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    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 thesettlor' 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 simpleand 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 Court Date SignalConsidered/

    FollowedTaxation Case D35 (1972) 72 ATC 200 TBR

    28/6/19

    72

    Cases considered by this case

    Annotations: All Cases Sort by: Judgment Date (Latest First)

    Annotation Case Name Citations Court Date Signal

    Cited Taxation, Deputy

    Commissioner of (SA) v

    [1960] ALR 196;

    (1960) 33 ALJR 506

    HCA 29/2/1960

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    Simpson

    CitedElder's Trustee & ExecutorCo Ltd v Commissioner of

    Succession Duty

    [1945] SASR 34 SASC 7/5/1945

    Cited Commissioner of StampDuties (NSW) v Thomson

    (1927) 40 CLR 394;

    [1928] ALR 30; (1927)1 ALJR 323;BC2700024

    HCA 10/12/1927

    Cited Rosenthal v Rosenthal

    [1911] VLR 277a;

    (1910) 11 CLR 87;(1910) 16 ALR 455;

    [1910] HCA 47;

    BC1000037

    HCA 16/9/1910

    Legislation considered by this case

    Legislation Name & Jurisdiction Provisions

    Aged and Infirm Persons' Property Act 1940

    (SA)-

    Estate Duty Assessment Act 1914 (Cth) -

    Words & Phrases

    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 thetestator'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 timeand 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:

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    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 Ihave 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 heappointed 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 betweenhis 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 thecapital 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 attaineda vested interest leaving issue, the share of the legatee so dying shall go to his or her child or children, butin 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-- somewithout 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 Cornwelland 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

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    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 tovesting 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 havingsurvived 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 togive 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 consequencesmay 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", itis 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

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    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 interestvested 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 followit. 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 ofdistribution. 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 theword "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 constructionof 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 thecircumstance 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).

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    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 inthose surviving at the time of the legatee so dying, that being actual event when substitution was to takeeffect, 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 theperiod 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 meansvested 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 inpossession 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 lessreason 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 therewas, quite apart from such a provision as we are here dealing with, another provision by which there was a

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    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 referredto 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 bycounsel--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 theevent 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 tothe 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 inthis 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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    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 priorlife 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 Court Date Signal

    Followed Harris v Skevington [1978] 1 NSWLR 176NSW

    CA

    11/4/19

    78

    Cases considered by this caseAnnotations: All Cases Sort by: Judgment Date (Latest First)

    Annotation Case Name Citations Court Date Signal

    CitedAttorney-General (SA) v

    Bray

    (1964) 111 CLR 402;[1964] ALR 955;

    (1964) 37 ALJR 447;

    BC6400450

    HCA 25/2/1964

    Cited Davies v Perpetual Trustee

    Co (Ltd)

    [1959] AC 439; [1959]

    2 All ER 128; [1959] 2

    UKPC 7/4/1959

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    WLR 673

    AppliedTacon, Re; Public Trustee vTacon

    [1958] Ch 447; [1958]1 All ER 163

    EWCACiv

    19/12/1957

    ConsideredWhite's Will Trusts, Re;

    Barrow v Gillard[1955] Ch 188

    EWHCC

    h24/6/1954

    Cited Willis v Commonwealth

    (1946) 73 CLR 105;[1946] ALR 349;

    (1946) 20 ALJR 195;

    BC4600024

    HCA 6/8/1946

    AppliedSlevin, In re; Slevin v

    Hepburn[1891] 2 Ch 236

    EWCAC

    iv20/3/1891

    Cited Attorney-General v Stepney(1804) 10 Ves 22;

    (1804) 32 ER 751-

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    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 theabsolute 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 wasnever 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 Court Date Signal

    Cited Taxation Case M25 (1980) 80 ATC 174 TBR 24/4/19

    80

    Cited Taxation Case J59 (1977) 77 ATC 505 TBR 11/10/1977

    Referred toGlynn v Commissioner of Stamp

    Duties (NSW)(1977) 7 ATR 417

    NSW

    SC

    19/5/19

    77

    Cited Taxation Case G47 (1975) 75 ATC 303 TBR 15/7/19

    75

    Cited Taxation Case G46 (1975) 75 ATC 289 TBR 8/7/197

    5

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    Cases considered by this case

