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Page 2 1 of 10 DOCUMENTS: CaseBase Cases

Gava v Grljusich
BC9702070 Court: WASC Judges: Sanderson M Judgment Date: 16/5/1997

Catchwords & Digest

Succession -- Accounts -- Whether payment of legal fees was for benefit of estate -- Where disputes between trustees and beneficiaries of estate Where defendants were executors and trustees of their late father's estate. Where plaintiffs, beneficiaries of estate, were successful in having them removed from those positions. Where defendants lodged accounts which plaintiffs objected to. Determination of matters to assist Registrar in taking of accounts. Where in action to remove caveat lodged by plaintiffs and another beneficiary over estate property Court ordered defendants' costs to be taxed and paid out of estate. Whether difference between taxed costs and amount actually incurred was valid expense of estate. Whether full indemnity required consent of beneficiaries. Whether expense incurred in removing one of plaintiffs as occupier of estate property was valid expense of estate. Where before trial plaintiff agreed to vacate. Where no order was made as to costs. Whether costs incurred in granting probate of mother's will on instructions from beneficiaries of father's estate were costs in connection with father's estate. Whether accounts filed by defendants needed to detail losses that were incurred by estate or record interest payable to life tenant. Where court in removing defendants as trustees did not base decision on wilful misconduct. Held: All expenses valid. Losses and interest were not required to be recorded.

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2 of 10 DOCUMENTS: Unreported Judgments NSW 8 Pages

RE PERPETUAL TRUSTEE COMPANY LTD - BC9701911


SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J 3276 of 1996 20 February, 7 April 1997, 21 April 1997
EQUITY [296] -- Trusts -- Life tenant and remaindermen -- Voluntary winding up of company -How distributions held. WORDS & PHRASES -- "Sale".

Young J
BC9701911 at 1 This is an application under s63 of the Trustee Act 1925 for judicial advice by a trustee. The plaintiff is the trustee of a trust known as the "Geoffrey Harold Arnott Trust" constituted pursuant to a declaration of trust dated 4 August 1983 ("the Deed"). It is also, together with Eleanor Dartnall, the trustee of the trusts of the will of Helen Annie Arnott ("the Will"). The Deed provided, inter alia, for trusts to attach to 1,000 shares of $2 each fully paid in the capital of Gleniston Pty Ltd which were transferred to the trustees. As at the date of hearing, there were 16,000 issued shares in that company, 1,000 were held by the plaintiff as trustee of the trust, a further 4,000 by the plaintiff and Eleanor Dartnall as trustees of the Will, and the remaining 11,000 by Ronald Geoffrey Arnott. Ronald Geoffrey Arnott and Suzanne Ethel Arnott are the children of Geoffrey Harold Arnott and Helen Annie Arnott. BC9701911 at 2 Neither of these children have any issue. The estate of Helen Annie Arnott is fully administered. Cl3 of the Deed provides that the trustees are to hold the Gleniston shares in the events which have happened on trust for Suzanne Ethel Arnott for life, and thereafter to such of the named grandchildren as are then living and have attained 25 years. The Deed names certain grandchildren. Mr Hallen of counsel has appeared for them on this summons. Cl9(c) of the Deed provides that: "The Trustees shall not sell any of the Gleniston shares during the life of Suzanne Arnott without the prior written consent of Suzanne Arnott." The will makes exactly similar provisions for the shares held by Mrs Arnott in Gleniston. Ronald Geoffrey Arnott has proposed that Gleniston be placed in voluntary liquidation. The plaintiff has no objection to this, but is concerned that its ability to consent is limited because of cl9(c) of the Deed and the

Page 5 corresponding provision in the Will. It accordingly sought the advice of the Court on the following questions:(i) Does cl9(c) of the Geoffrey Harold Arnott Trust and/or cl3(a) of the will of Helen Annie Arnott preclude the plaintiff voting in favour of a voluntary liquidation of Gleniston without the prior written consent of Suzanne Ethel Arnott? (ii) Otherwise, do the terms of the Geoffrey Harold Arnott Trust and/or the will of Helen Annie Arnott preclude the plaintiff from voting in favour of the voluntary liquidation of Gleniston? BC9701911 at 3 (iii) Whether those assets of Gleniston as distributed to the plaintiff (whether in specie or in cash) consequent upon a voluntary liquidation of Gleniston are to be held on the same trusts as the Gleniston shares held in the Geoffrey Harold Arnott Trust and the trusts of the will of Helen Annie Arnott? (iv) If the answer to question (iii) is no, how are those assets of Gleniston as distributed to the plaintiff (whether in specie or in cash) consequent upon a voluntary liquidation of Gleniston to be held by the plaintiff? The matter was argued before me on 20 February 1997 by Mr T K Tobin QC and Mr Willmott for the trustee. I suggested that interested persons should be notified and that further submissions should be put to me and adjourned the matter until 7 April. On that date, Mr Hallen appeared for the named grandchildren and it was made plain to me that a solicitor was in court on behalf of Suzanne Arnott. Neither Mr Hallen nor the solicitor sought to be heard, nor did they either consent to or oppose what the trustee was seeking. At the end of the oral argument I answered the questions "No", "No", "Yes" and "Does not arise" and said that I would give my reasons in due course. These reasons are now supplied. The first point that troubled me was whether a voluntary liquidation involved a sale. The answer to that enquiry is that a sale is involved in a voluntary liquidation, but not a sale of the shares. Rather there is a sale of the assets by the company to its shareholders. BC9701911 at 4 One usually commences an examination of what is a sale with reference to Benjamin's classic definition which now appears in para26 of the 2nd ed of Benjamin's Sale of Goods, viz: "A transfer of the absolute or general property in a thing for a price in money." This definition was adopted by the Court of Appeal in Ex parte Henry; Re Commissioner of Stamp Duties (1962) 63 SR (NSW) 298, 316. Counsel and I examined various authorities. In Great Western Railway Co v Commissioners of Inland Revenue [1894] 1 QB 507, two small railways were merged with the Great Western Railway and in exchange for their shares the shareholders in the smaller railways were to receive stock and debentures of the Great Western Railway Company. The English Court of Appeal held that the transaction was in substance a transfer on sale. There was virtually a sale of the shares of the smaller companies to the Great Western Railway Company to be paid for in stock and debentures. Mr Tobin QC and Mr Willmott said that this case was distinguishable as we are here dealing with a voluntary liquidation, not an amalgamation. I believe this submission is correct. However, nearer the core of the problem is Archibald Howie Pty Ltd v Commissioner of Stamp Duties (1948) 77 CLR 143. That case involved a reduction of capital where the company returned assets in specie and the capital was reduced from $2 per share to 5 cents per share. Dixon, J at 154 said that the proper analysis of the transaction was that the shareholder "in satisfaction of his proportionate 'interest' BC9701911 at 5 in the assets, an interest consisting of a congeries of rights in personam, takes an aliquot part of the assets" Williams, J said at p 159 that the payment for a share in a company is "full consideration for the right to receive any distributions of money or assets which the shareholder subsequently receives from the

Page 6 company." In Ord Forrest Pty Ltd v Federal Commissioner of Taxation (1974) 130 CLR 124, 142, Barwick, CJ, who was in the statutory minority said, "A company in allotting a share in its capital does not sell or transfer the share. ... The company does not part with any property, though by the allotment it diminishes its capacity to continue to allot shares ... ". Article 146 of Gleniston's Articles of Association provides that, on a winding up, the liquidator may, with the sanction of the appropriate resolution, divide the assets of the company in specie among its shareholders. I am informed that the probabilities will be that if there is a voluntary winding up, the assets of Gleniston, which are wholly shares in Arnotts Ltd, will be so distributed. If this occurs there may well be technically a sale of the Arnotts' shares, but not the shares in Gleniston Pty Ltd which will disappear. Mr Tobin QC also argues that one must look at the word "sale" in the context of the Deed and the Will. He put that when one does this, one can see that the word "sell" was used in other parts of the Will in a very technical way in contradistinction to "agree to sell" or "appropriate ... any part of the trust fund in specie". Accordingly, no matter what might be the situation for revenue law purposes, the settlor and the testatrix had used the word "sell" in the BC9701911 at 6 traditional sense of giving up an asset in exchange for money. Such a sale is not involved in a voluntary liquidation even if there is a distribution of assets. I again see the force of that argument and accept it. Accordingly, the involvement of the trustee in the voluntary winding up of Gleniston Pty Ltd does not involve a sale of the shares in Gleniston Pty Ltd within the meaning of the Will or the Deed and accordingly it is not necessary for the trustee to obtain the written consent of Suzanne Arnott. Of course, whether the consent is legally necessary or not, a wise and prudent trustee would seek the view of the beneficiary. The beneficiary has been served and has been given an opportunity to say what she feels about the transaction but has declined to take that opportunity. There may be very good reasons for her taking this stance, but the trustee has complied with its moral obligation to seek her view. Accordingly questions 1 and 2 were answered "No". Question 3 raises a different matter. The question virtually is upon what trusts will the cash or assets distributed in specie as a result of Gleniston's liquidation be held by the trustee? Counsel referred me to the cases discussed in Jacobs, Law of Trusts in Australia 6th ed (Butterworths 1997) pares [1923] and [1924]. These are to the effect that if the trust property is resumed and there are interests in succession, the life tenant is entitled to have her income made up from the income from the original property. The learned authors cite Askew v Woodhead (1880) 14 Ch D 27 and Re Quigley (1906) 6 SR BC9701911 at 7 (NSW) 360. However, when one looks at the cases, they were both decided on specific provisions of Acts of Parliament. In the case of Askew, s74 of the English Land Clauses Act 1845, and in the case of Quigley, s53 of the NSW Public Works Act 1900. Neither give guidance as to what happens under the general law where there is a transmogrification of the trust property. Indeed, the presence of such provisions and other statutory provisions such as s64 of the Conveyancing and Law of Property Act 1898 give the feeling that without such statutory provisions some other result might appertain. The problem does not seem to have been thoroughly considered before 1949 when Romer, J dealt with Re Scholfield's Wills Trusts [1949] Ch 341. War damage was caused to the real and leasehold property belonging to the trust and compensation money was received from the War Damage Commission. The trustees sought advice as to what part of the compensation moneys should be treated as capital. His Lordship found that none of the statutes such as the Settled Land Act dealt with the point before him, but he should, by analogy, follow what happened in Askew v Woodhead. He said at 346, "The fact that money has, through wholly fortuitous circumstances, been substituted for an interest in property affords, in my judgment, no ground for effecting, in addition, a substitution of beneficial interests." The same result seems to have been reached by Neville, J in Re Lingard [1908] WN (Eng) 107, 108, though the report is so

Page 7 abbreviated it is hard to say this for certain. See also Perpetual Trustee Co v Holt (1894) 15 LR (NSW) (Eq) 18; Clayton v Montgomery (1897) 18 LR (NSW) (Eq) 171, 177 and Underhill and Hayton, Law of Trusts and Trustees (Butterworths London) 15th Ed 1995, p 519. BC9701911 at 8 The proceeds of the liquidation are thus to be held on the same trusts as the Gleniston shares. As it is unlikely that the quantum of income will markedly differ from what is - paid at present, there is no need to consider whether surplus income should be capitalized or there be a resort to capital to supplement income. Order Accordingly, I gave the answer "Yes" to question 3. Counsel for the plaintiff: T K Tobin QC and M S Willmott Solicitors for the Plaintiff: Freidman Reeves Counsel for named grandchildren: P Hallen

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Page 9 3 of 10 DOCUMENTS: CaseBase Cases

Duffy (decd), Re
BC9700453 Court: TASSC Judges: Wright J Judgment Date: 27/2/1997

Catchwords & Digest

Succession -- Wills and codicils -- Construction -- Whether devise an absolute gift or a life estate Farm was devised to son of testatrix and then to daughters in equal shares. Whether son entitled to estate absolutely provided conditions relating to payment of outgoings was complied with. Whether son was to be life tenant of estate and then upon his death the estate was to be divided equally among testatrix's daughters. Where will contained another disposition of realty which specified unambiguously that disposition was absolute whereas disposition in question did not contain such clear language. Where disposition was not expressed to be to son but to trustees for son. Where no provision as to what was to happen to property in event of death of a daughter. Where unlikely that testatrix intended son to get all whilst daughters inherit nothing unless son did not comply with conditions as to payment of outgoings. Held: Son entitled to conditional life interest with remainder on death to sisters. Will intended to achieve equity amongst family members. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations [2001] TASSC 132; Cited Armstrong v Stokell BC200107221 (2001) 11 ANZ Ins Cas 61Thiess Contractors Pty Ltd v Cited 509; [2001] WASCA 364; Norcon Pty Ltd BC200107211 (2001) 10 Tas R 186; [2001] Followed Hopwood v Cuthbertson TASSC 64; BC200103007 Journal articles referring to this case Article Name Construction of Will

Court TASS C WAS CA TASS C

Date 20/11/2 001 16/11/2 001 7/6/200 1

Signal

Citations (2002) 76(11) ALJ 667

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Page 11 4 of 10 DOCUMENTS: CaseBase Cases

Seymour v Seymour
(1996) 40 NSWLR 358; BC9605024 Court: NSWCA Judges: Mahoney ACJ, Meagher JA and Abadee AJA Judgment Date: 25/10/1996

Catchwords & Digest

Trusts -- Trust property -- Maladministration of property -- Equitable remedies Where trust established as a result of divorce proceedings, with the former wife taking a life tenancy in the subject property and the children taking an interest in the properties as remaindermen beneficiaries. Where wife registered as owner in fee simple. Where arrangement made in 1974 for transfer of some of the property to one of the beneficiaries subject to his payment of certain equal sums to the other beneficiaries. Where during 1985 life tenant received incorrect advice from her solicitor to the effect that she held an unencumbered fee simple interest in the trust property. Where money not paid according to the arrangement due to the legal advice. Where, following the advice, the life tenant transferred part of the property to one of the beneficiaries for a nominal sum. Where transfer not registered until 1985. Where substantial improvements effected to property by beneficiary. Where beneficiary had paid all rates on the property during the relevant period. Whether beneficiary should return property to the estate or pay compensation. Whether equitable estoppel applicable: whether to depart from the assumption upon which the parties have acted would be unconscionable. Where beneficiary content to satisfy terms of the arrangement, with interest. Held: No binding legal contract arose out of the 1974 meeting. Relief against beneficiary denied. Legal practitioners -- Professional liability -- Duty of care to third parties -- Mistaken advice to beneficiaries of trust Whether duty of care owed by solicitor to third parties for wrongful advice. Whether sufficient damage suffered by plaintiffs where their equitable interest in remainder was converted into a claim in respect of the proceeds of sale. Whether cause of action barred by the Statute of Limitations. Whether solicitor fraudulently concealed cause of action pursuant to s 55 Limitation Act 1969 (NSW). Nature of fraud required to come within s 55. Held: Because of previous course of dealings between solicitor and third party; solicitor liable. No fraudulent conduct within the meaning of s 55. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations

