Page 1

Page 2 1 of 10 DOCUMENTS: CaseBase Cases

Elder's Trustee & Executor Co Ltd v Federal Commissioner of Taxation

(1966) 118 CLR 331; (1966) 40 ALJR 371; BC6600090 Court: HCA Judges: Barwick CJ, Taylor and Windeyer JJ Judgment Date: 29/11/1966

Catchwords & Digest

Taxation and revenue -- Miscellaneous taxation -- Estate duties -- Dispositions prior to death Appeal against assessment of tax. Testator land owner in fee simple transferred life estate interest in land to self and wife and remainder to son (first transfer). Subsequently excised and transferred portion of land to church. Subsequently transferred whole freehold to third party prior to death. Respondent assessed estate duty payable on basis that testator's estate included whole parcel of land. Determined first transfer amounted to 'settlement' under (CTH) Estate Duty Assessment Act 1914 (Act). Determined land comprised in settlement made by testator under which had interest for life under s 8(4)(c). Appellant estate claimed first transfer did not contain 'dispositions to take effect after the death of the settlor' under Act. Claimed first transfer operated to transfer absolute vested interests and dispositions took effect immediately upon registration. Claimed Act s 8(4)(c) did not apply as testator did not have life interest under first transfer by virtue of disposition of remainder to son. Established first transfer amounted to 'settlement' in Act notwithstanding testator's intention for immediate effect of disposition. Act s 8(4)(c) applied to first transfer which amounted to transfer of interest comprising whole fee simple and which purported to transfer to testator and to wife for joint lives. Not necessary to consider effect of transfers subsequent to first transfer as land comprised in first transfer brought to duty under Act s 8(4)(c) whether or not other interests created by first transfer subsist. Appeal dismissed. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Considered/ Taxation Case D35 (1972) 72 ATC 200 Followed Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations Cited Taxation, Deputy [1960] ALR 196; Commissioner of (SA) v (1960) 33 ALJR 506

Court TBR

Date 28/6/19 72

Signal

Court HCA

Date 29/2/1960

Signal

Page 3 Simpson Elder's Trustee & Executor Co Ltd v Commissioner of Succession Duty Commissioner of Stamp Duties (NSW) v Thomson

Cited

[1945] SASR 34 (1927) 40 CLR 394; [1928] ALR 30; (1927) 1 ALJR 323; BC2700024 [1911] VLR 277a; (1910) 11 CLR 87; (1910) 16 ALR 455; [1910] HCA 47; BC1000037

SASC

7/5/1945

Cited

HCA

10/12/1927

Cited

Rosenthal v Rosenthal

HCA

16/9/1910

Legislation considered by this case Legislation Name & Jurisdiction Aged and Infirm Persons' Property Act 1940 (SA) Estate Duty Assessment Act 1914 (Cth) Words & Phrases

Provisions -

settlement -- to take effect after the death -- under

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2 of 10 DOCUMENTS: Victorian Reports/Judgments/1967 VR/Re FAULWASSER, deceased - 1967 VR 182 - 23 August 1966 7 pages

Re FAULWASSER, deceased - [1967] VR 182

SUPREME COURT OF VICTORIA ADAM, J 23 August 1966
Will -- Gift of residue -- Postponed to life interest -- Directions for substitution and accrual -- Time of vesting -- In interest or possession -- Divestment. The testator, who died in 1921, gave a life interest in the whole of his estate to his wife, and, subject to the payment of a legacy, bequeathed the remainder of his personal estate thereafter to his seven named brothers and sisters. The will then provided: "in the event of any of the said residuary legatees dying without having attained a vested interest leaving issue, the share of the legatee so dying shall go to his or her child or children, but in the event of the said residuary legatees dying without having attained a vested interest, without leaving issue, then the share of the legatee so dying shall be divided equally between the surviving residuary legatees." The seven named legatees survived the testator, but five of them died before the testator's widow, some leaving children surviving them and some without issue. Held: the residuary personal estate of the testator vested indefeasibly in the seven named legatees on the death of the testator, and was not liable to be divested in the event of the death of a legatee after that time and before the period of distribution, either in favour of survivors or in favour of children of legatees so dying. Re Mudie, [1916] VLR 265, applied. Young v Robertson (1862) 4 Macq 314, distinguished. Originating Summons The facts are sufficiently set out in the headnote and the judgment, infra. JVC Guest, for the plaintiffs. SG Hogg, for the second defendants. AG Uren, for the third defendant. ICF Spry, for the fourth defendant. The first and fifth defendants did not appear and were not represented.

Adam, J:

Page 6

This is an originating summons raising questions arising upon the construction of the will of Otto Faulwasser, deceased. He died in February 1921, and his will was made in January of that year. The case has been very well and fully argued before me, and I think that no advantage would be served by my reserving my decision, as I have formed a clear view of what I should do. There are quite a number of questions raised in the originating summons, but I have found it necessary only to deal with one of them, the others being dependent on my reaching a different conclusion to the one I have on that one question. The will was obviously drawn by a solicitor, and uses legal terminology. The dispositions are for the most part quite simple. The testator, after bequeathing certain furniture and household effects to his wife, then directed his executrix to permit his wife to receive the rents and profits from his real estate, during her life. He gave to te executrix power to sell any of the real estate and invest the proceeds paying the income to the wife for life. He also gave the income from his personal estate to his wife for her life. It happens he appointed the wife also the executrix, but I do not think anything turns on that. Having given a life interest in the whole of his estate to his wife, he then provided that after the death of his wife, all his personal estate should be realized and, out of the proceeds, a legacy should be paid to a niece of his wife, Doris Norma Walker, of 250 pounds, and the balance of the estate, that is the residue, should be divided equally between his seven named brothers and sisters. Up to that point certain things are quite clear. Although the direction to pay the legacy to the niece after the death of the wife, and the direction to divide the residue after the death of the wife, among the named brothers and sisters, were in futuro, these were clearly all vested gifts as from the death of testator. The principle applicable is that stated in Brown v Moody, [1936] AC 635, where in such a case as this, there being nothing personal in the contingencies affecting the apparently future gifts, a direction to pay the income of a fund to one person during his lifetime, and to divide the capital among other named and ascertained persons on his death, even though there were no direct words of gift, vested the capital a morte testatoris in the remaindermen. The reason was that the future disposition of the capital was referable, not to any intention to postpone the vesting, but to the convenience of the administration of the estate so as to let in interests which are to be first enjoyed by others. So, if this will had stopped at this point, it is quite clear, in my opinion, that the seven named beneficiaries would have taken indefeasibly vested interests at the death of testator whether or not they survived the life tenant. The will goes on to provide that "in the event of any of the said residuary legatees dying without having attained a vested interest leaving issue, the share of the legatee so dying shall go to his or her child or children, but in the event of any of the said residuary legatees dying without having attained a vested interest, without leaving issue, then the share of the legatee so dying shall be divided equally between the surviving residuary legatees". [1967] VR 182 at 183 The first question arises because all of the named beneficiaries are now dead, and what is more important, five of them died between the date of testator's death and the death of his widow, the life tenant-- some without issue, others leaving children surviving them. The question is whether in the case of those who died during the lifetime of the life tenant, their intended shares remained in their estates, in other words whether they had indefeasibly vested shares at the death of testator so that their subsequent deaths during the life tenant's lifetime were immaterial, or whether the shares intended for them, by reason of their dying before the life tenant, passed away from them--in the case of those dying leaving children, to their children; in the case of those leaving no children, to such of the other residuary beneficiaries as answered the description "surviving residuary legatees". Two of the named residuary legatees survived the life tenant. They were Elizabeth Wilhemena Cornwell and Bertha Augustus Hooper. No one contends that they did not, seeing that they survived the life tenant, acquire indefeasibly vested interests which because they are now dead, vest in their personal representatives. The question whether the seven named residuary beneficiaries took indefeasibly vested interests at testator's death or interest liable to be divested in the event of death before the life tenant, depends on the proper

Page 7 meaning to be attached to the final substitutional clause. The question is whether the attaining of vested interests referred to in that clause required them to survive the life tenant or whether it was sufficient that they survived the testator. [1967] VR 182 at 184 The rule is now clearly established that the word "vest" or the words "vested interest" prima facie refer to vesting in interest, not vesting in possession. That is established by quite a number of authorities. I think it sufficient to refer to the references which Mr. Spry gave me and to the cases which are noted in Halsbury, 3rd ed., vol. 39, p. 1119; Williams on Wills, 2nd ed., p. 563; Theobald on Wills, 12th ed., p. 604. At one time the rule was, I think, thought to be the other way, but whatever formerly was the view it is now settled that, prima facie, "vest" refers to vesting in interest and not vesting in possession, although the word is not so inflexible that it may not be given what in law is its secondary meaning of vested in possession. The question is what meaning should be assigned to the word "vested" in the present context. In the first limb, if I may so describe it, of the substitutional clause, we find this: "In the event of any of the said residuary legatees dying without having attained a vested interest leaving issue, the share of the legatee so dying shall go to his or her child or children." Is there any reason, or sufficient reason, for giving to the expression "attaining a vested interest" in this context, a meaning other than acquiring a share which is vested in interest? If not, as I have earlier indicated, each of the seven residuary beneficiaries having survived the testator and having thereby acquired a vested interest, would not be subject to any defeasance under this provision in favour of their children should they have died leaving children before the life tenant. It has been suggested that while the word "vest" primarily refers to vesting in interest, it is a little absurd to give it that meaning in this part of the clause. If "attained a vested interest" means attained an interest which has become vested, clearly it means not having predeceased the testator, and it is submitted that this is a curious circumlocution. If that is what was meant, why did testator not say "in the event of any of the residuary legatees dying before me" leaving issue? Why express it "without having attained a vested interest" and create the problem that now faces us? I think there is weight to be attached to that, certainly from the layman's point of view. It seems rather absurd that the event of predeceasing the testator should be so described, whereas if in this context "vest" means "vest in possession" (while it might then of course have been expressed as the event of a residuary legatee "dying before the life tenant" or before the widow) it would perhaps not be so inappropriate to describe the event as "dying without having attained a vested interest" But while I think there is some force in this argument, I have to recall the injunction that the duty of the court is to construe the language used and not to speculate as to intention because the consequences may seem improbable or even lead to harsh or unexpected results: see per Buckley, J, in Re James Trust, [1962] Ch 226; [1960] 3 All ER 744. So this consideration alone is not sufficient to overcome the meaning of the words that he has used, although it is one of the circumstances which with others might compel a court to depart from the literal meaning of the words he has used. But the primary rule in the construction of wills is to give to all the words used their proper legal signification unless it is clear that that was not the intention. As to this particular argument that we have a circumlocution here, while it does create doubts as to whether the testator really meant what the law would attribute to the words "attained a vested interest", it is not such a doubt as I feel one can give effect to against the words used, unless there are other sufficient reasons to depart from the meaning in law of these words. If this first limb of the substitutional clause had stood by itself, I would feel there was quite insufficient ground for assuming that the attaining of a vested interest had the secondary meaning of taking in possession by outliving the life tenant. Certainly there is no case to which I have been referred which would justify any different conclusion. [1967] VR 182 at 185 As to that first limb of the substitutional clause, one would have to find in the second limb of the clause a sufficient context to justify giving it some meaning other than its primary meaning. The second limb of this clause provides for the event of any of the residuary legatees dying without having attained a vested interest, without leaving issue, in which case the share of the legatee so dying shall be divided equally between "the surviving residuary legatees". The main submission on this part of the clause, as indicating that the attaining of a vested interest means living to the period of distribution or the time when the interest vested in possession, rests on the gift over to the "surviving" residuary legatees. It is

Page 8 contended that that means to the residuary legatees who survive the life tenant. If that is correct then it makes it simpler, for the purpose of conforming to the intention of the clause, to treat the interests which are given over, as intended to be defeasible until the death of the life tenant, at which time the gifts over to the survivors would take effect. In other words, it would provide a reason, if the words were not too intractable, for reading the expression "attained a vested interest" as equivalent to"attaining an interest vested in possession". The basis for this construction of the second limb of the clause is primarily rested on the decision of the House of Lords in Young v Robertson (1862) 4 Macq 314, in which, upon a somewhat similar provision to this last part of the substitutional clause, their Lordships read the words "vested" as referring to a vesting in possession and the words "surviving" as referable to the period of distribution. It was contended before me, and with some force, that there are not sufficient differences in the clause now under consideration from the considered in Young v Robertson, supra, to justify my reaching a different conclusion. One must concede, of course, the high authority of that case, being a decision of the House of Lords, and if it is indistinguishable, then, despite the criticisms to which it has been subjected, it would be my duty to follow it. If I felt constrained to follow it, then I would be obliged to give to the expression attained "a vested interest" the meaning of "an interest vested in possession", not only in the final part of this clause but in the earlier part also as the identical words "attained a vested interest" must be given the same meaning, in both clauses. The decision in Young v Robertson, supra, clearly proceeded on the basis, first of all, that the gift over on the death without issue before the share vested to the survivors referred to those surviving at the period of distribution. It was treated as a prima facie rule that survivorship in such a context referred to surviving the period of distribution, and I should think from the language of the judgments, as an almost inflexible rule to be departed from only in a very special context. Having first construed the clause as prima facie passing the share of those dying to those who were living at the death of the life tenant--the period of distribution--their Lordships where disposed to treat the reference to the beneficiaries having died before their shares were "vested" as referring to the same point of time at which survivorship was to be determined--that is, the period of distribution; in other words, that the primary gifts were intended to remain defeasible right up to the period of distribution, at which time they passed to those then surviving. [1967] VR 182 at 186 The case has not escaped a great deal of criticism, in particular because the House of Lords treated the word "vested" as an equivocal word and, according to the leading judgment at least, as prima facie indicating vesting in possession rather than vesting in interest. Thus the requirement, that the gift over should only take effect in case a beneficiary died before his share"vested", was not treated as in any way inconsistent with the presumption that the gift over was in favour of the survivors at the death of the life tenant, i.e. at the period of distribution. Accordingly, the "vesting" was construed to refer to a vesting in possession and not to a vesting in interest. No doubt this led to a symmetrical and harmonious construction of the will. But in so far as their Lordships did treat the expression "vest" as no less susceptible to the meaning "vested in possession" than to "vested in interest", this decision must be taken to have been disapproved by the later weight of authority. While on is bound by the actual decision, one is tempted to distinguish it on what might otherwise seem somewhat unsubstantial grounds. In the present case it is more difficult, I think, to treat the word "vest" as meaning "vested in possession" rather than "vested in interest" because the expression is dying "without having attained a vested interest". That, in itself, points to a vesting in interest rather than a vesting in possession. One cannot overlook the circumstance that the will has been drawn by a lawyer and to the lawyer the attainment of "a vested interest" has a very precise signification. Accordingly, it would need a very strong indication of a contrary intention to warrant giving to the expression "attained a vested interest" any meaning other than obtained a share vested in interest. Does the reference to survivorship-- that the share of a deceased legatee is to go to the surviving residuary legatees--afford sufficient warrant for giving this secondary meaning to "attaining a vested interest"? Here again the view expressed by the House of Lords have not escaped criticism (I mean the proposition that prima facie survivorship in such a context refers to the period of distribution): see Jarman on Wills, 8th ed., p. 1994, note (o).

