Cock v Smith

9 CLR 773

COCK (PLAINTIFF)

AND HOWDEN (TRUSTEE OF COCK)

APPELLANTS;

SMITH AND OTHERS

RESPONDENTS. DEFENDANTS,

ON APPEAL FROM THE SUPREME COURT OF Truste-Discretionary trust- Exercise of discretion-Maintenance of one person

under two wills-Contribution - Trust estate entitled to interest in another trust

state-Right of action of beneficiary of first estate against trustees of second estate- Payments attributable to corpus or income.

J.M.S., who died in 1898, by his will devised and bequeathed all his real and personal property to trustees upon trust for sale and getting in with power indefinitely to postpone such sale and getting in. After setting out

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three specific devises the will continued :-" And as to £800 a year during the life of my daughter A.S. upon trust from time to time to apply the same or such part as my trustees may think fit for the personal maintenance and support or otherwise for the personal benefit of the said A.S. or to pay the same or such part as they shall think fit to her or any other person to be so applied without liability on the trustees' part to inquire into the application thereof or at the option of my trustees to pay the whole or such part to my executors to be applied as part of the residue and ultimate surplus hereinafter mentioned." Then followed a trust of an annuity of £500 for the benefit of another daughter and a legacy of £3,000, succeeded by the words and as to all the residue and ultimate surplus upon trust for," his son V.S. and his daughter L.S. " in equal shares absolutely." The testator appointed his son V.S., his daughter L.S. and W.A. his executors and trustees. L.S., who died in 1903, by her will, after making a specific bequest to her sister A.S., devised and bequeathed all her real, and the rest of her personal estate to her brother V.S. and W.A., whom she appointed her executors and trustees, upon trust for conversion, but directed that her trustees should not sell a certain house during the life of A.S. except with her consent, and that in the meantime they should permit A.S. to reside there. Subject to these trusts she directed that the trustees should stand possessed of the proceeds upon trust for investment, and should stand possessed of the residuary trust moneys and the investments representing them "upon trust after payment thereout of such sum or sums as they shall from time to time in their absolute and uncontrolled discretion think fit to apply in or towards the upkeep of the house before mentioned and the rates, taxes, insurance and other outgoings in respect thereof and in or towards the maintenance and personal support of my said sister during her life

to pay the residue of the income of the said trust premises to my nephew C. during his life, and after his death shall stand possessed of the said trust premises and the income thereof sub- ject to such payments aforesaid in trust for all the children of my said nephew who being sons," &. During the lifetime of L.S. the trustees of J.M.S. applied £400 a year out of the £800 to the maintenance of A.S., who during that time resided with L.S. at the before-mentioned house, all the household expenses being defrayed by L.S. After the death of L.S. the trustees of J.M.S. reduced this amount to £100 and the trustees of L.S. applied £700 a year out of the income of trust estate of L.S. towards the maintenance of A.S. The residuary estate of J.M.S. remained unconverted. An action was brought in the Supreme Court of Victoria by C. against the trustees of the estates of J.M.S. and L.S., alleging that the reduction from £400 to £100 a year was improper and unreasonable, and an unfair exercise of the powers or discretion of the trustees of J.M.S., and that the payments made by the trustees of J.M.S. in respect of the annuity of £800 had been made out of income and not out of capital whereby his interest in the estate of L.S. had been diminished, and asking for consequential relief. At the close of the plaintiff's case judgment was given for the defendants.

Held, by Griffith C.J. and O'Connor J. (Isaacs J. dissenting), (1) that C.

9 CLR 775

was entitled to bring the action against the trustees of both estates; and (Isaacs and Higgins JJ. dissenting) (2) that he was entitled to a declaration that for the purpose of determining the income of the estate of L.S. as between C. and his children it should be ascertained what sum would have been required at the death of L.S. to purchase an annuity of £800 during the life of A.S., that one-half of the interest at 5 per cent. per annum upon the sum so ascertained should be deducted in every year from the income of her estate, and that subject to such deduction one-half of the actual net income of the unconverted estate of J.M.S. should be deemed to be income of the estate of L.S. and payable to C. subject to all prior charges upon it; and (3) that on the evidence there had been no proper exercise of their discretion by the trustees of J.M.S. in respect of the annuity to A.S., and therefore that the plaintiff was entitled to a further declaration that the trustees of J.M.S. had been and still were bound in every year to exercise an independent indi- vidual discretion as well as their joint discretion as to how much of the £800 should be allowed for the maintenance of A.S. out of the estate of J.M.S., and that in the exercise of that discretion they were bound to have regard to the intention of their testator that the burden of that maintenance should fall equally upon V.S. and L.S., and to the respective rights of the plaintiff and his children under the will of L.S. and to the question what was a fair division of the burden of maintenance between the two estates.

Quare, per Griffith C.J. and O'Connor J., whether the equitable doctrine of contribution would not apply between the two estates in respect of the

Per Higgins J.-The plaintiff C. had no actionable grievance for which he Decision of the Supreme Court of Victoria (Hood J.) reversed.

APPEAL from the Supreme Court of Victoria.

John Matthew Smith, who died on 21st April 1898, by his will dated 11th March 1896 devised and bequeathed all his real and personal property to trustees-whore he also appointed his executors-viz., his son John Matthew Vincent Smith (hereinafter called Vincent Smith), his daughter Lucy Smith, and Harry Emmerton, solicitor, 'upon trust to sell and get in the same but with power to indefinitely postpone such sale and getting in and to dispose of the proceeds in the manner following." Then fol- lowed three specific gifts of realty expressed in these words :- 'As to my premises

part of Crown Allotment 11 of sec. 5 City of Melbourne

upon trust to pay the net income to my wife for her life

and as to my premises

9 CLR 776

known as Ludstone Chambers

upon trust for the said J. M. v. Smith absolutely

and as to my premises in Elizabeth Street

upon trust for the said Lucy Smith absolutely." The will then proceeded as follows << And as to £800 a year during the life of my daughter Alice Smith upon trust from time to time to apply the same or such part as my trustees may think fit for the personal maintenance and sup- port or otherwise for the personal benefit of the said Alice Smith or to pay the same or such part as they shall think fit to her or any other person to be SO applied without liability on the trustees' part to inquire into the application thereof or at the option of my trustees to pay the whole or any part to my executors to be applied as part of the residue and ultimate surplus hereinafter mentioned." Then followed a trust of an annuity of £500 a year for the benefit of another daughter, and a legacy of £3,000, succeeded by the words :-" And as to all the residue and ultimate surplus upon trust for the said J. M. v. Smith and Lucy Smith in equal shares absolutely." By a codicil the testator appointed William Aitken to be an additional trustee and executor of his will. Probate of the will was duly granted to the executors and executrix.

Lucy Smith died on 12th November 1903, and by her will, after a specific bequest to Alice Smith, she devised and be- queathed all her real and the rest of her personal estate to her brother J. M. v. Smith and William Aitken, upon trust for con- version, but directed that her trustees should not sell her house and land known as Castlefield or the furniture in it during the life of Alice Smith except with her consent, and that in the meantime they should permit Alice Smith to reside at Castlefield or with her consent let the property with or without furniture. Subject to these trusts, the testatrix directed that the trustees should stand possessed of the proceeds of conversion upon trusts for investment, and should stand possessed of the residuary trust moneys and the investments representing them "upon trust after payment thereout of such sum or sums as they shall from time to time in their absolute and uncontrolled discretion think fit to pay or apply in or towards the upkeep of my said Castlefield house and property and the rates taxes insurances and other outgoings

9 CLR 777

in respect thereof and in or towards the maintenance and per- sonal support of my said sister during her life and the payment of the said William Aitken of the annual sum hereinafter directed to be paid to him to pay the residue of the income of the said trust premises to my nephew Charles Matthew Germain Cock during his life and after his death shall stand possessed of the said trust premises and the income thereof subject to such pay- ments aforesaid in trust for all the children of my said nephew who being sons shall attain the age of 21 years or being daughters attain that age or marry under that age in equal shares and if there shall be but one such child the whole to be in trust for such one child." Failing such children there was a gift over to Vin- cent Smith. The will then contained the following declaration:-

And I declare that the rents profits and income actually received from and after my death from such part of my estate as shall for the time being remain unsold and unconverted shall after pay- ment thereout of all incidental expenses and outgoings be paid and applied to the person or persons and in the manner to whom and in which the income of the moneys produced by such sale and conversion would for the time being be payable or applicable under this my will if such sale and conversion had actually been made but no property not actually producing income which my trustees may in their discretion permit to remain unlet or unpro- ductive shall be treated as producing income or entitling any person to the receipt of income." By the will and by a codicil of 9th November 1903 the testatrix appointed Vincent Smith and William Aitken executors and trustees of her estate. Probate was granted to Aitken, Vincent Smith having renounced. Sub- sequently on 10th November 1904 Alfred John Noall was appointed a trustee of the estate of the testatrix.