Court

Date

Signal

Page 12 Considered Considered Approved McDonald v Grech; Bank of Western Australia Ltd v McDonald Langford v Reddy Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [2012] NSWSC 717; BC201204758 [2012] NSWSC 289; BC201203391 [2007] WASC 118; BC200704260 (2007) 229 CLR 519; (2007) 234 ALR 148; (2007) 81 ALJR 933; (2007) 61 ACSR 118; (2007) Aust Torts Reports 81-885; [2007] HCA 16; BC200702711 [2006] NSWSC 1097; BC200608344 (2004) 13 Tas R 51; [2004] TASSC 50; BC200403099 [2004] QSC 132; BC200402494 [2001] NSWCA 403; BC200107668 [2001] QSC 406; BC200107004 [2001] NSWCA 236; BC200104102 [2001] NSWSC 404; BC200102824 [2000] VSC 211; BC200003166 [2000] NSWSC 353; BC200005715 (1999) Aust Torts Reports 81-514; [1999] NSWSC 443; BC9902764 [2000] 1 Qd R 523; [1998] QSC 181; BC9804653 (1997) 18 WAR 384; BC9705863 BC9705209 [1997] NSWCA 230; BC9708211 NSW SC NSW SC WAS C 27/6/20 12 29/3/20 12 30/5/20 07

Considered

Commonwealth of Australia v Cornwell

HCA

20/4/20 07

Considered Considered Cited Considered Cited Applied Considered Applied Considered Distinguishe d Considered Applied Considered Cited

Wade v Trnka Tusyn v State of Tasmania Baker v Hallett; Baker v Pattison; Baker v James Walmsley v Cosentino Pittaway v WH Tutt and Quinlan Mann v Commonwealth of Australia AG-Exports (Australia) Pty Ltd v Export Finance & Insurance Corporation Di Sante v Camando Nominees Pty Ltd Mann v Commonwealth of Australia Hetherington v Mirvac Pty Ltd Grahame Allen & Sons Pty Ltd v Water Resources Commission Honey v McLennan Grew v Walsh Noss v Hilton

NSW SC TASS C QSC NSW CA QSC NSW CA NSW SC VSC NSW SC NSW SC QSC WAS C NSW SC NSW CA

16/10/2 006 26/5/20 04 7/5/200 4 21/11/2 001 15/10/2 001 13/7/20 01 4/6/200 1 25/5/20 00 3/5/200 0 12/5/19 99 8/9/199 8 30/10/1 997 16/10/1 997 29/9/19 97

Journal articles referring to this case Article Name Access to Justice for Survivors of Child Sexual Abuse Negligence Juggernaut and Unjust Enrichment Cases considered by this case

Citations (1997) 5 TLJ 221 (1997) 16 Aust Bar Rev 79

Signal

Page 13 Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1983) 151 CLR 422; (1983) 45 ALR 265; (1983) 57 ALJR 197; Applied Taylor v Johnson [1983-84] ANZ ConvR 63; [1983] HCA 5; BC8300058 [1949] 2 All ER 1107; Applied Solle v Butcher [1950] 1 KB 671 Legislation considered by this case Legislation Name & Jurisdiction Limitation Act 1969 (NSW)

Court

Date

Signal

HCA

23/2/1983

25/11/1949

Provisions s 55, s 55(1)(b)

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5 of 10 DOCUMENTS: Unreported Judgments NSW 27 Pages

SEYMOUR and ORS v SEYMOUR and ORS - BC9605024


SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY ACJ, MEAGHER JA and ABADEE AJA No. 40697 of 1993 16 September 1996, 25 October 1996
Trusts and Trustees -- Trustee as life tenant mistakenly conveys property to third party and to one of beneficiaries -- No power of sale -- Breach of trust -- Equitable remedies for remaindermen. Legal Practitioners -- Solicitors -- Duty of care to third parties -- Mistaken advice -- Whether action in negligence statute barred -- Whether solicitor "fraudulently concealed" cause of action Trusts and trustees -- Appeal against trial judge's refusal to grant relief to appellants in respect of the transfer of trust property to one of the beneficiaries and refusal to award damages in negligence against solicitor -- Deed of Arrangement arising from divorce settlement whereby wife as life tenant holds properties in trust for children -- Wife subsequently conveys one property to third party and transfers part of other property to son (Bruce) for nominal consideration -- Breaches of trust -Trustee has no power of sale -- Incorrect advice given by solicitor that wife held properties as beneficiary in fee simple -- Rights and remedies in equity for remaindermen. Legal Practitioners -- Solicitors -- Duty of care to third parties (appellants) where no contractual relationship -- Mistaken advice to family members involved in trust regarding legal and equitable interests in land -- Duty of care to beneficiaries in circumstances where solicitor acts for trustee -Whether relationship of proximity with appellants giving rise to duty of care -- Whether action in negligence statute barred -- Whether "fraudulent concealment" of action such as to attract s55 Limitation Act 1969 -- Conduct of Solicitor. BC9605024 at 2 Held: Appeal dismissed: (i) In respect of the claim against Bruce, the Court agrees with the order made by the trial judge regarding payment of the $9,500 with interest. (ii) The relationship of proximity was established and accordingly the solicitor owed a duty of care to the appellants. However the action in negligence became statute barred prior to the commencement of the proceeding. (iii) The solicitor did not "fraudulently conceal" the cause of action against him such as to attract the operation of s55 Limitation Act 1969.

1 2 3 4

Breskvar v Wall (1971) 126 CLR 376; Ramsden v Dyson (1866) 1 HL 129; Barnes v Addy (1879) LR 9 Ch App 244; White v Jones [1995] 2 AC 207;

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5 6 7 8 9 10 11 12
ORDERS

Baumgartner v Baumgartner (1987) 164 CLR 137; Hibberson v George (1989) 12 Fam LR 725; Logue v Shoalhaven Shire Council ([1979] 1 NSWLR 537; Sheldon v RHM Outhwaite [1996] 1 AC 102; referred to. Solle v Butcher [1950] 1 KB 671; Taylor v Johnson (1983) 151 CLR 422; Hawkins v Clayton (1988) 164 CLR 539; Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642; applied.

Appeal dismissed with costs.

Mahoney ACJ
Mr Phillip Lewis, a solicitor, was the nephew of the first respondent Mrs Seymour and the cousin of the plaintiffs and Mr Bruce Robert Seymour. The Seymour family were interested in some realty which passed to them upon the divorce of Mrs Seymour and her husband, the father of the other parties. Mr Lewis acted in relation to that realty. He made a mistake in the course of doing so: at one stage he acted upon the basis that Mrs Seymour owned the property in fee whereas she had only a life interest. That error led to the property being wrongly dealt with. Because of what was done, the plaintiffs have brought the present proceeding. Mr Lewis's mistake brought about three things: the maladministration of the property by Mrs Seymour; the transfer of part of the property to the third respondent; and the sale by Mrs Seymour of another part of the realty and her use as her own of the proceeds of sale. In respect of each of these the plaintiffs' rights were infringed. The proceeding has essentially been concerned with the remedies to which they are entitled. The trial judge, Bryson J, held Mrs Seymour to account on a trust basis in respect of the property which she had wrongly dealt with: against this there is no appeal. He refused relief to the plaintiffs in respect of the property transferred to the third respondent, subject only to stipulated payments being made by that respondent; and he refused to award damages in negligence against the solicitor Mr Lewis for the error he made. The plaintiffs have appealed to this Court against the second and the third of these matters. 1. THE FACTUAL BACKGROUND: Evidence was given at the trial by the plaintiffs and the defendants. Mrs Seymour was not represented. The evidence was not entirely consistent and the learned trial judge Bryson J made findings of fact upon disputed questions. None of the judge's findings have been the subject of appeal and this appeal must accordingly be conducted upon the basis that such findings are correct. The contrary has not been suggested. However, there are several matters of relevance upon which the judge made no specific finding: no doubt he found it unnecessary to do so in order to arrive at his conclusions. In the course of argument before this Court, reference has been made to them and to the evidence relating to them. It will be necessary for this Court to form conclusions in relation to them. In doing this, it is in my opinion proper that the Court accept that his Honour did not find that any of the witnesses to be attempting intentionally to misstate the facts. What occurred occurred a substantial time ago and differences of recollection and interpretation are to be expected. The facts may, in my opinion, be approached on that basis.

Page 17 The disputes now in question had their origin in what occurred upon the divorce of Mrs Seymour from her then husband. That divorce was made final in 1968. BC9605024 at 3 As part of the divorce arrangements, Mr Seymour, the husband, made provision for Mrs Seymour and their children. The arrangements made took varying forms but, in the end, they were finalised by Deed of Arrangement of 29 July 1968. That Deed provided that two properties (which I shall describe as "East Street" and "Broker Street") should be held for Mrs Seymour for her life and for the children as joint tenants in remainder. There were five children. One died. The interest in remainder has at all relevant times been contingently vested in the three plaintiffs and the third respondent. (I shall describe the parties by Christian names or otherwise in the manner adopted during argument). The properties were registered under the Real Property Act 1900. In September 1968 the father transferred them to the mother Mrs Seymour. She was registered as the owner of them in fee simple. How this came to be need not be pursued. It has been accepted that at all times she has held the properties on trust according to the interests provided by the Deed of Arrangement: cf Breskvar v Wall (1971) 126 CLR 376 at 385. But the fact that the properties were registered in her name as owner in fee simple no doubt contributed to what subsequently occurred. Mrs Seymour lived in a house on the Broker Street property. In or about 1974 it was proposed that the Broker Street property be subdivided and one of the lots, Lot 2, be vested in the third respondent Bruce. I infer that Mrs Seymour approached Mr Lewis, the solicitor, and discussed the proposal with him. He communicated with, inter alia, Mrs Field and, I infer, other members of the Seymour family. In March 1974 he wrote to Mrs Field about the proposal and in July 1974 he wrote to Mrs Seymour recording his discussion with her concerning what was proposed to be done. Ultimately, in late 1974 or perhaps early 1975, Mrs Seymour and the four children met with the solicitor in his office. They were then told, if they did not already know, that they had an interest in the properties subject to Mrs Seymour's life interest. As the result of the discussion all parties agreed that the Broker Street property should be divided into two lots and that one of the lots (Lot 2) should be BC9605024 at 4 transferred to Bruce. It was agreed that he would pay $9,500, to be divided equally between his three siblings. There was discussion before this Court as to what was agreed as to the date when the $9,500 should be paid. It is, in my respectful opinion, clear that the consensus was that the sum should be paid when the transaction was completed by transfer of the lot to Bruce. This, in my opinion, is the effect of the judge's findings and it is what is the effect generally of the evidence given by the parties. It was, in my opinion, the evidence of all of the Seymour children who gave evidence that at the time of this discussion a contract of sale to Bruce was signed; some of them said so in terms and I would infer that to be the recollection of all of them. But the solicitor's evidence was that no contract was signed. His Honour accepted as accurate the recollection of the solicitor. Accordingly, his Honour found that there was no legally binding contract at the time and no contract of sale was signed. The argument has proceeded upon the basis of that finding. At the time, Bruce wished to use the land to be transferred to him for the purpose of a residence. There was then no house upon it. He said, and there is, I think, no reason not to accept, that he had discussed with his mother the purchase of a moveable home, its installation upon Lot 2, and ultimately his use of the house as his residence. His evidence was that, when discussing this with his mother, he said that he did not have the money to carry out such a proposal and that she suggested to him that he should, when the house was put upon the land, lease it at a rental and accumulate money in that way. I accept that a conversation generally to this effect took place. The accounts as to the discussion at the solicitor's office to which I have referred were brief. But I infer, as a matter of probability, that at that time or at least shortly thereafter the plaintiffs were aware of what Bruce proposed to do. The consensus arrived at was, in my opinion, probably arrived at upon the basis that it was

Page 18 for that purpose that the land was to be transferred to him. BC9605024 at 5 Subsequently, what Bruce had discussed with his mother was put into effect. In 1975, he made a number of improvements upon what was to become Lot 2 and made them, as the judge found, "in reliance on the arrangement". In about June 1975, having acquired a house, Bruce moved the house from Woodhill Street, Fairy Meadow, to the lot. He let the house to a tenant for some time. Ultimately, in about 1976, he commenced to live in the house and has lived there ever since. The improvements which he has effected upon the land are substantial. Detail was given in evidence of paving, the installation of a swimming pool and other matters. And, of course, he paid the relevant rates in respect of it. It does not appear to have been in contest but that the plaintiffs each knew what Bruce had done in relation to the proposed Lot 2. His brother Raymond gave evidence that he had visited Bruce frequently and I infer that Bruce's sisters Mrs Field and Mrs Penno also were aware that, as contemplated by the arrangement made by them, he had moved his house onto the land, improved the land, and come to live upon it as his home. In order that the land be subdivided and vested in Bruce, at least three things were necessary. A plan of subdivision had to be prepared; the local council had to consent to the subdivision; and the land had to be transferred by Mrs Seymour to Bruce. His Honour accepted that the solicitor did not see the matter as requiring urgent attention and in fact it was several years before it was carried to completion. In March 1975, a survey plan was prepared. The solicitor arranged that each of the Seymour children and Mrs Seymour sign the plan. He did this, as I infer, upon the basis that each of them had a relevant interest in the Broker Street property and that accordingly the consent of each of them to the subdivision was required. In or about December 1977 the solicitor procured the consent of the council to the plan of subdivision. However, it was not until about April 1979 that the plan of subdivision was sent to the solicitor's law stationers in Sydney for registration. BC9605024 at 6 Notwithstanding what had been done in respect of the plan of subdivision of the Broker Street property, Lot 2 was not then transferred by Mrs Seymour to Bruce. The transfer was not registered until December 1985. The delay was not attributable to the wishes of any of the parties. I infer that, as the solicitor said in his evidence, he did not see the matter as one of urgency and did not come to preparing the transfer and having it executed and registered until that time. It is in my opinion proper to note that, as I accept, the plaintiffs did not call upon Bruce to pay the sum agreed $9,500 prior to the registration of the transfer of Lot 2 to him. Reference was made in the evidence to conversations in relation to the sum but in my opinion there was no demand for payment. This, I infer, was because, as part of the arrangement made in 1974, that payment was not to be made until the transaction was completed. Prior to the registration of the transfer of Lot 2 to Bruce, Mr Lewis the solicitor made the mistake which is in question in this proceeding. He concluded that Mrs Seymour was the beneficial owner of the two properties in fee simple, that the children did not have any interest in them, and that accordingly she could deal with the properties as she wished without their consent. He so informed her and she acted on his advice. What was done was done upon the basis of that mistake. As I have said, in or about April 1979 the solicitor sent the plan of subdivision of Broker Street to his Sydney law stationers for registration. He had prior to this been told by Mrs Seymour and had accepted that her interest in the properties was a life interest only and that the interest in remainder was vested in the children of the marriage. He had not seen the Deed of Arrangement. In 1979 he came to investigate the position more closely. What prompted the investigation is not clear. He concluded, from what the law stationers informed him and otherwise, that Mrs Seymour owned the properties beneficially in fee simple. He was influenced in this by a memorandum of 26 April 1979 which he received from the law stationers. He formed the conclusion he did mistakenly but, in my opinion, honestly. There is no

