Application by Perpetual Trustee Company Ltd [2017] NSWSC 35

Supreme Court New South Wales

Medium Neutral Citation: Application by Perpetual Trustee Company Ltd [2017] NSWSC 35 Hearing dates: 3 February 2017 Decision date: 03 February 2017 Jurisdiction: Equity Before: Stevenson J Decision: Advice given that trustee justified in forming the opinion that if beneficiary of life estate surrenders her life interest in favour of the remaindermen that their interest will accelerate; that the class of remaindermen will then close and that the remainder of the estate should be distributed to the remaindermen alive at the date of surrender Catchwords: TRUSTS AND TRUSTEES; JUDICIAL ADVICE – s 63 of the Trustee Act 1925 (NSW) – where beneficiary of life interest wishes to surrender that interest in favour of remaindermen – whether interests of remaindermen are thereby accelerated – whether class of remaindermen be closed upon surrender of beneficiary's life interest – proper construction of the will Legislation Cited: Trustee Act 1925 (NSW) Category: Principal judgment Parties: Perpetual Trustee Company Limited (Plaintiff) Constance Marjorie Edgar (Interested Party) Representation: Counsel: P P O'Loughlin (Plaintiff) D C Price (Interested Party)

Solicitors: Perpetual Legal Services Pty Ltd (Plaintiff) Bilbie Dan Solicitors (Interested Party) File Number(s): SC 2016/328202

EX TEMPORE Judgment (REVISED) 1. These proceedings concern the estate of the late Flora Lesley Ibbott. The plaintiff, Perpetual Trustee Company Limited, is now the sole executor and trustee of her estate. 2. Mrs Ibbott left a will dated 28 April 1978. She died on 21 April 1990. 3. By her will, she left her estate to her daughter, Mrs Constance Marjorie Edgar, and "from and after" Constance's death to Constance's children if they survived her and attained the age of 25. 4. Constance has three children and they have each attained 25. I will refer to them as the grandchildren. 5. The effect of the will was that if any of Constance's children predeceased her and had children of their own, those children would take their parent's share. 6. Mrs Ibbott's estate is now valued in the order of $450,000. 7. Constance, who is now 66, wishes to surrender her life interest in favour of the grandchildren. There is no question that Constance is entitled to do this. 8. Perpetual seeks advice under s 63 of the Trustee Act 1925 (NSW) as to whether it would be justified in concluding that if Constance did surrender her life interest: 1. the interests of the grandchildren as "remaindermen" (sic) would be accelerated; 2. the class of "remaindermen" would close; and 3. the remainder should be distributed to the "remaindermen" alive at the date of surrender (that is, the grandchildren). 1. An issue arises as to whether the interests of the grandchildren have yet vested. Perpetual and Constance have received advice from counsel. Each is deeply experienced in this area. Both agree that the interests of the grandchildren are presently vested in interest, albeit subject to defeasance (for example, if they died before Constance) or to the value of their interest being reduced in the event that more grandchildren join the class (a fanciful possibility as Constance is now 66 and has sworn that she does not intend to adopt any children). 2. Both counsel also agree if Constance chose to disclaim her life interest, that would close the class of beneficiaries in remainder and accelerate their interests. 3. Counsel for Perpetual has nonetheless expressed some concern in an opinion to Perpetual about the effect, as a matter of construction, of the words "from and after" Constance's death. Counsel has raised the issue of whether those words bespoke an intention by Mrs Ibbott that the grandchildren not take an interest in possession until after Constance had died. 4. I see the force of that point. However, as a matter of construction, the words that Mrs Ibbott has used in the will suggest to me that she had not contemplated the possibility that Constance might wish to eschew her life interest in the estate for the benefit of the grandchildren and that Mrs Ibbott adopted the language "from and after" on the assumption that Constance would claim the benefit of her life interest in residue. I thus see the words "from and after" being, so far as concerns Constance, words of entitlement, not requirement. 5. It is true that if Constance surrenders her interest now; 1. she might have or adopt children, each of whom would then be excluded (but that is a fanciful possibility for the reasons I have mentioned above); and 2. any of her children might predecease her (and their children, Mrs Ibbott's great-grandchildren, including yet unborn, would be excluded). 1. The second is a theoretical possibility but it seems to me that I can conclude it is overwhelmingly probable, if not certain, that if Constance surrenders her interest now, the interests of such great-grandchildren will be attended to by their parent. 2. In those circumstances I am satisfied I should make orders to the effect of those sought. I make the following orders: 1. Pursuant to s 63 of the Trustee Act 1925 (NSW), I order that the plaintiff would be justified in concluding that the questions posed in par 1 of the Summons should be answered as follows: 1. If Constance Marjorie Edgar surrenders the life interest created by cl 6 of the will, are the interests of the class of remaindermen accelerated? Answer, yes. 2. If Constance Marjorie Edgar surrenders the life interest created by cl 6 of the will, does the class of remaindermen close? Answer, yes. 3. If the answer to questions (a) and (b) are in the affirmative, and conditional upon Constance Marjorie Edgar surrendering her life interest, is the plaintiff at liberty and bound to distribute the remainder interest to those remaindermen who are alive at the date of the surrender and have attained the age of 25 years, in equal shares? Answer, yes. 1. Order that the costs of the plaintiff and of the beneficiaries be paid out of the estate of the late Flora Lesley Ibbott on the indemnity basis.