Up to the death of Lucy Smith the trustees of J. M. Smith's estate appropriated only £400 a year out of the £800 for the maintenance of Alice Smith. After Lucy Smith's death, however, the sum of £100 a year only had been SO appropriated.

Cock being dissatisfied with the payment of only £100 a year by the trustees of J. M. Smith's estate towards the maintenance of Alice Smith, brought an action against the trustees of J. M.

9 CLR 778

Smith's estate, the trustees of Lucy Smith's estate, Alice Smith,

and his own infant children, in which he claimed :-

" 1. A declaration that the defendants (the executors and trustees of J. M. Smith's estate) have improperly unfairly and and unreasonably and in breach of their duties as executors and trustees of the testator's will made the reduction from the main. tenance of the defendant Alice Smith as hereinbefore set forth.

"2. An order that the amount necessary for the maintenance of the defendant Alice Smith or alternatively that at least £400 a year for such purpose should be borne by the testator's estate alone or alternatively by the estates of the testator and the said Lucy Smith proportionately according to their respective amounts and values.

"3. A declaration that the amounts paid and payable out of the testator's estate for the maintenance of the defendant Alice Smith ought to have been and ought hereafter to be borne and paid by and out of the corpus of the estate of the testator.

4. A declaration that all amounts received or to be received by the trustees of the will of Lucy Smith from the trustees of the will of the testator in respect of the said sum of £800 a year or any part thereof is income of the residuary estate of the said Lucy Smith and should be paid to the plaintiff in terms of her said will.

5. An injunction restraining the defendants William Aitken and Alfred John Noall at trustees of the will of Lucy Smith from doing any of the acts or things mentioned in par. 11 of the state- ment of claim." [This paragraph is set out in the judgment of Griffith C.J. hereunder.]

"6. All necessary accounts and inquiries. "7. Administration SO far as may be necessary for the purposes of the matters and things raised in this action of the estates of the testator and of the said Lucy Smith."

The action was tried before Hood J., and at the trial an appli- cation was made by the plaintiff for leave to add the trustees of the estate of Lucy Smith as plaintiffs, withdrawing all charges of fraud against them. At the close of the plaintiff's case the learned Judge found against the plaintiff on the merits, but allowed him to amend on the condition of payment of all the costs of and occasioned by the amendment.

9 CLR 779

From this judgment the plaintiff appealed to the High Court. After the appeal had been instituted the appellant assigned his estate, and by order of Higgins J., on 6th August 1909, the trustee of his assigned estate, John McAlister Howden, was joined as a co-appellant. Other facts and material portions of the plead- ings will be found in the judgments hereunder.

Duffy K.C., Mitchell K.C., and Hayes, for the appellant Cock. The plaintiff made out a case which needed answering. The plaintiff was entitled to bring this action against the trustees of J. M. Smith's estate. There is a duty between them and the representatives of Lucy Smith's estate as to the amount to be paid for the maintenance of Alice Smith. If the reduction of the allowance to AliceSmith had been made during the lifetime of Lucy Smith she might have brought an action against the trustees of J. M. Smith to compel them to exercise their discretion. After her death her trustees might bring the action, and on their refusal to do SO the plaintiff was entitled to bring it: Meldrum v. Scorer 1 Gandy v. Gandy 2. Where trustees have not exercised a discretion given in such terms as those in which the discretion is given to the trustees of J. M. Smith, or have exercised it impro- perly, the Court will interfere and exercise it for them: Gisborne V. Gisborne 3; In re Hodges; Davey v. Ward 4; Tabor V. Brooks 5 In re Roper's Trusts 6; Tempest v. Lord Camoys 7; In re Bryant Bryant v. Hickley 8; Feltham v. Turner 9 Stopford v. Lord Canterbury 10. That would not be SO if the discretion were absolute and uncontrolled, but it is SO in the case of a discretion such as that which is given to the trustees of J. M. Smith.

[HIGGINS J. referred to Simpson on Infants, 3rd ed., p. 250 In re Brittlebank; Coates v. Brittlebank 11.]

In this case the trustees of J. M. Smith have not exercised their discretion at all, for the exercise of a discretion by several trus- tees must be unanimous; In re Roth; Goldberger v. Roth 12, and

156 L.T., 471. 230 Ch. D., 57. 32 App. Cas., 300. 47 Ch. D., 754. 510 Ch. D., 273, at p. 277. 611 Ch. D., 272. 721 Ch. D., 571. 8(1894) 1 Ch. D., 324. 923 L.T., 345. 1011 Sim., 82. 1130 W.R., 99, at p. 100. 1274 L.T., 50.

9 CLR 780

Aitken never in fact consented to the reduction from £400 to

£100 In re Beloved Wilkes's Charity 1. If he is to have been held to have joined in exercising the discretion, he did SO for wrong reasons, and the Court will interfere. Apart from mala fides the Court will control a discretion which is not absolute if it has been exercised improperly in the sense of unfairly or unreasonably. There is a sufficient case made out to call upon the respondents to answer the charge of mala fides.

[GRIFFITH C.J. referred to Duke of Portland v. Topham 2.] Counsel referred to Godefroi on Trusts, 3rd ed., p. 334; Lewin on Trusts, 11th ed., p. 750.

[ISAACS J. referred to Train v. Clapperton 3.] If the trustees of J. M. Smith do not agree as to what portion of the £800 is to be appropriated to the maintenance of Alice Smith then the whole fund should be applied for that purpose: Windham v. Cooper 4. The £800 has been taken each year out of the income of the residuary estate of J. M. Smith, whereas it should have been taken out of corpus Bulwer v. Astley (5); In re Muffett Jones v. Mason 6. It is a necessary result from Cock v. Aitken 7 that this amount should be paid out of corpus. Wilson v. Turner 8: [Aldrich v. Cooper 9; and Deering V. Earl of Winchelsea 10 were also referred to.]

Mitchell K.C. (with him Starke), for the appellant Howden. Weigall K.C. and Guest, for the respondent Vincent Smith. The facts are consistent with a perfectly honest and bona fide exercise of the discretion, and the Court will not in such circum- stances interfere: Godefroi on Trusts, 3rd ed., p. 603 Strahan and Kenrick's Digest of Equity, 2nd ed., p. 106.

[ISAACS J. referred to Marquis Camden v. Murray 11; Read V. Patterson 12; Bound v. South Carolina Railway Co. 13; Colton v. Colton 14 Gower v. Mainwaring 15; In re Gadd; Eastwood v. Clark 16 Theobald on Wills, 7th ed., p. 462; Shir-

13 Mac. &G., 440. 2L.R. 5 Ch., 40. 3(1908) A.C., 342. 424 L.T., 793. 639 Ch. D., 534. 76 C.L.R., 290. 822 Ch. D., 521. 9Wh. &T.L.C., 6th ed., vol. II., p. 96. 101 Cox Ch., 318. 1116 Ch. D., 161, at p. 170. 126 Am. St. R., 877, at p. 885. 1350 Fed. Rep., 853. 14127 U.S., 300, at p. 320. 152 Ves., Sen., 86. 1623 Ch. D., 134.

9 CLR 781

ley v. Fisher (1); In re Smith; Smith v. Thompson (2); Under- hill on Trustees, 6th ed., p. 276.]

No neglect of their duty nor any wrongful exercise of their power by the trustees has been shown. A mistaken or foolish exercise of the discretion is not sufficient to justify the Court in interfering. The trustees of J. M. Smith have exercised their discretion as to the £800, for Aitken, although at first he thought £400 a year should be allowed to Alice Smith, at last consented to what the other trustees thought ought to be allowed. No case has ever been made that Aitken was under a mistake of law as to what he could do, that therefore he never really exercised his discretion, and therefore that there was never an exercise of discretion by the trustees of J. M. Smith. The question as to what is capital and income of Lucy Smith's estate is one between the trustees and the beneficiaries of that estate only, and does not concern the trustees of J. M. Smith. All the latter trustees are bound to do is to afford any information to the former trustees to enable them to determine what is capital and what is income: see Harbin v. Masterman (No.2)(3). The trustees of J.M. Smith, as between themselves and the parties interested, were at liberty to have recourse to any of their funds for the payment of the £800: Allhusen v. Whittell (4). The only person who could or can sue in respect of the discretionary trust in favour of Alice Smith is she herself.

Davis (with him Schutt), for the trustees of Lucy Smith's estate, referred to Lewin on Trusts, 11th ed., p. 407; Perpetual Executors and Trustees Association v. Simpson (5).

