Fahey v Bird [2022] VSC 533

2 Under the will, the testator bequeathed the whole of her estate to her trustee upon trust:

(a) to pay her just debts and funeral and testamentary expenses;

(b) to pay $15,000 to her daughter Wendy Ann Bennett with her stated wish that the money be used towards the purchase a motor car, and to also pay her another $50,000 for her own use and benefit, and to also give to her the testator's home contents and personal items;

(c) to give her sister and brother-in-law $10,000 for their use and benefit;

(d) to give $10,000 to her grandson Aaron Bird (who I take to be the defendant's son;

(e) to give $5,000 to her granddaughter Jessica Ann Bird (who I take to be the defendant's daughter).

3 Those monetary legacies make for a total of $95,000.

4 The plaintiff in this proceeding, Chloe Angel Fahey (formerly known as Chloe Angel Bennett), is the granddaughter of the testatrix. She is 20 years of age. She will turn 21 on 3 January 2023.

5 The benefits to the plaintiff were conferred in Clause 9 of the will, which concerned the residuary estate of the testator. That clause bequeathed her residual estate to the defendant as trustee upon separate trusts for the plaintiff and the defendant. The clause said (emphasis is as shown in original):

As to all the rest and residue of my estate UPON TRUST to divide the same into two equal parts of shares UPON THE FOLLOWING TRUSTS

(a) As to one of such parts or shares UPON TRUST for my grand‑daughter CHLOE ANGEL BENNETT AND I DIRECT that such part or share shall be invested for the benefit of the said CHLOE ANGEL BENNETT and that the part or share together with interest on same shall be paid to the said CHLOE ANGEL BENNETT upon her attaining the age of twenty one years.

(b) As to the remaining part or share upon trust for my son and the said HOWARD REGINALD BIRD for his own use and benefit.

I EMPOWER my Trustee to apply such part of the presumptive share of any infant under this my Will towards the maintenance education and advancement in life such beneficiary during his or her minority.

ALL MONIES liable or requiring to be invested under the Trusts of this my Will may be invested in or upon any of the following investments property or modes of investment namely:-

(i) Investments authorised by law for the investment of trust funds in the Commonwealth of Australia or any of the States thereof.

(ii) Land situate in the State of Victoria or any interests therein

(iii) Deposit at interest or otherwise with any Bank

(iv) Fully paid or partly paid shares stock or debentures of any company which is officially listed on the stock exchange of any of the capital cities of the States of the Commonwealth of Australia.

6 The principal asset of the deceased estate was the executor's home in Burwood. In the inventory of assets and liabilities filed by the defendant April 2004 for probate purposes, he stated the value of the home at $425,000. It was sold for $375,000 in November 2004.

7 The testator's personal estate within Victoria was $34,055. Her personal estate outside Victoria was $31,000. That makes for a total of $65,055 and a total value of her assets at $440,055. The liabilities of the estate are shown as $12,838, which gives a net value of the estate at $427,217. After deducting the total amount of the pecuniary legacies of $95,000, the residual estate appears to be worth $332,217. That would be reducible by the amount of payment required for her debts, funeral and testamentary expenses.

8 The above figures would result in the plaintiff's one-half share of the residual estate being worth $166,108, which under clause 9 of the will was to be invested for the plaintiff's benefit, and the accumulated amount paid was to be paid to her when she turned 21.

9 The plaintiff has sworn two affidavits. The first was sworn on 13 September 2021. In it, she says she has attempted to contact the defendant (her uncle) on many occasions in an effort to obtain more information from him about how her entitlements as a residuary beneficiary have been invested, and how much currently is held by the Chloe Fahey Trust (as I will call it so as to isolate it) for her benefit. She swears that those attempts were made by calling him three times per week for six weeks at his place of work at the Defence Bank in Queen Street, Melbourne. She says she has also been emailing him at his work email address and his personal email address; texting him on his mobile telephone; and sending personal messages to him using the 'Facebook' platform. She shows as an example a Facebook message that she sent to him which she says was similar in content to other emails and text messages that were sent him over time. The message read:

Hey Howard Its Chloe Fahey, your niece. Ive been trying to get in contact with you in regards to Paulines Will. If you could contact me either here on fb or on my mobile [telephone number deleted] so we can discuss Paulines Will that would be greatly appreciated. Hope to hear from you soon

10 The plaintiff says the defendant has never responded to her messages. Nothing in the materials gives an understanding of the history and quality of the personal relations between them. However, they have a common interest as equal beneficiaries of the entirety of the testator's residuary estate.

11 The plaintiff's next step was to engage her present solicitors to pursue enquiries with the defendant on her behalf. Her solicitors sent a letter to the defendant dated 30 October 2020 addressed to him as the Head of Lending Assessment at the Defence Bank in Melbourne. The letter recited that the plaintiff was a beneficiary of half of the residuary estate and that he had failed to respond to messages that were sent to him to discuss the plaintiff's entitlement under her grandmother's will. The letter also said:

We are instructed that our client is suffering from severe financial stress and requires the funds in order to secure permanent and safe accommodation. Her current liabilities are exceeding the government beneficial she is receiving and she is unable to meet her financial commitments, let alone provide adequate food and essentials for herself.