Page 19 BC9605024 at 7 finding that he acted other than honestly in making the mistake and I would make no such finding against him. But in so concluding he acted negligently: the trial judge so held and that finding is not in question. Later in 1979 Mrs Seymour agreed to sell the East Street property to some acquaintances of hers Mr and Mrs Walker. His Honour found that in or about December 1979 she contracted to sell the property to them for $25,000. The East Street property was transferred to them by her on 13 June 1980. In acting for her on this transaction, the solicitor assumed that the children had no interest in the East Street property. He so advised Mrs Seymour. He did not communicate with the children to tell them of the sale. There is no finding that otherwise they came to know of the sale before it was completed. Mrs Seymour, acting on his advice, disposed of the proceeds of the sale. It was suggested that some of the proceeds were made available to Mrs Field and that accordingly it was to be inferred that she knew what had happened. There was no evidence from which I would infer that Raymond or Mrs Penno were aware that Mrs Seymour had sold the East Street property upon the basis that she alone had a proprietary interest in it. However, having regard to what was said as to the family relationships, I find it difficult to accept that at the time of the sale or shortly thereafter the plaintiffs did not know that Mrs Seymour had sold the East Street property and that she had done so without seeking their consent as remaindermen. But, however this be, the precise position in this regard was not pursued at the trial. I return to the subdivision of the Broker Street property. On 13 December 1985 Mrs Seymour transferred Lot 2 in the subdivision to Bruce for the sum of one dollar. The solicitor acted in that transaction. At the time, Bruce asked the solicitor about the payment of the $9,500. His evidence was that the solicitor told him that he was "lucky", that his mother owned the land and that in effect it was not necessary for him to pay any sum to the plaintiffs. Accordingly, he did not make any such payment. When an enquiry was made of him in that regard, he said that he was not obliged to BC9605024 at 8 pay the $9,500. He did this, I accept, only because of the advice given to him by the solicitor. If that advice had not been given to him, he would, I infer, have accepted that he should pay the sum and would have endeavoured to do so. Insofar as it may be relevant, I am of opinion that he did not intend to repudiate the arrangement made in the sense of determining to act contrary to what his obligations were in that regard. He was, I believe, content to act in accordance with the obligations, legal or otherwise, which he had assumed. He acted on the solicitor's advice in not making, or attempting to make the payment. The solicitor concedes that, having concluded that Mrs Seymour owned both properties beneficially in fee simple, he did nothing to bring to the attention of the plaintiffs that their belief that they had a remainder interest in the properties was incorrect. In particular, he did nothing to inform them that the impression which, at the 1974 meeting, he had given to them in that regard was wrong. However, the matter was pursued by the plaintiffs soon after the transfer of Lot 2 to Bruce was completed. On 11 April 1986, solicitors acting for Mrs Field wrote to the solicitor Mr Lewis referring to her claim that she had a remainder interest in the two properties and inviting the solicitor's comments as to why he had done what he had done. Subsequent correspondence referred to the Deed of Arrangement and, in my opinion, Mr Lewis came to realise that he had, or may have, made an error in advising Mrs Seymour as he had. On 2 May 1989 the present proceeding was commenced. On 29 June 1993 the amended Statement of Claim was filed for the plaintiffs. The hearing took place on 13 September 1993 and judgment was given on 5 November 1993. 2. THE CLAIMS PRESSED BY THE PLAINTIFFS: As I have indicated, the plaintiffs have pressed three main claims: a claim against Mrs Seymour for an account of her dealings with the trust property and compensation for what she has done; a claim against Bruce for return of Lot 2 to the BC9605024 at 9

Page 20 estate or appropriate compensation; and a claim against the solicitor Mr Lewis for damages at common law by reason of his negligence. Orders have been made against Mrs Seymour which, in substance, remove her as a trustee, provide for an independent trustee, and require her to pay compensation to the plaintiffs for the loss caused by her improper dealing with the trust property. Those orders are not now in question. Mrs Seymour has not appealed against them and has not appeared before this Court on the appeal. The trial judge held that it would be inequitable to direct Bruce to return Lot 2 to the trust estate. He gave relief to the plaintiffs in relation to it only to the extent that he ordered Bruce to pay $9,500 to the plaintiffs with interest. Bruce has not appealed against such orders. The plaintiffs have submitted that in limiting their relief in this regard his Honour erred. The plaintiffs have sued the solicitor upon a common law count of negligence. The trial judge held that he did not owe to them a duty of care and that accordingly no tort had been committed. His Honour held that, if the solicitor would otherwise been liable to them in tort, the proceeding had not been commenced until after the expiry of the statutory period of limitation and that that period of limitation was not extended by reason of, as the plaintiffs had submitted, fraudulent concealment within s55 of the Limitation Act 1969. It is in respect of the claims against Bruce and against the solicitor that submissions have been made in this appeal. 3. THE CLAIM IN RESPECT OF LOT 2 OF THE BROKER STREET SUBDIVISION: Prima facie the conclusion of Bryson J that it would be inequitable to require Bruce to return Lot 2 to the estate was correct. It must be accepted that, notwithstanding what the plaintiffs and Bruce suggested in evidence, no binding legal contract was made during the 1974 discussion in the solicitor's office. What occurred BC9605024 at 10 was that a non-legally binding arrangement was made that Bruce should be permitted to do what he did, that a subdivision of the land should be effected and that on completion Bruce should pay $9,500 to the plaintiffs. Bruce acted upon the basis of that arrangement. Had it not been for the advice he received from the solicitor, he would have been prepared to pay $9,500 to the plaintiffs or endeavour so to do. Subject to what I shall say, prima facie it would be inequitable to put aside what, in contemplation of the arrangement, he had done. Mr Brereton for the plaintiffs has acknowledged the effect in this regard of cases such as Ramsden v Dyson (1866) 1 HL 129; see generally Meagher Gummow and Lehane (3rd ed) para[1715]para[1724] where the relevant cases are referred to. Mr Brereton's submission has been that position should not obtain. He has pointed in this regard essentially to the following. The arrangement was not carried into effect for some eleven years. The plaintiffs were not guilty of laches or acquiescence in not pursuing remedies earlier: the judge so found. When the arrangement was carried into effect in December 1985 Bruce refused to pay the sum agreed. In these circumstances, it was suggested, it was not inequitable that the position should be effectively reversed. Without pursuing all of the variations of Mr Brereton's submissions, they have been essentially to the following effect. The claim which Bruce makes is, it is submitted, essentially based upon an equitable estoppel of the type involved in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Primmer v Mayor of Wellington (1984) LR 9 App Cas 699. That equitable estoppel, in the present context, is based upon the view that it is inequitable to depart from the assumption which the parties have made and acted upon if departure from that assumption would be unconscionable: Mr Brereton cited the Waltons Stores case at 406, 428-9; Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472; Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 at 604-612; Commonwealth v Verweyan (1990) 177 CLR 394 at 444. But, the submissions suggested, it is not inequitable to depart from BC9605024 at 11 the assumption or arrangement for two reasons: because Bruce departed from the arrangement and repudiated it by refusing to pay $9,500; and because, that repudiation apart, what Bruce had done was not,

Page 21 in any relevant sense, brought about by the plaintiffs. Mr Brereton submitted that a party is not held to a representation arrangement or assumption of the relevant kind if the party claiming reliance upon it has himself repudiated it: he referred to Vinden v Vinden (1982) 1 NSWLR 618 at 625; Beaton v McDivitt (1985) 13 NSWLR 134 at 157; (1987) 13 NSWLR 162 at-172. In this regard, he submitted, the time which had elapsed and the ultimate refusal of Bruce to pay the $9,500 indicated that it was not inequitable for the plaintiffs to seek the return of the land to the trust. Mr Brereton's second ground called in question the conclusion that it would be unconscionable for the plaintiffs to put aside what had been done. He submitted that the submission as to unconscionability depended upon it being found that the plaintiffs had, in a sense, encouraged Bruce to do what he did, had failed to assert their adverse title so as to prevent him doing it, and had remained wilfully passive thereafter in order to profit from what he had done: he cited generally Olsson v Dyson (1969) 120 CLR 365 at 378-9; Ramsden v Dyson (1866) LR 1 HL 129 at 140, 171; re Vandervells Trusts (1974) 1 All ER 47 at 74; cf Bismark Range (Lucknow) Gold Exploration NL v Wentworth (Lucknow) Goldfield NL (1935) 35 SR (NSW) 400 at 408. In my opinion these submissions should not be accepted. The present is not a case in which the plaintiffs merely stood by and permitted Bruce to do what he did. As their evidence discloses and as I infer they believe they had actually contracted to sell the land in question to Bruce for $9,500, payable on completion. They had sold the land to him in the express contemplation that he would do things of the kind that he did. They knew what he was doing and some at least of them visited him while he was doing what he did. If Bruce had offered to pay $9,500 on transfer of the land to BC9605024 at 12 him in December 1995, there could, in my opinion, have been no answer to his claim; the judge's conclusion would clearly have been correct. (I am conscious in this regard, as Mr Brereton has pointed out, that what is in question is equity and not one's ideosyncratic concept of justice or, as he indicated, "palm tree justice"). Mr Brereton has properly emphasised the delay which took place in carrying the arrangement into effect. That fact is, of course, relevant in considering what is in the circumstances equitable. But it is necessary to consider the significance in the present context of that delay. I do not doubt that the parties, in 1974, contemplated that what was to be done in completing the transaction and paying the money, would be done within a reasonable time. They left the matter to be carried out by Mr Lewis, assuming that that would be what he would do. Indeed, as was said by Mrs Field, they assumed that Mr Lewis was acting for them in this regard. It may be that, had objection been taken to the delay during the eleven year period in question and had Bruce then refused or failed to carry the matter forward without further delay, different considerations would have arisen. But nothing of that kind was done. As I have said, no demand was made for payment and no steps were taken to require completion to be achieved earlier than it was. The parties were content to leave the matter to the solicitor. But, as Mr Brereton's submissions suggest, delay was not the only matter. When the transaction was completed by transfer, Bruce refused to pay the $9,500. This also is to be taken into account. The Court is not concerned, as such, with whether, had there been a legally binding contract, a refusal by Bruce to pay would have amounted to a repudiation by him of his contractual obligations and so have entitled the plaintiffs to terminate the contract by acceptance of the repudiation. What is here in question is whether, given all the circumstances, it would be inequitable to set aside the arrangement and what has been done under it. BC9605024 at 13 (I do not pursue the question whether the plaintiffs have, in this regard, sufficiently offered to do equity if the arrangement be set aside and whether, if there be such an offer, they could in the circumstances offer proper reparation or compensation for what Bruce has done upon and in respect of the land. These matters

Page 22 have, in argument, not been pursued). If the matter be treated as analogous to a refusal to pay under binding contractual obligations, the matter is not, I think, as clear as the plaintiffs submit it to be. It is clear that Bruce did not subjectively intend to repudiate the arrangement. Upon the basis of the advice which Mr Lewis gave to him, the parties had, in 1974, acted upon the mistaken but common assumption that the plaintiffs had proprietary interests in the land and that accordingly they should be paid. Mr Lewis's advice to Bruce and Mrs Seymour was that that assumption was wrong. The solicitor told Bruce he need not pay. If the solicitor's view of the mother's entitlement was right, it was at least arguable that there was no legal and perhaps no moral basis for such a payment. However that be, what Bruce did was not done to repudiate an assumption but to act upon the fact that the arrangement had been made upon a fundamental common mistake. The effect of a mistake of this kind in relation to contractual obligations has been considered in several cases: see Solle v Butcher [1950] 1 KB 671; Taylor v Johnson (1983) 151 CLR 422. These cases establish, I think, that the fact that a person refuses to perform contractual obligations does not always constitute a repudiation of the contract; circumstances are to be considered. Here what is involved is not strict legal rights but equity. In my opinion, the same position obtains. It is relevant that Mr Lewis was the person chosen by or assumed by the parties to carry out the arrangement they had made and that it was, to an extent, his delay which caused the difficulty and his mistake which prompted what Bruce did. He was not a solicitor with a specific retainer from the plaintiffs to do what was necessary to complete the arrangement. But he was the person whom they contemplated would do BC9605024 at 14 what was necessary to procure for them $9,500. That is a matter to be taken into account. Bruce remains willing to pay the sum in question. He will do so with interest. In the circumstances, I do not differ from his Honour's conclusion that equity requires an order of the kind that was made. 4. THE CLAIM IN NEGLIGENCE AGAINST THE SOLICITOR: It is accepted that what Mr Lewis did was negligent in the sense that he did not do what in the circumstances a competent and diligent solicitor would have done. He formed a wrong conclusion as to Mrs Seymour's entitlement to the properties and acted upon it. He failed to inform the plaintiffs of that conclusion and what he had done upon the basis of it. The plaintiffs' claim is made only in tort. No claim is made upon the basis that there was a contract between the plaintiffs and the solicitor nor is any claim made upon the basis that the solicitor knowingly acted in a breach of trust by Mrs Seymour: see generally Barnes v Addy (1879) LR 9 Ch App 244. In argument, the following issues arose: (a) Did the solicitor owe a duty of care in negligence to the plaintiffs? (b) (If he did) did he act in breach of that duty? (c) (If he did) did the cause of action arise outside the ordinary statutory limitation period? and (d) (If it did) whether the ordinary statutory limitation period is to be extended by reason of matters referred to in s55 of the Limitation Act 1969. (a) As I have indicated, the solicitor's mistake as to Mrs Seymour's entitlement affected what he did both in relation to the Broker Street property and the East Street property. In argument before the judge and here, the claim in negligence BC9605024 at 15 has been pressed, in my opinion correctly, by reference only to the East Street property. I shall deal with the matter on that basis. It is now established that a solicitor may owe a duty of care in negligence to persons to whom in the particular transaction he is not contractually bound: see generally Hawkins v Clayton (1988) 164 CLR 539; Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642; White v Jones (1995) 2 AC 207. It has been said that the test of the existence of such a duty of care lies in "proximity": see Hawkins v Clayton per Deane J at 577 et seq. But "proximity" is, of course, a category of quite indeterminate nature. As a term it directs attention to matters by reference to which a court may determine whether a duty of care exists. But, in the end, the determination of whether a duty of care exists will depend upon a normative judgment formed by

