the manner that the transfer is to be effected will be by such means as the executors may be advised. They have liberty to apply for further directions if required. For present purposes, it is sufficient that I indicate that they are not constrained to liquidate the relevant assets and to pay the proceeds to the trustee. Transfers can be effected by other means.
The remaining substantive part of the application arises under paragraph 2 of the originating application in which a declaration is sought as to whether the will, together with the two codicils, provide for the trust, or trusts established by the will, to be administered in accordance with (a) the laws of Scotland; (b) the laws of Australia; or (c) for assets with their situs in Australia, laws of Australia and for all other assets the laws of Scotland.
The issue of the applicable law in respect of the administration of a trust is governed by the Convention on the Law Applicable to Trusts and on their Recognition made at The Hague on 1 July 1994, which I will refer to as "the Convention". It was given legislative force by the Trusts (Hague Convention) Act 1991 (Cth).
The relevant provisions of the Convention are helpfully set out in the written submissions of the applicant and the respondent. Article 6 of the Convention provides:
"A trust shall be governed by the law chosen by the settlor. The choice must be express or be implied in the terms of the instrument creating or the writing evidencing the trust, interpreted, if necessary in the light of the circumstances of the case..."
In the event that there is no choice of law, either express or implied, article 7 of the Convention applies and identifies the matters to which reference may be made in ascertaining the law with which the trust is most closely connected. I have had regard to the case law to which reference was made in submissions. This includes the judgment of Justice Young, as his Honour then was, in Saliba v Falzon [1998] NSWSC 302 and to the judgment in His Beatitude Archbishop Torkom Manoogian, the Armenian Patriarch of Jerusalem v Yolande Sonsino & Ors [2002] EWHC 1304.
I have had regard to Ballard v The Attorney-General for Victoria [2010] VSC 525 and to the other authorities cited to me, the most recent being Berezovsky v Abramovich [2011] EWCA Civ 153. Applying these principles and the relevant authorities, there seems to be no practical difference as to whether article 6 or article 7 applies in this case.
In deciding which law governs the trust, whether by reference to article 6 or article 7, I have to have regard to the will and the codicil as a whole. However, it is convenient to first look at the actual will. The factors that strongly point towards the law of Scotland are, first, that the nominated trustee is the Bank of Scotland, a professional trustee that is incorporated in Scotland.
Secondly, save for one beneficiary, all of the beneficiaries are domiciled in the United Kingdom. Many of the beneficiaries are, as I have noted, Scottish organisations. Some, but not all of the assets, are based in the United Kingdom. A further important factor is that the distributions provided for by the trust are expressed to be in pounds sterling, which is the currency used in the United Kingdom.
In short, the trust is centred on people and institutions located in Scotland. As against this, as both counsel have pointed out, a significant proportion of the assets are located in Australia and the deceased was resident in and domiciled in Australia. However, I do not consider that those matters should be accorded much weight. I agree with the submissions of counsel in that regard. The factors that I have already identified strongly outweigh those few matters which connect the trust to Queensland.
Given the interpretation which I have placed upon the codicil, there is no need to alter the conclusion that the law of Scotland applies to the administration of the trust. I should note for completeness that the institution of the trust is recognised in Scottish law.
My conclusion that the testamentary trust is governed by the law of Scotland, of course, says nothing about the appropriate operation of Australian laws, including laws that govern matters such as registration of shares and revenue laws that might apply. However, the declaration is not in respect of any such matter. The declaration sought relates to whether the testamentary trust or trusts are to be administered in accordance with the laws of Scotland and I consider that a declaration should be made to that effect.
In conclusion, the interpretation to be given to the second codicil is a meaning which focuses upon the practical administration of assets to be administered by the applicants as executors of the estate and the practical administration of the testamentary trust.
It is not to supplant the role and responsibility of the executors in respect of either Australian assets or overseas assets during the period of their administration of the estate. It simply encourages a practical approach to the administration of assets described as the testator's Australian assets and also to assets outside of Australia.
