Ardmona Fruit Products Co-Operative Co Ltd v Federal Commissioner of Taxation [1952] HCA 40

86 C.L.R.] OF AUSTRALIA.

income was insufficient to pay the same. In the event of the income H. ©. oF A.

of the property charged proving insufficient, the inference is that the burden would fall upon the corpus without any right of reim- bursement out of future income; for the corpus would be the source to which in the circumstances the annuitant would be entitled to look for payment.

So far as appears from the evidence contained in the only affidavit which was before Virtue J. in the present case, the annuities were not personal liabilities of the testator ; they were payable primarily out of the income of the Jarramongup land and, in so far as that income was insufficient, out of that land itself. The income which the Jarramongup land, as distinguished from the grazing business conducted thereon, produced in the period covered by the annuity payments in question was obviously insufficient to meet those pay- ments. In fact there was no such income, unless there should be attributed to Jarramongup some part of a sum of £500 which the executors received from the Government as for agistment of stock. According to the strict rights of the annuitants, therefore, the annuity payments fell to be made wholly, or almost wholly, out of the capital of Jarramongup ; and if there is no countervailing con- sideration the reasoning of In re Darby; Russell v. MacGregor, (1), would lead to the conclusion that the testator should be taken to have intended that fact to determine the ultimate incidence of the payments as between his beneficiaries.

Counsel for the remaindermen supported a contrary contention by reference to the cases of Honywood v. Honywood (2); Inre Owen ; Slater v. Owen (3), and In re Shee; Taylor v. Stoger (4). These cases show that where the life tenant under a residuary estate accepts his life tenancy, and amongst the assets there is property involving the estate in a liability for current outgoings such as interest or rent, the life tenant is bound, as between himself and the remainder- man, to keep down those outgoings out of the whole of the income produced by the entire residue throughout the period of his life tenancy. The principle gives effect to the presumed intention of the settlor as to the manner of ascertaining from time to time what the gift of income entitles the life tenant to receive ; it depends for its application upon the fact that the interests given are interests in the entirety of an aggregation of assets and must be accepted as a whole or rejected as a whole. It has to do with outgoings which the estate as a whole is liable to meet, but against which, by reason of their nature, the settlor must be taken to have intended