Page 9 There are several cases which would certainly warrant a different conclusion. Some of these I have been referred to. I have in mind such cases as White v Baker (1860) 2 De GF and J 55; 45 ER 542; Ive v King (1852) 16 Beav 46; 51 ER 693; and Crowder v Stone (1827) 3 Russ 217; 38 ER 558, all of which are discussed in Jarman on Wills, 8th ed., pp. 1991 et seq. In all of these, in a context not unlike the present, the gift over to survivors on the death of a legatee before his interest vested was considered to take effect in those surviving at the time of the legatee so dying, that being actual event when substitution was to take effect, and survivorship was not treated as referable to the period of distribution. I would, myself, consider, in the absence of authority compelling a different conclusion, that, according to the natural meaning of words, a gift over of a share of one of a number of residuary legatees dying without issue to the surviving residuary legatees referred to those who were the survivors at that point of time, rather than at the period of distribution. [1967] VR 182 at 187 If there is no settled rule that prima facie survivorship in such a context refers to the period of distribution, that destroys the very foundation for the decision in Young v Robertson, supra, and makes its reasoning inapplicable in this case, because there would then be no compelling reason for extending the period for the defeasance of the primary gift up to the period of distribution. That was only justifiable on the reasoning in Young v Robertson, supra, because the gift over was considered to take effect in those surviving at the period of distribution. If, as I consider, the preferable view be that a gift over on the death of a legatee, without having attained a vested interest to the surviving legatees, means those who were surviving at the time he died not having attained a vested interest, that leaves open the question whether vested means vested in possession or in interest. In that case one would naturally turn to the prima facie meaning in law of "attaining a vested interest", and in this case that means a morte testatoris. What I have said would cover my interpretation of the material clause, but I think it proper to say that while I have not referred in reaching this conclusion to a decision of this Court (Re Mudie, [1916] VLR 265). I am confirmed in the views that I have expressed by the decision there reached by Cussen, J, in a will substantially identical in its terms. His authority as a lawyer, not only in this State but elsewhere, needs no comment from me, and one would be courageous, sitting as a primary judge, in differing from a conclusion on such a matter which he had reached after reserving his judgment. The question is whether there is any material distinction between the will in that case and the will now under consideration. There are some points of difference, but I am quite satisfied that the differences would not have affected his Honour's decision had this case come before him. Cussen, J, in that case expressed doubts as to the views expressed in Young v Robertson, supra--views on which that case primarily founded --that the gifts over to the survivors in that case referred to the survivors at the period of distribution. Cussen, J, also disagreed with the view that the word "vest" is one that primarily signifies vesting in possession rather than vesting in interest. His Honour also referred to a distinction present in Re Mudie, supra, and also in the case before me, a distinction from Young v Robertson, supra, that in Young v Robertson the substitutional clause had provided only for the one event--that of a beneficiary dying without issue before his share vested, in which case his share was to go to the survivors. In both Re Mudie, supra, and in the present case, as I have indicated, there is also a substitutional provision in the event of a beneficiary dying without his share vesting leaving issue, in which case it is provided that the share of the legatee so dying is to go to his or her children. There is nothing like that in Young v Robertson, supra, and as in that particular contingency there seems to be no doubt that the gift over would go to the children regardless of whether the children survived the period of distribution, that suggests that there is even less reason than there was in Young v Robertson for treating the word "surviving" in the final part of the clause as referring to the period of distribution. If one should assimilate the consequences arising from death before the vesting of a share in each limb of the final clause, then the surviving of the life tenant would seem to be irrelevant: what is important is the surviving of the person on whose death the gift over takes effect. But there was in Re Mudie, supra, one point referred to by his Honour which distinguishes it from the present case and, no doubt, made it easier for him to reach the decision he then did. In Mudie's will there was, quite apart from such a provision as we are here dealing with, another provision by which there was a

Page 10 gift to a beneficiary, Olive Hellmore, and in regard to that gift there was an express provision "if the said Olive Hellmore shall die before my said wife" then a substitutional gift was to take effect. That, of course, suggested to his Honour that a distinction should be drawn between the words"attaining a vested interest" in the substitutional clause relating to the residue; and the expression "shall die before my said wife" which was the period of distribution. To give a different meaning to the two forms of expression, of course, strengthened the conclusion that the attaining of a vested interest meant precisely what it said and referred to the date of testator's death, which was the time the gifts in question vested in interest. As I say, the circumstance is not present in the case before me, but it does not persuade me that there is any substantial distinction between this case and in Re Mudie, supra, on which I found a different result. I might add that, in Re Mudie, supra, Cussen, J, stressed as one of the points in which he could distinguish Young v Robertson, supra, from the case before him, the use in Re Mudie of the expression "attain a vested interest" instead of the simple word"vest" --a distinction relevant also in the present case. I was referred at the conclusion of argument to a New Zealand case Re McLean, [1938] NZLR 181, in which Fair, J, followed Young v Robertson, supra, on the construction of a will not materially different from that before me. That decision appears to me, with all respect, to have followed Young v Robertson, supra, uncritically and I am not prepared to accept it as correct, particularly in face of Re Mudie, supra. [1967] VR 182 at 188 The reasons that I have given--and I have not, I think, done justice to all the arguments put before me by counsel--suffice to indicate why I think in this will there is no sufficient reason not giving to the expression "attained a vested interest" what is in law its primary signification and, that being so, the clauses in question should be read as "in the event of the said residuary beneficiaries dying before me" (the testator)--without leaving issue then the share of the legatees so dying is to go to his or her children, and likewise "in the event of the said residuary legatee dying before me", without leaving issue, then the share is to go over to the surviving residuary legatees. I have not overlooked the point that what goes over, according to the terms of the will, is the "share" of the legatee so dying, and in certain contexts that would indicate a reference to something that had already vested going over, and, of course, you could not fail to attain a vested "interest" in something which had already vested. But the same point arose before Cussen, J, and he was not disposed to attach significance to the use of the word "share" rather than the "share which one would have taken if one had not died" or the"expectant share", because the word share is commonly used not to describe something that is already vested, but as definitive of a portion of the estate which has been referred to. I take it in that same sense in this will. That means that, in my view, the residuary estate vested indefeasibly in the seven named brothers and sisters on the death of the testator, and was not liable to be divested, either in favour of survivors or in favour of their own children in the event of death after that time and before the period of distribution. That conclusion indicates that I should answer question 1 (a) of the originating summons, which deals with the interests of all the seven except the two who had survived the life tenant and about whom there was no dispute--Yes, the residuary legatees named in the will attained vested interests in the said estate within the meaning of the expression "vested interest in the will." [His Honour then dealt with another question.] Order Order accordingly. Solicitors for the plaintiffs: Rodda, Ballard and Vroland. Solicitor for the second defendant: K Fraenkel. Solicitors for the third defendant: Walters and Griffin.

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Solicitors for the fourth defendant: Pearce and Webster. DOUGLAS GRAHAM

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Page 13 3 of 10 DOCUMENTS: CaseBase Cases

Attorney-General (NSW) v Perpetual Trustee Co Ltd

(1966) 115 CLR 581; (1966) 40 ALJR 97; BC6600650 Court: HCA Judges: Barwick CJ, Taylor and Owen JJ Judgment Date: 20/5/1966

Catchwords & Digest

Succession -- Wills and codicils -- Construction -- Testator's intention Appeal against decretal order. By codicil, testator devised certain lands for building hospital and after deaths of wife and nephew all real estate and property to be sold and proceeds put towards building hospital. New South Wales Supreme Court (NSWSC) declared that devise of certain lands was subject to prior life estate given by will in favour of certain named nephews of testator. Whether at testator's death it was practicable to carry into execution trust for building of hospital or whether reasonable prospect that it would be practicable to do so in future because of subsisting prior life interests in subject land. NSWSC authorised sale of subject land and proceeds were paid to respondent. Irrelevant that prior subsisting interests in subject land prevented execution of trust immediately upon testator's death. Question of practicability to be considered at date of testator's death. Testator's intention was to devise land to be used for hospital and thereafter trust of moneys created to be applied towards building of hospital and as contribution to supplement income of hospital. Trust validly created as charitable trust and had been irrevocably devoted to charity. Rights of beneficiaries and next of kin excluded and proceeds of sale of land administered cy-pres. Appeal allowed. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Followed Harris v Skevington [1978] 1 NSWLR 176

Court NSW CA

Date 11/4/19 78

Signal

Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1964) 111 CLR 402; Attorney-General (SA) v [1964] ALR 955; Cited Bray (1964) 37 ALJR 447; BC6400450 Cited Davies v Perpetual Trustee [1959] AC 439; [1959] Co (Ltd) 2 All ER 128; [1959] 2

Court HCA UKPC

Date 25/2/1964 7/4/1959

Signal

Page 14 Applied Considered Cited Applied Cited Tacon, Re; Public Trustee v Tacon White's Will Trusts, Re; Barrow v Gillard Willis v Commonwealth Slevin, In re; Slevin v Hepburn Attorney-General v Stepney WLR 673 [1958] Ch 447; [1958] 1 All ER 163 [1955] Ch 188 (1946) 73 CLR 105; [1946] ALR 349; (1946) 20 ALJR 195; BC4600024 [1891] 2 Ch 236 (1804) 10 Ves 22; (1804) 32 ER 751 EWCAC iv EWHCC h HCA EWCAC iv 19/12/1957 24/6/1954 6/8/1946 20/3/1891

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Page 16 4 of 10 DOCUMENTS: CaseBase Cases

Glynn v Federal Commissioner of Taxation

(1964) 111 CLR 169; (1964) 38 ALJR 175; BC6400330 Court: HCA Judges: Kitto J Judgment Date: 4/9/1964

Catchwords & Digest

Trusts -- Trustees -- Shares held in trust -- Assessment of trustee's estate Appeal against assessment of deceased's estate. At date of death deceased registered holder of company shares bought 34 years earlier. In share transfer forms consideration shown to have been paid by deceased as trustee for two sons. Approval of transfers at meeting of directors of company where deceased was Chairman was recorded in minute book and signed by deceased. Share certificates signed by deceased certified that the sons were holders of shares by their trustee, the deceased. Deceased did not communicate existence of trusts to sons. Deceased did not account to sons for any dividends derived from the shares but acknowledged dividends belonged beneficially. Respondent claimed shares should be included in deceased's estate for estate duty purposes. Held: allowing the appeal per Kitto J: (i) The correct conclusion from the circumstances was that there was no reason to doubt that the deceased intended the immediate constitution of the trusts. (ii) The deceased's course of conduct after the share transfers did not seem to justify an inference that the absolute trusts to which the deceased repeatedly assented in the written documents were in truth subject to an unexpressed qualification reserving a life interest to himself. Although the creation of the trusts was never disclosed to the two beneficiaries there was no secrecy about it. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Cited Cited Referred to Cited Cited Taxation Case M25 Taxation Case J59 Glynn v Commissioner of Stamp Duties (NSW) Taxation Case G47 Taxation Case G46 (1980) 80 ATC 174 (1977) 77 ATC 505 (1977) 7 ATR 417 (1975) 75 ATC 303 (1975) 75 ATC 289

Court TBR TBR NSW SC TBR TBR

Date 24/4/19 80 11/10/1 977 19/5/19 77 15/7/19 75 8/7/197 5

Signal

Page 17 Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1953) 90 CLR 86; Distinguishe Kauter v Hilton (1953) 27 ALJR 714; d BC5300820 (1940) 57 WN (NSW) Cited Teasdale v Webb 151 (1920) 28 CLR 178; Commissioner of Stamp (1920) 26 ALR 210; Cited Duties v Jolliffe [1920] HCA 45; BC2000036 Legislation considered by this case Legislation Name & Jurisdiction Estate Duty Assessment Act 1914 (Cth)

Court HCA NSWSC HCA

Date 17/12/1953 12/6/1940 14/8/1920

Signal

Provisions s 26

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5 of 10 DOCUMENTS: Victorian Reports/Judgments/1961 VR/Re LEWIN - 1961 VR 528 - 28 November 1960 9 pages