    Annotations: All Cases Sort by: Judgment Date (Latest First)

    Annotation Case Name Citations Court Date Signal

    Distinguishe

    dKauter v Hilton

    (1953) 90 CLR 86;

    (1953) 27 ALJR 714;

    BC5300820

    HCA 17/12/1953

    Cited Teasdale v Webb(1940) 57 WN (NSW)151

    NSWSC 12/6/1940

    CitedCommissioner of StampDuties v Jolliffe

    (1920) 28 CLR 178;

    (1920) 26 ALR 210;[1920] HCA 45;

    BC2000036

    HCA 14/8/1920

    Legislation considered by this case

    Legislation Name & Jurisdiction Provisions

    Estate Duty Assessment Act 1914 (Cth) 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 estateconsisted 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 loansaccumulated 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 percent 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 SummonsThe 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 conversionand 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 topayment of these legacies, to invest the residue (comprising both ready moneys and moneys subsequently

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    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 andadministration of her estate consequently lasted over a period of years during which time the mortgageloans 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. Byhis 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 fullestpower 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 herown 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 suchlegacies 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

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    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 47,000pounds. 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 andbequeath my real and residuary personal estate to my trustee upon trust to realize the same and after payingout 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 myestate 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 inthe 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

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    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 beinvested, 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'sexecutors 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 cameto 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'sresidue, 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 wouldtake the whole net income thereof to the tenant for life, does not tell the court anything as to the testator'sintention 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

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    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. Butthe whole residuary disposition commences with a general trust for conversion. There is a trust forconversion 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 argumentfor 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 beforehis 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 estatehad 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 theretention 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 theproper 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 widowdeprived of all income therefrom until they are actually received and invested. But this is a badly drawn

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    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 fairmethod of achieving what, if the testator's attention had been called to the nature of his sister's estate, he ismost 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 outat 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 appliedmechanically 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 Ch80. 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 appearsto me on a consideration of the whole of the residuary dispositions of the testator that the widow is reallygiven 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

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    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 deathto 17 April 1959, and that to pay 12,000 pounds before apportioning the balance of the 31,000 pounds willmean 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 inCommonwealth 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 themortgages--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 notaware. 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 2July 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.

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    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 partpayment 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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    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 Court Date Signal

    ReversedSimpson v Deputy

    Commissioner of Taxation

    [1959] ALR 610;

    (1958) 32 ALJR 292HCA 21/11/1958

    Cases referring to this case

    Annotations: All CasesSort by: Judgment Date (Latest First)

    Annotation Case Name Citations Court Date Signal

    Considered/

    FollowedTaxation Case D35 (1972) 72 ATC 200 TBR

    28/6/19

    72

    Cited

    Elder's Trustee & Executor Co Ltd

    v Federal Commissioner ofTaxation

    (1966) 118 CLR 331; (1966)

    40 ALJR 371; BC6600090 HCA29/11/1

    966

    Cases considered by this case

    Annotations: All Cases Sort by: Judgment Date (Latest First)

    Annotation Case Name Citations Court Date Signal

    Followed Elders Trustee & Executor Co

    Ltd v Federal Commissioner

    of Taxation

    (1953) 88 CLR 200;

    [1953] ALR 697;

    (1953) 27 ALJR 341;

    HCA 30/7/1953

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    BC5300340

    Legislation considered by this case

    Legislation Name & Jurisdiction Provisions

    Estate Duty Assessment Act 1914 (Cth) 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 alife 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 thisoriginating 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 thisreport. 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 'allor 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 thesettlement. 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 in1915 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 equitableestate 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 notapply in equity. (3) The settled property was a mixed fund of freehold land, leasehold land and chattels, and

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    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 ofequitable 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 theprovisions of the Act and to the fact that they did not provide for the transfer of equitable interests; indeedequitable 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 equitableestate 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 f