Page 23 the court in the instant case. Accordingly, Mr McClintock, for the solicitor Mr Lewis, has referred the Court to cases in which courts have considered the circumstances in which such a duty of care should be held to exist. Mr McClintock has submitted that a solicitor who acts for a trustee does not owe a duty of care to beneficiaries who claim the trust property: he referred to Wickstead v Browne (1992) 30 NSWLR 1 at 1718; (1993) 179 CLR 688; Royal Brunei Airlines Sdn Bhd v Tan (1995) 2 AC 378 at 391-2; cf Linley v Kirstiuk (1986) 28 DLR (4) 485. He concedes that in some cases a solicitor who drafts a will may owe a duty of care to the then prospective beneficiaries whom the testator specified: White v Jones (1995) 2 AC 207; Ross v Caunters (1980) Ch 297; Van Erp v Hill (1995) Aust Torts Rep para81-para317 (appeal pending); Gartside v Sheffield Young and Ellis (1983) NZLR 35; cf Seale v Perry (1982) VR 193. See also Thors v Weekes (1989) 92 ALR 131. Mr Brereton, in his submissions, referred the Court in addition to Canadian cases: Granville Savings and Mortgage Corporation v Slevin (1992) 93 DLR (4) 269; Tracy v Atkins (1979) 105 DLR (3) 632; Clarence Construction Ltd v Lavallee (1981) 132 DLR (3) 153; and to New Zealand cases: Allied Finance and BC9605024 at 16 Investment Ltd v Haddow (1983) NZLR 22; and Connell v Odlum (1993) 2 NZLR 257. It is no disrespect to the industry of counsel that I do not pursue the detail of the authorities to which they have referred. The differing views of the members of the High Court in Hawkins v Clayton and of this Court in Waimond Pty Ltd v Byrne indicate, in my respectful opinion, that there are not yet established principles or factual situations which, when applied to an instant case, compel a decision that a duty of care does/not exist. The matters referred to by; for example, Deane J in Hawkins v Clayton: at 444 et seq; are in my opinion intended to be indications or guidelines to assist in determining whether the necessary relationship, of proximity or however described, exists in the instant case and exists in such a form as warrants a duty of care being held to exist. I shall therefore go to the main factual considerations which, in the present case, appear to be of significance. In this regard it is important to have in mind what precisely was the act or omission which is in question. The solicitor was in error in concluding that Mrs Seymour owned the land beneficially in fee simple. He came to that conclusion negligently: had he taken proper care and used proper skill, he would not have come to that conclusion. If he had not come to that conclusion, he would not have done what he did in respect of the sale of the East Street property or in advising Mrs Seymour that she could use the sale proceeds as her own. And it would have been clear to him, on proper reflection, that if he was wrong in his conclusion as to her entitlement and did those things, it was likely that the plaintiffs would almost certainly be damaged. It was argued that he was negligent in that he failed to bring to the plaintiffs' attention the fact that, contrary to what he had previously told them and they believed, they had no remainder interest in the property. But, in my opinion, his failure so to inform them was not the negligence or lack of care which was in BC9605024 at 17 question. That was another consequence of the negligently formed opinion as to Mrs Seymour's rights. It remained that negligence which was here in question. Accordingly, the question is whether the solicitor owed a duty of care to the plaintiffs not to make the negligent mistake that he made. The learned trial judge concluded that no duty of care existed. With respect, I have come to a different conclusion. There are, inter alia, two things of significance in considering whether there was a relationship of proximity between the solicitor and the plaintiffs. In this case, the plaintiffs were not merely beneficiaries or potential beneficiaries in respect of the property. They were persons who would be damaged by negligence in his assessment of Mrs Seymour's entitlement to the properties: they would almost inevitably be damaged by that negligence because, as I have indicated, the solicitor would almost inevitably do what he did. And, if he did that, they would be immediately and directly damaged: they would lose their equitable interest in remainder.

Page 24 Second, the relationship between the plaintiffs and the solicitor was particularly close. It is to be accepted, as Mr McClintock emphasised, that there was no legal retainer in existence between the plaintiffs and the solicitor in the sense of a contract under which he, as a solicitor, assumed obligations to them. But the absence of a contractual retainer does not determine the present matter. The plaintiffs were related to the solicitor. Generally, they had entrusted him with the conduct of matters for them. They had looked to him to act to carry out their arrangement for the transfer to Bruce of part of the Broker Street property. He advised Mrs Seymour and the plaintiffs in relation to both properties. On occasions, he had acted in separate matters for one or other of the plaintiffs. He acted for Raymond in relation to the adoption of a child; he acted for Maureen's husband in relation to a minor prosecution; and he acted for Carol regarding investment of moneys. Two of the plaintiffs, Mrs Field and Mrs Penno said in terms that they relied on him, at least in respect of the Broker Street arrangement. He knew that they had received and had relied upon his advice as to BC9605024 at 18 their entitlements in respect of the trusts and accordingly of the Broker Street property. As I have said, he knew that if he was wrong in his conclusion that Mrs Seymour was the beneficial owner of East Street and acted on that conclusion as he did, they would in all probability suffer loss. Whatever be the position generally in relation to beneficiaries or potential beneficiaries, I am of opinion that, in this case, the relationship of proximity was established and that he ought to have seen the plaintiffs as so affected by what he did as to require him to take care in their interests. I am conscious that in this area of the law there has been a substantial and important extension of the liability which solicitors must bear: this was referred to in Hawkins v Clayton in the passages to which I have referred: see Waimond Pty Ltd v Byrne at 659. I am conscious also that if a solicitor may be liable to third parties in this way, he cannot be sure in advance of the persons to whom he may become liable: the tests for determining his liability are, as I have indicated, so vague that, in many cases, he does not know his position until the decision of the (ultimate) court is known. I believe the law should be slow to hold a solicitor liable to persons with whom he is not directly concerned. But in this case the relationship between the solicitor and the plaintiffs was both close and special. It was one in which he should in my opinion be expected to have regard to their interests. I have dealt with this matter upon the basis that there was no contractual relationship between the plaintiffs and the solicitor. This of course was not the plaintiffs' view. The plaintiffs, in their evidence, claimed that a contract of sale had been made in 1974 in relation to the Broker Street property, that the solicitor was carrying out the contractual arrangements then made, and that he had assumed the role of securing for them the $9,500 that was to be paid. There was no existing contractual relationship in relation to the East Street property but the question of Mrs Seymour's rights was common to each property. Their view of their relationship to him went, I think, a step beyond his mere involvement in a non-contractual arrangement. BC9605024 at 19 (b) It is not contested that, as the judge held, the solicitor failed to do what his duty to the plaintiffs required him to do. The breach was his failure to use proper care and skill in deciding what was Mrs Seymour's interest in the properties. (c) It is necessary to determine when the cause of action in negligence was complete. It was, of course, complete when damage first accrued to the plaintiffs. In my opinion, damage accrued when the solicitor caused the contract with Mr and Mrs Walker to be completed by transfer. The interest of the plaintiffs in the properties was - Mrs Seymour having been registered as proprietor of the land - an equitable interest in remainder. The registration of the transfer to Mr and Mrs Walker of the East Street property destroyed that interest in that property. As Mr Brereton submitted, the plaintiffs could have pursued a claim in respect of the proceeds of sale and secured relief in respect of them. But they had lost what they had had, namely the proprietary interest in the land: it had been converted into an equitable claim or interest of a different kind. That, in my opinion, constituted damage sufficient to complete the cause of action in negligence. Those things occurred in 1980. The contract was made in December 1979 and the transfer took effect on 13 June 1980. Prima facie the ordinary period of limitation commenced to run from at the latest, 13 June 1980.

Page 25 It follows in my opinion that the ordinary statutory period of limitation expired prior to the commencement of the present proceeding on 2 May 1989. Prima facie the action at law in negligence became statute barred prior to the commencement of the proceeding. (d) Mr Brereton has submitted that the plaintiffs are entitled to the benefit of s55 of the Limitation Act 1969. That section provides: "55. (1) Subject to subs(3) where: (a) there is a cause of action based on fraud or deceit; or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed, BC9605024 at 20 the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by him or by a person claiming through him against a person answerable for the fraud deceit or concealment. (2) Subs(1) has effect whether the limitation period for the cause of action would, but for this section, expire before or after the date mentioned in that subsection. (3) For the purposes of subs(1), a person is answerable for fraud deceit or concealment if, but only if: (a) he is a party to the fraud deceit or concealment; or (b) he is, in relation to the cause of action, a successor of a party to the fraud deceit or concealment under a devolution from the party occurring after the date on which the fraud deceit or concealment first occurs. (4) Where property is, after the first occurrence of fraud deceit or concealment, purchased for valuable consideration by a person who is not a party to the fraud deceit or concealment and does not, at the time of the purchase, know or have reason to believe that the fraud deceit or concealment has occurred, subs(1) does not, in relation to that fraud deceit or concealment, apply to a limitation period for a cause of action against the purchaser or a person claiming through him." The learned judge held that s55 had no application in the present case. I infer that he so concluded on the ground that, for the section to apply, it was necessary that the solicitor be shown to have been involved in "moral turpitude" or the like and that that had not been shown. Two things require consideration: what the section requires; and does it apply in the present case. BC9605024 at 21 What is here in question is an allegation that Mr Lewis "fraudulently concealed" the cause of action which existed against him. Mr Brereton relied upon, as he described them, the English line of cases. He cited: Beaman v ARTS Ltd [1949] 1 All ER 465, 467H-468A, 469C-E, 470B; Kitchen v Royal Air Force Association [1958] 2 All ER 241, 2451, 249C-E, 250B, 253F-G, 254C; Archer v Moss [1971] 1 All ER 747, 750F-H, 751J-752D, 753H754B; King v Victor Parsons and Co [1973] 1 WLR 29, 33-34; Tito v Waddell (No 2) [1977] Ch 244H245C; Nupponen v Hymix Quarries Pty Ltd (Supreme Court (NSW) Foster J, 24 October 1986, unreported), 3.8-4.5; Hamilton v Kaljo (1989) 17 NSWLR 381, 386; Inca Ltd v Autoscript (NZ) Ltd [1979] 2 NZLR 700, 704-711; Rippon v Bradley (Supreme Court (NSW) Smart J, 13 August 1992, unreported). See also Hawkins v Clayton (1988) 164 CLR 539, 590.5 (Deane J). Mr McClintock submitted that the decision of McLelland CJ in Eq in Hamilton v Kajo (1989) 17 NSWLR 381 should be followed in preference to the English authorities. McLelland CJ in Eq said at 386: "For my own part, I would regard it as a misuse of language, and unsound, to apply the statutory expression 'fraudulently' in s55 to any conduct which did not involve some form of dishonesty or moral turpitude". Mr McClintock referred the Court to Nupponen v Hymix Quarries Pty Ltd (Supreme Court (NSW) Foster J, 24 October 1986, unreported); New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 and CE Heath Underwriting and Insurance (Aust) Pty Ltd v Caraway Constructions Pty Ltd (Supreme Court (Victoria) Batt J, 3 August 1995, unreported). In my opinion, the section is not confined to simple common law fraud. It extends to conduct beyond that.

Page 26 On the other hand, it is not, I think, sufficient merely that for the defendant to take advantage of the statute of limitations would be unconscionable or inequitable in the wide sense of these terms. Terms such as unconscionable and inequitable now are used to describe conduct which, in previous BC9605024 at 22 times, would not have fallen within them: see Baumgartner v Baumgartner (1987) 164 CLR 137 at 147 and Hibberson v George (1989) 12 Fam LR 725 at 731. Nor, in my opinion, is "fraudulently" wide enough to include evening which would fall within the description of "equitable fraud". Equitable fraud is a doctrine which depends, for this purpose, too much upon nice distinctions which have been drawn in other times: see Snell's Equity (29th ed) at 550 et seq; Meagher, Gummow and Lehane (3rd ed) at para1208; and see the discussion in Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 553. The history of the English legislation was recently reviewed in Sheldon v RHM Outhwaite (1996) 1 AC 102: see, eg, at 144, 153. In my opinion, there must be in what is involved a consciousness that what is being done is wrong or that to take advantage of the relevant situation involves wrongdoing. At least, this is so in the generality of cases. (There is in this as in many things, the problem of dealing with the person who "closes his eyes to wrong" or is so lacking in conscience that he is not conscious of his own lack of proper standards.) How does that apply in the present case? I do not think that what the solicitor Mr Lewis did in this case falls within these categories, however they be understood. In order to characterise what he did, it is necessary to define more closely what is impugned. Mr Brereton's submissions suggested, inter alia, that after the receipt of the letter from Mrs Field's solicitors in April 1986, Mr Lewis became aware that he had been negligent. At that point, the suggestion was, honesty required that he bring this to the notice of the plaintiffs so that they could, before the expiration of the six months period in June 1986, commence proceedings for negligence against him. The suggestion was that he did not notify them in order to protect himself. I do not think that such a finding should be made. Mr Brereton, in his detailed and comprehensive crossexamination of Mr Lewis, did not, in terms, suggest to him the kind of dishonesty to which I have referred. Nor, I think, did Mr Lewis BC9605024 at 23 concede such. The learned judge did not so find and I, on a review of the matter as on a rehearing, would not make such a finding against him. In the result, I agree with the orders which have been proposed by Bryson J. I would dismiss the appeal with costs.

Meagher JA
I agree with Mahoney ACJ.

Abadee AJA
I agree with the reasons for judgment of Mahoney ACJ and the order proposed by him. Order Appeal dismissed with costs. Representation:

Page 27 Counsel for the Appellant: PLG Brereton/S Kaur-Bains Solicitors for the Appellant: Denley Gargett and Baird Counsel for the Respondent (2): BR McClintock Solicitors for the Respondent (2): Minter Ellison Morris Fletcher

Page 28

Page 29 6 of 10 DOCUMENTS: CaseBase Cases

Lehmann v Haskard
BC9603930 Court: NSWSC Judges: Young J Judgment Date: 29/8/1996

Catchwords & Digest

Succession -- Life estates -- Maintenance and insurance of property -- Whether life tenant ought to bear costs Construction of testator's holograph will. Where will granted testator's ex-wife a life estate in family property and stated that property must be "maintained and fully insured". Scope of concept of maintenance discussed. Whether doctrine of salvage applied. Whether trustees had an obligation either to do any maintenance themselves or to compel life tenant to do any. Whether trustees could compel life tenant to take out adequate insurance. Held: Life tenant was responsible for upkeep but not improvement of property, and for costs of insurance. Trustees could not compel maintenance but could take out necessary insurance and recover costs from life tenant. Perpetuities and accumulations -- Class gifts -- Class closing rules -- Ascertainment of class of grandchildren Where testator made gift to grandchildren upon their reaching majority. Whether "grandchildren" included those alive at time of testator's death and any born subsequently, or only those born or en ventre sa mere at time eldest grandchild attained 21 years of age. Whether gift was distributable as each reached majority or only when all within the class had reached majority. Held: Class of grandchildren amongst whom the legacy was divisible included all those alive or en ventre sa mere at time when eldest reached majority. Gift not distributable until all those in the class reached majority. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Public Trustee of Queensland v [2009] 1 Qd R 26; [2008] Cited Smith QSC 339; BC200811481 (2007) 72 NSWLR 605; Considered McDonald v Ellis [2007] NSWSC 1068; BC200708266 Perpetual Trustees WA Ltd v [2001] WASC 123; Cited Darvell BC200102522