Re LEWIN - [1961] VR 528

SUPREME COURT OF VICTORIA SHOLL, J 29 July, 28 November 1960
Will -- Tenant for life -- Remaindermen -- Income accumulating during administration of estate -Distribution as between tenant for life and remaindermen -- Rule in Re Earl of Chesterfield's Trusts -- Rate of interest appropriate in application of the rule. The testator's will provided, in effect, for legacies of 4000 pounds to each of three children (with discretion to trustees as to time of payment and without interest), a life interest in the residue to his widow, and after her death both capital and income of the residuary estate to be upon trust for the three children. The testator's estate virtually consisted of an interest in the will of his deceased sister, the assets of whose estate consisted of mortgages secured on real estate and not due for repayment at her death. Realization and administration of the sister's estate extended over several years during which time the mortgage loans accumulated considerable interest. The testator died in December 1955. In July 1959, his trustees received from his sister's estate 31,000 pounds, 5904 pounds of which was accumulated interest. Held: the widow was entitled to receive a sum determined by calculating the sum which, put out at five per cent per annum on the date of the testator's death, and accumulating at compound interest, with yearly rests, would, with the accumulation of interest, have produced by July 1959, the sum of 19,000 pounds (i.e. 31,000 pounds, less the amount of the legacies to the three children)--the sum so calculated being carried to corpus of residue, and the difference between that sum and 19,000 pounds being paid to the widow tenant for life as income of residue in respect of the period referred to. Observations on the adoption of the rate of five per cent per annum, and on the omission of income tax from the calculation. Re Earl of Chesterfield's Trusts (1883) 24 Ch D 643, applied. Meyer v Simonsen (1852) 5 De G and Sm 723; 64 ER 316, not applied. Originating Summons The plaintiffs, who were the executors of the estate of Hamilton Bruce Lewin, deceased, caused this originating summons to be taken out to determine the rights to income of the deceased's widow, Irene Margaret Catherine Lewin, who was the tenant for life of the settled residue of the estate of the deceased. The testator by his will left the whole of his real and personal estate after payment of debts, etc., to certain trustees upon trust to convert into money with the fullest power and discretion to postpone such conversion and after such conversion to pay his three children 4000 pounds each free of duty with absolute discretion as to time of payment, and without liability for interest in the event of delay in payment, and, subject to payment of these legacies, to invest the residue (comprising both ready moneys and moneys subsequently

Page 20 coming into the hands of the trustees pursuant to the trust) and to pay the income therefrom to the testator's widow for life and after her death to hold both capital and income of the residuary estate upon trust for his three children. The testator died on 11 November 1955. At that time he possessed personalty worth only 50 pounds, but on 19 September 1955 his sister had died leaving him a substantial part of her estate, much of which consisted of mortgages secured on real estate not due for repayment at her death. Realization and administration of her estate consequently lasted over a period of years during which time the mortgage loans accumulated considerable interest. On 2 July 1959, the sum of 31,000 pounds, representing material assets from the testator's sister's estate plus 5904 pounds 4s11d. interest accumulated during the period of realization, was paid to the testator's estate pursuant to his sister's will. [1961] VR 528 at 529 L Voumard, QC, with him, AH Croxford, for the plaintiffs. Nubert S Stabey, for the widow, Margaret Catherine Lewin, and two children, Frederick Bruce Lewin and Margaret Jane Lewin, being the first, second and fourth defendants. John N Bennett, for the married daughter of the deceased, Helena Alwyn Monro, the third defendant.

Sholl, J:
This is an originating summons to determine the rights to income of the tenant for life of the settled residue of a testamentary estate. The testator, Hamilton Bruce Lewin, died at Cheltenham, Victoria, on 11 November 1955. He left him surviving his widow, two adult daughters and an adult son who are all defendants in these proceedings. By his will dated 26 October 1955, he appointed the three plaintiffs his executors and trustees and proceeded as follows: "After payment of my just debts funeral and testamentary expenses probate and estate duties I give devise and bequeath the whole of my real and personal estate wheresoever situate to my trustees upon trust to sell call in collect and convert into money the said real and personal estate at such time or times and in such manner as they shall think fit (but as to reversionary property not until it falls into possession unless it shall appear to my trustees that an earlier sale would be beneficial) and so that they shall have the fullest power and discretion to postpone the sale calling in collecting or conversion of the whole or any parts of the said premises including leaseholds or other property of a terminable or wearing out nature during such period as they shall think proper without being responsible for loss and out of the moneys to arise from such sale calling in collecting and conversion as aforesaid together with ready moneys forming portion of my personal estate to pay (a) to my son Frederick Bruce Lewin the sum of 4000 pounds free of duty for his own use absolutely; (b) to my daughter Margaret Jane Lewin the sum of 4000 pounds free of duty for her own use absolutely; (c) to my daughter Helena Alwyn Monro the sum of 4000 pounds free of duty for her own use absolutely and I declare that payment of the legacies hereinbefore bequeathed or any of them may be made wholly or in part in such manner and at such time or times as my trustees shall in their absolute discretion think fit having regard to the amount of moneys available from time to time for payment of such legacies provided that no interest shall be payable to any of my said children in respect of any delay on the part of my trustees in payment in full of any such legacy and subject to the payment in full of such legacies I direct that my trustees shall in their absolute discretion as and when they shall think fit and from time to time invest the residue of moneys arising from time to time and coming into their hands pursuant to the trust hereunder together with ready moneys forming part of my estate in any of the investments authorized by law and shall stand possessed of such investments and of all parts of my estate (hereinafter called my

Page 21 residuary estate) (a) upon trust to pay the income thereof to my wife Irene Margaret Catherine Lewin during her lifetime and after her death, (b) upon trust as to both capital and income of my residuary estate for my said children in equal shares." I need not read a substitutionary clause which did not operate since his children all survived him. [1961] VR 528 at 530 The testator's own estate was very small. It comprised only 50 pounds personalty and (as I was told by counsel for the plaintiffs) he had been a joint tenant with his wife of the house in which they resided, his interest surviving to her on his death. But on 19 September 1955, less than three months before his own death, his sister Mrs. Helena Clarke, a widow possessed of a large estate, died in Hobart, and under her will dated 11 December 1947 he was her sole residuary beneficiary. Her estate was sworn for probate in Tasmania at over 90,000 pounds gross, and Mr. Bernasconi's affidavit shows that at 31 January 1958 the net residue after allowing for debts, duties, legacies, and administration expenses was estimated at over 47,000 pounds. Her administrator c.t.a., appointed on the authority of the executor named in her will, is the National Executors and Trustees Company of Tasmania Ltd. More than 70,000 pounds of the gross assets of her estate consisted of mortgages secured on real estate in Tasmania, most at least of which were not yet due for repayment at her death. By her will, after bequeathing two small specific legacies, she proceeded in CL4 as follows: "I devise and bequeath my real and residuary personal estate to my trustee upon trust to realize the same and after paying out of the net proceeds thereof my debts and funeral and testamentary expenses all duties in the nature of probate estate legacy or succession duty payable on my estate and every part thereof to hold the balance upon the following trusts." And (a) of those trusts reads: "To set aside and invest an amount sufficient to provide out of the income thereof for the payment to Frances Neal of Hobart aforesaid spinster the sum of 3 pounds per week during her life such payments to commence from the date of my death and upon her death to hold such amount upon trusts hereinafter declared concerning my residuary estate." Then followed directions to pay four pecuniary legacies. By CL5 she directed payment of all duties out of residue. By CL6, CL7 and CL8 she provided as follows: "6. I direct my trustee to hold the balance of my estate for my brother Bruce Lewin of Fairfield in Victoria absolutely but if he shall not be living at my death then to hold the same for such of his children as shall be living at my death and if more than one in equal shares 7. I declare that notwithstanding the trust for realization hereinbefore contained my trustee may allot such of the securities which I may hold at my death as he shall see fit towards creating the fund hereinbefore directed to be set aside for the said Frances Neal. 8. I empower my trustee to postpone the realization of any part of my estate during such period as he shall think proper with the same full powers of management during such postponement as if he were absolute owner." Her trustee set about realizing and administering her estate but of course it went on receiving interest from her mortgagors until the loans were repaid or (as happened in many cases) the mortgages were, by way of realization, taken over by the trustee company as investments for other estates which it was administering. On 19 June 1959, the trustee company paid to the plaintiff's agents in Tasmania by way of an interim distribution of residue the sum of 32,124 pounds 17s 9d. But, by reasons of deductions or retentions not particularized or explained in the exhibits to the affidavits, those agents remitted to the plaintiff's solicitor only 31,000 pounds which he received on 2 July 1959. It has been calculated by the trustee company that in the 32,124 pounds 17s 9d. was included 5904 pounds 4s 11d. representing income received by Mrs. Clarke's estate as income of the capital assets thereof from the date of the death of her brother, the testator, on 11 November 1955, to 17 April 1959. The total income which the company calculated from the date of her own death on 19 September 1955 to 17 April 1959 was 6306 pounds 4s 7d., but after deducting 401 pounds 19s 8d. attributable to the period between her death and that of her brother the balance is 5904 pounds 4s 11d. A later calculation shows that from 18 April 1959, to 30 November 1959 the company has received as income a further 1604 pounds 4s 11d., but no payment other than the 31,000 pounds has yet been made to the plaintiff's or their agents. [1961] VR 528 at 531 The question for my decision is what rights the testator's widow has in the sum of 31,000 pounds, as the

Page 22 tenant for life of the testator's residuary estate. It would appear from the facts above recited that, although he died more than five years ago, she has not as yet received any income under his will. Three different contentions were advanced before me: (1) It was argued for the widow, and for her son and her unmarried daughter (though the contention was against the pecuniary interests of these two children) that she was entitled to the whole of the 5904 pounds 4s 11d. (income of the residuary assets of Mrs. Clarke's estate, included in the sums from which the payment of 31,000 pounds to the testator's estate resulted), as being income also of the testator's residue to which she was entitled without apportionment or other deduction. From the balance remaining after deducting the 5904 pounds 4s 11d. from the 31,000 pounds, that is to say 25,095 pounds 15s 1d., there should, it was argued, be deducted the 12,000 pounds for the three children's legacies of 4000 pounds each, and the balance then left, namely 13,095 pounds 15s1d., should be invested as corpus of residue in the testator's estate, the widow receiving the income thereof thereafter for life. (2) For the testator's married daughter, Mrs. Monro, it was argued that under the testator's will the widow was entitled to no income at all until the children's legacies were paid; that out of the 31,000 pounds the 12,000 pounds should be deducted; and the balance of 19,000 pounds should be invested, and the widow paid merely the interest on the 19,000 pounds, as from the date of investment only. (3) For the plaintiffs, as executors and trustees, it was suggested that this might more properly be considered a case where the interest of the testator's estate in his sister's residuary estate should be treated as reversionary property, and upon each payment on account thereof coming to the hands of the testator's executors it should be apportioned between tenant for life and corpus in accordance with the rule in Re Earl of Chesterfield's Trusts (1883) 24 Ch D 643. There are expressions in the will which can be and were referred to as tending to support, on the one hand, the first argument, and, on the other hand, the second, but on the whole I have come to the conclusion that the testator has not made sufficiently clear his intention that either of those consequences should ensue, and that, therefore, the matter being one for this Court as a Court of Equity to determine according to its discretion, the fair and proper way to do justice between tenant for life and remaindermen is to adopt the rule in Re Earl of Chesterfield's Trusts (1883) 24 Ch D 643. The reasons for this view I shall now proceed to explain. In support of the argument that the widow should get as income of testator's residue everything which came to the administrator of Mrs. Clarke's estate as income of her residue, and was paid over by it to the testator's executors, reliance was placed, first, upon the bracketed provision in the trust to convert the testator's residue, and I quote: "but as to reversionary property not until it falls into possession unless it shall appear to my trustees that an earlier sale would be beneficial". It was argued that this indicated on the part of the testator an intention that the tenant for life was to have the whole income of such property while unconverted. But such a provision for the non-realization of reversionary property usually indicates an intention that the tenant for life is to get nothing from it until it falls in and is invested, and that no apportionment of it takes place as to the time before its receipt; see Re Pitcairn, [1896] 2 Ch 199; Underhill, Law of Trusts and Trustees, 8th ed. (1926), p. 254; Chandler, Trust Accounts, 4th ed. (1930), p. 111. So far from assisting the widow, it tends against her case. Secondly, it was said that the power to postpone realization of, inter alia, leaseholds showed an intention that the tenant for life should receive in specie the income of unconverted assets, because s35(2) of the Property Law Act 1958 would in any case produce that result as to the leaseholds, and the testator had grouped other assets with them. The testator, of course, had no leaseholds, but that would not be material if the reference to them clearly showed the intention alleged. In my opinion, however, the fact that if the executors postponed realization of leaseholds, the law would take the whole net income thereof to the tenant for life, does not tell the court anything as to the testator's intention with respect to the income of other unconverted property. The next point relied on was the privative provision disentitling the children to interest on their legacies, even if payment were delayed. It was argued that this must have been provided in order to ensure the receipt by the widow of the whole of the estate income, to the exclusion of the children, lest otherwise interest on their legacies might reduce her income. This, however, is mere speculation, and the application of the equitable doctrine of apportionment represented by the rule in Re Chesterfield's Trusts (1883) 24 Ch D 643, will still carry to the widow a fair share of the receipts from the testator's sister's estate, while the testator's will will prevent any charge against her income for interest on the children's legacies. The last, and I think the only important argument

