Plaintiffs v Firstnamed Defendant

2 Susan Spry has been found to be unable to manage her affairs and the State Trustees Limited ("State Trustees") has been appointed her guardian pursuant to s 43 of the Guardianship and Administration Act 1986. She was born on 10 October 1949, Matthew Spry was born on 1 April 1983 (now aged 25) and Christopher Spry Turnbull was born on 3 August 1990 (now aged 18). The parties agreed (and I will confirm that by formal order) that the fourth defendant should be appointed to represent the unborn children of Susan Spry as well as Matthew Spry and Christopher Spry Turnbull, and appeared at the hearing. Each of the defendants was represented in the proceeding before me by separate counsel.

3 The deceased's residuary estate was disposed of by clause 9 of the Will. Clause 9 made provision for Susan Spry during her lifetime and upon her death for her children. Clause 9 provides:

I GIVE DEVISE AND BEQUEATH the rest and residue of my Estate both real and personal unto my Trustees UPON TRUST ... to pay such of the income therefrom to my daughter or for the benefit of my daughter SUSAN SPRY during her lifetime to such amount as my Trustees in their absolute discretion think fit and to accumulate the balance of the income and upon the death of SUSAN SPRY if she survives me or upon my death if she fails to survive me UPON TRUST to hold the capital of the residue and any accumulated income for such of the children of SUSAN SPRY as shall be living at the date of my death if SUSAN SPRY predeceases me and at the date of death of SUSAN SPRY if SUSAN SPRY survives me such children to take as tenants in common in equal shares and if only one then to that one only and in any case contingently on attaining the age of twenty-one years PROVIDED FURTHER that if any child of SUSAN SPRY fails to attain a vested interest but leaves a child or children him or her surviving then such last mentioned child or children shall take by way of substitution the share which their his or her parent would have taken if such parent had attained a vested interest and if more than one in equal shares as tenants in common and in any case contingently on attaining the age of twenty-one years.

It is proposed ("the proposal") that State Trustees relinquish Susan Spry's entitlement to be considered for an income benefit under clause 9 of the Will in return for the sum of $200,000 to be deposited into a separate trust for her benefit. The proposal is the subject of an order by the Victorian Civil and Administrative Tribunal ("VCAT") which was made 10 October 2005. In that year the first plaintiff initiated proceedings in VCAT under the Guardianship and Administration Act 1986 for an administration order in relation to Susan Spry. On 10 October 2005 VCAT recorded that it was satisfied that Susan Spry had a disability and was unable by reason of that disability to make reasonable judgments about her estate and needed an administrator. VCAT, by formal order, approved the administrator disposing of certain shares for the sum of $2,160,000 for the benefit of Susan Spry and relinquishing her entitlement "to be considered for an income benefit under Clause 9 of the Will" of the deceased "for a sum of $200,000" and depositing the proceeds into a separate trust for her benefit.

4 The first issue for my consideration concerns certain consequences from the proposal if implemented. Two questions have been posed for the Court's advice in that context. The questions essentially concern the entitlement of Susan Spry's two children, and any possible unborn children, in the event that the proposal is put into effect. The parties to this proceeding have made detailed written submissions and agree amongst themselves about the orders which I should make on the questions sought by the amended originating motion. In my view, the questions asked are to be answered in accordance with the submissions which have been put to me by all of the parties for the reasons which follow.

5 Susan Spry does not have an interest in the income of the residuary estate provided for by clause 9 of the Will beyond a right to have the trustees give proper consideration to whether or not to exercise their discretion to apply part of the income to her from time to time.[1] As such, she may validly renounce the right to be considered in respect of such an exercise of discretion and may release the trustees from any obligation that she be considered in the future.[2] For present purposes a renunciation and release is to be considered as no different from a surrender or disclaimer.

6 One consequence of the proposed renunciation by Susan Spry (through State Trustees) will be to accelerate the interest of her two living children. The words in clause 9 of the Will do not convey an intention that there should be any gap between the enjoyment of the interests held by the trustees between the period during which Susan Spry might be capable of enjoying the benefits of distributions to her and the period of time when her children would take their benefit (subject to such conditions as would apply to their entitlements). It is plain from the terms of clause 9 of the Will that the postponement of the interests of her children was to permit her to enjoy such distributions as the trustees thought fit should be made to her during her lifetime and thereafter to her children. The words limiting the enjoyment by her children, namely, "upon the death of Susan Spry" relate back to the words which delimit the power to pay income to her "during her lifetime" rather than create a gap between her and their enjoyment of benefits.