Court QSC NSW SC WAS C

Date 19/12/2 008 27/9/20 07 18/5/20 01

Signal

Page 30 Journal articles referring to this case Article Name Construction of Wills in Australia 2007 (book) Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1993) 33 NSWLR 188; Considered Pateman v Heyen BC9303950 (1992) 33 FCR 594; BP Oil Refinery (Bulwer (1992) 92 ATC 4031; Considered Island) Ltd v Federal (1992) 23 ATR 65; Commissioner of Taxation BC9203302 [1981] 1 All ER 324; ACT Construction Ltd v [1981] 1 WLR 49; Considered Customs & Excise [1980] STC 716; [1980] Commissioners TR 357 [1953] 2 All ER 387; [1953] 1 WLR 906; Considered Day v Harland & Wolff Ltd [1953] 2 Lloyd's Rep 58 Merchants Bank & Trust Co v Considered New Canaan Historical (1947) 54 A 2d 696 Society Robins, In re; Holland v Considered [1928] Ch 721 Gillam (1922) 22 SR (NSW) Permanent Trustee Co of New Considered 606; (1922) 39 WN South Wales Ltd v Fraser (NSW) 211 (1917) 17 SR (NSW) O'Donnell v Perpetual Trustee Considered 547; (1917) 34 WN Co (NSW) 202 Considered Blyth v Dowling (1916) 12 Tas LR 21 Wilkie v Equity Trustees [1909] VLR 277; Considered Executors & Agency Co Ltd (1909) 15 ALR 208 Tong v The Trustees [1907] VLR 338; Considered Executors & Agency Co Ltd (1907) 13 ALR 119 (1906) 23 WN (NSW) Considered Birkenhead v Jones 86a (1906) 3 CLR 1198; (1906) 7 SR (NSW) 11; Considered Cousins v Cousins (1906) 23 WN (NSW) 166e; [1906] HCA 27 (1905) 8 GLR 248; Considered Eyre v O'Rorke & Churton (1905) 25 NZLR 182 De Teissier's Settled Estates, Considered In re; De Teissier v De [1893] 1 Ch 153 Teissier (1791) 3 Bro CC 401; Considered Andrews v Partington (1791) 29 ER 610

Citations ISBN: 9780409320954

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Court NSWSC FCA

Date 16/12/1993 3/2/1992

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EWCAC iv EWHCQ B EWHCC h NSWSC NSWSC TASSC VSC VSC NSWSC HCA SCNZ EWHCC h -

9/10/1980

9/6/1953

26/6/1947 6/6/1928 22/9/1922 12/9/1917 21/4/1916 6/5/1909 25/3/1907 31/5/1906 14/5/1906 22/9/1905 10/11/1892 16/12/1791

Page 31 Legislation considered by this case Legislation Name & Jurisdiction Trustee Act 1925 (NSW) Words & Phrases

Provisions s 63

maintained

Page 32

Page 33

7 of 10 DOCUMENTS: Unreported Judgments NSW 22 Pages

LEHMANN v HASKARD - BC9603930


SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J No. 2335 of 1996 3 June and 27 August 1996, 29 August 1996
EQUITY [154] and [300] -- Trusts -- Settled land -- Life tenant and remainderman -- Maintenance and insurance -- How expenses borne. EQUITY [250] -- Class gift -- When class ascertained. SUCCESSION [182] -- Class gift -- Class closing rules -- Application.

Young J
This is an application under s63 of the Trustee Act, 1925, by the trustees of the estate of the late Anthony Robert Burton. The trustees wish advice as to how they should administer the estate because of the unorthodox holograph will which the testator made. The application really requires construction of the will. Normally the court would decline to make an order under s63, except perhaps to advise the trustees that they should take out a summons for construction. However, as the whole estate only comprises about $400,000 and there would have to be representation of three interests, the practicalities are that the matter cannot be dealt with in that way. The parties are agreed that the economics of the situation mean that it is to be dealt with by way of judicial advice. Another preliminary observation that I should make is that during argument both counsel and myself tried to find good practical solutions. However, we realised, and it should be stated that we realised, that the beneficiaries under the will, some of whom are infants, are entitled to have the will administered according to law and their legal BC9603930 at 2 rights preserved no matter how administratively inconvenient that might be, at least up to the point where the costs of administration do not exceed the amount of benefit. The testator died on 26 August 1994. He had married June Phyllis Turner on 30 August 1965. At the time of their marriage June had two children from a previous marriage, the fourth defendant, Patricia Ortlipp, and the fifth defendant, Malcolm Burton. There were then three children of the marriage, Julie Haskard, Cathie Lehmann and Christopher Burton. The testator and June were divorced, the decree nisi being made on 21 April 1980. The testator made his last will, the holograph will, on 5 January 1993. Cl4(A), cl(B) and cl(C) are as follows: "4(A) I give my real estate property situated at 5 Penrith Avenue, Wheeler Heights, NSW to June

Page 34 Phyllis Burton (nee Turner) and the contents therin, including tools and equipment in garage on property for her natural life. Should June Burton decide to re-marry or enter a common law relationship then the property is to be sold and divided equally between her children, Patricia Ortlipp, Malcolm Burton, Cathie Lehmann, Julie Haskard and Christopher Burton. Should June Burton choose not to reside in the premises then it can be rented and rental monies to be for her use. The property must be maintained and fully insured. Mortage balance existing to be discharged out of long service leave funds. 4(B) Super funds to be invested in reputable trust fund and interest received therefrom to a maximum benefit of $1,500 per year to be allocated by 20% to each family in total. 4(C) Upon each grandchild attaining the age of 21 years the investment of trust funds shall be allocated by 20% to each family and divided equally within each family by the number of grandchildren." BC9603930 at 3 Seventeen questions were asked with respect to the will. Some Mr Underwood, who appeared for the trustees and also presented argument for the children of the testator, and Mr Cashion, who appeared for the grandchildren of the testator, were agreed on the answers. I agree with their assessment of the situation and, accordingly, I would advise the trustees: (1) That the trustees are justified in proceeding on the basis that Cl4(A) of the will gives June Phyllis Burton a life estate in 5 Penrith Avenue, Wheeler Heights defeasible upon her re-marriage or her entering into a common law relationship. (2) The condition of defeasance is not void as against public policy. (3) There is an intestacy as to the remainder of the deceased's estate which passes pursuant to 61B of the Wills Probate and Administration Act 1989 to Julie Haskard, Cathie Lehmann and Christopher Burton in equal shares. (4) The sum of $1,500 referred to in Cl4(B) of the will is a total sum of $1,500 per year. (5) "Family" in cl4(B) and cl4(C) means a group of June Burton's issue of which the senior member is respectively (a) Julie Haskard, (b) Cathie Lehmann, (c) Christopher Burton, (d) Patricia Ortlipp, or (e) Malcolm Burton. This leaves for decision (A) who must pay for the upkeep and insurance of 5 Penrith Avenue, Wheeler Heights? (B) for how long does the trust in 4(B) last? (C) who are the beneficiaries under the trust in 4(B)? (D) who are the beneficiaries in the trust set out in 4(C)? and (E) how and when is the distribution of the fund referred to in 4(C) to BC9603930 at 4 be done? I will deal with each of these five general questions and then note further advice I give the trustees. (A) There are three possible meanings of the words "The property must be maintained and fully insured", viz (i) that it must be maintained and fully insured by the trustees; (ii) that it must be maintained and fully insured by the life tenant; or (iii) that the general law applies and the statement is merely a statement of expectation. Mr Cashion submits that the specification that the mortgage is to be discharged out of the specific fund and the reference to June taking the rents for her own use are both indicators that the testator intended that she should bear the costs of maintenance and insurance. He says that if the testator has made specific provision for payment out of the mortgage, yet made a specific statement as to insurance, etc, but has not nominated a fund, then by an expressio unius rule one would assume that the burden falls on the life tenant. This is again reinforced by the fact that if the property were let one would expect the net rent only to be paid over to the life tenant and that she would bear the normal expenses of letting, including estate agent's commission, insurance and day-to-day repairs. The argument that the burden is to fall on the estate is based on the fact that the word "must" is a word of command. The only command could be addressed to the BC9603930 at 5 trustees and should be contrasted with a condition. The testator put on a condition in his dum caste clause, yet chose a command. Whichever view one takes, one has got to look at the word "maintained". This is usually a word which indicates that day-to-day fair wear and tear and deterioration through natural forces must be made good, but

Page 35 not that facilities be upgraded. However, it must be remembered that the word "maintained" is a vague word. Sometimes it is not distinguished from "repair", but "it may in some context be a wider word which includes repairing as well as other operations": Day v Harland and Wolff Ltd [1953] 1 WLR 906, 910. In ACT Construction Ltd v Customs and Excise Commissioners [1981] 1 WLR 49 at 56-57, Brandon LJ said of the word "maintenance": "One extreme position is to say that, if the work done involves an improvement to the building, it can never be maintenance. The other extreme position is to say that, if the work has the purpose of remedying an existing defect in the building or preventing a future defect from developing, it must always be maintenance. In my view, neither of these extreme positions is correct. The expression "maintenance" should be given its ordinary and natural meaning. In regard to the first extreme position, there may well be cases where the work done, although it involves some degree of improvement (for instance, because of the use of modern or better materials or methods) is nevertheless maintenance in the ordinary and natural meaning of that word. For example, if metal gutters, which are liable to decay in time, are replaced with plastic gutters which are not liable to decay however long they remain there, that is an improvement to the building, but I would still regard that work as maintenance. With regard to the second extreme position, there may well be cases where, although the purpose of the work is to remedy existing or BC9603930 at 6 to prevent future defects in the building, it is nevertheless not within the expression 'maintenance' in the ordinary and natural meaning of that word. For example, if a building has a flat roof which leaks continuously and the owner decides to replace the flat roof with a pitch roof so as to eliminate that defect, then, although that work was designed to eliminate a defect, it would not in my view be maintenance in the ordinary and natural meaning of that word." In BP Oil Refinery (Bulwer Island) Ltd v Federal Commissioner of Taxation (1992) 23 ATR 65 at 73, Jenkinson J in the Federal Court of Australia, when dealing with the term "repair", said that repairs covered not only remedying defects but also work done in anticipation of forthcoming defects, but work would not be considered repair: "unless it includes some restoration of something lost or damaged, whether function or substance or some other quality or characteristic." Accordingly, whatever the expression "The property must be maintained" means, it can mean no more than remedying defects and not improving the structure. Before dealing with what the words in the will mean, one must look to the general law position. The first thing that must be considered is whether the trustees are bare trustees, or whether they have active powers of management. In my view, apart from the powers given by the Trustee Act, the will itself confers no powers of management. The will does not contain any residuary gift so that the residue will pass to the children as on intestacy. Where there are no powers of management, there is no power in anyone to apply money out of the estate for the BC9603930 at 7 purpose of effecting repairs: Re Willis [1902] 1 Ch 15, 21; Wilkie v Equity Trustees etc Ltd [1909] VLR 277, 280; In re Dawes [1954] VLR 76 and Re Joseph [1960] VR 550, 561. The only exception is the case of salvage. See also in general Ford and Lee on Trusts 3rd ed [11250] et seq and cases there cited. In Wilkie's case, Madden, CJ said at 280-1, "... where property is settled on life tenants and remaindermen and the trustees are only bare trustees without active duties to perform there is no power in anybody to apply money out of the estate for the purpose of effecting repairs. The Court cannot apply the corpus of the estate in effecting repairs unless the trustees can show that the estate is in jeopardy - ie, that a case of salvage has arisen, in that expenditure is necessary to keep the property in existence for the remaindermen. In that case, and in that case only, the Court will interfere and authorise expenditure out of corpus to keep the trust property from being destroyed. But in cases where life estates and remainders are created, and trustees are appointed to whom are given active powers of management, a different condition of things arises. The principle long known to the law, of course, always prevails, that a tenant for life without impeachment of waste is under no liability to spend a penny on the property. He may enjoy it during his life, putting up with the disrepair if he chooses, but he is under no obligation to repair. But while

Page 36 BC9603930 at 8 this is so, a trustee who has power of management has, in the course of good management, full authority to see that repairs are made for the purpose of preserving the property for the remaindermen. If it is necessary to spend money for that purpose, the trustee has authority to do so to an extent necessary to pay for repairs, and to charge the cost of certain repairs against the rents coming to the life tenant and of others against the remaindermen. If it is necessary to raise money out of corpus for the purpose of making repairs chargeable to corpus the trustee may apply to the Court for assistance as to how it may be done. The Court will then, for example, authorise the money to be borrowed, and will declare a scheme for repayment of principal and interest. Where the repairs are such as recurring ordinary repairs of the sort which in all probability will enure substantially for the advantage of the life tenant, they are to be borne out of income; the principle being that where you have repairs of that sort so closely appertaining to the life tenant's enjoyment as distinguished from that of the remainderman, the trustees should not be troubled with estimates and nice balancing of rights of enjoyment in respect of that matter, and that on the whole the wisest course is thought to be that the life tenant shall bear them. "Then come structural repairs of a character which makes them essentially and in the full and proper sense matters appertaining to the remainderman's interest, BC9603930 at 9 structural repairs of such a character that the benefit arising from them will enure almost wholly to the remainderman. In that case the trustees would act properly in charging the whole cost against the remainderman. "Sometimes you find structural repairs of such a character that they clearly will for a time add to the benefit and the advantage of the tenant for life, although they will subsequently enure to the advantage of the remainderman. In these cases where the Court has authorised money to be borrowed on security of the corpus the rule has generally been that the life tenant is ordered to keep down the interest and the remainderman is charged with the principal. That rule has been acted on many times and was the rule referred to in Re Tong [1907] VLR 338, it has also been acted on in other cases, as the accepted rule. But we think it is in the discretion of the trustees in a just exercise of their authority to properly apportion the cost between income and corpus of repairs of that kind." In Re Tong a life tenant's executor claimed that trustees had wrongly deducted from her income expenses incurred in maintaining the relevant property as well as insurance premiums. A'Beckett, J held that as the life tenant had no obligation to repair, any work done by the trustees without reference to the life tenant could not be charged to her account. Do then the words "The property must be maintained and fully insured" alter this general law position? BC9603930 at 10 The problem is that the words which the testator used are in the passive voice. However, it is acknowledged by both counsel that the will did not impose any duties of management on the trustees. No residuary beneficiaries were named. Accordingly, it is clear that the testator intended that the property should be maintained and fully insured by someone, and the only someone that could be would be the life tenant. Although accordingly there is little material to aid one in construing the will, it seems to me that there is sufficient to throw the burden of effecting maintenance, that is, remedying defects, onto the life tenant. Mr Underwood relies on a passage in Underhill and Hayton, Law of Trusts and Trustees 14th ed (Butterworths London 1987), Article 53, commencing on p 474. Subject to the directions of the will and of Statute, the learned authors say that the rules are as follows: "(a) the corpus bears capital charges, and the income bears the interest on them. If the current income is insufficient, arrears of interest on capital charges must be paid out of subsequent income. (b) the income usually bears current expenses ... (c) where repairs to trust freeholds are necessary to save them from destruction ... or for putting in repair leasehold property which was out of repair at the date of the creation of the trust, the court may empower the trustees to raise the necessary amount in such a way as will be equitable between income and corpus. (d) all costs incident to the administration and protection of the trust property, including legal proceedings, are borne by corpus,