Woinarski, for the infant children of the appellant Cock. The £800 a year is an annuity payable out of income of the residue with a right in the trustees to resort to corpus Scholefield V. Redfern (6); Theobald on Wills, 7th ed., p. 641; Croly V. Weld (7); In re Grant, Walker v. Martineau (8); Gover on Capital and Income, p. 95; Bulwer v. Astley (9).

(6) 2 Drew &S., 173. (2) (1896) I Ch., 71.

(7) 3 DeG. M. &G., 993. (3) (1896) I Ch., 351.

(8) 52 L.J. Ch., 552. (4) L.R. 4 Eq, 295.

(9) 13 L.J. Ch., 329. (5) 27 A.L.T., 179.

9 CLR 782

[ISAACS J. referred to Carmichael v. Gee 1.

HIGGINS J. referred to Boughton v. Boughton 2.] There is no right in the beneficiaries to an apportionment In re Perkins; Brown v. Perkins 3; Ingpen's Executors and Administrutors, p 507.

Duffy K.C., in reply, referred to Oceanic Steam Navigation Co. v. Sutherberry 4; Wilson v. Turner 5.

[GRIFFITH C.J. referred to Fryer v. Buttar (6); In re Tyler Ex parte Official Receiver 7.

HIGGINS J. referred to Saunders v. Vautier 8; Wharton V. Masterman 9.]

Cur. adv. vult. The following judgments were read :-

GRIFFITH C.J. This is an action brought by the appellant Cock, who is entitled to a life interest under the will of Lucy Smith, against the trustees of her will, the trustees of the will of J. M. Smith, under which she took large benefits and the trusts of which are not yet fully satisfied, another beneficiary under both wills, and the persons entitled in remainder under Lucy Smith's will after the appellant's life estate, claiming a declara- tion of rights and consequent administration of both estates SO far as necessary.

J. M. Smith, who died on 21st April, 1898, by his will dated 11th March 1896, devised and bequeathed all his real and personal property to his son the respondent, J. M. v. Smith (whom I will speak of as Vincent), his daughter Lucy, and the respondent Emmerton, "upon trust to sell and get in the same but with power to indefinitely postpone such sale and getting in and to dispose of the proceeds in the manner following." Then followed three specific gifts of realty expressed in these words: " As to my premises

part of Crown allotment 11, of Section 5, City of Melbourne

upon trust to pay the net income to my wife

15 App. Cas., 588. 21 H.L.C., 406. 3(1907) 2 Ch., 596. 416 Ch. D., 236. 522 Ch. D., 521, at p. 525. 7(1907) 1 K.B., 865. 8Cr. &Ph., 240. 9(1895) A.C., 186, at p. 198.

9 CLR 783

for her life "And as to my premises known as Ludstone Chambers

upon trust for the said J. M. v. Smith absolutely :" " And as to my premises in Elizabeth Street upon trust for the said Lucy Smith absolutely." The will then proceeded as follows: " And as to £800 a year during the life of my daughter Alice Smith Upon trust from time to time to apply the same or such part as my trustees may think fit for the personal maintenance and support or otherwise for the personal benefit of the said Alice Smith or to pay the same or such part as they shall think fit to her or any other person to be SO applied without liability on the trustees' part to inquire into the applica- tion thereof or at the option of my trustees to pay the whole or such part to my executors to be applied as part of the residue and ultimate surplus hereinafter mentioned." Then followed a trust of an annuity of £500 a year for the benefit of another daughter and a legacy of £3,000, succeeded by the words " And as to all the residue and ultimate surplus upon trust for the said J. M. V. Smith and Lucy Smith in equal shares absolutely." By a codicil the testator appointed the respondent Aitken an additional trustee and executor of his will.

I pause here for a moment to consider the rights and interests of Vincent and Lucy under this will. All the estate not specifi- cally devised or bequeathed was notionally divided into three parts, each of which was indeterminate in amount; (1) So much as was required to satisfy the trust as to £800 a year; (2) So much as was required to satisfy the annuity of £500; (3) The residue after satisfying these two gifts. To this residue Vincent and Lucy were entitled in equal shares. They were also entitled to the usufruct of this residue, not as income of the testator's estate, but as fruits of their own property. And, as it was im- possible to ascertain what was the amount of this residue until provision had been made for the other two gifts, SO it was equally impossible to ascertain the amount of the usufruct. On the other hand, these gifts were payable out of the whole estate of the testator, corpus as well as income, until conversion. But the postponement of conversion could not affect the rights of Vincent and Lucy, which were vested at the testator's death. They were entitled to accounts of the estate, distinguishing between capital

9 CLR 784

and income. The estate not specifically given being thus divided

into three parts, no portion of any of them could be finally appropriated in satisfaction of another, although in favour of the beneficiaries of the annuities the residue might be temporarily drawn upon. It follows that no part of the real usufruct of Vincent's and Lucy's part of the estate could be appropriated in payment of these annuities. Mr. Mitchell contended that under the circumstances the £800 a year was payable out of corpus only, and that the whole of the income actually derived from the unconverted estate was payable to Vincent and Lucy. But this contention cannot be supported, since part of that income was derived from property which for the time being represented the gift for the benefit of Alice.

In principle the trustees were bound before distributing any part of the residuary estate to retain a sufficient amount to satisfy the annuities, and the real amount of the usufruct of the residuary estate could not be ascertained until this was done, since in theory all the successive payments had been taken out of the testator's estate before the residue was ascertained. But this amount, having been once taken out, could not be taken out again from the usufruct of what was left.

During Lucy's life the trust with respect to the sum of £800 a year was performed by allotting £400 for the benefit of Alice (which was paid to Lucy, with whom she lived and who provided for her) and the remaining £400 fell into the residuary estate as corpus, whether it had been in fact taken from corpus or income of the unconverted estate; and it was SO held by this Court in the case of Cock v. Aitken 1. It is alleged that it was in fact taken from income.

It was the duty of the trustees in each year to exercise their discretion with regard to this sum with a primary regard to Alice's necessities, and when they had exercised this discretion the part of the £800 not applied for her benefit fell back into the estate to become equally divisible between Vincent and Lucy. There were, therefore, three beneficiaries in respect of this annual sum of £800-Alice, Vincent, and Lucy-and each of them was entitled to insist upon a due execution of the trust. If, for

16. C.L.R., 290.

9 CLR 785

instance, in any year the trustees failed to exercise their joint H. C. OF discretion, either from disagreement or for any other reason, either of the beneficiaries could have asked the Court to substi- tute its own discretion. Suppose that, failing to agree, they had paid the £800 into a bank to abide the result of their future exercise of discretion. It is clear that in such a case the Court would execute the discretionary trust. No authority is needed to support this position. It was, indeed, suggested that any one of the beneficiaries invoking the aid of the Court must have shown a pecuniary loss to himself or herself, but that suggestion is manifestly untenable.

Lucy died on 12th November 1903. By her will, made on 6th April 1900, after a specific bequest to her sister Alice, she devised and bequeathed all her real and the rest of her personal estate to her brother Vincent and the respondent Aitken upon trusts for conversion, but directed that her trustees should not sell her house and land at Castlefield or the furniture in it during Alice's lifetime except with her consent, and that in the meantime they should permit Alice to reside at Castlefield, or with her consent let the property with or without the furniture. Subject to these trusts the testatrix directed that the trustees should stand pos- sessed of the proceeds of conversion upon trusts for investment, and should stand possessed of the residuary trust moneys and the investments representing them "upon trust after payment there- out of such sum or sums as they shall from time to time in their absolute and uncontrolled discretion think fit to pay or apply in or towards the upkeep of my said Castlefield house and property and the rates taxes insurance and other outgoings in respect thereof and in or towards the maintenance and personal support of my said sister during her life and the payment to the said William Aitken of the annual sum hereinafter directed to be paid to him to pay the residue of the income of the said trust premises to my nephew Charles Matthew Germain Cock' " (the appellant) during his life and after his death shall stand possessed of the said trust premises and the income thereof subject to such pay- ments aforesaid in trust for all the children of my said nephew who being sons shall attain the age of twenty-one years or being daughters attain that age or marry under that age in equal shares

9 CLR 786

and if there shall be but one such child the whole to be in trust

for such one child."

The will also contained the following declaration :- And I declare that the rents profits and income actually received from and after my death from such part of my estate as shall for the time being remain unsold and unconverted shall after payment thereout of all incidental expenses and outgoings be paid and applied to the person or persons and in the manner to whom and in which the income of the moneys produced by such sale and conversion would for the time being be payable or applicable under this my will if such sale and conversion had actually been made but no property not actually producing income or which my trustees may in their discretion permit to remain unlet or unproductive shall be treated as producing income OF entitling any person to the receipt of income."