Page 23 submitted in the interests of the widow, was based on the words--"and of all parts of my estate"--in the passage which I have already read. It was said that, read literally, this gave to the widow the income of--(a) the proceeds of conversion remaining after payment of the legacies; (b) ready moneys forming part of the testator's estate, and (c) all other parts of the testator's estate--which must, it was said, mean all unconverted residuary assets thereof. Perhaps, read literally, the words might possibly be capable of such a meaning. But the whole residuary disposition commences with a general trust for conversion. There is a trust for conversion with a power to postpone conversion, and in such a case the rules of equitable apportionment are not to be excluded except by a clear indication that the testator so intends; the onus of establishing it being on those who seek to exclude the rule; cf Macdonald v Irvine (1878) 8 Ch D 101, at p. 124; Re Woods, [1904] 2 Ch 4; Re Chaytor, [1905] 1 Ch 233; Lewin on Trusts, 14th ed. (1939), p. 236, and Michael v Callil (1945) 72 CLR 509, at pp. 522-4, 527, 530 and 536. I do not consider that the words relied upon are a clear enough indication of such an intention having regard to other parts of the residuary disposition. [1961] VR 528 at 532 Though the provision for the non-conversion of reversionary property might be said to favour the argument for Mrs. Monro, that the widow takes nothing except income arising after the legacies are paid and after the balance of any moneys received from Mrs. Clarke's estate is invested by the testator's trustees, I think on the whole that it is quite improbable that the testator intended that his wife's right to income from his estate should not even commence until his children's legacies were paid. [1961] VR 528 at 533 He contemplated delay in paying the legacies. He must have known, since his will was made shortly before his death, that the only important asset of his estate would be his interest under his sister's will. But there are other difficulties in the way of the married daughter's argument also. The 31,000 pounds does not necessarily include the whole of the 5904 pounds 4s 11d., since from the sum of 32,000 pounds odd, which did include it, deductions have been made by the plaintiff's own agents in Tasmania. In any case, however, it does not appear to me that it can be said that moneys which came to the administrator of Mrs. Clarke's estate as income of the residuary assets of that estate are necessarily to be regarded as income of the residue of the testator's estate, even though he was the sole residuary beneficiary under Mrs. Clarke's will. When such income was received by the National Executors Company, none of the residuary assets of her estate had been appropriated to or handed over in specie to the executors of the testator's will. None of the mortgages or other investments of Mrs. Clarke's estate was in specie an asset of the testator's estate. It may be that his executors could have called for the handing over of the residuary assets in specie, subject to the retention by Mrs. Clarke's administrator of the necessary fund to meet the annuity, and of assets sufficient to meet possible future administration expenses. But unless and until they did so, the right of the testator's executors was merely to have an account and an order for the administration and execution of the trusts of Mrs. Clarke's will, which required her trustee to convert her residuary assets into money; see Williams on Executors, 12th ed. (1930), pp. 1232 et seq. There is a good deal to be said for the view that the payments reaching the testator's executors do so in the character of capital, though subject to apportionment in his estate in favour of the tenant for life. The case is not one of the testator having a life interest in another deceased estate, so that the payments coming to his estate are prima facie of an income character, though possibly subject to apportionment in his estate in favour of the remaindermen; see and contrast what was said by Dixon, J, as he then was, in Michael v Callil (1945) 72 CLR 509, at pp. 531-3. Considering then that no contrary intention sufficiently appears, I am of opinion that apportionment is the proper course. This is not the strict Howe v Lord Dartmouth case [(1802) 7 Ves 137], which is where there is no trust to convert, but a mere disposition of residuary personalty to persons in succession, but similar rules are applied by analogy where there is a trust to convert with a mere power to postpone conversion; see Macdonald v Irvine (1878) 8 Ch D 101, at p. 124, and the other authorities cited in it, and see also Re Davis, [1953] VLR 639; [1953] ALR 1079, and Strachan, Law of Trust Accounts, 2nd ed., pp. 86-90. The doubt which I have had is whether the bracketed direction as to reversionary property ought to lead to the conclusion that in this case apportionment is excluded as to the Tasmanian moneys, and the widow deprived of all income therefrom until they are actually received and invested. But this is a badly drawn

Page 24 will; it uses legal terms, but shows no signs of having been drawn with any real attention to the nature of the testator's estate or the fact that his principal asset would be his interest under his recently deceased sister's will. It is not by any means certain that the draftsman intended by the words "reversionary property" to refer to such interest, and indeed it is strictly not a reversion but a bequest vested at once in interest on the testatrix's death. However, the testator's intention is obscure and apportionment is the obviously fair method of achieving what, if the testator's attention had been called to the nature of his sister's estate, he is most likely to have wished. [1961] VR 528 at 534 Another question which may occur to lawyers is whether, if apportionment is to be ordered, the testator's residuary interest in the Tasmanian estate ought to be treated as a reversionary interest within the meaning of Re Chesterfield's Trusts (1883) 24 Ch D 643, and Beavan v Beavan (1883) 24 Ch D 649 (n), or merely an unauthorized investment within the meaning of Meyer v Simonsen (1852) 5 De G and Sm 723; 64 ER 1316, and such as could not without unnecessary sacrifice be realized within the executors' year; compare Re Grant, [1933] VLR 263. If the former, apportionment is effected by calculating the sum which, put out at four per cent (or other rate substituted by the Court) compound interest at the testator's death, with yearly rests, would on 2 July 1959 (the date of actual receipt of the net amount by the plaintiff's from their agents) have produced 19,000 pounds--that is to say, 31,000 pounds less 12,000 pounds for the legacies--so that the sum so ascertained will go to corpus and the interest so calculated will go to the tenant for life. If, however, the latter alternative were correct, the method of apportionment would be to value the testator's residuary interest at his death, deduct 12,000 pounds for the legacies, and give to the tenant for life interest on the balance at four per cent per annum (or other rate substituted by the Court) from his death; see Meyer v Simonsen (1852) 5 De G and Sm 723; 64 ER 316; Strachan, Law of Trust Accounts, 2nd ed., pp. 88-9; Chandler, p. 109, and Re Parry, [1946] 2 All ER 413; [1947] Ch D 23. But the residuary interest was not in any real sense an unauthorized income-producing asset of the testator's estate even if possibly the testator's executors might have sold it as a whole to some financial institution. So to treat it might bring the widow more income, but I think there is a closer analogy to a true reversionary interest, treating each payment from the Tasmanian administrator like an instalment on account of an ultimate capital total. At all events, that seems to me the approach which best fits the circumstances here. The so-called rules of equitable apportionment are instruments to be employed according to the Court's discretion in order to do equity; see Chandler, p. 106, citing Re Perkins, [1907] 2 Ch 596; Re Poyser, [1910] 2 Ch 444, at p. 448. The rule in Howe v Lord Dartmouth "is not an absolute rule to be applied mechanically and it may be modified to meet varying circumstances" per Latham, CJ, in his dissenting judgment in Michael v Callil (1945) 72 CLR 509, at p. 524, where his Honour was prepared to apply Re Chesterfield's Trusts (1883) 24 Ch D 643, to a life interest owned by the testatrix in another estate, as being fairer in the circumstances to all concerned than Meyer v Simonsen (1852) 5 De G and Sm 723; 64 ER 1316. And since there is a trust for conversion in the sister's will as well as in the testator's, I do not think any question arises here of excluding from apportionment such part, if any, of the 31,000 pounds as may represent the proceeds of the sale of the sister's real property; see Re Lyne's Settlement Trusts, [1919] 1 Ch 80. In Re Davis,[1953] VLR 639; [1953] ALR 1079, on the other hand, the testator's interest was in real estate and personal estate passing to him under another will and not subject to conversion before it did so. Hence the learned Chief Justice apportioned only the income of the personalty. It will be observed that I have proceeded on the basis that the 12,000 pounds for legacies is to be deducted from the 31,000 pounds before applying the rule as to apportionment, whatever that rule may be. It appears to me on a consideration of the whole of the residuary dispositions of the testator that the widow is really given only the income of residue remaining after payment of the legacies, and that accordingly the sum to be apportioned should be 19,000 pounds and not 31,000 pounds. [1961] VR 528 at 535 These equitable rules are deductions from the general equitable principle that equity considers that as done which ought to be done. If the trustees had sold the testator's interest in his sister's estate for a price discounted to its actuarial value at the date of his death, using a rate of four per cent per annum and assuming that 31,000 pounds would be available to the purchaser at 2 July 1959, they would have had a

Page 25 cash sum in hand, out of which they would have been obliged to pay the legacies at once. The tenant for life would have received income from the balance only. The legatees would have had their money and could have invested it at interest. The trustees did not so act, but, in effect, left the testator's estate invested as it was. It is true that one result of that course is that the money now available to pay the legacies consists partly of interest earned by the whole asset over the three years and seven months from the testator's death to 17 April 1959, and that to pay 12,000 pounds before apportioning the balance of the 31,000 pounds will mean that the corpus of residue, which the three legatees also happen to take, will be increased by so much of the 12,000 pounds now available as represents income. It may then be said that to benefit them to that extent is really to give them, even if only in remainder expectant on their mother's death, interest on their legacies contrary to the expressed direction in the will. But the answer is, in my judgment, that what they thus gain, they gain as residuary legatees in remainder and not as interest on their pecuniary legacies. And the widow gets the income on such addition to corpus, so that she does not wholly lose the benefit of the additional interest. I regard the point as a difficult one. It was not adverted to by counsel but in the end I have come to a clear conclusion about it. It was submitted for the widow that if the rule in Re Chesterfield's Trusts were the method adopted, a higher rate than four per cent should be directed to be used; and reference was made to Chadwick v Bennett (1870) 1 VR (Eq) 109, and Re Thompson, [1927] VLR 98, in which eight per cent and seven per cent were respectively fixed. See also Re Kerrigan, [1916] VLR 516; 22 ALR 316, (six per cent), and Re Jones (1930) 30 SR (NSW) 26 (five per cent). None of these was actually a Re Chesterfield's Trust case, but they were all cases of other forms of equitable apportionment. They, however, were cases of two pastoral properties, a hotel property and a professional contract, respectively, earning in each case a high rate of net income over the relevant period. In such cases, it is to be noted, a rate exceeding four per cent was allowed as fair, notwithstanding that the proceeds, if available to be invested in cash at the testator's death, at compound interest, might not have earned more than four per cent compounded. In the present case most of the income of the testatrix's residue came from first mortgages of land. I have looked at the numerous accounts from the Tasmanian administrator, exhibited to the affidavits of Mr. Bernasconi, and on the whole I doubt if the average gross interest rate would have much exceeded five per cent over the period from 1955 to 1959, having regard to the fact that some investments were in Commonwealth stock bearing only three-and-a-quarter or three-and-a-eighth per cent; a few mortgages, including one of 12,000 pounds at four per cent, returned under five per cent and a number were at over five per cent. Some of the rates of interest were increased in 1957 to 1959--no doubt on renewal of the mortgages--to as high as six-and-a-half per cent. The income was subject to commission and collection charges before it reached the plaintiffs. Commission at four per cent appears to have been charged by the Tasmanian administrator's solicitors, who collected the interest. [1961] VR 528 at 536 Income tax has also been deducted, according to the accounts, but on what basis and at what rate, I am not aware. I shall refer again to income tax in a moment. It was suggested, in these circumstances, that I might refer it to the Master to inquire as to a proper rate to adopt for purposes of apportionment, but I am unwilling to put the parties to the further expense, and the widow to the delay, which such an enquiry would involve. If the rate of earning averaged something over five per cent, say five-and-a-quarter per cent, with charges and deductions as high as five per cent of such earnings, the result would be a rate very near to five per cent. On the whole, I think I shall do substantial justice here if I fix five per cent as the appropriate rate. It may, in regard to the large payment made on 2 July 1959, work out in a way slightly favourable to the tenant for life, but in respect of later payments (and there will be substantial but lesser amounts still to come) it may, because of higher earning rates, work out slightly against her. In the original statements of the rule in Re Chesterfield's Trusts, it was the practice to allow also for income tax; see Chandler, pp. 111 to 113. But so far as I am aware, it is not the practice in modern times, at any rate, to do so in Australia, and in stating the rule and a proposed order based thereon, Latham, CJ, in Michael v Callil (1945) 72 CLR 509, at pp. 517 and 525 of the report, omitted all reference to it.

Page 26 It may be that as the Tasmanian administrator has already paid some income tax, the tenant for life will have the advantage to that extent. But on the present material it seems to me unnecessary to refer to it.[His Honour then finally dealt with the questions in the summons and answered the principal one as follows:--] It is the duty of the plaintiffs to apportion the sum of 19,000 pounds, being the balance remaining after paying the legacies of 12,000 pounds, out of the net sum received by the plaintiffs on 2 July 1959, as a part payment to the testator's estate of the amount of his residuary interest in the estate of his deceased sister, Helena Clarke. Such sum should be apportioned between the first defendant, as tenant for life of the testator's residue, and the corpus of residue, according to the rule known as the rule in Re Earl of Chesterfield's Trusts, but using an interest rate of five per cent--that is to say, by calculating the sum which, put out at five per cent per annum interest on the date of the testator's death, and accumulating at compound interest, with yearly rests, would, with accumulations of interest, have produced on 2 July 1959, the sum of 19,000 pounds--the sum so calculated being carried to corpus of residue, and the difference between that sum and 19,000 pounds being paid to the tenant for life as income of residue in respect of the period referred to. Order Questions answered. Solicitor for the plaintiffs: Louis E Bernasconi. Solicitors for the first, second and fourth defendants: Jack Cohen, Marks and Co. Solicitor for the third defendant: John H Warren, Sandringham. F. G. DYETT

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Page 28 6 of 10 DOCUMENTS: CaseBase Cases

Taxation, Deputy Commissioner of (SA) v Simpson

[1960] ALR 196; (1960) 33 ALJR 506 Court: HCA Judges: Dixon CJ, McTiernan, Fullagar and Windeyer JJ Judgment Date: 29/2/1960

Catchwords & Digest

Taxation and revenue -- Miscellaneous taxation -- Estate duty -- Property Appeal from decision of single judge of Hoigh Court of Australia. Settlor settled property on trust for two sons with life interest to settlor. Settlor surrendered life interest to sons for consideration. Settlor made gifts of money to sons. Soms paid money to settlor in discharge of debts created by surrender of property to them. Money amounts and property assessed by appellant Deputy Commissioner of Taxation for estate duty. Appeal allowed in respect of property not money by single judge of High Court of Australia. Whether property in settlement deemed to comprise part of estate of deceased under (CTH) Estate Duty Assessment Act 1914 s 8(4)(c). Held: Appeal allowed (4:0). Property in settlement deemed to comprise part of estate of settlor under s 8(4)(c). Litigation History Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations Simpson v Deputy [1959] ALR 610; Reversed Commissioner of Taxation (1958) 32 ALJR 292

