George Jones and wife Kathleen moved to Queensland in 1965 to take up cattle raising at “Malo”, a property of almost 3,000 hectares south west of Biloela.
George made his last will on 19 June 2002. He died one month later and was survived by Kathleen and 7 of their 8 children.
At the time of his death, George – who still owned Malo – had a half share in the neighbouring property Forest Hills with his youngest son Laurence and a half share in another, Barellen.
He also owned plant & equipment and livestock on those properties, and other assets.
In total, his estate was valued in the order of $10 million.
The “problematic” will contained only six numbered clauses. Clauses 3 and 5 were particularly confusing in that it was difficult to discern what George intended as specific gifts, and what were intended to constitute the “residue of the estate”.
The ambiguity lay in particular with a “difficult and confused” sub-clause 3(m) – which on its face appeared to be a bequest of the residue of the estate – but was thereafter divided into two sub-parts.
Sub-part A put the Malo property and all associated livestock and farming plant and machinery in trust for a period of 20 years with the income generated to be used in order of priority:
- for operational expenses, maintenance and machinery replacement
- for mortgage repayments re “Malo”
- to pay income tax on “Malo” income
- $10,000 per year to Kathleen
- to make up any shortfall in the assets available to pay the legacies referred to in sub-part B
- to pay any residue to Laurence
It went on to provide that after 20 years, “Malo” was to be sold and the proceeds divided among various grandchildren with “the balance thereof including any plant or livestock then remaining” to go to Laurence.
Sub-part B left non-rural liquid assets as specific gifts but also directed payment “of the rest and residue thereof” to various grandchildren. This was the second use of the phrase “rest and residue” – a reference to the residue of the estate – in the document.
The conflict within those will clauses meant the executor had to seek assistance from Queensland’s Supreme Court to determine what assets and funds comprised the “residue”.
The distinction between specific gifts on the one hand and residue on the other is an important one. That is because estate expenses i.e. the costs of estate administration, must be met from the residue of the estate unless there is a specific gift charged with their payment.
And if the residue is insufficient to meet all administration expenses, specific gifts are reduced proportionally to contribute to the shortfall.
The expenses of this “lengthy, acrimonious and extremely costly” administration had been enormous. They included the estate’s costs of $430k in resisting Laurence’s unsuccessful application for a greater share of George’s estate.
The issue came before Justice Graeme Crow in December 2019 who had to decide whether the residue included the assets referred to in sub-part A, including “Malo” itself, or whether it was confined to the assets gifted in sub-part B.
His honour ruled that the “residue” was limited to that part of the estate specified in sub-part B which would ordinarily have reduced the benefit to be ultimately received by George’s grandchildren. And if those assets were of insufficient value to meet all expenses, each specific gift in the Will would have been proportionately reduced to the extent needed to make up the expense shortfall.
However, Justice Crow – in interpreting the Will as a whole – decided that was not the will-maker’s intention and that expenses should be paid from another source.
He ruled the provision in sub-part A that Malo income should top up any shortfall in the benefits intended for his grandchildren by way of sub-part B and the further benefit to them on the expiration of the Malo trust, evidenced George’s intention that administration expenses were to be paid from that source rather than from the residue itself.
That ruling had the effect of ultimately reducing Laurence’s estate share.
The court also approved payment to the executor of an annual salary of $20,000 as “executor’s commission, such salary reducing after Malo was sold. This was instead of the conventional basis of a percentage of the estate assets.
The confused will drafting was clearly inadequate to accommodate George’s relatively complex estate plan. Court intervention was inevitable particularly in circumstances where strained relationships and other court litigation made a negotiated agreement impossible.
The legal expenses and tensions among George’s family that kept on for the better part of two decades could potentially have been avoided had his will better set out the source of funds for paying estate expenses.