7 A further consequence of the acceleration occasioned by implementing the proposal in this case is to close the class of children capable of benefiting under the Will. The terms of clause 9 are to be read as providing for the capital and accumulated income to be held "for such of the children of Susan Spry as shall be living at the date of her death". In Crane v Crane[3] Dixon J said:

If a fund is bequeathed to a class so that when each member attains a specified age or fulfils some other condition attached to the gift he is enabled to call for his share, only those may take who are in existence when the first member reaches that age or fulfils the prescribed condition and those who come into existence afterwards are excluded. ... The rule applies alike to limitations which merely postpone payment until attainment of the specified age or fulfilment of the given condition and to limitations which make vesting contingent thereon.[4]

There is nothing in the terms of this Will which expresses an inconsistent intention. Accordingly, the proposed relinquishment would have the effect of closing the class of persons entitled to the residuary estate: namely to Susan Spry's two existing children. The difference in ages between her two children, however, may have different consequences for them under clause 9 of the Will. Matthew Spry has attained the age of 21 and, accordingly he can take his interest immediately. Christopher Spry Turnbull has not yet obtained 21 years of age and, in his case, there is a question of construction which arises, namely, whether his interest is properly treated as a contingent interest or an interest that is vested but subject to being devested in the event that he does not attain 21 years of age. It is not necessary for me to deal with that question in this proceeding because, in either event, the capital and accumulated income would need to be held by the trustees pending his turning 21 years of age.

8 Accordingly, I propose to answer each of the two questions in the affirmative.

9 The next matter for me to determine is whether to approve the execution by the plaintiffs of the proposed deed of renunciation and release exhibited to the affidavit of the first plaintiff. The proposed deed contains five recitals and a comprehensive release and renunciation of all entitlements under, and in connection with the Will, and provides for the payment of $200,000 in consideration for entry into the Deed by the trustees of the deceased's estate to State Trustees as administrator of the estate of Susan Spry.

10 The amended originating motion seeks an order from the Court pursuant to Rule 54.02(c) "approving the execution by the plaintiffs of the proposed Deed". The form of order sought by consent of the parties is in similar terms, namely, an order that the "execution by the plaintiffs of the proposed Deed of Renunciation and Release" exhibited to the affidavit of the first plaintiff "is approved".

11 I did not find very helpful the submissions in favour of the approval in the terms sought. The plaintiffs' outline of submissions contended:

1. The 'approval' which the Court is asked to give is not approval in the sense that the Court, if placed in the position of the trustees, would itself act in the manner they propose. It is instead approval in the sense that that Court would confirm that it was proper for the trustees so to act:
   • Re Green [1972] VicRp 98; [1972] VR 848, Crockett J at 850.

I am not confident that the form of the approval sought in the amended originating motion, or in the form of orders handed to me, adequately reflects "the sense" in which the approval is sought.

12 The reference in the submissions to the judgment of Crockett J in Re Green may not sufficiently assist the plaintiffs in the proposition for which it is relied. His Honour in that case, and on the very page cited, expressed considerable reservation about approving the proposal in that case because of the insufficient material of a factual nature tendered to enable the Court to conclude that the contemplated exercise of discretion was not improper. His Honour's decision to give "approval" was based not upon a "sense" in which the orders were sought but, rather, that "wisdom or lack of it in relation to the proposed exercise of the discretion [was] not something upon which [he had] been asked in [that] originating summons to express an opinion".[5] What he had been asked in the relevant part of the question before him was to say "whether it is improper for the plaintiffs to exercise the power which they possess in the postulated manner".[6] I too would approve the trustees' proposal if the question asked of me was in such terms, or, putting it differently, if the "sense" asserted in paragraph 19 of the plaintiffs' submissions was unambiguously reflected in the question posed in the originating motion and the proposed order handed for my pronouncement. Indeed, counsel for the fourth defendant helpfully, I thought, suggested that the plaintiffs might wish to amend the form of approval sought to reflect the sense in which it was being sought and the existing authorities: that suggestion was not adopted by the plaintiffs for reasons which were not explained to me.

13 The trustees, in my view, do have power to enter into a deed of the kind proposed and, accordingly, the plaintiffs as trustees, have the power to execute a deed of renunciation and release of the kind proposed.[7] My disquiet is not about whether the trustees have the power, but whether the form of order clearly enough reflects what is sought.