Court HCA

Date 21/11/1958

Signal

Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Considered/ Taxation Case D35 (1972) 72 ATC 200 Followed Elder's Trustee & Executor Co Ltd (1966) 118 CLR 331; (1966) Cited v Federal Commissioner of 40 ALJR 371; BC6600090 Taxation Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations Followed Elders Trustee & Executor Co (1953) 88 CLR 200; Ltd v Federal Commissioner [1953] ALR 697; of Taxation (1953) 27 ALJR 341;

Court TBR HCA

Date 28/6/19 72 29/11/1 966

Signal

Court HCA

Date 30/7/1953

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Page 29 BC5300340 Legislation considered by this case Legislation Name & Jurisdiction Estate Duty Assessment Act 1914 (Cth)

Provisions s 8(4)(c)

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7 of 10 DOCUMENTS: Victorian Reports/Judgments/1960 VR/Re AUSTIN'S SETTLEMENT; STRACHAN v AUSTIN - 1960 VR 532 - 10 November 1959 5 pages

Re AUSTIN'S SETTLEMENT; STRACHAN v AUSTIN - [1960] VR 532

SUPREME COURT OF VICTORIA DEAN, J 6, 7, 8 October, 10 November 1959
Real property -- Registered land -- Settlement -- Words of inheritance not used -- Whether merely a life interest -- Rule of equity unaffected by statutory power to convey legal estate without words of inheritance -- Direction to divide -- Effective as implied trust for sale -- Trust property consisting of both real and personal estate -- Rules as to conveyance of land unaffected. By the law of New South Wales in 1915, a conveyance of freehold land in that State without the words 'and his heirs' would convey only a life estate, and as equity followed the law, a conveyance of the equitable interest in freehold also gave only a life interest unless there were words of inheritance added. Property, the subject of a settlement made in 1915, included freehold land in New South Wales which was subject to the Real Property Act 1900 of that State. No words of inheritance were used. The settlement contained no express trust for conversion, but provided that 'before the arrival of the period of distribution the trustees shall divide the capital of the said trust premises into four equal shares or portions'. Questions arose on originating summons in respect of moneys representing the proceeds of such land. Held: (1) Though under the Real Property Act 1900 (NSW) the legal estate in freehold land could be conveyed without words of inheritance, the rule of equity which required words of inheritance to pass the equitable interest in the fee simple was not thereby relaxed. Re Bennett, [1951] St R Qd 202, applied. Carroll v Chew (1946) 47 SR (NSW) 229, not followed; but (2) The direction to divide the trust premises into four equal shares or portions required that it should be sold for the purposes of division (Pagels v MacDonald (1936) 54 CLR 519; [1936] ALR 224, applied); accordingly, the rules of equity applicable to the conveyance of freehold ceased to apply and those relating to the passing of personalty operated and the beneficiaries under the settlement took an absolute interest and not merely a life interest. Originating Summons The plaintiffs, James Ford Strachan, Ronald Albert Austin, and Herbert Manlius Hogensen, caused this originating summons to be taken out and therein sought answers to questions in respect of a settlement made by Albert Austin on 8 January 1915. The property settled comprised land situated in New South Wales upon which the settlor carried on the business of a grazier and the stock, plant, chattels and effects thereon. Some of the settled land was freehold and some consisted of leaseholds of Crown lands held on various terms and conditions. The property was duly transferred to the trustees. The present trustees now held on the trusts declared. HR Newton, for the plaintiff.

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SEK Hulme, for the next of kin of the settlor. FM Bradshow; Voumard, QC (with him RE McGarvie); Gowans, QC (with him RK Todd), and BF McNabb, respectively, for various defendants.

Dean, J delivered the following written judgment:

[His Honour dealt with questions of construction of the deed of settlement which are not the subject of this report. He then continued:--] [1960] VR 532 at 533 I turn now to consider a question of law, not of construction, raised by Mr. Hulme for the next of kin of the settlor, in relation to the sum of 10,000 pounds released by Mrs. Bulleid from the power of appointment conferred upon her by the settlement. This sum is part of the share of corpus over which Mrs. Bulleid had a power of appointment. The result of this release is that it passes by the terms of CL2 of the settlement to 'all or any the children or child of such daughter living at the period of distribution and the child or children then living of any deceased child of such daughter who being male attain the age of 21 years or being female attain that age or marry if more than one in equal shares', with a provision for distribution per stirpes and a provision for hotchpot. Mr. Hulme, in the course of a most attractive and careful argument, contended that as the gift to children, which I have quoted, was not expressed to be a gift to them in fee simple, they took so much of the said corpus as consisted of freehold land or its proceeds as life tenants only, and that there was a resulting trust to the next of kin of the settlor of the reversions dependant upon such life estates. He contended that this was the legal result whatever was the intention of the settlor disclosed by the settlement. The settlement was executed in New South Wales in 1915 and at that date a conveyance of the legal estate to A without the addition of the words 'and his heirs' was effective to pass a life estate only. It was only by the Conveyancing Act 1919 (NSW), s47, that this technical rule of the common law was abolished and the matter was made to depend upon intention. Some of the trust property the subject of the settlement was freehold land in New South Wales. Some of it was leasehold land held under various types of leases from the Crown, and some of it consisted of 'stock, plant, chattels and effects' on such properties. If the point raised by Mr. Hulme is a good one, it will become necessary to direct an inquiry into the proportion of the sum of 10,000 pounds which is represented by the proceeds of freehold land. Mr. Newton, for the trustees of the settlement, in the course of an equally excellent argument, and counsel for other parties, opposed Mr. Hulme's contention. It is clear that Mr. Hulme's first step is correct, namely, that in 1915 a conveyance of freehold land without the words 'and his heirs' would convey only a life estate, and this was not challenged by counsel for any other party. His second step was that, in the case of an executed trust such as this is, equity follows the law and, independently of the intention of the settlor, a conveyance of the equitable interest in freehold also gave only a life interest unless there were words of inheritance added. This proposition is clearly established by a decision of the Court of Appeal in Re Bostock's Settlement, [1921] 2 Ch 469, and a decision of the High Court in Sexton v Horton (1926) 38 CLR 240; 32 ALR 373, overruling Hunt v Korn (1917) 24 CLR 1; 24 ALR 45. No other counsel challenged the authority or effect of these decisions and they clearly establish Mr. Hulme's contentions. See further Holliday v Overton (1852) 15 Beav 480; 51 ER 623; Tatham v Vernon (1861) 29 Beav 604; 54 ER 762. But counsel for other parties advanced a number of reasons why they did not apply to the present case. These were: (1) the freehold land settled was land under the Real Property Act 1900 (NSW), corresponding to the Transfer of Land Act 1958 of Victoria, under which a transfer of the legal fee simple is effected by registration of a transfer which contains no words of inheritance; it was said, therefore, that in the case of land under the Act, equity, following the law, did not require the use of such words to convey an equitable estate in fee simple. (2) The settlement contains a trust for sale whereby the freehold land settled is notionally converted into personalty and the technical rules relating to the conveyance of land at law do not apply in equity. (3) The settled property was a mixed fund of freehold land, leasehold land and chattels, and

Page 33 that the common law rule and its equitable counterpart did not apply to dispositions of an interest in the fund. [1960] VR 532 at 534 I take these grounds in order. (1) The argument based upon the Real Property Act 1900 (NSW) will first be considered. It is true that the property settled included freehold land in New South Wales which was subject to the Act. The Act provides for the transfer of a legal estate in fee simple in land under the Act by means of a signed transfer without words of inheritance followed by registration of such transfer in accordance with the Act. It was contended that as the legal estate in fee simple could be transferred without words of inheritance, the equitable estate could likewise be so transferred, because equity follows the law. In Carroll v Chew (1946) 47 SR (NSW) 229, Roper, J, took this view. He said, at p. 232: 'The transferor of the legal estate having been freed from the purely technical requirements as to the use of words of limitation it appears to me that the creator of equitable estates should have the same freedom'. A contrary view has been taken in Queensland in a case in which Carroll v Chew was not cited--Re Bennett, [1951] St R Qd 202, a decision of the Full Court which did not refer to the effect of the Torrens legislation upon a transfer of the legal estate. The cases are discussed in a brief note in 25 ALJ 683. Mr. Hulme, however, contended that Carroll v Chew, supra, was wrongly decided. He pointed to the provisions of the Act and to the fact that they did not provide for the transfer of equitable interests; indeed equitable interests cannot appear on the register. It would, therefore, he said, be impossible for equity to follow the law in such a case and accordingly the freedom given in relation to the transfer of the legal fee simple cannot be extended to transfers of an equitable fee simple which remains in the same position as before. I agree with this contention. As the matter stood apart from the Act, the same rule applied to the conveyance of a fee simple both at law and in equity, at law because of the common law rule and in equity because equity followed the common law rule. The relaxation of the common law rule in certain cases seems to afford no basis for the relaxation of the rule of equity to which the Act does not apply. It does not meet the position to say that, in relation to conveyance of the legal estate, there are legislative provisions in the case of land under the Real Property Act which lay down a procedure for conveying the legal estate in which words of inheritance are not required. I do not see how this can affect a conveyance of the equitable estate in fee simple with which the Act has nothing to do. Accordingly, I do not think the first reason advanced by Mr. Newton for avoiding the operation of the general rule of equity is correct. (2) It is not disputed that if the settlement contains a trust for sale of the freehold land as distinct from a mere power of sale, a notional conversion of the land into personalty in equity is thereby effected with the result that the rules applicable to conveyance of freehold land at common law cease to apply. See Maitland's Equity, Lecture XVIII, as to the principle of conversion in such a case. 'It is presumed that the parties in directing money to be invested in land, or land to be turned into money, intend that the property shall assume the very character of the property into which it is to be converted, whatever may be the manner in which that direction is given'--Story's Equity Jurisprudence, 3rd ed., p. 337. Mr. Newton contended, while Mr. Hulme denied, that the settlement did contain a trust for sale upon the death of the last of testator's daughters. There is no express trust for conversion contained in the settlement, but Mr. Newton relies upon the words with which CL2 opens, 'before the arrival of the period of distribution the trustees shall divide the capital of the said trust premises into four equal shares or portions'; and he contends that the trust to divide necessarily implies a trust for sale in order to effect such division. For this he relied upon the decision of the High Court in Pagels v MacDonald (1936) 54 CLR 519;[1936] ALR 224. In that case, a testator had by his will devised and bequeathed real and personal property to his wife for life and directed that on her death it should be 'equally divided' between a son and daughters. After the death of the life tenant and after executorial duties had been completed, the administrators with the will annexed and all the beneficiaries except one desired to sell the real estate. As one beneficiary refused to consent to a sale the administrators sought the opinion of the court by originating summons, the question asked being whether the administrator 'was entitled to sell the real estate'. This clearly inquired not whether there was a trust for sale but whether there was a power of sale, a very different thing. Gavan Duffy, J, had held that the administrator was not entitled to sell the land. The High Court, however, held that he was so entitled. Mr.

Page 34 Hulme rightly says that the case did not raise any question of trust for sale but merely a question of the existence of a power to sell and that, therefore, it does not have any bearing upon the question before me. But members of the court travelled outside the question raised and used language which appears to indicate that the direction created a trust for sale. Thus Latham, CJ (54 CLR, at pp. 523-4), said: 'I am of opinion that the direction to divide the land implies that the executors should sell the land and divide the proceeds'. Starke, J, at p. 528 said: 'Such a direction makes it clear, I think, that the testator intended a sale, and that the legal personal representative of the testator should effect his purpose and sell and divide the proceeds of the property amongst those entitled thereto'. Dixon and Evatt, JJ, in a joint judgment, at p. 530 said: 'In the present case, the will requires a division after payment of debts of the whole of an estate which must have been composed of assets of divers descriptions, including livestock, plant and land. This appears to us to imply conversion'. And again, '...in the absence of agreement among the beneficiaries to take in specie, conversion became imperative when the period of distribution arrived'. These expressions may be compared with those in Holliday v Overton, supra, and Tatham v Vernon, supra, in each of which no attempt was made to remove the case from the application of the general rule on the ground that the word 'divide' was included in the limitations of the equitable estate. And in Lucas v Brandreth (No 1) (1860) 28 Beav 273; 54 ER 371, there was a devise of real and personal estate to trustees to divide and distribute equally between three persons, and the will authorized a sale for the purposes of dividing. Sir John Romilly, M R, held that there was no trust for sale. He said: 'The will merely contains an authority to sell, but nothing like an absolute direction, which, in the absence of the exercise of the power, could be treated as having converted the property into personalty'. [1960] VR 532 at 535 In view of the statements of the High Court in Pagels v MacDonald, supra, I must hold that the direction to divide the trust property requires that it shall be sold for the purposes of division, that is, that there should be implied an imperative trust for sale. But even without this authority I would have thought that a direction to divide a number of assets of such diverse kinds in varying shares among a number of persons could not be carried into effect unless those assets were converted into money and that a trust for sale should, therefore, be implied. [1960] VR 532 at 536 This conclusion receives some support from CL9 which confers upon the trustees 'power' to postpone the realization of the said trust premises or any part or parts thereof, notwithstanding that the period of distribution shall have arrived. This power is quite meaningless unless there was a duty on the trustees to realize, and the reference to the period of distribution supports the view that the trust for sale then arises. Accordingly, I think that by reason of the existence of an implied trust for sale, on the death of the last survivor of the daughters of the settlor, the trust property is notionally converted into personalty and its disposition is no longer affected by the rules of common law or equity governing a conveyance of an estate in fee simple. (3) The ground that there is here a mixed fund and that, therefore, the rules relating to the transfer of personal estate should be applied is not, I think, one that should be upheld. The mere fact that the trust property includes both real and personal estate is not sufficient to render inapplicable such rules as are otherwise applicable to the conveyance of legal or equitable estates in so much of the settled property as consists of land. In Holliday v Overton, supra, the settlement included both realty and personalty, but it was not suggested that this affected the mode of transferring an equitable estate in fee simple in the land. In Re Bostock's Settlement, [1921] 2 Ch 469, the settlement included real and personal estate, but the trusts of each were separately declared. The settlement does not use any language which has the effect of creating a mixed fund. It is in no different position from what the position would have been if identical trusts had been declared by separate clauses in respect of each kind of property. As I have already said, Mr. Hulme's argument fails because there is here, as I think, a trust for conversion. [His Honour then formally dealt with the questions.] Order