During Lucy's life it was practically immaterial, except per- liaps for purposes of income tax, to distinguish whether payments made to her by the trustees of her father's will were corpus or income of her own property. But after her death it became very material, as between the plaintiff and his children, to distinguish betweeen capital and income with regard to any moneys received by her trustees from J. M. Smith's estate. And, since the plain- tiff was only entitled to the residuary income of Lucy's estate, it was of importance to him to ascertain its amount, and to see that no undue deductions were made from it. It was consequently necessary, as between the tenant for life and those entitled to remainder, to ascertain what part of the moneys received by Lucy's trustees from J. M. Smith's trustees in any year was to be regarded as income of her property and what part as corpus.

It is a well recognized jurisdiction of the Court to adjust the burden of an annuity as between tenant for life and remainder- man. See, for instance, the cases of Allhusen v. Whittell 1; and In re Perkins; Brown v. Perkins (2). And in my opinion the appellant is entitled to have that question determined. In each year a sum not exceeding £800 was to be taken out of J.M. Smith's estate. If it were taken out of the income yielded by the unconverted estate, which estate, subject to the provision for

1L.R. 4 Eq., 295. 2) (1907) 2 Ch., 596.

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the £800 and £500 a year, belonged to Vincent and Lucy in equal shares, the amount of the money paid to Lucy's trustees as income was de facto diminished to the extent of £400, while if it were taken out of corpus there was no diminution. The case of Harbin V. Masterman (No. 2) 1 establishes the rule that residuary legatees are entitled to a division of the residuary estate if suffi- cient provision has been made for securing payment of annuities charged upon it. And although, where there is a discretionary trust for conversion, one of several residuary legatees cannot insist upon an immediate conversion and a setting apart of a sufficient fund to answer the annuities, yet, as the Court for the purpose of dealing with the rights of parties having successive interests will not allow a postponement of conversion to affect their substan- tive rights, I think that for the purpose of adjusting such rights the Court can deal with them on the footing of a sufficient fund having been set aside. I think, therefore, that the appellant was entitled as between himself and his children to insist that the incidence of the burden of each sum SO withdrawn from the estate of J. M. Smith should be divided between his children and himself.

If we discard irrelevant facts from consideration, the posi- tion, SO far as regards the plaintiff's rights, is in principle the same as if J. M. Smith's will had merely contained the discre- tionary trust as to the £800 a year with a gift of all the residue of his estate to Lucy, and Lucy had died a day after the testator leaving a will in its actual form. The circumstances that there were specific devises and bequests, that there was also a gift of an annuity of £500 a year, that the residue was to be divided between Lucy and Vincent, and that Lucy survived the testator for some years, are all equally irrelevant for this purpose.

If the testator's estate had been converted immediately after his death, it is clear, on the authority of Harbin v. Masterman (No. 2) (1), that Vincent and Lucy would have been entitled to have the residue handed over to them after making sufficient provision for the £800 a year, and the income of Lucy's share of that residue would have been income to which the plaintiff is entitled under her will, subject, of course, to the trust in favour of Alice.

1(1896) 1 Ch., 351.

9 CLR 788

Delay in actual conversion makes no difference as to their sub-

stantative rights.

The case of In re Perkins; Brown v. Perkins 1, shows how an apportionment may be made between tenant for life and remainderman in the case of an annuity charged upon a whole estate the residue of which is given for successive interests. In that case the annuity was not created by the will but was a debt secured by covenant. So in this case the annuity is not created by Lucy's will, but is a charge imposed upon property which is only given to her subject to the charge.

The principle upon which such an apportionment is made is that each sum paid as an instalment of the annuity is regarded as being in reality made up partly of a smaller sum which has been earning income, and partly of the income SO earned.

I take leave, however, to express a doubt whether the actual declaration made by Swinfen Eady J. in In re Perkins; Brown V. Perkins (1) was quite fair to the tenant for life. The effect of it was that in respect of the first year's annuity one year's interest was charged to her, two year's interest in respect of the second, and SO on, until after twenty years, if the annuity were SO long payable, 371 per cent. of the annuity would come out of income, which would consequently be reduced from year to year. A fairer method, I think, would have been to make an equal deduction in each year. (See In re Dawson Arathoon v. Dawson 2.)

I should add that I do not think that the declaration in Lucy's will as to income or non-income-bearing property has any effect upon the application of these principles.

It follows from what I have said that, as between the plaintiff and his children, the only extent to which the usufruct of Lucy's half share of J. M. Smith's unconverted estate could be reduced in respect of the £800 would be her half share of the interest on a fund sufficient to provide the £800 a year for Alice's life. And, having regard to the decision in Cock v. Aitken 3, I think that it is important to ascertain what sums of £800 were in fact taken from the income and what from the corpus of the uncon- verted estate of the testator.

It follows from that decision that the whole £800 was in each

1(1907) 2 Ch., 596. 2(1906) 2 Ch., 211. 36 C.L.R., 290.

9 CLR 789

year to be disposed of either by way of payments for Alice's maintenance or as an accretion to the corpus of the testator's estate. If, therefore, it was in fact taken from income the amount paid to Lucy's trustees as income of her share of J. M. Smith's estate was effectively reduced by £400, irrespective of the amount actually paid for Alice's maintenance. If, on the other hand, it was taken wholly or in part from corpus, the amount paid to Lucy's trustees as income of her share suffered no actual diminu- tion to the extent to which the £800 was SO taken. But, as he was in either event equally liable to bear his share of the burden of £800, the same amount should be deducted from the income of Lucy's estate as between him and his children, whether the £800 was in fact taken from corpus or income of the unconverted estate.

For these reasons I think that the plaintiff was entitled in a suit instituted against the proper parties to an account of the income of the unconverted estate of J. M. Smith and of the amounts from time to time taken from that income and applied to the trusts of the £800 a year. He was also entitled to a declaration that for the purpose of determining the income of Lucy's estate as between himself and his children it should be ascertained what sum would have been required at her death to purchase an annuity of £800 a year for Alice's life, and that one- half of the interest upon the sum SO ascertained, calculated at 5 per cent. simple interest from her death, should be deemed to be deducted in every year from the income of her estate, and that, subject to such deduction, one-half of the actual net income of the unconverted estate of J. M. Smith should be deemed to be income of Lucy's estate and payable to the plaintiff, subject, of course, to all prior charges upon it. For this purpose an inquiry would be necessary.

It is said that there is no precedent for such a declaration. Perhaps not; but, as was said of very similar relief in Harbin V. Masterman (No. 2) 1, it is common sense, and is merely an application of recognized doctrines of the Court to new circum- stances: see Fletcher v. Stevenson 2.

In such an action the trustees of Lucy's estate and the plain-

1(1896) 1 Ch., 351. 23 Ha., 360, at p. 371.

9 CLR 790

tiff"s children would, of course, be necessary parties. And for

the purpose of ascertaining the actual income of J. M. Smith's unconverted estate and the sum to be notionally set apart from his estate, accounts and inquiries would be necessary, which could not be taken or made in the absence of the trustees of his estate, who would therefore be also proper parties. The costs of such a suit should be borne by Lucy's estate, since the necessity for it arises from the terms of her will.

So far from this declaration being inconsistent with the judg- ment in Cock v. Aitken 1 (with which, if I may say SO, I entirely agree), it is based upon that judgment.

Hitherto I have dealt only with the plaintiff's rights as appear- ing upon the construction of the two wills, which is a matter of law. I pass now to consider another branch of the case which depends in part upon questions of fact.

Up to Lucy's death, as already said, £400 a year only had been appropriated out of the £800 for Alice's maintenance. Whatever sum was SO taken, the burden fell equally upon Vincent and Lucy, for property, whether corpus or income, which would other- wise have been divisible between them was reduced by that amount, while the unappropriated residue of the £800 fell into residue and was equally divisible between them.

Since Lucy's death, however, the sum of £100 only has been SO allotted. It has been always assumed that the total amount that ought to be allotted for Alice's maintenance, including the cost of keeping up Castlefield, is £800 a year, and the balance of £700 a year has been paid by the trustees of Lucy's will from the income of her estate, SO reducing the plaintiff's income by that amount.