Accordingly, our client seeks the full payment of her entitlement now and requests that you deposit same into our Trust Account by 4pm on Friday 6th November, 2020.

...

Failure to provide these funds within the given time frame will give our client no option but to institute proceedings with the Supreme Court of Victoria to obtain the appropriate Orders for a full accounting of the Estate and disbursement of the full entitlement to her client.

...

We further require a copy of the Financial Statement of Receipts and Payments setting out how our client's entitlement has been calculated and full details of where you have invested the entitlement since the administration was finalised and full details of the income received from all investments.

Please ensure that the full entitlement (including all interest to date) is deposited either on or before 4pm on 6 November, 2020 as noted above and provide a detailed response to our client's queries before that time.

Should you wish to discuss this further, please contact Kellie English of our firm.

12 The defendant did not respond to that letter; nor has he taken up the invitation to discuss the matter with the plaintiff's solicitors. The Court is given no clear insight as to what might be explaining this uncooperative behaviour, but the materials suggest trouble. At the outset of this proceeding the plaintiff sought and obtained from the Court an order that she be relieved of the procedural necessity to state her personal address on the motion "... because I am fearful of him and of any repercussions from this action."[1]

13 The materials show there would be a natural apprehension that the defendant is unconcerned about the plaintiff's interests, and that her financial entitlements as beneficiary have been compromised or mishandled, or worse still, disregarded. The only means to begin an investigation into his administration of the trust is to obtain information by way of an account from him, as an accounting party.

14 I have obtained and examined the contents of the Supreme Court probate file. In an affidavit sworn by the defendant on 6 April 2004, the defendant swore:

13. If I obtain Probate, I undertake to the Court that I will

(a) well and truly collect and administer the estate of the deceased according to law;

(b) if required by the Court or by the Registrar [of Probate], make and file or cause to be made and filed in the Court, a true and just account of the administration of the estate;

15 It appears that the failure of the defendant to respond to the plaintiffs' requests for information led to assistance being rendered by the Probate Registry of the Supreme Court. In an email sent on 13 January 2021 from the Assistant Registrar of Probates, the defendant was requested to file an administration account in the Office of the Registrar within 30 days. Where relevant, the request from the Assistant Registrar said:

In the Plaintiff's Affidavit of Executor sworn on 28 April 2004, the Plaintiff gave an understanding that if required by the Court or Registrar, he would make and file or cause to be made and filed in the Court a true and just account of the administration of the estate.

Pursuant to the powers conferred on the Registrar of Probates by Rule 6.03 of the Supreme Court (Administration and Probate) Rules 2014 the Plaintiff is required to file in the Office of the Registrar, within 30 days of this request a true and just account, verified by Affidavit, of the administration of the estate of the deceased.

...

Please see the prescribed form for the documents under 'Probate Forms' of the Supreme Court of Victoria website.

Please acknowledge receipt of this email.

16 The defendant did not respond to the Assistant Registrar's request. The plaintiff states that despite further reminders by the Court and emails forwarded to the Defendant's work email and posted to his home address, there remains non‑compliance with the Registrar of Probates' request.

17 Those events led to the plaintiff filing her originating motion on 28 June 2022. She sought the following relief:

...

1. The defendant furnish and verify accounts of the estate of Pauline Ann Tyson (deceased) pursuant to r. 54.02(b)(i) of the Rules.
2. A declaration that the trust for the plaintiff's benefit established by the Will of Pauline Ann Tyson (the Trust) is terminated.
3. The defendant is ordered to transfer all property of the Trust to the plaintiff forthwith.

18 That motion and its complementary summons seeking the same relief, and a supporting affidavit was served on the defendant personally on 24 August 2022 at his place of work at the Defence Bank.

19 The above account of the situation demonstrates that the defendant, who has responsibilities as executor and trustee to act in the interests of a beneficiary, and to carry out the instructions of the testator, has simply ignored all requests to explain the carriage of his responsibilities and in particular, has failed to respond to any inquiries concerning his conduct of the administration and financial affairs of the Chloe Fahey Trust. The materials do not enable me to understand why he would so flagrantly ignore requests that he was bound to satisfy, as an executor and trustee, for all information concerning the administration of the trust. Even with the institution of legal proceedings he has simply refused to communicate. It is certainly reasonable for the plaintiff and her legal advisors to have serious apprehensions that he has failed to carry out his responsibilities as trustee or worse still conducted himself in an unfaithful manner so as to adversely affect the plaintiff's beneficial financial interest.

20 The material shows the plaintiff to be in a parlous financial situation. In her affidavit in support of the motion, she states:

I was born to drug dependant parents and have suffered abuse as a child. I have lived most of my life under Child Protection Services and Department of Human Services. I gave birth to a child when I was 13 years old and my son is currently in Foster care. I have only completed two years of secondary education. I have been involved in abusive domestic relationships in the past. I am unemployed and at risk of further homelessness. I have no family support. I am currently living in a shared rental property. I do not want to disclose my address to the defendant because I am fearful of him and of any repercussions from this action.