Page 37 unless they relate exclusively to the tenant for life. The BC9603930 at 11 corpus must pay all costs, charges and expenses incurred for the benefit of the whole estate." "Current expenses" includes rates and taxation; Fountaine v Pellet (1791) 1 Ves 337, 342; 30 ER 374, 376. The dayto-day replacement of broken windows, the cleaning of floors and carpets, repair of blocked pipes are part of the normal current living costs and are borne by the life tenant. A substantial item, such as the installation of a new hot water service or a new bath, is something which should be borne by corpus, though if the trustees need to borrow to pay for the item then the interest is borne by the life tenant. The evidence is that the actuarial value of a life estate of a 60 year old Australian female is that she has 70.6% of the property in respect of which the life estate is held. However, the passage in Underhill and Hayton only refers to situations where the trustee has a power of management and, although I was initially attracted by it, on further consideration do not really consider it helps the instant case. In the present case, there is a report by a Mr Chalkley, a building expert that as at the date of his report the premises were in a state of disrepair. Mr Chalkley says, "Generally the building is currently under-going repairs, maintenance and modest upgrading work, to correct a previously run-down condition. Work done and BC9603930 at 12 substantially completed at time of inspection was confined to removal of degraded internal furnishings and re-painting of all three bedrooms. Kitchen space has been 'gutted' ready for completely new equipment. Bathroom has been partially refurbished, with provisions for new wall linings and wall tiles and new bathtub and vanity wash basin cabinet. "Garage was filled with household furnishings, preventing detailed inspection and side driveway contained rubbish stacked ready for disposal." I suggested that further evidence should be filed as to the state of the premises at the testator's death, as this may bear on the question of salvage. This request was met by two further affidavits being filed. These show that the life tenant went into possession in December 1994 and that since that date she has effected and paid for certain of the matters referred to in Mr Chalkley's report. The further evidence showed that the work that was referred to in Mr Chalkley's report was not to remedy a state of disrepair which was in existence at the date of the testator's death. The repairs which were being done when Mr Chalkley visited the property in November 1994 were repairs being done to upgrade the property prior to the life tenant moving in. Had the situation been that the testator had left the property in a state where the kitchen had been gutted intending to build a new kitchen, the case would clearly be one of salvage. BC9603930 at 13 Thus the position is that the life tenant must do all necessary remedial work to remedy defects and that unless this is a case of salvage, whoever does any other work on the property pays the costs without recourse. Is the present case then one of salvage? Re Robins [1928] Ch 721, makes it clear that a situation where salvage is required will exist where a local authority issues a statutory notice that the premises are in a defective condition. Re Smith [1930] 1 Ch 88 is to the same effect. In Eyre v O'Rorke (1905) 25 NZLR 182, it was held to be salvage where a retaining wall was erected consequent upon the local authority lowering the level of the front street. In Birkenhead v Jones (1906) 23 WN (NSW) 86, it was held that the erection of a rabbit proof fence was a matter of salvage. Probably this can be explained because the statutory authority had a power to erect the fence and charge the trustees with the costs of the fence if it was not erected voluntarily; see Re Wentworth (1915) 15 SR (NSW) 384, 385. However, in Blyth v Dowling (1916) 12 Tas LR 21, the Tasmanian Full Court held it was salvage to prevent

Page 38 a grazing property being overrun by blackberries. This case would fall outside the statutory notice principle. Again, in Permanent Trustee Co of NSW Ltd v Fraser (1922) 22 SR (NSW) 606, it was held to be salvage for the trustees to BC9603930 at 14 keep the trust property (being life policies) alive by paying the premiums. In Re De Teissier's Settled Estates [1893] 1 Ch 153, 161, Chitty, J said that propositions put from the bar in possible salvage cases are "very often of a very loose character indeed, and the court has to examine with care to see whether the case is one of salvage or not." At 161-2, his Lordship limited salvage to cases where, if the work were not done, the authority would condemn the property or do the work itself and bill the trust. The principle as stated by Chitty, J is too narrow as can be seen from some of the examples given above, including Eyre v O'Rorke. In Cousins v Cousins (1906) 3 CLR 1198, the High Court adopted a different test, namely, could the testator's intention be effectuated if the subject work were not done in connection with the property? However, in O'Donnell v Perpetual Trustee Co (1917) 17 SR (NSW) 547, 551, Harvey, J held that Cousins' case did not affect the general law as to salvage, but was decided in a case where a trustee was really seeking authorisation in protecting an infant's estate by raising money to restore a vineyard to a condition where it might be efficiently worked for the production of wine. Harvey, J pointed out that Cousins' case was not a settled land case at all and it "cannot, I think, be considered as laying down any new law, or as widening the inherent jurisdiction of the Court in the case BC9603930 at 15 of salvage." It should be noted for what it was worth that Harvey, J was counsel for the appellant in Cousins' case: there were no other appearances in that case. What Harvey, J says about Cousins' case appears to be correct. There is no question in the instant case of a public authority giving a notice to the trustees to do the work. If the principle extends beyond statutory notices and premises that were left out of habitable repair by the testator to the wider class of situations envisaged in cases such as Eyre v O'Rorke we still do not have that situation encompassed by the facts in the instant case. Accordingly, the present case does not fall within the principle of salvage. The evidence shows that the life tenant is living on a pension. She has done considerable work to the property since she entered into occupation, but her funds are now exhausted. She would not be able to pay any expensive repair bills in the future unless something extraordinary happens. Although the will does cast upon her the duty to maintain in the limited sense to which I have already referred, in my view the will does not impose that duty on her as a condition of her life estate continuing; see Carrodus v Carrodus [1913] VLR 1. Accordingly, if she is unable through financial stringency to comply with the limited duty cast upon her, there is little the trustees can do about the matter. As I have said, the trustees also BC9603930 at 16 cannot force the life tenant to do repairs over and above that limited duty, nor can she force the trustees or the remainder persons to do any work on the property. In these circumstances, there is a suggestion in some of the authorities that a trustee should explore with the life tenant and remaindermen the possibility of reaching a scheme which is fair and equitable) see eg Re Hotchkys (1886) 32 Ch D 408. Unfortunately, different people have varying ideas as to what is fair and reasonable. In Australia, recourse is often made to the proportion that actuaries give to the value of the life estate as compared to the value of the remainder. As I have indicated, the evidence on this point is that the ratio is 70:30. There is a further complication in the instant case that the beneficiaries on intestacy differ from those who take in remainder. However, as the people involved are mother, children and grandchildren, this problem may be more theoretical than real. It would be acceptable for the trustees to prepare a scheme after

Page 39 consultation with such of the beneficiaries that were of age and if the trustees considered that they needed protection, to approach the Court either under s63 of s81 of the Trustee Act for the appropriate order. If no satisfactory scheme can be worked out, it may be that the property will need to be sold under the provisions of the Conveyancing and Law of Property Act 1898, and the proceeds invested on identical trusts. Accordingly, I advise the trustees as follows:BC9603930 at 17 (6) The life tenant is responsible for remedying defects and for doing work in anticipation of forthcoming defects but not for improving the structure. The trustees have no obligation either to do any maintenance and repair work themselves or to compel the life tenant to do those works. The trustees would be justified in preparing a scheme after consultation with all beneficiaries of full age which would permit defects to be remedied and replacements and periodic maintenance to be carried out for the preservation of the estate. I now turn to the question of insurance. I have already indicated that on the proper construction of the will the life tenant is to pay the insurance on the property. The insurance should be not only for the life tenant's right title and interest in the property, but also for the whole fee simple. However, if the life tenant does not comply with her duty to insure, then the trustees may consider it necessary to insure in the light of what I say below and to sue the life tenant for an indemnity. S41(1) of the Trustee Act 1925 provides: "A trustee may insure against loss or damage, whether by fire or otherwise, any insurable property, and against any risk or liability against which it would be prudent for a person to insure if he were acting for himself." In Pateman v Heyen (1993) 33 NSWLR 188, Cohen, J approved of statements in sundry United States cases including Merchants Bank L Trust Co v New Canaan Historical Society 54 A (2d) 696 (1947) (Conn), where it was held that BC9603930 at 18 there was a general duty of a trustee to insure in such a way and in such an amount as would an ordinary prudent person. It would seem to me in the instant case that the trustees should make proper enquiry each year to make sure that the life tenant has insured in a proper amount and if they find she has not, to effect insurance taking reasonable precautions to indemnify themselves against the life tenant should that happen. Accordingly I advise the trustees: (7) That the primary duty to insure the property is on the life tenant. They must make due enquiries each year to ensure that adequate insurance is effected by the life tenant. If they ascertain that the life tenant has not insured in a proper amount, then they should effect insurances and recover the cost from the life tenant if it is thought prudent to do so. (B) How long does the trust under 4(B) last? The gift under 4(B) is to terminate upon the gift of corpus under 4(C) taking effect. This really, means that one must construe 4(C) to see whether it involves one distribution period or a series of distribution periods. If there is one distribution period then the trust under 4(B) must cease at that period. If there is a series of distribution periods then this question is a very difficult one. In my view, on the wording of 4(C) there is but one distribution period. This is the whole focus of the clause. I acknowledge that one has to read the word "each" in 4(C) as if it were "each and every". I do not think that too BC9603930 at 19 much violence is done to the word "each" by so construing it and there is less violence done to the will by taking this viewpoint than in taking any other. Accordingly, this question (B) answers itself because the trust of income will exist up until the time of distribution of the capital. (C) It is to be noted that the beneficiary in 4(B) is "each family", whereas the beneficiary under 4(C) is "to each family and divided equally within each family". Under 4(B) the money could pass to "the family" or, alternatively, one could say that as the gift of the corpus was to each grandchild, and the whole focus of the trust is on the corpus, the gift of income merely

Page 40 being to deal with a situation before all the grandchildren were of age, the beneficiaries under 4(B) must also be the grandchildren. I do not consider that this latter view is correct. There is to be a gift of $300 per year to each family and the persons who are to benefit under that will include grandchildren who are of very tender age. I cannot believe that the testator would have intended that the trustees or the parents of the grandchildren would have to open trust accounts into which they paid, say, $150 per year depending on how many grandchildren were in each family. It seems to me far more likely that the testator intended that the $300 per year be paid to the head of that family, being one of his or his former wife's children, for the benefit of the family. BC9603930 at 20 Accordingly, I further advise the trustees: (8) That the gift of income under cl4(B) may whilst the five nominated children of June Burton are each alive be paid to that child on trust for his or her family without any necessity for the trustees to ensure that that sub-trust is carried out. Should any of those five children die then the trustees must make provision that the annual sum be paid for the benefit of the deceased person's family. (D) The will has not defined the term "grandchild". It could mean any grandchild in existence as at the date of his death, any grandchild subsequently born or any grandchild born until the class of grandchildren closes. Even though one of the grandchildren currently in existence, Madison Lehmann, was born on 9 December 1994, after the testator's death, because she was en ventre sa mere at the date of the testator's death and was subsequently born alive the law considers that she was alive as at the date of the testator's death. Accordingly, under any view the nine grandchildren named in the summons must qualify. Under the class closing rules, sometimes known as the rules in Andrews v Partington (1791) 3 Bro CC 401; 29 ER 610, where one has a gift with a qualification as to age, the class closes when the first member of the class becomes entitled to the distribution of his or her share. If this rule applies, then as soon as a grandchild attains twenty-one years the class will close and only grandchildren who BC9603930 at 21 are alive at that time will qualify. On the evidence, assuming that she survives to twenty-one, this will occur on 30 May 1997 when Carly Ortlipp attains twenty-one. The class closing rules have been associated with the modern rule against perpetuities, though it is clear that they pre-dated the final statement of the modern rule against perpetuities. They have been associated because the effect of the class closing rules has been to dampen the devastating effect of the modern rule against perpetuities. However, this is not the only effect of the class closing rules and it would seem that they have not been affected by the abolition of the modern rule against perpetuities by the Perpetuities Act 1984; see Sappideen and Butt Perpetuities Act Law Book Company, Sydney 1986, chapter 9. Accordingly, assuming that Carly Ortlipp survives, only grandchildren who were in existence as at 30 May 1997 can take. However, this will include any child who was en ventre sa mere at that time and who was subsequently born alive. (E) As I have said above, there is one point of distribution. This must be when the youngest of the grandchildren who are in esse as at the date the eldest grandchild attains twenty-one attains that age. However, in the meantime each grandchild who attains twenty-one obtains a vested interest, so that even if a grandchild dies after attaining twenty-one but before the date of distribution his BC9603930 at 22 or her estate will benefit. A grandchild who was alive when the eldest grandchild attained twenty-one but who fails to attain twenty-one never obtains a vested share and his or her share falls back into the fund to be redistributed amongst the others. Accordingly, I advise the trustees: (9) That the beneficiaries under 4(C) are those grandchildren who are in being as at the date the eldest grandchild attains twenty-one years and who attains the age of twenty-one years.

