Ritchie's Will Trusts, Re [2005] QSC 81 (14 April 2005)

Supreme Court of Queensland|2005-04-14|Before: Helman J.

[1] This is an application for orders under the Trusts Act 1973 in relation to trusts established under the will dated 24 September 1982 of Mr Edward Alexander Ritchie, grazier, who died on 23 May 2002 aged seventy-four years. Mr Ritchie was survived by his second wife Ethel and five children: Jeffrey born on

[2] The disposition of the testator's furniture and 'items of personal effects', the residue of his personal estate, and his interest in a property at Dohles Rocks Road, Kallangur was in clauses 3, 4 and 5:

3. I GIVE AND BEQUEATH to my wife ETHEL IRENE RITCHIE all my furniture and other items of personal effects.

4. I GIVE the rest and residue of my personal estate unto and to the use of my sons JEFFREY EDWARD RITCHIE, PETER THOMAS RITCHIE, JOHN ROBERT RITCHIE, DOUGLAS HUDSON RITCHIE and my daughter KATHRYN LUEANNE SEEGAR in equal shares PROVIDED THAT should any of the said JEFFREY EDWARD RITCHIE, PETER THOMAS RITCHIE, JOHN ROBERT RITCHIE, DOUGLAS HUDSON RITCHIE and KATHRYN LUEANNE SEEGAR predecease me leaving issue at my death such issue shall take the share of my personal estate which their parent would have taken if he or she had survived me, and if more than one as tenants in common in equal shares.

5. I DEVISE my interest in a property at Dohles Rocks Road, Kallangur in the State of Queensland described as Resubdivision 2 of Subdivision 3 of Portion 13 Parish Redcliffe unto and to the use of my trustee upon trust that my trustee shall permit the said ETHEL IRENE RITCHIE to reside there rent free so long as she may wish during her life or until she shall remarry or express in writing a wish to cease to reside therein. The said ETHEL IRENE RITCHIE shall during the term in which she shall occupy the said residence pay all rates, charges, insurance and other outgoings on the said residence, and I DECLARE that from and after the death or remarriage of the said ETHEL IRENE RITCHIE or upon her expressing her wish in writing to cease to reside therein my trustee shall STAND POSSESSED of the said residence upon the trust and subject to the powers and provisions hereinafter declared and contained concerning my residury [sic] Real Estate.

[3] In clause 6 the testator disposed of the residue of his real estate:

6. I DEVISE the rest and residue of my Real Estate where so ever situated unto the use of my trustee from the following trust that is to say

(a) For a period of twenty (20) years from the date of my death (hereinafter called the 'term') to pay the income so derived therefrom, from time to time to the said JEFFREY EDWARD RITCHIE, PETER THOMAS RITCHIE, JOHN ROBERT RITCHIE, DOUGLAS HUDSON RITCHIE KATHRYN LUEANNE SEEGAR and ETHEL IRENE RITCHIE as tenants in common in equal shares.

(b) Should any of the said JEFFREY EDWARD RITCHIE, PETER THOMAS RITCHIE, JOHN ROBERT RITCHIE, DOUGLAS HUDSON RITCHIE and KATHRYN LUEANNE SEEGAR predecease me or die during the term, leaving issue living at my death or living during the term my trustee shall pay to such issue the share of the income so derived therefrom, from time to time, as his or her parent would have received if he or she had survived and if more than one as tenants in common in equal shares.

(c) At the expiration of the said term my trustee shall sell call in and convert my residury [sic] Real Estate and divide the nett proceeds therefrom between such of the said JEFFREY EDWARD RITCHIE, PETER THOMAS RITCHIE, JOHN ROBERT RITCHIE, DOUGLAS HUDSON RITCHIE and KATHRYN LUEANNE SEEGAR as shall be living at the expiration of the term as tenants in common in equal shares PROVIDED THAT should any of the said JEFFREY EDWARD RITCHIE, PETER THOMAS RITCHIE, JOHN ROBERT RITCHIE, DOUGLAS HUDSON RITCHIE and KATHRYN LUEANNE SEEGAR predecease me or die during the term leaving issue living at the expiration of the term such issue shall take in the share of the net proceeds of the said conversion which their parent would have taken if he or she had been living at the expiration of the term.