Page 35 Questions answered. Solicitors for the plaintiffs: Aitkin, Walker and Strachan. Solicitors for the next of kin of the settlor: Blake and Riggall. Solicitors for other defendants: Weigall and Crowther; Lynch and McDonald; Hedderwick, Fookes and Alston; Madden, Butler, Elder and Graham. ERIC E. HEWITT

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8 of 10 DOCUMENTS: Victorian Reports/Judgments/1959 VR/Re HOKIN - 1959 VR 711 - 24 June 1959 6 pages

Re HOKIN - [1959] VR 711

SUPREME COURT OF VICTORIA O'BRYAN, J 19, 22-, 24 June 1959
Administration and probate -- Testator's family maintenance -- Application by adult son -- Adequate provision -- PtV, Administration and Probate Act 1928 (No. 3632), s139 -- PtIV, Administration and Probate Act 1958 (No. 6191), s91. A testator died leaving an estate of more than 31,000 pounds in value. He was survived by his wife, his three sons and a daughter. Under his will the testator gave successive life interests in his estate to his wife and to his second son, remainder to his grandson, the son of the testator's eldest son. The testator made no provision in his will for his youngest son, the applicant. The applicant was thirty-nine years of age on the death of the testator and had worked for a number of years on the testator's farm without wages. He was subject to illness and owned some property which had been given him by the testator before his death, but which was insufficient to provide him with a living. Held: The testator had not made adequate provision in his will for the proper maintenance and support of the applicant and provision should be made for the applicant by payment to him of the sum of 4000 pounds on the death of the testator's widow. SUMMONS James Richard Hokin, who died on 11 September 1956, left a will in which he made no provision for his youngest son, Thomas William Hokin. Thomas William Hokin caused a summons under PtV of the Administration and Probate Act 1928 to be taken out seeking an order that provision be made out of the estate of the testator for his maintenance and support. The relevant facts appear in the judgment. Minogue, QC (with him, WO Harris), for the applicant. Gowans, QC (with him, Pitcher), for the executors of the will.

O'Bryan, J:
This is an application under PtV of the Administration and Probate Act 1928. S139 of that Act, which now appears as s91 of PtIV of the 1958 Act, provides that if any person dies leaving a will and without making therein adequate provision for the proper maintenance and support of the testator's widow, widower or children, the Court may, in its discretion on application by and on behalf of the said widow, widower or children, order that such provision as the Court sees fit shall be made out of the estate of the testator for such widow, widower or children. This application is made on behalf of a son of the testator.

Page 38 It has been frequently stated that that section does not enable the Court to re-write the will of the testator and, in the sense that it does not enable the Court to write a will for the testator disposing of his property in such way as the Court would think would be a more just and fair way for the testator to dispose of his property, one cannot quarrel with that statement of the law. On the other hand, of course, every order that is made under this Act is treated, by the very terms of the Act itself, as though it were a codicil to the testator's will, and so the Court when it makes an order does, to the extent that it makes an order, re-write the will of the testator. [1959] VR 711 at 712 However, the jurisdiction under the section only arises where adequate provision for the proper maintenance and support of the applicant has not been made and even when the jurisdiction arises, a very wide discretion is given to the Court as to whether it will make an order in favour of the applicant and if it does, a very wide discretion is given as to what order it will make. And that order should not exceed what is necessary to be done for the making of adequate provision for the applicant's proper maintenance and support. In considering what is the proper maintenance and support of an applicant, regard may be had, not only to the needs of the applicant himself, but also to the extent of the estate which the testator had to dispose of and also to the claims which other persons might well have upon his bounty. Regard is also had to the manner of life which the applicant was leading at the time of, and prior to, the death of the testator. But the view of the Court is not confined to that. As can be well seen, a very wealthy testator might treat, let us say, his wife in a very poor and niggardly manner during his lifetime, and may leave her very ill provided for by his will; but the Court would not regard her proper maintenance and support, or may not regard her proper maintenance and support, as being confined to the manner of living in which the testator had compelled her to live during his lifetime. It may have regard, as well, to what he had to dispose of and what a wise and just testator would have done in all the circumstances of the case. In having regard to what is adequate for proper maintenance and support, regard, of course, also has to be had to the means of the applicant, particularly at the time of death of the testator. When a testator leaves nothing at all to an applicant, it may be said that obviously he has, in such a case, not made adequate provision for the proper maintenance and support of the applicant; but if the applicant himself had adequate means to provide for his proper maintenance and support, whether that would mean the Court had no jurisdiction to act or whether it would mean the Court, on such an occasion, would not make an order I think it is idle for me to say. In truth and in fact, in such a case, no order would be made. Now with those introductory remarks I turn to look at the circumstances of this case. The applicant here was a son of the testator, and at the time of the testator's death was aged 39, rising 40 years of age. He was married and was living with his wife and he had a child on the way and it might be well expected that he would have a child or children. There is no evidence that he was in actual ill-health at the date of the testator's death, but the fact is that he was a man of poor physique and had over the years--for four or five years prior to the testator's death--been subject to illness for which he had had medical attention. And I am satisfied that during the year 1952 and in the year 1954 he was unable to work owing to illness. He suffered from fibrositis during that time. He had, however, in May 1955 sufficiently recovered to be able to go away and earn money as a shearing hand. His financial position was that he owned his own home which stood on an area of about 27 acres of land and which had been given to him by his father some years before He had a utility truck, a 1950 Austin A70, which in his affidavit he says was worth about 400 pounds at the time of the testator's death. I should think it certainly was not worth any more. He had a tourer car, which was laid up, which he valued at about 100 pounds. On the 27 acres of land he had been running a poultry farm and he had about 200 fowls, which he estimates as being worth about 200 pounds. He had 100 shares in Victorian Producers Co-operative Company, which his father had given him some years before and he owned a property known as Owens, a property of about 320 acres, which has been described as unimproved and, to a large extent, unfenced. Certainly, even in a fenced condition it was not sufficient, run as a farm, to give a living to a man. [1959] VR 711 at 713

Page 39 From his poultry farm he said he was earning about 5 pounds a week. He owed money at the time of his father's death; he owed about 160 pounds to the bank and 62 pounds to the Queen Victoria Hospital for the expenses of his wife's illness. He did not have enough money to enable him to fence the property known as Owens and if that were to be fenced with hired labour it would cost him in the region of 650 pounds to have completed the fencing on it. Could that man be said, at that time, to have adequate provision for his proper maintenance and support? And in answering that question I think one should look now at his father's position. Mr Gowans, who appeared for the executors, asked me to look at the position as it was disclosed in the Statement for Probate Duties and said that if I looked at that position and looked at the debts, the duties which had to be paid and so on, it would appear that the testator might, if he knew all the facts, and I think one should assume that he would know all the facts, have said that he would have nothing more than a property worth about 22,000 pounds to dispose of. In my opinion that presents an untrue picture. This property was put in for probate duty purposes as of the value of 22,157 pounds, but since the date of death an area of it has been sold for 6318 pounds and according to the affidavit of the executors the remaining acreage is worth about 24,900 pounds. So at the time of the swearing of the affidavit, it would appear that the value of this property was something over 31,000 pounds. Now I have before me the evidence of a sworn valuer, and from his evidence I am satisfied that this property was, at the date of the death, worth as much as it is today, and the conclusion I draw is that the estate has been fortunate in getting this property through at the valuation that it did get it through for probate duties, and that the real value of this land at the time of death was more like 31,000 pounds. It is that estate which the testator would have contemplated having to dispose of when he was making his testamentary dispositions. A man with that estate would contemplate that he had, as possible claimants on his bounty, first and foremost his widow, who is a woman of advanced years. She is now, I think, 76 years of age. He had three sons and a daughter. The eldest son had left home at a comparatively young age and was well enough set up in life; Jim, the second son, was not so well off: and I have not had much evidence about the daughter at all, except that she is married and apparently living with her husband and is able to care for herself. In those circumstances I think a wise and just testator, looking at this son aged 40 and all the circumstances connected with him, would say that his proper maintenance and support would require him to have more behind him than he had. It would require him to have something in addition to the land at Owens, and the 27 acres and the house which stood upon them and the few minor assets which he had. He should be in a position in which he could become a more or less independent farmer. And what he had was not adequate for his proper maintenance and support, having regard to all the circumstances of the case. [1959] VR 711 at 714 The question then arises as to what is a proper order to be made. The Court in making such an order does not go about distributing the estate in the way in which it thinks would be most fair amongst a family such as the testator had, but it looks simply at the application and says: "What would a wise and just testator do by way of making, so far as in his power lay, having regard to the extent of his estate and the other claims upon it, to make adequate provision for the proper maintenance and support of this young man?" And in that regard I think one should look at the moral claim particularly of the applicant. The facts in regard to him appear to be these: he was the youngest child of the family and in 1930, being then aged about 14 years, he left school. He did not have a particularly good education--it was an education below merit standard of the State School. Having left school he came home and from 1930 until 1941 he did what I suppose many young men do as sons of farming folk, he worked with his father on the land and received no wages during that time, but he was kept and there were means available to him to make a little pocket money for himself here and there. During part of that time his brothers, or one of his brothers, were home at the farm. But during the latter part of the period, from about 1936 onwards at any rate, he seems to have been the only member of the family there. In 1941 he was called up in the Army and he was in the Army for a short time but in 1942 he was released from service in the Army, apparently on his father's application on the ground that he was required to work on the farm. And from 1942 until 1949 he again came home and worked with his father without wages. At that time he seems to have spoken to his father about these matters and he was given, by his father, this property known as Owens. It was then reckoned to be worth about 1400 pounds. In one sense that may be said to have been a generous benefaction from the father to

Page 40 the son, on the other hand, it may be thought that that was doing little more than making up to him for a long period of service without wages. At about the same time, his father gave him 600 pounds to enable him to buy this utility truck which he still possesses and which was used in the ensuing years in the partnership to which I will refer to in a moment. The land known as Owens was used for the same purpose during the ensuing years. In 1950 an arrangement was made or a partnership agreement was entered into between the father and the son, whereby they agreed to work the farms in conjunction and that partnership agreement, although it is dated 28 August 1950 related back to the previous year and according to the income tax returns, it is shown that the son received for the year ending 30 June 1950, a sum of 708 pounds. He says he received nothing during that year to the best of his recollection. I do not know what the facts are and it may be that the 600 pounds that was given to him with which he bought the truck and the 100 pounds the father gave to him in that period by way of purchasing 100 shares in Victorian Producers made up that 700 pounds, but I make no finding on that. It is left in the dark. The terms of that partnership agreement were that the partners were to receive the profits on the basis that the father took two-thirds of the net profits and the son one-third. Actually the applicant tells me that it was not worked out exactly between them on that basis, but when they received a cheque, a wool cheque or other cheques from the earnings of the property, that was divided between them in the ratio of two-thirds to the father and one-third to the son. In other words they took the gross receipts in that way and each of them, from time to time, paid part of the expenses. How the thing ultimately was worked out as a matter of accounting between them does not appear clearly. But according to the income tax returns, he received in the six years which that partnership covered, the sums of 708 pounds, 1621 pounds, 1068 pounds, 409 pounds, 793 pounds and 654 pounds. It was an average amount of somewhere about 17 pounds a week he received over the whole period. [1959] VR 711 at 715 It is to be remembered, of course, that during that same period he was working on the farm and his father was receiving just twice what the son was receiving in the way of profits. In the year 1954 the applicant tells me that he fell ill and I believe that he did fall ill. He received medical attention at that time and was unable to work. His father grew tired of seeing him not working there and eventually formed the opinion that he was loafing--that he was not really ill. Now there has been a good deal of investigation of this question of the applicant's desire to work. I think a great deal of the evidence, which appears in the affidavits in opposition to his claim, is not supported by any really solid foundation. I do not form the opinion of the applicant that he was a loafer on the property; I do not think he is a man of strong physique and perhaps he does not do as much work as the ordinary strong man does on a farm. That may have led to dissatisfaction on his father's part, but I did not form an adverse opinion of the applicant. At all events his father did form this adverse opinion of him and, having formed that adverse opinion, he brought the partnership to an end. The partnership ended on 30 June 1955 and he sent for one of his other sons, James, who came down and who from that date on, and until the date of the testator's death on 11 September 1956, worked on the property for wages. The partnership having been brought to an end, the son went away first to work as a shearing hand, then having heard that his wife was unhappy at home owing to some family disagreement that arose, thought that he ought to come home to live with her and he has lived at home ever since, running this poultry business on the 27 acres, earning very little from it, but showing some success with it at any rate in as much as he has built up the number of his fowls to something over 400 now. In those circumstances, my opinion is that this son did have quite a strong moral claim on his father to have as adequate provision for his proper maintenance and support as the father was capable of giving him, having regard to the other claims which he had to meet. The other claims, which he had to meet, were first the widow's claim; secondly, although his eldest son, Clive, was set up in life, I think he had a moral claim less strong probably than the applicant and there was James, who had had some support from his father by way of guarantees, one of which for 500 pounds the father had to meet and by way of an 800 pounds gift to his wife for a house during the father's life. But he had done helpful things for his father during his lifetime,