Page 41 (10) Upon the youngest of the grandchildren referred to in (9) of the advice attaining twenty- one years the fund may be distributed by paying twenty per cent times the number of grandchildren in any particular family to each eligible grandchild. Order Accordingly, the court by order advises the trustees in accordance with the ten paragraphs set out above and orders that the costs of all parties on the indemnity basis be paid out of the estate of the late Anthony Robert Burton. Counsel for the plaintiffs: GE Underwood Solicitors for the plaintiffs: Williams Woolf and Zuur Counsel for the defendants: M Cashion Solicitor for the defendants: Ken Heasman

Page 42

Page 43 8 of 10 DOCUMENTS: CaseBase Cases

Collins v Equity Trustees Executors & Agency Company Ltd


[1997] 2 VR 166; BC9601882 Court: VSC Judges: Batt J Judgment Date: 22/5/1996

Catchwords & Digest

Succession -- Bequests -- Acceleration of remainder interest -- Surrender of life interest in residuary estate Whether execution of deed disclaiming or surrendering interest in life estate is sufficient to cause acceleration of remainder interest, so that second donee becomes absolutely entitled in possession. Whether gift to remainderman was contingent on surviving life tenant, or vested, subject to being divested if remainderman predeceased life tenant. Whether remainderman unable to take anything until death of first donee. Whether, on construction of testamentary disposition, clear intention that to be no acceleration of remainder interest. Where clause stated that assets to be held on trust for second donee "absolutely provided that he shall be then surviving" first donee. Whether acceleration of interest will give second donee interest absolutely, or subject to divestment if predeceases mother. Distinction where class gift is accelerated. Held: Gift to second donee will be accelerated on execution of deed. Interest will vest indefeasibly on execution of deed. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations [2008] NSWSC 890; Cited Feeney v Feeney BC200807664 [2008] VSC 113; Cited Laycock v Ingram BC200802463 (2005) 30 WAR 568; [2005] Applied Hamersley v Newton WASC 221; BC200507603 [2004] NSWSC 1175; Cited Bell, Re BC200408597 (2004) 181 FLR 220; (2004) 31 Fam LR 608; (2004) Applied Coventry v Smith FLC 93-184; [2004] FamCA 249 Cited Bassett v Bassett (2003) 58 NSWLR 258; (2003) 11 BPR 21,099;

Court NSW SC VSC WAS C NSW SC FamC A NSW SC

Date 13/8/20 08 14/4/20 08 7/10/20 05 6/12/20 04 24/3/20 04 30/7/20 03

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Page 44 [2003] NSWSC 691; BC200304386 [2001] NSWSC 907; BC200106399

Cited

Weavers v Dawson

NSW SC

25/9/20 01

Journal articles referring to this case Article Name Construction of Wills in Australia 2007 (book) Question Raised in Phipps v Ackers Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations Followed Hartigan, Re [1989] 2 Qd R 401 12/07/1988 VSC Followed Patterson, Re Unreported Followed Syme (decd), Re [1980] VR 109 Distinguishe Howes (decd), Re; Quinton v [1971] 2 NSWLR 387 d Howes Distinguishe Taylor, Re; Lloyds Bank Ltd [1957] 3 All ER 56; d v Jones [1957] 1 WLR 1043 (1931) 44 CLR 546; (1931) 5 ALJR 39; Followed Tompkins v Simmons [1931] HCA 8; BC3190101 Referred to Referred to Finch v Lane Doe d Planner v Scudamore (1870) LR10Eq 501 (1800) 2 Bos & P 289; (1800) 126 ER 1287

Citations ISBN: 9780409320954 (2006) 80(4) ALJ 227

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Court QSC VSC VSC NSWSC EWHCC h HCA EWHCC h -

Date 1/6/1989 12/7/1988 31/7/1979 25/10/1971 18/7/1957 1/4/1931 25/7/1870

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Page 45

Page 46 9 of 10 DOCUMENTS: CaseBase Cases

Fox, Re
[1997] 1 Qd R 43 Court: QSC Judges: White J Judgment Date: 2/5/1996

Catchwords & Digest

Succession -- Wills and codicils -- Construction and effect -- Gift to blood relations preceded by life interest Where testatrix gifted property to 2 of her daughters and after their death to be divided between blood relations. Whether blood relations of testatrix or life tenants. Whether time for determining blood relations was death of testatrix or death of last life tenant. Where the gift employed the word "after" following the life interests. Whether relations took interest as tenants in common or joint tenants. Where property was to be divided between relations. Held: Blood relations of testatrix at time of her death took vested interest in remainder of estate as tenants in common in equal shares at date of her death. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations [2009] NSWSC 206; Cited Application of Marais, Re BC200902330 [2005] QSC 177; Cited Prosper v Wojtowicz BC200504808 Journal articles referring to this case Article Name Construction of Wills in Australia 2007 (book) Hutley's Australian Wills Precedents 7ed 2009 (book) Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations Considered/ Shield, In re; Bache v Shield [1974] Ch 373 Applied Applied/ Gansloser's Will Trusts, In re; Considered/ Chartered Bank of India, [1952] Ch 30; [1951] 2 Distinguishe Australia & China v All ER 936 d Chillingworth

Court NSW SC QSC

Date 16/2/20 09 24/6/20 05

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Citations ISBN: 9780409320954 ISBN: 9780409323719

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Court EWCAC iv

Date 30/1/1974 22/10/1951

Signal

Page 47 Applied Applied Distinguishe d Applied Applied Applied Applied Applied Bridgen, In re; Chaytor v Edwin Wilson v Duguid Eagles v Le Breton Robertson v Frazer Bullock v Downes Boulton v Jones Gundry v Pinniger Harrington v Harte [1938] Ch 205 (1883) 24 Ch D 244 (1873) LR15Eq 148; (1873) 42 LJ Ch 362 (1871) LR6ChApp 696 (1860) 9 HL Cas 1; (1860) 11 ER 627 (1857) 2 H & N 564; (1857) 27 LJ Ex 117; (1857) 157 ER 232 (1851) 14 Beav 94; (1851) 51 ER 222 (1784) 1 Cox Eq Cas 131; (1784) 29 ER 1094 EWHCC h EWHCC h EWHCC h EWHCC h 5/11/1937 10/7/1883 25/2/1873 17/7/1871 24/7/1860 25/11/1857 14/6/1851 16/7/1784

Words & Phrases

blood relations

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10 of 10 DOCUMENTS: Unreported Judgments Qld 17 Pages

IN THE MATTER OF THE ESTATE OF FOX - BC9601834; [1997] 1 Qd R 43


IN THE MATTER of the ESTATE OF ELSIE EDITH FOX (Deceased) IN THE MATTER of the Trusts of the Will of ELSIE EDITH FOX (Deceased) IN THE MATTER of O.64 of the Supreme Court Rules

SUPREME COURT OF QUEENSLAND WHITE J 687 of 1995 15 April 1996, 2 May 1996
WILL -- life tenants -- after to blood relations -- when class determined -- joint tenants or tenants in common.

White J
The applicant is the sole executor and trustee appointed under the will of his late mother Elsie Edith Fox. He applies for a construction of the will and directions as to how the estate is to be distributed. The remaining asset in the testatrix's estate is a house property in Fortitude Valley in Brisbane. The executor also seeks orders that he be at liberty to sell the property and that he be entitled to purchase the property and set off its sale price against his entitlement as a beneficiary. The parties have agreed to a valuation of the property and to Mr Fox purchasing the property at that price. BC9601834 at 2 The questions posed in the summons are: 1. Whether, on the true construction of the Will in the events that have happened, the gift and bequest by the Testatrix in her Will "I give to my daughter Doris Elsie Hambleton and Myrtle Irene Fox my property 31 Love Street, Valley, Brisbane, Subdivision 15 Portion 249, with contents equal after their their deaths to be divided between blood relations": (a) comprised a gift of the whole of the estate or interest of the Testatrix in her property at 31 Love Street, Fortitude Valley and; (b) operated: (i) to make an absolute gift to the sisters Doris Elsie Hambleton and Myrtle Irene Fox; or (ii) to create a valid trust for life for the said sisters with remainder for the blood relations of the Testatrix; or

Page 50 (iii) to create a valid trust for life for the said sisters with remainder for the blood relations of the life tenants; or (iv) to create some other and if so what trust. (c) if it were held under (b) that the gift and bequest created a valid trust for the benefit of the blood relations of the Testatrix or of the life tenants, whether: (i) such relations were to be ascertained as at the date of the Testatrix's death or as at the date of the death of the last surviving life tenant; (ii) the relations of the Testatrix took as joint tenants or tenants in common; (iii) the interest of the relations is taken per capita or per stirpes. (d) benefited which blood relations; (e) benefited which beneficiaries; BC9601834 at 3 (f) resulted in what quantum of each such beneficiaries' interest in the trust property. The testatrix died on 10 August 1964 aged 82 years. She was survived by her four children the applicant, William George Fox, and three daughters Doris Elsie Hambleton, Myrtle Irene Fox and Vera Bertha Harvey (formerly Mann). By her handwritten will dated 5 May 1953 the testatrix appointed her son to be her executor and trustee and provided as follows I GIVE DEVISE AND BEQUEATH I devise and bequeath unto my son William George Fox my property at 17 Love Street Valley known as the Palms Subdivision 14 portion 249 with contents and furniture. I give to my daughter Doris Elsie Hambleton and Myrtle Irene Fox my property 31 Love Street Valley Brisbane Subdivision 15 Portion 249, with contents equal After their their [sic] deaths to be divided between blood relations, and I bequeath one hundred 100 pounds to my daughter Vera Bertha Harvey. Furniture and contents of my daughters room Doris Elsie (Fox - crossed out) Hambleton as her own personal property over THE WILL CONTINUED This is my last Will and testerment (sic) Dated this 5th day of May in the year One Thousand Nine Hundred fifty 3 three 1953 The will has been attested in accordance with the provisions of the legislation. BC9601834 at 4 The executor is now the only surviving child of the deceased. Vera Bertha Harvey died on 16 September 1974. At the date of her death she was married to her second husband Harold William Harvey. She was and is survived by her four children Joan Gloria Vera Newton aged 51 years, Geoffrey Richard Mann aged 44 years, Dawn Valma Jean Henley aged 40 years, Richard Ashley William Mann aged 38 years. Probate was granted on 14 October 1975 of her will dated 3 December 1973. Pursuant to her will Vera Harvey bequeathed her interest in her mother's property at 31 Love Street, Fortitude Valley to her two sons Geoffrey Richard Mann and Richard Ashley William Mann equally and the rest and residue of her estate was left to her four children equally. Geoffrey and Richard Mann are represented before me by Mr A Wilson of counsel. Dawn Matthais (Henley) appeared on her own behalf and swore an affidavit that she had spoken with her sister Gloria Joan Vera Newton who did not intend to appear or be represented at the hearing of the application. An affidavit of Mr Peter Little, solicitor, is to similar effect. Myrtle Irene Fox died on 29 October 1976. Her death certificate indicates that she died unmarried and without issue at the age of 73 years. She died intestate and on 6 March 1995 the Public Trustee of Queensland advised that her estate passed to the following: * William George Fox - lawful brother - 1/3 share * Doris Elsie Hambleton - lawful sister - 1/3 share * Issue of Vera Bertha Mann nee Fox Geoffrey Richard Mann - lawful nephew - 1/12 share Joan Gloria Vera Newton - lawful niece - 1/12 share

Page 51 BC9601834 at 5 Richard Ashley William Mann - lawful nephew - 1/12 share Dawn Valma June Henley - lawful niece - 1/12 share Doris Elsie Hambleton died on 20 January 1991. She left no issue surviving her. She had one child who pre-deceased her and he had no issue. She was divorced in 1947. By her will dated 12 May 1986 she appointed the Public Trustee of Queensland to be her executor and trustee and after certain specific bequests she bequeathed the rest and residue of her estate to her brother William George Fox, the applicant. The property referred to in the testatrix's will as "my property, 31 Love Street, Valley, Brisbane Subdivision 15 Portion 249" is the property described as 15 Love Street, Fortitude Valley after the numbers in the streets had been altered by the Brisbane City Council. After the death of the testatrix a transmission by death in favour of the life tenants was lodged at the Titles Office in the names of Doris Elsie Hambleton and Myrtle Irene Fox for their joint lives and for the life of the survivor of them. The executor placed the property in the name of the estate of his mother care of himself with the Brisbane City Council. In the original application the executor sought an order that he be at liberty to pay his holding costs and expenses relating to the property out of the proceeds of sale. That part of the application was not proceeded with since it was accepted that he was entitled to such costs. The parties agree that the effect of the words in the will in respect of the property at 31 Love Street are such as to give a life interest to Doris Elsie Hambleton and Myrtle Irene Fox and BC9601834 at 6 in its contents (excluding the furniture and contents of the room of Doris Elsie Hambleton) equally. The issues which arise for consideration are * who are "blood relations"; * the time at which the blood relations are to be ascertained; * how the members that class of relations are to take their interest. BLOOD RELATIONS The parties agree that the relevant "blood relations" are those of the testatrix and not either or both of the life tenants. "Blood relations" means "relations" see Jarman on Wills (8th ed) page 1621. In order to save a gift from invalidity through vagueness expressed to be in favour of a class which could be so wide as to be incapable of sensible ascertainment the court as a matter of established practice has confined the class of relations to those who would take under the Statute of Distribution had there been an intestacy, Wilson v Duguid (1883) 24 Ch D 244 per Chitty J at 251; Re Gansloser's Will Trusts [1952] Ch 30 per Evershed MR at 37. The applicable statutes are the Succession Act 1867 s29 to s32 or the Succession Act s1981 s34 to s37, In Re Bridges, Chator v Edwin [1938] s1 Ch 205. TIME FOR ASCERTAINMENT OF THE CLASS The applicant maintains that the time for determining who comprises the class of relations is at the date of death of the testatrix on 10 August 1964. The respondents submit that on a BC9601834 at 7 proper construction of the will it is on the death of the last of the life tenants, Doris Elsie Hambleton, on 20 January 1991. The general rule where there is a gift to the next of kin (including issue) of a person is that such a class is to be ascertained at the death of that person unless there be special words to show that that construction ought not apply, Gundry v Pinniger (1851) 14 Beav 94; 51 ER 222; Re Gansloser's Will Trusts per Jenkins LJ at 44; Re Shield [1974] 1 Ch 373. Where the gift to next of kin is preceded by a life or other limited interest the same rule applies unless the construction demands some other time. The determination of the life or limited interest is the period not when the objects are to be ascertained but when the gift takes effect in possession, ibid. See also Jarman page 1634 et seq. Counsel submit that the approach to be taken to the construction of this will depends upon a preference for the analysis in Gansloser or that in Shield. In

Page 52 Gansloser the testator disposed of the residue of his estate as follows: "The remainder of my estate wherever situated ... I desire to be divided as follows, viz, one-half to my wife's relations one-half to my own relations but not till the death of my wife. Until then my wife shall have the unrestricted use of the income of my said estate. I advise my trustees ... to communicate with ..., solicitors, Oxford, who will and can help my trustees in ascertaining my wife's surviving relations and in the case of my relations the Banking Institution ... can be relied upon to supply all necessary information." The testator was survived by his wife who lived a further 20 years. Neither the testator nor his wife had issue but both had several collateral relations. Vaisey J held that the class of persons to take being the next of kin of the testator and his wife were to be ascertained as at the death of the testator. In BC9601834 at 8 the case of the wife's relations they were to be ascertained on the hypothetical footing that she had died intestate at the date of his death. The three children of the wife's deceased brother appealed since under the decision they did not take a share. There was no appeal as to the half share of the estate given to the testator's own relations. The case also concerned whether the members of the class should take as joint tenants or tenants in common a matter which arises for consideration here. The Court of Appeal held that on the true construction of the will the date at which the class was to be ascertained was the date of the death of the testator. The appellant children contended that the appropriate dates for ascertaining the members of the class were as regards the testator's relations, his death, and as regards the wife's relations, her death. At 38 Evershed MR said "The first point to note is that the testator "desires" his estate "to be divided as follows"; and then the two halves are designated. Prima facie it would, I think, be surprising that this testator intended the executors to set to work at once to find out the class of persons entitled to onehalf, but to wait for a long time - 20 years - before they started to discover who was entitled to the other half. It seems to me that the language contemplates the ascertainment once and for all at his death of the persons who will constitute the classes ultimately entitled to his estate. That is supported by the next few words that follow: "... but not till the death of my wife." I think, if the idea had been that as regard part of the residue the persons to take were not to be and could not be discovered until the wife's death, that would be a very remarkable way of giving effect to the intention. The testator contemplated an immediate operation of discovering the classes, and he added that, although those are the classes to take, they are not to enjoy the property until the death of his wife and until that event she is to have the unrestricted use of the income." BC9601834 at 9 Jenkins LJ considered the question of the date at which the wife's relations should be ascertained at 44. He said "That rule [in Gundry v Pinniger] comes to this: That, in as much as the proper time for the operation of the Statutes of Distribution in relation to the estate of any person is the death of that person, therefore, prima facie, a reference to next of kin according the statutes involves by implication the ascertainment of those persons at the proper time, namely, the death of the person whose next of kin according to the statutes are referred to. There is no doubt, I think, that this rule is, prima facie, of general application and should be followed unless there is something in the terms of the particular will under consideration which shows that it was not intended that the ascertainment of the next of kin of the propositus according to the statutes should take place as at the death of the propositus. In this particular case, I agree with my Lord that the language and scheme of the will make it sufficiently plain that the testator's intention was that both his wife's relations and his own relations should be ascertained at one and the same time, namely, as at the testator's death. My reasons for that view are these. The testator's direction is: "I desire [the remainder of my estate] to be divided as follows, viz, one-half to my wife's relations one-half to my own relations". That, on the face of it, is a direction for an immediate division to be effected at the testator's death and to be effected once and for all. It is a division to be made as to one-half to his wife's relations and as to one-half to his own relations - that is to say, to the next of kin according to the statutes of two different people, the testator himself and his wife, who may or may not survive him. In view of this direction for immediate distribution, it seems to me that prima facie the proper