[4] By a deed of agreement made on 21 February 2003 Mrs Ethel Ritchie accepted the transfer of a property in full and final discharge of any claims she had on the estate. No other claims have been made on the estate. The property now the subject of the trust established under clause 6 comprises a farm near Gatton and a building containing flats at Kallangur. The value of the two properties is, according to Jeffrey, approximately $1,255,000. In addition there is $113,000 in an investment account with a credit union.

Pursuant to s. 95 Trusts Act 1973 the Court vary the trust established under the Will dated 24 September 1982 of Edward Alexander Ritchie (deceased) by varying the term of the trust from twenty (20) years from the date of death of the deceased to a period of thirty (30) days from the date of his death or such other date as the Court may deem appropriate.

That the Court issue directions pursuant to s. 96 Trusts Act 1973 concerning the management and administration of the trust assets.

The direction sought in the alternative order is to the effect that the trustees be permitted to lend $150,000 of the proceeds of sale of the real property to each of the five children of the testator on first mortgage security at the rate applying from time to time to advances of that kind by the National Australia Bank Ltd.

[6] Sections 95 and 96 of the Trusts Act, so far as they are relevant, provide:

95 Power of court to authorise variations of trust

(1) Where property, whether real or personal, is held on trusts arising, whether before or after the commencement of this Act, under any instrument creating the trust, the court may if it thinks fit by order approve on behalf of -

(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting; or

(b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class (as the case may be) if the said date had fallen or the said event had happened at the date of the application to the court; or

(d) any person in respect of any discretionary interest of the person under protective trusts where the interest of the principal beneficiary has not failed or determined;

any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts.

(a) in the case of an unascertained person whose entitlement is dependent on a future event which the court is satisfied is unlikely to occur; or

(b) where the court approves of an arrangement on behalf of a person referred to in subsection (1)(d):

the court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.

96 Right of trustee to apply to court for directions

(1) Any trustee may apply upon a written statement of facts to the court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

[7] The reason for the application is that the class of beneficiaries will not close until 2022 if any of the five children of the testator have further children before then. Each has children now: Jeffrey, two of full age and one minor; Peter, two of full age; John, two of full age; Kathryn, two of full age; and Douglas, two minors. Each child of the testator asserts that he or she will have no further children. John and Douglas say it is impossible by reason of surgical operations they have undergone, and the others because they do not intend to have further children. The children of full age have been consulted about this application and raise no objection to it.

[8] The trustees find administration of the real property onerous, particularly the farm. There is, however, as was conceded on their behalf, nothing to prevent their acting under s. 32 of the Trusts Act to sell the real estate, so converting it into a less onerous form of property.

[9] The trustees were represented before me by Mr Michael Burnett of counsel and, in accordance with the proper practice in matters of this kind, they obtained an opinion concerning the interests of persons unborn and unconceived who could become beneficiaries of the trust from other counsel, Mr Daniel Morgan. Mr Morgan's helpful advice dated 25 January 2005 was before me. In it he referred of course to the relevant sections of the Trusts Act and to decisions of judges of this court in

Re Christmas' Settlement Trusts [1986] 1 Qd. R. 372 (McPherson J.), Re Blocksidge [1997] 1 Qd. R. 234 (Williams J.), and Re Estate of Bradbury deceased, no. 2822 of 1999, 2 July 1999 (Wilson J.). Mr Morgan's advice was that 'it would be open to the Court to conclude that it was an unlikely possibility that there would be any more children of the primary beneficiaries, and that it would be within the Court's discretion to look beyond whether or not the proposal was for the benefit of the unborn'. However, Mr Morgan added, adverting to McPherson J.'s conclusions in Re Christmas' Settlement Trusts, that he could not say that the proposal was 'directly for the benefit of the unborn children of the primary beneficiaries'. The reference to McPherson J.'s conclusions was to his Honour's not being persuaded by an argument for permitting an arrangement for varying a trust that would, it was said, enlarge the wealth of the parents of potential unborn beneficiaries affording the latter the advantage of 'a wealthier father and other compensations belonging to a more affluent family'. His Honour added that any benefit accruing to the child in those circumstances would be 'of a remote, indirect and insubstantial kind' (p. 378).