At this stage it will be convenient again to pause to consider the respective rights and obligations of the parties with regard to the trust for £800 a year in J. M. Smith's will as affected by the alterations in the circumstances caused by Lucy's death. Her trustees succeeded to her rights, and were entitled, as she was, to insist upon a due exercise of the trust as to the £800 per annum to be taken from J. M. Smith's estate. But the question was no longer one of mere academic importance, since the benefit which the plaintiff, whose interests they were bound to regard, would

16 C.L.R., 290.

9 CLR 791

gain under Lucy's will would largely depend upon the manner in which the discretion was exercised. It is suggested that, as the trustees of her will might allow any sum they thought fit for the benefit of Alice, the plaintiff must be content with their action whatever it might be. But they were bound in the exercise of their discretion to take all the facts into consideration, including Alice's means of support from other sources, which could not be known until it was ascertained how J. M. Smith's trustees had exercised, or were about to exercise, their own discretion. One important change in circumstances brought about by Lucy's death and her will was that, whereas before her death she had voluntarily charged herself with the task of providing a residence for Alice and maintaining her, receiving a contribution of £400 a year from J. M. Smith's estate, after her death she charged her trustees with the duty of providing a residence for Alice and making such future payments for her maintenance as they might think fit. The intention of the testator J. M. Smith that the burden of Alice's maintenance should fall equally upon Vincent and Lucy was not altered, although it was in the power of the trustees to disregard it. But it was a matter which they were bound to take into consideration with the other facts.

Again, each of the three beneficiaries of the £800 was entitled, as before Lucy's death, to insist on the due execution of that trust. But what had been a mere formal right on Lucy's part became in the hands of her trustees a right coupled with a duty (scil, to regard the interests of all the beneficiaries under her will).

It was no longer immaterial, as it had been as between Lucy and Vincent, to determine how the burden should fall, but it became material to see that no undue burden was imposed on either the tenant for life or those entitled in remainder under her will. And another important change in circumstances was occasioned by Lucy's death. Up to that time the primary duty of the trustees of J. M. Smith's will was to have regard to the interests of Alice. When they had done SO, any benefit which followed to Lucy and Vincent was merely incidental to the due execution of the trust, and accrued equally to both. But after her death Vincent had a direct pecuniary interest in reducing the

9 CLR 792

allotment from J. M. Smith's estate, since any deficiency would probably be made up from Lucy's estate, while any benefit which he gained by a reduction would in that event be accompanied by a very much greater immediate loss to the plaintiff. In the events that happened he gained £150 a year (half of the reduc- tion from £400 to £100), while the plaintiff suffered a reduction of his income to the extent of £300. Such a change in circum- stances was, perhaps, not contemplated by the testator.

It is suggested that trustees ought to have sole regard to their own beneficiaries, and to endeavour to do their best for them regardless of the rights of others. Or, to put it in another way, trustees on whom a discretion is conferred for a particular pur- pose find themselves placed by circumstances not contemplated by the creator of the trust in a position in which they can confer a large pecuniary benefit upon one of themselves at the expense of a pecuniary loss of double the amount to another person, to whom one of the trustees owes a fiduciary duty. We are asked to say that, under such circumstances, the trustees may act on the " good old rule, the wiser plan."

If this is the doctrine of the Court of Chancery, I should be disposed to agree with James V.C. (when he was asked to strain a doctrine of the Court SO as to work a fraud), to wish, if the argument were sound, that there was a Court of Equity for the purpose of correcting the dealings of the Court of Chancery. But

I do not think that it is the doctrine of the Court of Chancery. Honesty and fair dealing are the basis of equitable doctrines. (Cf. In re Tyler; Ex parte Official Receiver 1 ). I think that the real question to be decided in such a case is what is honest and fair. Even if the ordinary rules of honesty and fair play cannot be invoked, I think that the same result follows from the consideration that trustees are subject to the control of the Court. Now, when the Court is called upon to exercise a dis- cretionary power it always takes into account the question of what is fair, and will not, when exercising such a power for trustees who have failed to exercise it, do anything which is manifestly unfair. One element to which the Court always has great regard is the fairness of distribution of the incidence of a

1(1907) 1 K.B., 865.

9 CLR 793

burden as between a tenant for life and remainderman. If a burden or benefit is to fall upon or accrue to an estate limited for successive interests the Court will see that it is fairly dis- tributed between them.

From this point of view the direct pecuniary interest of Vincent in reducing his own contribution became a very relevant fact, having regard to the well known rule formulated in Duke of Portland v. Topham 1. In that case Lord Westbury L.C. said: - " I think we must all feel that the settled principles of the law upon this subject must be upheld, namely, that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying into effect any bye or sinister object (I mean sinister in the sense of its being beyond the purpose and intent of the power) which he may desire to effect in the exer- cise of the power." Lord St. Leonards said 2 :- A party having a power like this must fairly and honestly execute it without having any ulterior object to be accomplished. He can- not carry into execution any indirect object, or acquire any benefit for himself, directly or indirectly." No doubt the appli- cation of the rule to the present case was to some extent qualified by the circumstance that Vincent was himself one of the per- sons charged with the exercise of a discretion the exercise of which might benefit him. But the extent of the qualification is,

I think, limited by the necessity for it. After Lucy's death Vincent was bound not to seek any pecuniary benefit to himself from the future exercise of his discretion.

Another important change in circumstances brought about by Lucy's death and the terms of her will was that Alice became entitled to an allowance for maintenance from two funds, the amount to be contributed from each being discretionary, and there being one trustee common to the two funds. In respect of both funds she was a quasi creditor. Under such

circumstances

I think that the equitable doctrine of contribution is applicable.

111 H.L.C., 32, at p. 54. 211 H.L.C., 32, at p. 55.

9 CLR 794

As Lord Redesdale said in Stirling v. Forrester 1 :- The

principle established in the case of Deering v. Lord Winchelsea 2 is universal, that the right and duty of contribution is founded in doctrines of equity; it does not depend upon contract. If several persons are indebted, and one makes the payment, the creditor is bound in conscience, if not by contract, to give to the party paying the debt all his remedies against the other debtors. The cases of average in equity rest upon the same principle. It would be against equity for the creditor to exact or receive pay- ment from one, and to permit, or by his conduct to cause, the other debtors to be exempt from payment. He is bound, seldom by contract, but always in conscience, as far as he is able, to put the party paying the debt upon the same footing with those who are equally bound. That was the principle of the decision in Deering v. Lord Winchelsea (2); and in that case there was no evidence of contract."

I do not know of any case in which this rule has been formally applied to a case like the present, but I cannot doubt that it applies, at least to the extent that the trustees of either fund were entitled to insist upon a bond fide exercise of discretion by the trustees of the other, and that any person beneficially inter- ested in either fund was entitled to call for such exercise by the trustees of both. In Gisborne v. Gisborne 3 this seems to have been assumed. In Lucas v. King 4 the Court, on the applica- tion of an infant beneficiary entitled to maintenance from two funds, exercised a very similar jurisdiction. I cannot doubt that if the trustees of both wills failed to exercise their discretion Alice could maintain a suit against both, and invoke the discre- tion of the Court, which would not be exercised in the absence of either. And it seems to me plain that the trustees of either fund, or any beneficiaries who would be prejudiced by a non-execution of the trusts of either, would be equally entitled to invoke the jurisdiction.

These being the respective rights and duties of the parties and the trustees, I proceed to consider the facts to which the law is to be applied.

13 Bl., 575, at p. 590. 22 Bos. &Pul., 270. 32 App. Cas., 300. 411 W.R., 818.

9 CLR 795

After Lucy's death half of the £700 unallotted in each year H. C. OF A of the £800 taken out of J. M. Smith's estate, and which was divided between Vincent and Lucy's trustees, was treated by the latter as income of her estate, and paid to the plaintiff as part of it, until the decision in Cock v. Aitken 1, where it was held that the sum formed part of the corpus and not of the income of Lucy's estate. The trustees have since called upon him to refund by instalments the amount SO overpaid.