Page 53 conclusion must be that those persons, the objects of the distribution, are to be ascertained at one and the same time, namely, the testator's own death. I think that that conclusion is reinforced by what follows. The testator continues: "... but not till the death of my wife". Those words were relied on in argument as equivalent to a gift of a life interest to the wife preceding the direction to divide, which should, it was said, be regarded as if it had been expressed as a gift in remainder expectant on the wife's death. In my view, however, there is for the present purpose a real distinction between a disposition in that form and the language actually used by this testator. The word "but" I regard as BC9601834 at 10 highly significant. The testator, having directed a division which, according to its terms is capable of being immediately carried out, goes on to say that this operation is to be postponed until a certain date: That he does by the words: "... but not till the death of my wife". Moreover, if the gift is of "one-half to my wife's relations" is to be construed as a gift "to my wife's next of kin according to the statutes ascertained as at her death, the words "... but not till the death of my wife," though not on that construction deprived of all meaning, would not as it seems to me to be totally appropriate." The court concluded that on a proper construction of the will the rule in Gundry v Pinniger, was excluded (the wife being the propositus as to her relations) with the result that the wife's relations and the testator's own relations were to be ascertained at one and the same time, namely, at the death of the testator. Re Shield, also concerned a homemade will. There the testator made a bequest in the following terms: "I give and bequeath unto my wife Mary Victoria Shield all my money and investments until her death. Then after that it will be shared to my relations also my wife's relations." The testator died in 1972. He had married twice and had no issue of either marriage. The various interests brought a construction summons to ascertain, inter alia, whether the relations were to be ascertained as at the date of the death of testator or as at the date of the death of the first defendant, his widow. Pennycuick V-C, after stating the general rule considered the difficulty which arises in the case where the gift is to the relations of two different persons. He identified three possible alternatives as to the date or dates at which the class or classes of the relations were to be ascertained. The first was to ascertain the relations of the testator at his death and then ascertain the relations of the widow at her death. The second BC9601834 at 11 would ascertain the relations of both the testator and the widow at his death and the third would ascertain the relations of both at the death of the widow. The second approach commended itself to the Court of Appeal in Gansloser and in that case the relations of both took a vested interest in reversion on the life interest of the widow. Pennycuick V-C concluded that it was improbable that this "rather simple testator" should have contemplated the ascertainment of the whole class on his own death and that the members of the class should then take a vested reversionary interest. He found a critical difference between the words of the will under construction and the will in Gansloser. He thought that the third alternative namely, that the relations of both should be ascertained at the death of the widow seemed an altogether more probable intention to ascribe to the testator. He concluded "It is, I think, much more likely that the testator would have contemplated an immediate distribution of his estate between the living than that he should have contemplated the vesting of reversionary interests." He noted at 380 that in Gansloser the Court of Appeal and particularly Jenkins LJ, placed the greatest of reliance upon the order of the words in the gift. "I am not much enamoured of distinctions based upon mere differences in the order of words, but there is no doubt that in In re Gansloser's Will Trusts [1952] Ch 30 the Court of Appeal treated the order of the words as of critical importance, and it seems to me that with the order of words inverted I am not only entitled, but rather encouraged, by the decision in In re Gansloser's Will Trusts to reach the view which seems to me to be most likely to carry out the intention of the testator, namely, that the date for ascertainment of both classes is the death of the widow." BC9601834 at 12 Gansloser and Shield were complicated by the need to ascertain the next of kin according to the Statute of

Page 54 Distribution of two different people. No such difficulty arises here. The employment of the word "after" following the life interests does not in my view take this will outside the usual rule that the next of kin of the propositus are to be ascertained at her death. It does no more than identify when the gift is to vest in possession. A reference to two cases referred to in Jarman at 1635 suggests that similar adverbs do not qualify the time for ascertainment of the class. In Harrington v Harte (1784) 1 Cox 131; 29 ER 1094 a fund was given after the death of the daughter of the testatrix to such persons as the daughter would appoint and in default of appointment to "such persons as would then by virtue of the Statute of Distributions be entitled to the testator's personal estate in case she had died intestate". The daughter made no appointment. The following appears in the report "Another point was made by the pleadings, viz. Whether this fund should go to such persons as were next of kin to the testatrix at the time of her death, or such as were so at the death of Jane Champernowne [the daughter], which turned on the construction of the word "then"; but defendant's counsel gave up the point, and admitted that the word "then" was to be taken as an adverb of relation, and not of time, and it must therefore go to such persons as were next of kin to testatrix at the time of her death." In the later case of Bullock v Downes (1860) 9 HLC 1; 11 ER 627 after making specific provision for different members of his family the testator gave the residue of his estate to the respondent and two other persons, both of whom had died, upon trust to pay the interest of the residuary property to his son BC9601834 at 13 for life and after his son to his son's widow, if any, an annuity as the son should appoint and to the son's children and "in case there shall not be any child or children of my said son Robert Downes, who, under the trusts aforesaid, should obtain a vested interest in the said trust moneys, etc, then do and shall stand and be possessed of the said trust moneys, etc, and the interest, dividends and annual produce thereof, in trust for, and to pay, assign, and transfer the same moneys, etc. unto such persons or persons of the blood or next of kin of me the said Andrew Downes as would, by virtue of the Statute of Distribution of intestates' effects, have become and been then entitled thereto in case I had died intestate". The Lord Chancellor, Lord Campbell said at 12 [631] "Generally speaking, where there is a bequest to one for life, and after his decease to the testator's next of kin, the next of kin who are to take are the persons who answer that description at the death of the testator, and not those who answer that description at the death of the first taker. Gifts to a class following a bequest of the same property for life vest immediately upon the death of the testator. Nor does it make any difference that the person to whom such previous life interest was given is also a member of the class to take on his death." Lords Brougham and Cranworth held to similar effect at 16-18 [633]. Lord Wensleydale said at 24 [636] "The question is strictly not what the testator meant, but what is the meaning of the word; for the use of the expression "the intention of the testator", is apt to lead the mind to speculate as to what the testator meant to do, instead of enquiring what he has done. And farther, the words used must be read in their ordinary and grammatical sense, unless the construction would lead to some obvious absurdity or inconsistency repugnant to the declared intentions of the testator, to be collected from the whole instrument. It is much more useful to attend closely to these rules, than to look out for guides and decisions on the construction of words in similar instruments. It seldom happens that the decisions on the meaning of words in one instrument are of any assistance in the construction of others, the context in each case, and the circumstances admissible in evidence vary so much as to give a different meaning to the expressions used. ... BC9601834 at 14 Applying these rules, the persons who would by the Statute of Distribution of Intestates' Effects have been entitled to them in case he died intestate, are those who filled the character of wife or next of kin at the time of the testator's death. The testator has provided that those (except the widow), if there should be no child of his son Robert who should obtain a vested interest, should receive the residue of his estate; but he has not said that those who would have been entitled if the testator had then died, that is died at the time of the event happening, should be entitled ... It has long been held that courts should try to construe every legacy so as to make it vested at the earliest possible period consistent with the words of the bequest, and not to be

Page 55 contingent unless the words require it; therefore we ought to hold that this legacy to the next of kin should be construed as giving the residue to the son and daughters, subject to the son's life estate." There is nothing in my view about the use of the word "after" to displace the usual principle of construction that the class of relations by reference to the statute is to be ascertained on the death of the propositus, namely, the testatrix. HOW SHOULD THE CLASS TAKE The testatrix provided that after the death of the last life tenant the property was "to be divided between blood relations". By virtue of s31 of the Succession Act, 1867 the class consists of the children of the testatrix as at her date of death. The question then is ought they take as directed by the statute or as joint tenants of the gift. If the latter construction is preferred then the applicant takes the whole estate by survivorship. In Eagles v Le Breton [1873] 42 LJ Ch 362 (the Law Reports report in [1873] 15 Eq 148 is extremely brief) the will provided that "At the death of my sisters Anne Peppin and Jane Coucher the residue of my property is to pass to my relatives in America." BC9601834 at 15 It was held that the class was to be ascertained at the date of death of the testator and that "relatives" meant the persons who would take under the Statutes of Distribution. It was argued that whenever there is either an express or an implied reference to those statutes the next of kin take as tenants in common and that only in those gifts without reference to the statutes would the class take as joint tenants. Romilly MR rejected that argument accepting that when there was an express reference to the Statutes of Distribution in a testamentary instrument the relations would take as tenants in common in the shares in which they would have taken on an intestacy but when there was no express reference the case was different and the ordinary rule applied, namely, that where a gift was to a class without words of severance the members of the class took as joint tenants. The Court of Appeal in Gansloser concluded that it ought to follow Eagles v Le Breton it having stood for nearly 80 years and not being incorrect in principle. Jenkins LJ at 46 said: "That decision [Eagles v Le Breton] commends itself to me as being in accordance with commonsense and in accordance with the basic principles of the construction of wills. The rule, whether it be called a rule of construction or a rule of convenience, under which the word "relations" is held to be limited to the next of kin of the propositus according to the statutes is an artificial rule which the court in its benevolence has adopted to prevent a testator's disposition failing from uncertainty. That was considered sufficient justification for imputing a wholly conventional and artificial intention to the testator by limiting his meaning of the word "relations", or the meaning he might attach to the word "relations", to the next of kin according to the statutes. The alternative of uncertainty was the justification for the procedure. But, that procedure having been gone through and the problem of uncertainty thus resolved, I cannot, speaking for myself see what justification there can be for going on to impute to the testator a further entirely artificial intention that the fund or subject matter BC9601834 at 16 of the gift should be divided amongst the next of kin according to the statutes in the shares and manner provided for in the statutes. That is a matter with which uncertainty has nothing to do; and, speaking for myself, in a case of this sort, where there is a gift to "relations", and the reference to the Statute of Distribution is imported simply and solely by force of the benevolent rule of the court, I think there is no sufficient justification for applying it beyond the point necessary to avoid uncertainty. Once that is done, for my part, I would hold the rule to be exhausted, and that the gift, limited by force of the rule to persons answering the description of the next of kin according to the statutes, should take effect like any other gift; that is to say, if, as here, it is a gift without words of severance, it should be treated as operating to create a joint tenancy." Mr Wilson for the respondents submits that by using the word "divided" the testatrix has implied a tenancy in common. In Shield Pennycuick V-C at 380 construed the words "then after that it will be shared to my relations also my wife's relations" as constituting a single class of relations and held that the word "shared" imported a distribution per capita. In Robertson v Fraser [1871] 6 Ch App 696 Lord Hatherley LC said at 699 when construing a codicil to a will "I cannot doubt, having regard to the authorities respecting the effect of such words as "amongst" and "respectively", that anything which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy, and to create a

Page 56 tenancy in common." See also Booth v Alington (1858) 27 LJ Ch 117. There is little in the will to assist in ascertaining how the members of the class, the issue, are to take. The testatrix seemed concerned to make some provision for each of her four children. An inclination away from survivorship, that is, joint tenancy, can only be deduced from the word "divided" but I think that is sufficient to displace the usual rule. Accordingly, the children of the testatrix each took a vested interest in the BC9601834 at 17 remainder of the estate as tenants in common in equal shares at the date of her death. The applicant is thus entitled to a quarter share as one of a class of four members. He is also entitled to the quarter share of his sister Doris Elsie Hambleton and her one-third share in Myrtle Irene Fox's quarter interest pursuant to her will and one-third of the quarter share of his sister Myrtle Irene Fox pursuant to her intestacy. That interest may be represented fractionally as 1/4 (his) + 1/4 (Doris's) + 1/12 (Doris's 1/3 of Myrtle's 1/4) + 1/12 (1/3 of Myrtle's 1/4) = 2/3. Pursuant to Vera Bertha Harvey's will her two sons, Geoffrey Richard Mann and Richard Ashley Mann, are each entitled to one-half of her one-quarter share. Together with their sisters Joan Gloria Vera Newton and Dawn Valma June Henley they are each entitled to a twelfth share in the one-quarter interest of Myrtle Irene Fox under her intestacy. Thus Geoffrey and Richard Mann's shares (each) may be represented fractionally as 1/8 (1/2 of mother's 1/4) + 1/48 (1/12 of Myrtle's 1/4) = 7/48 Joan Gloria Vera Newton and Dawn Valma June Henley are each entitled to 1/12 of Myrtle's 1/4 interest, ie, 1/48. Order The questions should be answered as follows: * 1(a) * 1(b)(i) * 1(b)(ii) * 1(b)(iii) * 1(b)(iv) * 1(c)(i) * 1(c)(ii) * 1(c)(iii) * 1(d) * 1(e) Yes No Yes No unnecessary to answer. such relations to be ascertained as at the date of the testatrix's death; the relations of the testatrix took as tenants in common; the interest of the relations is taken per capita, that is, as tenants in common in equal shares; benefited William George Fox, Myrtle Irene Fox, Doris Elsie Hambleton and Vera Bertha Harvey; benefited William George Fox and the children of Vera Bertha Harvey, namely, Geoffrey Richard Mann, Gloria Joan Vera Newton, Richard Ashley William Mann and Dawn Valma June Henley; * gave to William George Fox a two-thirds interest (32/48); * gave to George Geoffrey Richard Mann a seven fortyeighth interest; * gave to Richard Ashley Mann a seven forty-eighth interest; * gave to Gloria Joan Vera Newton a one forty-eighth interest; * gave to Dawn Valma June Henley a one forty-eighth interest.

* 1(f)

It is further ordered by consent that William George Fox be at liberty to sell the property at 15 Love Street, Fortitude Valley by private treaty and that he be permitted to purchase the

Page 57 BC9601834 at 19 property at a price not less than $180,000 and set off against the sale price his net entitlement as a beneficiary and to pay to the estate the balance thereof. I further order that the costs of and incidental to this application of the applicant and the respondents be taxed and paid on an indemnity basis from the estate. Representation: Counsel for the applicant/executor: Mr L Stephens Solicitors for the applicant/executor: Duells Counsel for the respondent: Mr A Wilson Solicitors for the respondent: VAJ Byrne and Co

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