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General, Wills

31 or 32, what is the Court to do?

In Re Estate of Kamo relates to the interpretation of a clause in a will that on the face of it, offends the rule against perpetuities.  The clause in question provides that:

“I DIRECT the residue of my estate shall be administered by the Public Trustee as Trustee to provide a scholarship to be known as the Kamo-Tuuta Scholarship and the net income thereof shall be utilised on an annual basis at the discretion of the Trustee for the purpose of facilitating post graduate study through the University or other recognised tertiary education system firstly for members of the Peter Kamo and/or George Tuuta families but should there be no members of such families in any particular year available for such award then secondly, for any other Maori student of Te Atiawa or Arawa descent who intends undertaking post graduate study as the Trustee shall determine.”

As noted at [6]:

“If the trust is not charitable, then, in order for the trust to be valid, a perpetuity date must be determinable in accordance with the Perpetuities Act 1964. The potential obstacle to that is that the words “and the net income thereof shall be utilised [for the specified purpose] on an annual basis” do not appear to contemplate any distribution of capital at all. And if that is so, then there is no possibility that all future interests in the trust can vest within the applicable perpetuity period.”

It is accepted that “by virtue of sheer numbers, it now seems unlikely that the Trust could operate other than for the benefit of the members of the Kamo/Tuuta families—so it is unlikely to meet the Oppenheim public benefit test.”  Further an application to register the Trust under the Estate was declined.

In Oppenheim v Tobacco Securities Trust Co Ltd, the “public benefit” test was articulated by Lord Simonds at [34] as follows:

[T]he question is whether that class of persons can be regarded as such a “section of the community” as to satisfy the test of public benefit. These words “section of the community” have no special sanctity, but they conveniently indicate (i) that the possible … beneficiaries must not be numerically negligible, and (ii) that the quality which distinguishes them from other members of the community, so that they form by themselves a section of it, must be a quality which does not depend on their relationship to a particular individual. It is for this reason that a trust for the education of members of a family, or, as in Re Compton, of a number of families cannot be regarded as charitable. A group of persons may be numerous, but if the nexus between them is their personal relationship to a single propositus or to several propositi, they are neither the community nor a section of the community for charitable purposes.

The lawyers who drafted the will were able to provide handwritten notes of Mrs Kamo’s instructions.  As noted by the Court at [20]:

“Nothing in these instructions suggests the money available for the scholarship should be limited to the income of the residuary estate. Given the nature of the trust created by the will, it seems unlikely that Mrs Kamo intended the trust to continue forever or intended that only the income was to be used each year.”

The issue for the Court became whether Mrs Kamo’s will should be corrected pursuant to s 31 of the Wills Act 2007, or interpreted by reference to external evidence pursuant to s 32 of the Wills Act.

As noted by Ellis J at [21]:

“In my view, s 32 is not the appropriate route here. That is because it is not the words used that make cl 3(b) of the will meaningless (in the sense of being void for perpetuities) but, rather, the words that have been omitted. Even with the benefit of the evidence as to Mrs Kamo’s instructions I do not think it is possible to “interpret” the words “the net income thereof” as meaning “the income and the capital”.”

In this regard see Re Gallais where the court has held that the s 32 rules for interpreting wills do not limit the scope of s 31 and that court may choose to correct the words of the will even if those words are not themselves ambiguous.

In Kamo the decision in Marfell was precisely on point. “The evidence before the court was that Mrs Kamo did not instruct cl 3(b) to be drafted to exclude the use of the capital of her residuary estate for the purposes of the scholarship. And cl 3(b) will—in light of the perpetuities problem—be left meaningless and ineffective unless it can be corrected to enable the distribution of the whole of her residuary estate within the (default) perpetuities period.”

Accordingly an correction was ordered so that the words “the net income thereof shall be utilised on an annual basis” were deleted from clause 3(b) of Mrs Kamo’s will to be replaced with “the capital and income shall be used”.

References:

  • In Re Estate of Kamo [2020] NZHC 474
  • Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 at 306; [1951] 1 All ER 31 (HL)
  • Wills Act 2007
  • Marfell v Marfell [2015] NZHC 2714

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