The practical objective appears to be the containment of costs and the facilitation of the transfer of assets. It was to avoid the cost of persons other than the respondent being engaged during the period of administration in the United Kingdom to administer the overseas assets and to attend to their day to day administration.
It was intended to facilitate a transition the administration of the estate and the administration of the trust, with the respondent as the Bank of Scotland being responsible for administration on at least a day to day basis, subject during the period of administration of the estate to the overall control, rights and responsibilities of the executors.
Next, by way of conclusion, the codicil was intended to ensure that initial administrative steps relating to assets situated in Australia were conducted in Australia. That seems to have been its predominant purpose. However, it seems to me also likely that the testator intended that should those assets remain in Australia it would be in the interests of the trusts that their administration be conducted in Australia by people who are familiar with Australian conditions, laws and cultures and not administered, as it were, remotely and at greater cost and possible detriment to the proper administration of the estate.
Next, for the reasons I have explained, the term "pay" in clause 4 should be interpreted so as to mean transfer. The result being that the applicants are not required to liquidate assets before transferring them to the testamentary trustee. So far as the Australian assets are concerned, as I have said, neither the executors nor the trustee are obliged to immediately liquidate them.
The trustee, in particular, is permitted to keep those assets in Australia to be administered in Australia for so long as they remain in Australia. The first limb of the codicil does not, however, require those assets to remain in Australia for the term of the trust. Whether they remain in Australia, and for how long they remain in Australia, is a matter for the trustee to be decided in accordance with the trustee's legal obligations.
In that regard, and in accordance with the declaration that I intend to make, those legal obligations will be governed by the law of Scotland.
I will make declarations and orders in a form to be submitted by counsel. It is appropriate that the costs of and incidental to the application be the parties’ costs and be paid out of the estate or the trust fund on an indemnity basis.
I have derived assistance from the submissions of both parties on complex matters. I greatly appreciate their assistance and I expect their further assistance with the proper formulation of declarations. It does not seem to be appropriate for me to make any further directions. I should observe that the executors, following upon this hearing, intend to progress the administration of the estate and to consider the potential tax consequence of the Court's interpretation of the second codicil and to obtain advice from a firm of accountants in relation to taxation matters and to, if necessary, obtain a private ruling from the Australian Taxation Office.
I consider that that is an appropriate course and I do not consider it is strictly necessary for that to be reflected in a formal declaration. I will include it, if requested, after the conclusion of that investigation with respect to tax payable by the estate in Australia, if any.
The estate will then consider if it is entitled to claim double taxation relief for any tax payable in Australia as against inheritance tax, for which it may be liable, under the laws of the United Kingdom. Again, that seems to me to be an appropriate course.
It is not appropriate for me to go beyond saying what I have said in relation to the rights and obligations of the testamentary trustee. For one thing, their obligations are governed by Scottish law being a matter about which I profess little knowledge. It is sufficient in giving directions in the exercise of the jurisdiction which I possess to give the directions which I already have, which, in general terms, are that according to the proper interpretation of the will and the codicil, the will does not require the Australian assets to remain indefinitely in Australia.
The period during which they will remain in Australia, either in the name of the executors or the trustee, is a matter for the proper administration of the estate and also the prudent consideration of the trustee. I would not presume to give them any advice about the course of keeping those assets in Australia.
It is appropriate to conclude that Mr MacKenzie's heart obviously remained in his homeland, as is apparent from the terms of his will. However, most of his assets remained in his adopted land. The trustees might choose to keep those assets in Australia for some time. However, they are not obliged to do so.
Whether it is prudent for them to do so, to transfer those assets to Scotland or, indeed, to invest them in some other part of the world, is a matter for their decision in accordance with the laws of Scotland.
I suspect that the laws of Scotland are not dissimilar to the laws of Australia in governing the trustee’s decision about where those assets will remain or to where they may be transferred. Presumably the trustees will give appropriate regard to what is necessary for the preservation of the trust assets, the fulfilment of the purposes of the trust and the interests of beneficiaries. In that regard perhaps they will carefully study the prudent investment strategy which Mr MacKenzie obviously adopted over a very long and productive life.