Page 41 and particularly during the last year or so of his life. But as I say, very little has been heard of the daughter, Martha, and I do not know very much about the strength of her moral claim. But she had the moral right of a daughter to expect something from her father, unless there was something in her life which I have not heard of. I have no reason to suppose there was. The difficulty is to know what is a proper amount to say that a wise and just parent would have set aside for this applicant and how he should have provided it. What the testator did by his will was to give his wife a life interest in the property (and I do not feel that one can say that there was any lack of wisdom or propriety in his doing that) and to postpone any benefit which he was going to give to the other beneficiaries until after her death. After her death he disposed of the property in this way; he gave another life interest to his son, James, and after James' death he directed the property go to his grandchild, the eldest son of his eldest son, Clive. He is a young man, Peter Hokin, who really had no moral claim upon the testator's bounty. In my opinion the testator should have left a legacy to the applicant and should have directed that it be payable to him on the death of the widow. [1959] VR 711 at 716 I have had some difficulty in making up my mind what is the proper amount of the legacy, but in the end I think if he had left him a legacy of 4000 pounds, that legacy would have been adequate provision, in addition to what the applicant had, for his proper maintenance and support, having regard to what the testator had to leave. And that is the order which is made, namely that, provision be made for the applicant by payment to him of the sum of 4000 pounds upon the death of the testator's widow. I will make the usual order that this order be endorsed upon the Probate and that the executors have their costs and expenses out of the estate, and the applicant to have his costs taxed as between solicitor and client and paid out of the estate. Order Order made accordingly. Solicitor for the applicant: J McD Jones. Solicitors for the respondents: Tatchell, Dunlop, Smalley and Balmer, Bendigo. DARYL DAWSON

Page 42

Page 43 9 of 10 DOCUMENTS: CaseBase Cases

Simpson v Deputy Commissioner of Taxation

[1959] ALR 610; (1958) 32 ALJR 292 Court: HCA Judges: Kitto J Judgment Date: 21/11/1958

Catchwords & Digest

Taxation and revenue -- Miscellaneous taxation -- Estate duty -- Life interest Appeal against decision of Federal Commissioner of Taxation. Appellants executors of estate. Settlor made settlement of company shares and reserved life interest. Within three years before death, settlor surrendered life interest to two beneficiaries. Settlor gave beneficiaries amount of money to enable payment of consideration. Respondent determined settlor's dutiable estate as including assets under settlement trust and monetary gift. Whether settled property excluded from estate for tax purposes. Held: Appeal allowed. Settled property not taxable. Settlor had not retained life interest in property until death and sale for value. Litigation History Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations Taxation, Deputy [1960] ALR 196; Reversed Commissioner of (SA) v (1960) 33 ALJR 506 Simpson Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Cited Taxation Case D35 (1972) 72 ATC 200

Court HCA

Date 29/2/1960

Signal

Court TBR

Date 28/6/19 72

Signal

Legislation considered by this case Legislation Name & Jurisdiction Estate Duty Assessment Act 1914 (Cth)

Provisions s 8(4)(a)

Page 44

Page 45

10 of 10 DOCUMENTS: Victorian Reports/Judgments/1958 VR/Re FAWAZ, deceased; SALAMY v FAWAZ - 1958 VR 426 - 2 August 1957 9 pages

Re FAWAZ, deceased; SALAMY v FAWAZ - [1958] VR 426

SUPREME COURT OF VICTORIA DEAN, J 10, 11 July, 2 August 1957
Will -- Construction -- Validity -- Rule against Perpetuities -- Intention of testator -- "Children" -Context showing intention to restrict meaning to children in being at date of will. By his will the testator devised his house property, after a life interest to his niece RK, to his trustees with provision for its use as a home by her unmarried children and on the marriage of the last of such children upon trust for sale. He left his residuary estate to his trustees upon trusts, inter alia, as to the income arising therefrom to make certain payments thereout, including payments to be made at the discretion of the trustees, to and for the benefit of the children of RK, and to pay the residue of the income by annual payments to a named charity, with an ultimate trust for such charity"upon the death of the last survivor of the children of RK." At the date of the will, RK resided with the testator in his said house together with her son and her daughter NK and two other daughters, all of such children being then unmarried. RK was then aged 52 years and her husband was alive and resided in Lebanon. CL3(b) of the will contained a declaration "that it is my intention to permit the said NK to reside in the said dwelling-house whether she is married or unmarried as she is the person eminently suited to maintain the said dwelling- house as a home for her unmarried brother and sisters". Held: that none of the above dispositions infringed the Rule against Perpetuities because, having regard to a number of indications to be found in the will and in particular the reference to "brother" in the singular in the declaration contained in CL3(b) of the will, the testator had evinced an intention to confine the benefits given to RK's children by the will to those of RK's children who were alive at the date when he made his will; and all references in the will to the children of RK must be read as restricted to children living at that date. Originating summons The testator, John Michael Fawaz, died on 10 May 1955. Probate of his will dated 24 May 1949 was on 27 September 1955 granted to the plaintiffs who were the executors named in the will and were appointed by the will the trustees of the testator's estate. The testator's niece Rose Kurban was now still living and had four children who were all still alive namely three daughters, Najla Kurban, Nadia Salamy (formerly Nadia Kurban), and Nouhad Kurban, and one son Nageeb Kurban. Rose Kurban's husband was still living and resided in Lebanon. At the date of the will Rose Kurban and her four children, all of whom were at that date unmarried, resided with the testator at his house at 1040 Drummond Street, North Carlton. At the date of the testator's death Rose Kurban and three of

Page 46 her children who were still unmarried still resided there with the testator, but Nadia Salamy was married and had gone to live elsewhere. The following provisions of the will are material to this report:--

1)

3. As to my dwelling-house and land situate at 1040 Drummond Street, North Carlton and the whole of the contents of my said dwelling-house...my trustees shall hold the same upon the following trusts: 1. Upon trust to permit my niece Rose Kurban to use and occupy the same during her lifetime. 1. Upon the death of my said niece and until the date of sale to permit Nadia Kurban and such of the children of the said Rose Kurban as shall be unmarried to have the use and occupation of the said dwelling-house and contents. I declare that it is my intention to permit the said Nadia Kurban to reside in the said dwelling-house whether she is married or unmarried as she is the person eminently suited to maintain the said dwelling-house as a home for her unmarried brother and sisters. 1. Upon the date upon which the last of the surviving children of the said Rose Kurban shall marry (herein called the date of sale) the said dwelling-house and contents shall be sold and the proceeds held upon the same trusts as my residuary estate is directed to be held with power to my trustees to postpone such sale for such period as they shall think fit and to allow any one or more of the said children to occupy the said premises at a fair rental... My trustees shall out of the income from my residuary estate make the following payments: 2. So long as the said dwelling-house is held in trust for the said Rose Kurban and her children my trustees shall pay the rates taxes fire insurance premiums and all other outgoings payable rated charged or assessed in respect of the said property. 2. My trustees shall during the lifetime of the said Rose Kurban pay to her the sum of Six Pounds per week until such time as Nouhad Kurban the youngest daughter of the said Rose Kurban commences to work or in the opinion of my trustees should have commenced to work and shall thereafter pay to the said Rose Kurban the sum of 4 pounds per week for life. 2. If my trustees shall in their discretion think it justifiable having regard to all the circumstances to pay to the said Rose Kurban or direct to her children or any one of them a sum not exceeding Two Pounds per week for the maintenance of each child as shall not be working. In exercising their discretion under this clause my trustees shall consider whether the child in respect of whom the payment is being made is reasonably justified in not working and in particular shall have regard to whether the said child is prevented from working by illness or inability to obtain work in which cases my trustees shall exercise the discretion conferred upon them hereunder. I declare that the discretion to make payments to the children of the said Rose Kurban conferred upon my trustees by this clause shall not be confined to the lifetime of the said Rose Kurban but may be exercised by my trustees at any time so long as my residuary trust estate or any part thereof remains in their hands. My trustees may also if they shall in their absolute and uncontrolled discretion think fit from time to time pay or apply such sums as they shall deem fit out of the income or corpus of my residuary estate to or for the maintenance benefit or welfare in life generally of the said Rose Kurban or of any of her children in the event of the said Rose Kurban or any of her children or the issue of such children or their respective spouses becoming ill or incapacitated and entitled in the opinion of my trustees to some assistance from my estate...".

1 1.

2 1.

Page 47

1.

I direct my trustees to stand possessed of the residue of my real and personal estate (herein called my residuary estate) upon the following trusts:-1. [SubCL(a) and subCL(b) provide for payment of debts and pecuniary legacies respectively.] 3. Subject as aforesaid my trustees shall stand possessed of my residuary estate upon the following trusts: 1. Until the date of the death of the last survivor of the children of the said Rose Kurban to cause to be sent to such person or authority as my executors shall deem fit the sum of Ten Pounds per year to be distributed between the poor of the said Town of Joun in the Republic of Lebanon. 1. To make the payments hereinbefore directed to be made by my trustees out of the corpus and income of my residuary estate to or for the benefit of the said Rose Kurban or her children. 1. To pay the residue of the said income by annual payments to the President Treasurer and Secretary or other appropriate Governing or Executive Board of The American University of Beirut at Beirut Lebanon...to be applied by the said University Authorities or their successors in office for the purpose of assisting needy students of Lebanese parents of the said University in such manner as the Governing Body of the said University shall determine... . I declare that it is my desire that my trustees shall as far as possible send to the said University regular annual payments of at least One hundred pounds but I realize that the extent to which the University will benefit will vary according to the benefits conferred by my trustees upon the children of the said Rose Kurban in accordance with the powers and discretions hereinbefore conferred upon them.

2. 3 1.
Upon the death of the last survivor of the children of the said Rose Kurban my trustees shall stand possessed of my residuary estate in trust to pay and transfer the same together with any accumulated income to the President Treasurer and Secretary or other appropriate governing or executive body of the said The American University of Beirut to be applied by them or their successors in office to establish a trust fund to be known as the 'Hanna Michael Fawaz Trust' the income from which shall be used for the purpose of assisting needy students of the said University of Lebanese parents in such manner as the governing body of the said University shall determine and without in any way limiting the generality of the foregoing either for the purpose of maintaining such students while they are attending the said University or granting to them such scholarships or assistance as the said governing body shall think fit." [1958] VR 426 at 428

The plaintiffs took out this originating summons asking for the determination, inter alia, of the following questions:

1a) 1b) 1c) 1d)

Is the disposition contained in paragraph (b) of CL3 of the said will void to any and what extent as infringing the Rule against Perpetuities? Is the disposition contained in paragraph (a) of CL4 of the said will void to any and what extent as infringing the Rule against Perpetuities? Is the disposition contained in paragraph (c) of CL4 of the said will void to any and what extent as infringing the Rule against Perpetuities? Is the disposition contained in CL5 of the said will void to any and what extent as infringing the Rule against Perpetuities?

Page 48

1e) 1f) 1g)

Is the disposition contained in CL8 of the said will void to any and what extent as infringing the Rule against Perpetuities? Is the disposition contained in CL7(c)(iii) of the said will void to any and what extent as infringing the Rule against Perpetuities? Did the testator die intestate as to any part of his estate? Voumard, QC and Nimmo, QC, for the plaintiffs.

Newton, for the defendant Edgar Harold Fawaz as representing the next-of-kin of the testator other than Rose Kurban. McInerney, QC and Southwick, for the defendant Nadia Salamy as representing the children of Rose Kurban. Menhennit, QC and Strauss, for the defendant Rose Kurban. Fullagar, for the remaining defendants. [1958] VR 426 at 429

Dean, J, delivered the following written judgment:

This originating summons raised a number of questions each of which turned upon the validity of a separate provision of the will of the testator. The source of invalidity relied upon in each case was the Rule against Perpetuities. I shall have to examine the will in more detail presently, but for the immediate purpose of stating the nature of the problems a brief summary is desirable. The will contains two sets of dispositions. CL3 deals with the testator's house at 1040 Drummond Street, North Carlton and its contents. The remaining provisions deal with the rest of his considerable estate. The scheme of the provisions dealing with his house and its contents is this: He gives to his niece Rose Kurban a life interest therein, and after her death he provides for its use as a home by her unmarried children; upon the marriage of the last of her children the house and contents are to be sold, the proceeds being held upon the trusts relating to his residuary estate; then a power to postpone sale and to allow any of the children to occupy the premises at a fair rental. It is said that these trusts infringe the Rule against Perpetuities because the children of Rose Kurban include not only those in existence at the date of the will but also any who may thereafter be born to her, and that the interests of the children may vest more than twenty-one years from her death, and discretionary trusts in their favour may be exercised beyond the permitted period. The residuary estate is given upon trusts for the benefit of Rose Kurban and her children, contained in CL4 and CL5 of the will, and for similar reasons it is said that they are invalid. CL7(c) contains trusts of income which last during the lives of the children, including, in subCL7(c)(iii), provision for assisting needy students of Lebanese parents at The American University of Beirut, at Beirut, Lebanon. CL8 contains an ultimate trust for that University to come into operation, "upon the death of the last survivor of the children of Rose Kurban". These gifts are likewise said to be obnoxious to the Rule. It will be convenient to take in order the questions asked by the summons, to consider the relevant provisions of the will, and so to deal with the various questions raised. Question (a) asks:--"Is the disposition contained in paragraph (b) of CL3 of the will void toa any and what extent as infringing the Rule against Perpetuities?" [1958] VR 426 at 430 No argument was advanced against the validity of this paragraph and it appears to me to be valid. Whatever view be taken as to who are the children included in the gift, they must all be born in the life-time of Rose Kurban, and she is a life in being for the purposes of the Rule. The right of use and occupation accrues to them at once and is not dependent upon any exercise of any discretionary or other power by the trustees. The interest vests at her death and it is no objection to a gift that it may last beyond the period allowed for