14 It should go without saying that the form of order the Court is asked to make should unambiguously reflect the "sense" in which it is intended. That was the case in Re Green as is clear from the passage relied upon by the plaintiffs. In Gisborne v Gisborne,[8] Lord Cairns said:

My Lords, in a case like this, where the Court of Chancery recognises that the trustees and not the Court, are to be judges of the quantum to be allowed, where the trustees are willing to exercise the discretion which they claim to exercise, and where the Court allows and declares their right to exercise that discretion, I do not understand it to be the habit of the Court to go on and express any opinion as to whether the exercise of the discretion by the trustee is a wise or an unwise exercise of that discretion. I understand that in such a case the Court of Chancery steps aside and recognises the trustees as the persons to exercise the discretion, and in its decree does nothing more than, with regard to payments which may be necessary, act upon the exercise of the discretion of the trustees so made.[9]

In Re Allen-Meyrick's Will Trusts; Manganall v Allen-Meyrick[10] Buckley J said:

... if the trustees were to apply to the court indicating that they were anxious to exercise the power in a particular way, and sought directions of the court as to whether that proposed exercise was an exercise within their powers, the court would enlighten them if they were in any doubt in that sort of respect; or if they were to come to the court and ask whether a particular exercise of power was the proper one for them to embark upon, having regard to the attending circumstances, again the court would be able to say whether or not, in the judgment of the court, that was a proper thing for the trustees to do.[11]

As these passages show it is critical to distinguish between the Court being asked to make "a decision as to the wisdom of the proposed course of conduct" with it being "asked to consider whether there was no impropriety".[12] The particular approval said to be sought from the Court is that the trustees would be acting within power if, in the trustees discretion, they decided to act in the way proposed or contemplated. The Court is being asked only whether the proposed decision is within their power to make if they consider it appropriate to do so. The order made by the Court should reflect, and be expressed in terms which does reflect, the particular "sense" in which the approval is sought and obtained. A person reading the order should be able to tell on the face of the order what the Court has determined without ambiguity. It would not be right for a person affected by the order to be left with the impression that the Court had itself formed the view that the proposal was wise unless, of course, that is what occurred and there was sufficient material upon which the Court could give its approval in that "sense".

15 The evidence before me is, in my view, insufficient for the Court itself to adopt a view that the proposal is appropriate. In fairness to the parties, the material put before the Court did not seriously seek to obtain the Court's approval in the "sense" that the Court would act in the manner proposed if the Court were in the position of the trustees. In the circumstances I will grant leave to the plaintiffs to reformulate their proposed order seeking approval to accord with the particular "sense" in which it seeks approval in accordance with these reasons. Subject to those matters, I will order that:

(1) The fourth defendant represent any unborn children of Susan Spry, Matthew William Spry and Christopher Mark Ashley Spry Turnbull.

(2) The questions asked in the amended originating motion are answered as follows:

In the events that have happened, and upon the exercise by the plaintiffs and the first defendant of the proposed deed of renunciation and release which is Exhibit JFC-9 to the affidavit of John Francis Chamberlin sworn 9 July 2007:

(a) the second defendant, Matthew William Spry, will be presently entitled to a half share of the accumulated income and capital held under clause 9 of the Will of the late Robert Henry Spry;

(b) the third defendant, Christopher Mark Ashley Spry Turnbull, will, provided he attains the age of 21 years, be entitled to a half share of the accumulated income and capital held under clause 9 of the Will of the late Robert Henry Spry.

(3) The plaintiffs costs of and incidental to this proceeding be paid or retained out of the estate of the late Robert Henry Spry.

(4) The first to fourth defendants' costs of the proceedings including any reserved costs, be taxed on a solicitor-client basis, to be paid out of the estate of the late Robert Henry Spry.

(5) The plaintiffs have liberty to apply within seven days for an order that there is no impropriety in the plaintiffs entering into the deed of renunciation if in the circumstances the plaintiffs, as trustees, form the opinion that it is appropriate for them to do so.

[1] Commissioner of Taxation v Harmer (1990) 24 FCR 237, 249 (Wilcox and Lee JJ); Gartside v Inland Revenue Commissioners [1967] UKHL 6; [1968] AC 553.

[2] Re Gulbenkian's Setlements [No 2] [1970] 1 Ch 408, 418 (Plowman J).

[3] [1949] HCA 52; (1949) 80 CLR 327.

[5] Re Green [1972] VicRp 98; [1972] VR 848, 850.

[7] See: Trustee Act 1958 s 19(1)(f); Dowling v St Vincent de Paul Society of Victoria Inc [2003] VSC 454.

[8] (1877) 2 App Cas 300.

[10] [1966] 1 WLR 499.

[12] Invensys Australia v Austrac Investments [2006] VSC 112; (2006) 15 VR 87, 95 (Byrne J); see also Hornsby; Hornsby v Playoust No 2) [2005] VSC 125 (Unreported, Mandie J, 28 April 2005); and McKinnon v Samuels [2000] VSC 393 (Unreported, Eames J, 21 September 2000).