Before any question had been raised as to the plaintiff's right to this sum of £350 a year he had instituted the present suit. The statement of claim, as amended on 14th August 1908 (after the decision in Cock v. Aitken (1) after setting out the wills and other formal matters, alleged the reduction of the sum pay - able to Alice from £400 to £100 a year and submitted (par. 9) 'that such reduction was improper and unreasonable and an unfair exercise of the powers of discretion given to them by that will by reason of the following facts and circumstances " with others not material to be mentioned :-

(a) The defendant John Matthew Vincent Smith as one of

the said executors and trustees is greatly benefited by the fact of such reduction, as he is under the said will entitled to one-half of the difference between £400 a year the amount previously paid and £100 a year the amount subsequently paid for the purposes aforesaid and his interest and duty therefore conflict. "(b) The defendant Harry Emmerton has since the death of

the testator always been and still is the solicitor of the defendant John Matthew Vincent Smith and his interest and duty also conflict and he made or concurred in making such deduction with the object and effect of benefiting his client to the extent aforesaid. (c) The defendant William Aitken protested against the

making of such deduction believing such reduction to be wrong and improper but allowed himself to be over- borne by his co-trustees and co-executors in respect of such deduction because he was in the minority and he

16 C.L.R., 290.

9 CLR 796

allowed and still allows such reduction to be made whilst still retaining such belief. "(d) The object and effect of such reduction was and is to

throw the additional burden in providing a sufficient sum for the maintenance of the defendant Alice Smith upon the estate of the said Lucy Smith and thereby to substantially reduce the amount of income payable to the plaintiff under the will of the said Lucy Smith deceased." It then alleged in paragraphs 10 and 11 as follows:-

10. Since the death of the said Lucy Smith the surviving executors and trustees of the testator's will have treated and dealt with the said annual sum of £800 as income of the testator's estate when in fact it should have been treated as corpus and all payments made by them in respect of such sum were made by them out of income instead of out of corpus and the defendants William Aitken and Alfred John Noall have permitted and are still permitting them SO tc do without protest or objection to the prejudice and detriment of the plaintiff whose interest under the will of the said Lucy Smith is thereby greatly diminished and in breach of their duty they have not taken and will not take any steps or proceedings against the surviving executors and trustees of the testator's will in respect thereof.

11. Alternatively the executors and trustees of the will of the said Lucy Smith have paid to the plaintiff (inter alia) £350 a year or thereabouts in respect of his interest under that will which amount they have received from the executors and trustees of the testator's will as income of the share to which the said Lucy Smith was entitled under the testator's will and they threaten to and will unless restrained by this Court make good the amount

SO paid to the plaintiff out of the future income of the residuary estate of Lucy Smith to which he is entitled."

The plaintiff claimed :- "1. A declaration that the defendants John Matthew Vincent Smith Harry Emmerton and William Aitken have improperly unfairly and unreasonably and in breach of their duties as executors and trustees of the testator's will made the reduction for the maintenance of the defendant Alice Smith as hereinbefore set forth.

9 CLR 797

3. A declaration that the amounts paid and payable out of the testator's estate for the maintenance of the defendant Alice Smith ought to have been and ought hereafter to be borne and paid by and out of the corpus of the estate of the testator.

5. An injunction restraining the defendants William Aitken and Alfred John Noall as trustees of the will of Lucy Smith from doing any of the acts or things mentioned in paragraph 11 of this statement of claim.

6. All necessary accounts and inquiries. 7. Administration SO far as may be necessary for the purposes of the matters and things raised on this action of the estates of the testator and of the said Lucy Smith."

The case came on for trial before Hood J. upon oral and documentary evidence. At the close of the plaintiff's case the learned Judge thought there was no case for the defendants to answer, and gave judgments for the defendants with costs, and this appeal is from his judgment.

So far as the plaintiff's claim rests upon the construction of the two wills it is admitted that this Court is in a position to give final judgment, but SO far as it rests upon extrinsic evidence all the Court can do, if it thinks that a prima facie case for relief has been made out, is to remit it to the Supreme Court for further inquiry.

The plaintiff offered evidence to prove that the trustees of J. M. Smith's will, and in particular the defendant Aitken who was a trustee of both wills, had never exercised any real discretion in

9 CLR 798

determining what amount should be allowed to Alice from the

£800 annually taken out of J. M. Smith's estate. I will after- wards deal with the question whether this point could be raised upon the pleadings.

It is not disputed that the discretion must be exercised jointly by all the trustees, SO that if any one of them fails to exercise his discretion, or is incompetent to exercise it, or wilfully or improperly exercises it for his own benefit, there is no valid exercise of the joint discretion at all. In the exercise of the dis- cretion the trustees were bound, first of all, to consider what amount, not exceeding £800, ought to be provided for Alice's benefit from all sources. This being determined, they had next to consider how much of that amount should be provided from J. M. Smith's estate. And, as the only other available source was Lucy's estate, the question was, in substance, how the burden of £800 should be divided between the two estates. The testator had, as already pointed out, expressed his intention that the burden should be equally borne by Vincent and Lucy. Even if Aitken had not been a trustee of both estates I think that the trustees of both were bound to consult each other. And, further, Vincent was bound to avoid all imputation of seeking his own personal interest. I am unwilling to think that he ever con- sciously did so, but the fact that he did benefit himself at the expense of the plaintiff is a circumstance to be considered. If he consciously did SO there was no valid exercise of the discretion by him or at all. Moreover, the trustees were bound to take all relevant facts into consideration. How far, then, has there been a real exercise of joint discretion applied to the relevant facts

It appeared upon the evidence for the plaintiff that after Lucy's death the plaintiff spoke to Aitken on the subject before probate of her will was granted (which was on 5th February 1904). Aitken said he was going to allow £700 or £750 a year out of her estate for Alice (including the upkeep of Castlefield), and only allow £100 a year out of J. M. Smith's estate. The plaintiff said

What £100 a year, do you think that fair 2" Aitken replied, No, I don't." Plaintiff said, "Can't you do anything ?" Aitken said "No I can't." Plaintiff said, "Did you object ?" and Aitken

9 CLR 799

replied, "They" (i.e., Vincent and Emmerton) "told me that is all H. they were going to allow, and that is all I know about it."

Shortly afterwards plaintiff told Aitken that he was advised that the trustees must be unanimous and that if he objected "they" (i.e., I suppose, the others) "could not do anything." In June Aitken told plaintiff that his solicitor thought he, Aitken, could not do anything in the matter.

At a later period in the same year plaintiff again approached Aitken on the subject and wished to discuss the situation, but Aitken said " Oh ! it is two to one and I've no say in it."

In April 1907 plaintiff spoke to the defendant Noall on the subject, who said he could not see how it was fair and would talk to Vincent about it. Later Noall said he had done SO, and that Vincent had said that he did not know anything about it but had left it all to Emmerton. This evidence, however, was probably not admissible, though it was not objected to.

Aitken, who was called as a witness for the plaintiff, gave evi- dence which tended to show that his co-trustee Emmerton, with whom he was not on speaking terms, had entertained no good will to Lucy in her lifetime.

He deposed that in February 1904 he had a conversation with Vincent, who said that counsel's opinion had been taken, and that Emmerton still thought that only £100 a year should be allowed, adding. " You know I am an interested party, and you are inter- ested, and Mr. Emmerton is neutral, and therefore his opinion should be followed," to which Aitken replied, " I thought this was a feasible way to look at it, and SO I gave way." He had thought that £400 a year from each estate would be a fair division.

Aitken also deposed that in May 1904, while he was sole trustee of Lucy's estate (in succession to Vincent, who had renounced), he asked his solicitor to see Emmerton and try if he could not get a further allowance for Alice from J. M. Smith's estate, and that his solicitor told him he had seen Emmerton and explained the whole thing and discussed it with him, and that he could not but advise us that Emmerton had a perfect right to exercise his discretion as he has done," and added, " After this I never tried to raise the allowance from J. M. Smith's estate as I saw it

9 CLR 800

was no use, and this is the reason why no further proceedings

were taken by me."

He further deposed that in November 1904 he and his co- trustee Noall were advised by their solicitor that they could do nothing.

At the close of the plaintiff's case the defendants asked for judgment on the ground that no case had been made calling for an answer, and Hood J. gave judgment for them. The learned Judge is reported to have said that, although Aitken allowed himself to be overborne in one sense, he was not convinced that he allowed himself to be overborne in the sense alleged in sub- par. (c) of par. 9 of the statement of claim. It is apparent from this observation that that paragraph was taken at the trial as alleging such a submission to what he supposed to be irresistible force as to show that he did not really exercise his discretion at all. The evidence which I have quoted was directed to this point and to nothing else. I am, therefore, of opinion that the state- ment of claim as it stands should be construed as alleging a failure on Aitken's part to exercise his discretion. But, even if that is not the proper construction, I think that it is a case for amend- ment to raise that issue. Upon the evidence as it stands, if not contradicted or explained by the defendants, I think the proper inference is that Aitken never concurred with his mind in the proposed division of the burden, but acted in the mistaken belief that he was bound by the majority, of whom one, Vincent, was an interested party. This is not a real exercise of discretion at all.

I think, further, upon the evidence as it stands, that the trustees never applied their minds collectively to all the circum- stances of the case, and especially to the question of what was fair as between the persons interested in the two estates or as between the plaintiff and Vincent, or to the fact that the testator intended that Vincent should always bear one-half of the burden of Alice's maintenance. In my opinion this was not a real exercise of discretion (In re Beloved Wilkes's Charity 1. The discretion must, therefore, if these are the facts, be exercised by the Court.