As I am currently unemployed I am receiving a Youth Allowance from Centrelink of $603 per fortnight. ...

21 That financial allowance enables her to meet her fortnightly expenses for rent, electricity, food, toiletries and dog food. She says that she cannot afford any other expenses and she has no money for clothing, entertainment or medical expenses. She is relying on a friend, identified as Michelle, for initial support and from whom she receives assistance from time to time by loaning her money. She says that if she is paid her entitlements under the will, she will ask her friend Michelle to assist her in managing her finances.

22 I think the age qualification in clause 9 of the will should not be construed as a pre‑condition of receiving the residuary gift. Rather, attaining the age of 21 is to be construed as denoting the timing of the enjoyment of the gift as already vested.[2] Thus, what the plaintiff obtained under this will was an immediate and absolute vested and indefeasible interest as sole beneficiary of the Chloe Fahey Trust, and exclusively for her benefit. No other person has a contingent interest. Being over 18, she has already attained full age and full legal capacity and is capable of giving a valid discharge to the trustee. [3]

23 The plaintiff's application to terminate the Chloe Fahey Trust is made according to what is frequently called the "rule" in Saunders v Vautier[4] , being a rule of law and not one of construction.[5] The rule was recognised by the High Court of Australia in CPT Custodian v Commissioner of State Revenue[6] as embodying a "consent principle" which:

... recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor to subject property to the continuing trusts, powers and limitations of a will or trust instrument.[7]

24 CPT Custodian adopted the modern formulation of the rule as being:

... an adult beneficiary (or a number of adult beneficiaries acting together) who has (or between them have) an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation.[8]

25 In Beck v Henley [9] the New South Wales Court of Appeal explained that:

... the "rule" is best described as a power on the part of the beneficiaries, with a correlative liability on the part of the trustees ... The exercise of the power does not involve the performance by the trustees of any part of their office as active trustees; instead, it brings their office to an end.[10]

26 The 'rule' in Saunders v Vautier is said to illustrate and exemplify the idea of beneficial ownership of property in equity, and exclusive or autonomous decision making by the person to whom the property is given. That is, "... if there is only one beneficiary of a particular trust that beneficiary must be entitled to take the property subject to the trust and decide what he wishes to do with it ... it no longer belongs to the settlor or (obviously) the testator"[11].

27 The power of a beneficiary to bring the trust to an end is not unqualified. The exercise of the power may be subject to the trustee's right to reimbursement or exoneration for the discharge of liabilities incurred in the administration of the trust. Further, as a reflection of the equitable interests involved, there may also be 'special circumstances' such as to disentitle a beneficiary, in the eyes of equity, from exercising the power.[12]

28 In this case I do not see any such disentitling conduct or special circumstances. To the contrary, the affidavits of the plaintiff show her tragic personal history and the dire financial predicament that she is in. As sole beneficiary of a one half share of the residuary estate, she is entitled at law to direct the defendant as trustee to terminate the Chloe Fahey Trust and accelerate and transfer the beneficial entitlement to her before she turns 21 years of age. And the trustee would be bound to accede. As beneficiary she is also is entitled to the Court's intervention to compel the defendant to produce accounts showing how he has, as a fiduciary and accounting party, administered the financial affairs of the trust that was established for her exclusive benefit.

29 The Court will separately make declaratory and ancillary orders to: terminate the Chloe Fahey Trust; require the defendant to produce a true and just account of the administration of the deceased estate and of the administration of the trust for the plaintiff. It will also direct the defendant as trustee to convey to the plaintiff her accumulated beneficial interest. The Court's declaratory order will be expressed in this way:

The plaintiff Chloe Fahey being of full age and legal capacity, and being absolutely entitled to a vested and indefeasible interest in the Chloe Fahey Trust as sole beneficiary of a one half share of the testator's residuary estate as granted under the Will, is entitled at law to terminate the Chloe Fahey Trust by directing the defendant Howard Bird as trustee to pay her entire beneficial interest under the trust to her presently without having to first attain the age of twenty‑one years as stated in clause (9) of the Will, and, in bringing this proceeding the plaintiff is to be taken as making such a direction, to which the defendant is bound to accede. Accordingly, the Chloe Fahey Trust is hereby terminated.

[1] Affidavit sworn 13 September 2021 [13].

[2] See Krstic v State Trustees [2012] VSC 344.

[3] See Age of Majority Act 1977 (Vic) s 71.

[4] [1841] EngR 629; (1841) 4 Beav 115; 49 ER 282

[5] See Jacob's Law of Trusts in Australia (8th ed) at [9-34]

[6] [2005] HCA 53; (2005) 224 CLR 98.

[9] [2014] NSWCA 201.

[10] Ibid at [33]. See also G E Dal Pont, Equity and Trusts in Australia (5th ed) at [25.140].

[11] See Paul Matthews, 'The Comparative Importance of the Rule in Saunders v Vautier' in (2006) 122 Law Quarterly Review 266 at 273-6.