[10] There are three features of the case before me to which I should refer before proceeding. First, the evidence of the value of the estate is not shown to come from a qualified valuer. It appears to be an estimate made by the trustees and may well be correct but nonetheless it cannot be regarded as authoritative. Secondly, no opinion was sought in relation to the position of the children who have not yet reached their majority, as McPherson J. suggested should be done: Re Christmas' Settlement Trusts at pp. 374-375. Thirdly, it is not clear on the evidence before me whether the money to the credit of the estate in the investment account with the credit union is subject to the trust established in clause 6 of the will. In Jeffrey's affidavit it appears to be suggested that it is, but it may not be, as that trust applies only to real estate. The source of that sum is not clear. Those matters, although worthy of mention, will not affect the determination of this application.

[11] So far as persons unborn must be considered on this application, the application rests on the assertion that the evidence reveals that since each child of the testator has disavowed the intention - and in two cases, the ability - to have further children, the court could act under s. 95(1A)(a) and conclude that the birth of such children is unlikely to occur, even if the arrangements proposed would not be for their benefit. The difficulty with that proposition in the case of Jeffrey and Peter and Kathryn is that it rests on stated intentions by persons who, it appears, could have further children if their intentions changed with a change in their circumstances. I have no reason to doubt that those three have sworn truthfully and accurately as to their present states of mind, but such intentions are notoriously subject to change with changed circumstances - and, I should add, such events are notorious for occurring unexpectedly, even with no change of mind. The cases of John and Douglas appear to be on stronger ground on this aspect of the matter, but in the absence of expert evidence on their conditions I cannot reach the conclusion that even for them the advent of more children is unlikely. It should be remembered that to satisfy the requirement of s. 95(1A)(a) the court is required to reach a definite conclusion that the future event is unlikely to occur.

[12] The first order sought would clearly not be for the benefit of any as yet unborn child of the children of the testator, because the effect of the order would be to deprive that child of any relevant benefit under the will. Disadvantaged in the same way would be the three children not yet of full age.

[13] In the course of Mr Burnett's oral submissions he suggested that if the first order sought were not to be made consideration could be given to granting the relief sought on behalf of all the children of the testator at least to one or more of them. John is probably in the best position to seek such an order : both of his children are of full age and he claims to be unable to father more children. Would it not then be possible to give him the relief sought? I have already mentioned the difficulty presented by the lack of expert evidence in his case, but in addition there is the difficulty that it is possible that he and his children could die before the twenty-year term ends. If that were to happen any unborn children and children not now of full age of a deceased child of the testator could take a larger share of the fund than they would if either John survived to the end of the term or at least one of his children did. To distribute his share now would be to deprive such unborn children and the children not now of full age of other children of the testator of that possible advantage. It might be said that the demise of John and his children is unlikely, but bearing in mind the length of the term it seems to me I cannot definitely conclude that it is unlikely. But since the latter difficulty was not adverted to at the hearing, I shall be prepared to hear further argument on it, if required.

[14] For those reasons I am not persuaded that the first order sought should be made.

[15] I am not persuaded that the second order sought should be made in the form in which it is proposed at present because the lending regime is likely to be impractical and imprudent: default would require enforcement of remedies within the family circle with all of the difficulties likely to attend that circumstance. It may be possible, however, to devise an amended proposal that would eliminate that difficulty and safely preserve the trust property for the remainder of the twenty-year term.

[16] It follows from what I have said that, on what is at present before me, neither order should be made, but I shall be prepared to hear further submissions.

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