13 Mac. &G., 440.

9 CLR 801

With regard to amendment it would be a shocking thing if a beneficiary entitled to relief against his trustees should be finally excluded from it by a slip in pleading. It is at least arguable that the judgment, if it stands, would be a bar to any further suit for the relief claimed SO far as it relates to the past (see Henderson v. Henderson 1. And I am still as surprised as I was during the argument at the strenuous opposition made by the trustees to the plaintiff getting what he is entitled to, what- ever that may be.

Hood J. was also of opinion that the action was wrongly constituted. For reasons already given I think that it is properly constituted SO far as regards the matters of law arising upon the construction of the two wills.

With regard to the non-exercise of discretion by the trustees of J. M. Smith's will, it would be absurd to suggest that Aitken, as a trustee of Lucy's will, should sue himself and his co-trustees under J. M. Smith's will to compel a due execution of the trusts of that will by them and himself. His co-trustee, Noall, might, perhaps, have sued alone for this purpose, but he could not be expected to do SO under the circumstances. And whether he could or could not sue, the plaintiff is entitled to maintain the action for relief on this head, since that relief involves a con- sideration of the respective rights of himself and his children. Moreover, the action being properly brought for the first branch of relief, it would be absurd to require a second suit to be brought for further administration of the trusts of the same wills, in which the parties would be identical, merely for the sake of having a different plaintiff.

The relief asked for by the plaintiff is not in form that to which

I think he is entitled on either branch of the case. But that is no reason why he should not get the relief to which he is entitled.

In my judgment there should be a declaration to the effect already stated with an order for the necessary accounts and inquiries. And, having regard to the arguments which have been addressed to us in a contrary sense, and to the anomalous position of Vincent, whose interests and duty are in danger

13 Ha., 100, at p. 115.

9 CLR 802

of conflict, I think that the plaintiff is also entitled to a de-

claration that the trustees of J. M. Smith's estate are respec- tively bound in each year to exercise an independent individual discretion, as well as their joint discretion, as to how much of the £800 should be allowed for Alice's maintenance out of that estate, and in the exercise of that discretion to have regard to the intention of the testator as to the equal division of the burden of maintenance as between Vincent and Lucy, to the respective rights of the plaintiff and his children under Lucy's will, and to the question of what is a fair division of the burden of main- tenance between the two estates. With these declarations and orders the action should be remitted to the Supreme Court for further trial of the issues of fact, with liberty to all parties to amend as they may be advised.

The costs of all parties to the action, SO far as it relates to the first part of the case, should be borne by the capital of Lucy's estate, but taxation should be deferred until the general taxation of costs in the action.

As to the costs of the appeal, I think that the appellants and the infant respondents should have their costs out of the capital of Lucy's estate. The other respondents should have their costs out of the capital of their respective estates.

O'CONNOR J. This case involves the consideration of some well established principles of equity in relation to a somewhat unusual combination of facts. The learned Judge of first instance at the close of the plaintiff's case held that no ground for relief had been made out, and the whole of the facts have never been fully inquired into. The appellants now come to this Court not for a determination of rights on the facts in evidence, but for further inquiry on the ground that they have established their right to the equitable relief claimed. I have had the advantage of reading the judgment of the learned Chief Justice in which he has stated very fully the relevant portion of both wills, the rights in his opinion thereby conferred and the facts in

SO far as they are material. In respect of these matters it is un- necessary for me to say more than that I concur in and wish to adopt the statements and conclusions contained in that judgment.

9 CLR 803

I wish, however, to express my view with as little detail as possible on the wrong which the appellant alleges he has suffered and asks to have redressed, the principles on which the remedy is to be applied, and the form in which it should be demanded at the hands of the Court. The appellant Cock, whom I shall speak of as the plaintiff, is not a beneficiary under J. M. Smith's will. But under Lucy Smith's will he is entitled for life to the residue of income left after payment of certain provisions out of income. After his death the whole residue goes to his children. Of those payments out of income only two need be referred to-that for the upkeep of Castlefield and that for the maintenance and personal support of Alice Smith at Castlefield. The sums to be applied in each case are left to the absolute and uncontrolled discretion of the trustees. The amount of the plaintiff's income in each year depends materially upon the sums applied by the trustees in respect of these two provisions. In fixing the amount for Alice's maintenance and personal support in each year the trustees are bound to consider her financial position and particu- larly any other means of maintenance and support which may then be coming to her. The only outside source from which income comes to her is apparently J. M. Smith's will, the trustees of which have since Lucy's death paid towards her support £100 a year instead of £400 a year which they used to pay in Lucy's lifetime. The payments to Alice out of J. M. Smith's estate are made by the trustees of that estate in the exercise of an absolute discretion, conferred on them in substantially the same terms as those used in Lucy's will. They, too, are bound to consider Alice's needs in view of other sources of income. Being aware that income must come to her from Lucy's will under the pro- visions to which I have referred, they have in the alleged exercise of their discretion apportioned £100 towards her maintenance, assuming that the balance necessary will be provided by Lucy's trustees out of the income of Lucy's estate.

Turning now to the provision of J. M. Smith's will, by virtue of which the amount of £400 before and £100 since Lucy's death have been paid, it must, I think, be taken from the terms of that will and the actings of the parties concerned that an annual income of £800 was required for Alice's support, and it can hardly be

9 CLR 804

doubted that if Lucy in her lifetime had not given her a home

Alice might fairly have looked to the trustees for an allotment yearly of the whole £800. It was, however, evidently con- SMITH.

templated by the testator that Lucy and her brother Vincent would share equally the burden of Alice's main- tenance, accordingly any portion of the £800 not applied in any year for that purpose goes into residue where it is equally divided between them. In accordance with that view the brother and sister acted. Lucy gave Alice a home, £400 was applied by the trustees for her maintenance, and the remaining £400 went into residue benefitting Lucy and Vincent in equal shares. After Lucy's death Alice continued to live and be main- tained at Castlefield as before, her position was in no way altered, except that Lucy's will conferred upon her the right to hold for life the accommodation at Castlefield, which Lucy in her lifetime had of her own free will allowed her. It is true that Lucy, by her will, empowered her trustees in their discretion to apply a portion of income for Alice's maintenance, but if the equal appor- tionment of Alice's maintenance between brother and sister were to be continued after the sister's death between the brother and her estate, the allowance of £400 a year from J. M. Smith's estate was just as necessary after Lucy's death as before. Any reduc- tion in that amount imposed on Lucy's estate a larger share than she in her lifetime had borne of Alice's maintenance. However, J. M. Smith's trustees (I assume for the present that they all acted in the matter) determined to alter the incidence of the burden and reduced the allowance to £100. Two consequences necessarily followed. Vincent Smith, himself a trustee under his father's will, benefitted to the extent of £150 each year, the corpus of Lucy's estate gained the other £150, and an additional burden of £300 a year for Alice's maintenance was thrown on Lucy's estate; the last mentioned consequence reducing by that amount the residue of income in Lucy's estate to which the plaintiff is entitled. The trustees of Lucy's estate unfortunately took the view that J. M. Smith's trustees owed no duty to Lucy's estate, and that there was no remedy for this injury to their cestur que trust, and in spite of the plaintiff's strongly expressed wishes they took no action to ensure a fairer distribution of the

9 CLR 805

OF AUSTRALIA burden of Alice's maintenance between the estates. Indeed, the ill consequences to the plaintiff did not stop there. Half of the saving of £300 in J. M. Smith's estate coming from that estate as corpus was corpus also in Lucy's estate: but as it was in fact paid out of income in J. M. Smith's estate, the trustees of Lucy's estate treated it as income of her estate when it came to their hands, and as such paid it to the plaintiff. Then came the decision in Cock v. Aitken 1, which determined that these payments must be taken to have come out of corpus in J. M. Smith's estate and must be treated as corpus in Lucy's estate. Since then the trustees of Lucy's estate have ceased to pay these moneys to the plaintiff, have called upon him to refund the amounts previously paid, and are now systematically reducing his income by retaining portion of it each year to effect such refund. As between the plaintiff and his children, the question what is income and what is corpus in Lucy's estate is of course vitally important, and it is the clear duty of the trustees of that estate to insist upon and maintain that distinction for the benefit of the plaintiff's infant children. The greater part, if not the whole, of Lucy's estate consists of her interests in J. M. Smith's estate. The latter is as yet for the most part only notionally converted, but it is vested in the persons entitled according to their interests, the income, to adopt Mr. Hayes' expression, going to each person as fruit of the tree which is his. No sum has been as yet set aside to produce or ensure the production of the £800 per annum, or such portion of it as the trustees may think fit to apportion in each year towards Alice's maintenance. Whether on the true construction of the will the £800 is to come out of corpus or income, or both, it is clear that the portion of it unap- plied towards Alice's maintenance in each year falls into residue and becomes corpus. But the payments from J. M. Smith's to Lucy's trustees come in fact from income, and it is impossible, therefore, for Lucy's trustees to observe the necessary distinction in these moneys as they come to hand until J. M. Smith's trustees have ascertained what is income and what is corpus in the pro- ceeds of that estate. Until some settled plan has been adopted by which that can be ascertained, Lucy's trustees cannot put the