Page 49 vesting. This question is therefore answered "No". Question (b) is: "Is the disposition contained in paragraph (a) of CL4 of the will void to any and what extent as infringing the Rule against Perpetuities?" CL4 directs the trustees to make certain payments out of the income from the residuary estate. Paragraph (a) is: "So long as the said dwelling-house is held in trust for the said Rose Kurban and her children my trustees shall pay the rates taxes fire insurance premiums and all other outgoings payable rated charged or assessed in respect of the said property". No argument was advanced against the validity of this provision and I do not think it is invalid. It is a right accruing at the death of Rose Kurban to those of her children who occupy the premises pursuant to CL3(b). If, as I think, the right to occupy is valid, then the right to have the payments referred to made out of income during such occupation must be valid also. Question (b) should therefore be answered "No." Question (c) is: "Is the disposition contained in paragraph (c) of CL4 of the will void to any and what extent as infringing the Rule against Perpetuities?" It is necessary to set this paragraph out at length: It is as follows: "(c) If my trustees shall in their discretion think it justifiable having regard to all the circumstances to pay to the said Rose Kurban or direct to her children or any one of them a sum not exceeding Two pounds per week for the maintenance of each child as shall not be working. In exercising their discretion under this clause my trustees shall consider whether the child in respect of whom the payment is being made is reasonably justified in not working and in particular shall have regard to whether the said child is prevented from working by illness or inability to obtain work in which cases my trustees shall exercise the discretion conferred upon them hereunder. I declare that the discretion to make payments to the children of the said Rose Kurban conferred upon my trustees by this clause shall not be confined to the lifetime of the said Rose Kurban but may be exercised by my trustees at any time so long as my residuary trust estate or any part thereof remains in their hands." It appears quite clear that if the expression "children of Rose Kurban" includes any who may be born after the death of the testator, the clause contravenes the Rule. The children who are alive at the death of Rose Kurban acquire no vested interest in any share of the income. No one of them can take anything unless and until there is an exercise of the discretion of the trustees in his or her favour. This may be at any time beyond the period of twenty-one years from the death of Rose Kurban or of those children born in the testator's life time. This is too remote. A power exercisable beyond the period allowed by the Rule is void-Re Blew, [1906] 1 Ch 624; Re De Sommery,[1912] 2 Ch 622; Jarman on Wills 8th ed., p. 316; Morris & Leach, The Rule Against Perpetuities, pp. 134-5. [1958] VR 426 at 431 But those who seek to uphold the will challenge the interpretation upon which the contention of invalidity proceeds. They contend that, properly construed, the expression "children of Rose Kurban" is limited to those in existence at the date of the will. This contention, if well-founded, preserves the validity of other clauses of the will which are said to be invalid, namely, CL5, CL7(c)(iii) and CL8. It is therefore one of very great importance. Before examining the contention I propose to set out certain facts in evidence before me, while for the moment expressing no opinion whether they can be admitted in evidence on a question of construction. Rose Kurban was born in Lebanon in 1897, and was thus fifty-two years of age in 1949 when the will was made. She was married and had had four children, all of whom are still living. They are, a daughter, Najla, born in 1923, a daughter, Nadia, born in 1928, a son, Nageeb, born in 1929, and a daughter, Nouhad, born in 1934. All were unmarried at the date of the will. Testator had lived in Victoria for many years, and Rose Kurban, who was his niece resided with her husband and children in Lebanon until 1947, when two of the children came to Victoria. In 1949 Rose Kurban and the other two children came here, arriving three months before the date of the will. The daughter, Nadia, married in 1950, and thereafter lived in Ormond, but Rose Kurban and the other three children resided with the testator from the dates when they

Page 50 respectively came to Victoria at the house at 1040 Drummond Street, North Carlton, until his death in May 1955. Rose Kurban's husband is still alive, and living in Lebanon. I turn now to the question whether the expression in the will "children of Rose Kurban" is confined, as a matter of construction, to those in existence at the date of the will. Unless it is so confined, the clause under consideration is void. If by any possibility further children could be born to Rose Kurban, the gift would fail. The attitude of the law on this matter would scarcely commend itself to an intelligent layman. It is prepared to concede that a deceased person cannot have children, but it will concede no more. The fact that by a surgical operation a woman's organs of generation have been removed, or the fact that she is of an advanced age will not, in the eye of the law, exclude the possibility of further children being born to her. As Dr. Morris and Professor Leach observe, the rule dates from a time when the science of gynaecology was almost unknown. See op. cit. pp. 74-5, 79-81. I am, however, bound by authority: Jee v Audley (1787) 1 Cox Eq Cas 324; Re Dawson (1888) 39 Ch D 155; Ward v Van der Loeff, [1924] AC 653; Ker v Hamilton (1880) 6 VLR (E) 172; Re Breheney, [1915] VLR 242; Re Deloitte, [1926] Ch 56; but I am not prepared to agree with Lord Brougham that the doctrine is "one of the corner-stones of the law"-- Dungannon v Smith (1846) 12 Cl & Fin 546, at p. 631. There have been suggestions that some court of high authority may some day reconsider the matter--see per Lord Maugham in Berry v Green, [1938] AC 575, at p. 584. I must resist the temptation, which I feel is very strong in this case, to look at the facts I have referred to above and to say that the testator was probably intending to provide for those who had come to share his home, namely his niece and her four children. But the true use of extrinsic evidence is not to use it to ascertain intention, but only as a guide to the meaning of the will. In Ward v Van der Loeff, [1924] AC 653, at p. 663, Viscount Cave, quoting Rigby, LJ, said there was a "fundamental distinction between evidence simply explanatory of the words ...themselves, and evidence sought to be applied to prove intention itself as an independent fact." [1958] VR 426 at 432 It is well settled that prima facie a reference to the children of a person means the children born or to be born of that person. If a child be in fact a child of such person, there is no reason for excluding him from the class--Re Breheney, [1915] VLR 242. But it is possible to find sometimes in a will an indication of the testator's intention that the word "children" was confined to children born at the date of the will. Cussen, J, was able to arrive at such a conclusion in Re Hobson,[1907] VLR 724. In doing so, he derived some support from the discredited decision of Shadwell, V-C, in Elliott v Elliott (1841) 12 Sim 276. See Jarman on Wills, 8th ed., p. 1676; Gray on Perpetuities, 4th ed., s640--and see per Isaacs and Gavan Duffy, JJ, in Reid v Earle (1914) 18 CLR 493, at pp. 504-5. One further matter should be referred to. It is very tempting to construe the will in a way which would avoid the defeat of the dispositions by the Rule against Perpetuities, by taking at its face value the maxim which states that documents should be interpreted ut res magis valeat quam pereat. But it has been frequently laid down that it is not permissible to take the existence of the Rule against Perpetuities into account in construing a will. Thus in Dungannon v Smith (1846) 12 Cl & Fin 546, at p. 599, Parke, B, said: "Our first duty is to construe the will; and this we must do, exactly in the same way as if the Rule against Perpetuities had never been established, or were repealed when the will was made; not varying the construction in order to avoid the effect of that rule, but interpreting the words of the testator wholly without reference to it." See also, per Lord Macnaghten in Edwards v Edwards, [1909] AC 275, at p. 277; Pearks v Moseley (1880) 5 App Cas 714; Ward v Van der Loeff, [1924] AC 653, at p. 660; Gray on Perpetuities, 4th ed., p. 599. Having administered to myself these necessary warnings and cautions, I proceed to consider the contention that there are in this will definite indications that the testator intended to refer and to refer only to those children of Rose Kurban whom the testator knew and who were living at the date of his will. I turn now to the will. CL3(b) provides that upon the death of Rose Kurban and until the date of sale Nadia Kurban "and such of the children of the said Rose Kurban as shall be unmarried" are to have the use and occupation of his dwelling-house and contents. He adds "I declare that it is my intention to permit the said

Page 51 Nadia Kurban to reside in the said dwelling-house whether she is married or unmarried as she is the person eminently suited to maintain the said dwelling-house as a home for her unmarried brother and sisters". Great significance is attached to the use of the word "brother" in the singular, as showing that he did not have in mind the use of the house by any future son of Rose Kurban. This is said to show that he was providing a home solely for the existing children. Rose Kurban had only one son, the brother of Nadia. This is a circumstance of considerable significance even if it were the sole indication to be found in the will. It supports the view that when in CL3(c) he directs a sale "upon the date upon which the last of the surviving children of the said Rose Kurban shall marry", he is referring to the marriage of the last of her then existing children to marry. [1958] VR 426 at 433 But there are other indications of a similar intention--clause 4 begins the series of trusts in relation to his residuary estate. It is concerned only with the application of the income of his residuary estate. I need not repeat CL4(a). CL4(b) provides: "My trustees shall during the lifetime of the said Rose Kurban pay to her the sum fo Six pounds per week until such time as Nouhad Kurban the youngest daughter of the said Rose Kurban commences to work or in the opinion of my trustees should have commenced to work and shall thereafter pay to the said Rose Kurban the sum of 4 pounds per week for life". The only beneficiary under this clause being Rose Kurban herself it has no direct bearing upon this case. But what is important is that Nouhad Kurban is referred to as the "youngest daughter" of Rose Kurban. So she was at the date of the will, but if Rose Kurban were to have another daughter she would not be the youngest. This is relied on for the contention that the testator did not have any intention of benefiting any children of Rose Kurban except those known to him. If it be assumed, as Counsel for the next-of-kin contended, that by the words "children of Rose Kurban" testator was intending to include future children, then the description of Nouhad as the youngest daughter was one which he would have regarded as not necessarily correct. If, on the other hand, he was intending to benefit the then existing children alone, it is, and always will be, correct so to describe Nouhad. But CL4(b) is important in another way. He provides that an additional 2 pounds per week is to be payable to Rose Kurban until Nouhad, who was aged 15 at the date of the will, commences to work. If testator had contemplated the possibility of other children being born to Rose Kurban it would have been expected that he would have made a similar provision in respect of any such child. The fact that this provision is made only in respect of Nouhad tends to show that he was not concerned to provide for any subsequent children. Similar conclusions can be drawn from CL4(c) which I have already set out in full. He does not appear to treat infancy as a ground for making the extra payments which the trustees are empowered by this clause to make. Such a case is dealt with by CL4(b) as regards Nouhad, but in CL4(c) he is contemplating the case of a child old enough to work but prevented from working by some circumstance such as ill-health or inability too obtain work. In my opinion the matters to which I have referred appear to show with some definiteness that testator was intending to confine the benefits given by the will to those of Rose Kurban's children who were alive when he made his will. The matters referred to indicate that these were the only children he had in mind as the persons to be benefited thereby. It may be said that while testator himself did not contemplate the possibility that further children might be born, nevertheless his language is wide enough to cover such children, and the fact that they were not contemplated is not sufficient to exclude them. But if the testator has made the dispositions in his will upon the basis that the persons who would benefit thereby would fall within a restricted class, then even though the actual description of the donees is prima facie wide enough to include members of a wider class, the actual words of description must be read in the light of other indications of his intention to be found in the will. If, whether be design or because he gave no thought to the possibility of additional children, he has shown an intention to confine the gift to the existing children, it would be contrary to his intention to extend it to possible future children. I am satisfied from a perusal of the will as a whole that testator had no other intention beyond that of providing for the family group, providing a home for them, and empowering his trustees to make other payments to them. In my opinion question (c) should be answered "No." [1958] VR 426 at 434

Page 52 Question (d) is: "Is the disposition contained in CL5 of the will void to any and what extent as infringing the Rule against Perpetuities?" This clause empowers the trustees to pay or apply any part of the corpus or income of his estate for the maintenance, benefit or welfare in life generally of the said Rose Kurban or of any of her children in the event of the said Rose Kurban or any of her children or the issue of such children or their respective spouses becoming ill or incapacitated and entitled in the opinion of his trustees to some assistance from his estate. The clause concludes: "The discretion conferred upon my trustees by this clause shall be a general one and my trustees shall be entitled to assist the persons herein mentioned in such manner as my trustees shall in their uncontrolled discretion think fit." Despite the reference to the issue and spouses of children and the expression"the persons herein mentioned" in the concluding sentence, I think the only persons to whom payments can be made under this clause are Rose Kurban and her children, the illness, incapacity or need of the issue or spouses of children being events upon which payments may be made under the power, though not the only events. If I am correct in thinking that the expression "children" is confined to children existing at the date of the will, the clause does not offend the Rule as they are all lives in being. Even if the power does extend to authorize payments to issue or spouses of children, it comes to an end upon the death of the last of the children, when CL8 operates. I think this question should be answered "No." Question (f) is: "Is the disposition contained in CL7(c)(iii) of the will void to any and what extent as infringing the Rule against Perpetuities?" By CL7 his trustees are directed to stand possessed of his residuary estate upon trust to sell, to pay debts, duties and some pecuniary legacies. Paragraph (c)(iii) directs them to pay the residue of the income by annual payments to The American University of Beirut to assist needy students. Although this is a charitable gift, it must take effect within the period permitted by the Rule--Chamberlayne v Brockett (1872) LR 8 Ch 206. But it comes to an end when CL8 operates, that is, "upon the death of the last survivor of the children of the said Rose Kurban." Upon the view I have taken as to the persons included as "children" this gift does not offend against the Rule, and the question should be answered "No." Question (e) is: "Is the disposition contained in CL8 of the will void to any and what extent as infringing the Rule against Perpetuities?" This question is answered by the view I have taken as to the persons included in the words "the children of the said Rose Kurban". This expression should receive the same interpretation throughout the will. If I am correct in the view I have expressed, then it includes only the children in existence at the date of the will. So construed the gift comes into operation within the permitted period. The question should be answered "No." Question (g) asks whether the testator died intestate as to any part of his estate. This also should be answered "No." [1958] VR 426 at 435 The questions asked by the summons are answered:-(a) No. (b) No. (c) No. (d) No. (e) No. (f) No. (g) No.

Page 53 Order Questions answered accordingly. Solicitors for the plaintiffs: Corr & Corr. Solicitors for the defendant Edgar Harold Fawaz: John W McComas & Co. Solicitor for the defendant Nadia Salamy: Con Demetrie. Solicitors for the defendant Rose Kurban: R R Renowden & Co. Solicitors for the remaining defendants: Moule, Hamilton & Derham. LEO S. LAZARUS

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