16 C.L.R., 290.

9 CLR 806

income which the plaintiff is entitled to enjoy as between himself

and his children on any certain or permanent basis. Such being the plaintiff's position under Lucy's will, and the relation of these estates to one another, I find it difficult to escape from the con- clusion that the plaintiff has suffered substantial injury by reason of the actings of the trustees in both estates. Whether he must submit without hope of remedy, or whether equity will give him relief, and, if so, whether in the form in which he has claimed it, or in some other and what other form, are matters which this Court is now called upon to determine. There are, it is con- tended, two irremovable obstacles in the plaintiff's way in these proceedings. The first is that no one but Alice can complain of maladministration of the trust for her annuity. The second is that the plaintiff cannot as cestur que trust be allowed in this litigation to stand in the position of Lucy's trustees. The validity of the first objection depends upon whether J. M. Smith's trustees owe any duty to the other estate. I shall first, therefore, consider the mutual duties and obligations of these two sets of trustees. In this connection certain central facts must be borne in mind. Alice, even though she may be admitted to be of sound mind, appears to have been by reason of her delicate state of health an object of special solicitude to both testators. Her care was treated by J. M. Smith's will as a family obligation to be equally shared by Vincent and Lucy. That position was adopted by them and acted on in the apportionment of the special fund for her maintenance. Eight hundred pounds seems to have been fixed by J. M. Smith's will as the amount reasonably necessary to be expended by all parties in Alice's maintenance. The trustees under both wills were under pre- cisely similar obligations. In fixing the amount of allowance they were bound to exercise their discretion after full inquiries into Alice's financial position and to consider what was fair under all the circumstances. Moreover, the cestuis que trustent under each will were entitled to the exercise of that discretion by their trustees, and to the concurrence of all their trustees in any course determined upon. In Lucy's lifetime three persons were interested in the proper administration of the £800-Alice, Vin- cent and Lucy. Any one of them might insist upon the trustees

9 CLR 807

performing their duty. It was urged that no cestur que trust could complain of a breach of trust who was not financially injured thereby. Neither reason nor authority, in my opinion, support that proposition. The apportionment of an unreasonably small sum to Alice, made without the concurrence of all the trustees or without consideration of the essential factors of the question to be determined, would be a breach of trust, and Lucy in her lifetime, even if Alice did not complain, could have insisted on an apportionment in accordance with the trustees' duty even though she might have benefitted by their breach of trust. After Lucy's death the trustees of her will were in the same position. Her estate in each year benefitted to the extent of one half of the unapplied portion of the £800. But if the trustees of J. M. Smith's estate fixed an amount for Alice's maintenance under circumstances which amounted to a breach of trust, it is to my mind clear that, having regard to Alice's position under J. M. Smith's will and her state of health, Lucy's trustees would be entitled to disavow any such unfair advantage to Lucy's estate, and claim that the fund should be administered in accordance with the terms of the trust. Similarly the trustees under Lucy's will were bound to keep before their minds the interests of all their cestuis que trustent. They were bound, in the interest of the plaintiff, to consider that an increase in the amount of their allowance for Alice's maintenance necessarily involved a substantial diminution of his income, and where that increase was rendered necessary by a reduction in the contribution for that purpose from J. M. Smith's estate, they were bound in the interests of their cestuis que trustent to question it if the reduced amount was fixed by J. M. Smith's trustees under circumstances amounting to a breach of trust. Such being the general principles which are in my opinion applicable to the state of facts presented by the plaintiff, his right to adequate relief in a Court of Equity depends upon his establishing a right to have the trusts of both wills in respect of Alice's maintenance administered with due regard to the interests of all parties con- cerned. In fixing the amount to be applied from their respective estates, each set of trustees purported to exercise the discretion conferred by the will. That will not prevent the Court from

9 CLR 808

inquiring whether there has been any real exercise of discretion,

and by all the trustees, and whether the exercise of discretion has been honest in the sense in which the Court uses that expression. In Colton v. Colton 1 Matthews J. concisely states the true principle. "In the case of Constabadie v. Constabadie 2 Vice-Chancellor Sir James Wigram said If the gift be subject to the discretion of another person, SO long as that per- son exercises a sound and honest discretion, I am not aware of any principle or any authority upon which the Court should deprive the party of that discretionary power. Where a proper and honest discretion is exercised, the legatee takes all that the testator gave or intended that he should have-that is, SO much as in the honest and reasonable exercise of that discretion he is entitled to. That is the measure of the legacy.' But it is always for the Court eventually to say, when called upon, whether the discretion has been either exercised at all, or exercised honestly and in good faith: In re Hodges Davey v. Ward 3. Plainly, if the trustee refuses altogether to exercise the discretion with which he is invested, the trust must not on that account be defeated, unless by its terms it is made dependent upon the will of the trustee himself." It must, I think, be conceded that the plaintiff's right to bring his claim into Court depends upon two conditions. He must, in the first place, show circumstances en- titling him to proceed against his own trustees-that is the trustees under Lucy's will. Secondly, in SO far as the trustees under J. M. Smith's estate are concerned, he must show a breach of trust by those trustees against the trustees of Lucy's estate. As to the first there is, I think, quite sufficient evidence. Lucy's trustees, deeming that they had no right to influence or to inter- fere with the exercise of discretion by the trustees of J. M. Smith's will, refused to recognize any duty to the plaintiff in that respect. Such refusal would not of itself be sufficient to entitle a cestur que trust to take proceedings in lieu of his trustee; but there are, it seems to me, special circumstances in the case which would justify the Court in permitting the plaintiff as cestui que trust to demand that the trustees shall discharge their

But Lucy Smith died in 1903 leaving a will. Under this will the plaintiff is entitled to the income of her residuary estate for life; but only after payment out of the income of such sums as the trustees shall from time to time in their "absolute and uncon- trolled discretion think fit" to apply in or towards the upkeep of Castlefield (Lucy's house, which Alice is to enjoy for her life), and its rates and outgoings, and in or towards the maintenance

9 CLR 836

and personal support of Alice during her life. The plaintiff's

children are to take the corpus of the residue after his death.

Aitken is the executor of the will of Lucy; and he and Noall are the trustees.

Before Lucy's death the trustees of the will of J. M. Smith applied for the maintenance, &., of Alice £400 per annum; since Lucy's death they have been applying only £100 per annum, because of the other provisions for the benefit of Alice contained in the will of Lucy. The result is that the trustees of Lucy, in the exercise of their discretion under her will, are applying more out of the income of her estate for the benefit of Alice than they would apply if the trustees of J. M. Smith kept up the £400 per annum; and the plaintiff's income is thereby diminished.

But what right has the plaintiff, a beneficiary under the will of Lucy, to bring an action to compel the trustees of the will of J. M. Smith to exercise their powers more liberally in favour of Alice ? Every plaintiff must show that he has an actual direct interest in the subject matter of his action; it is not enough to show that he has an interest in the indirect or remote conse- quences of what is being done. A. cannot compel B. to carry out his duty to C., even though A. be indirectly injured by B.'s failure in duty. A charitable institution may compel trustees to carry out a trust made directly in its favour but it cannot com- pel trustees, who hold funds for a liberal benefactor of the charity,

pay to that benefactor the funds. If the trustees of will A. and the trustees of will B. have each a discretion as to applying income to (say) a foundling hospital, and if the trustees of will A. resolve to reduce their allowance, the trustees of will B. have no right to complain. A fortiori, the beneficiaries under will B. have not any right to complain even if their trustees find them- selves constrained (as a matter of discretion-not by any compul- sion of law) to increase the allowance from will B., and thereby reduce the income of the beneficiaries.

The truth is the trustees of the will of J. M. Smith are not under any obligation, owe no duty, to the trustees of Lucy Smith, and much less to the plaintiff, SO far as regards the giving of a sufficient allowance to Alice. They are under no duty to Lucy's trustees; they are under a duty to Alice to exercise their discre-

9 CLR 837

tion. On the contrary, it is the actual interest of the estate of Lucy Smith that as little as possible of the £800 should be applied for the benefit of Alice; for the balance unapplied falls into residue, and as to one half goes to the estate of Lucy Smith. The trustees of the will of Lucy have no right to complain if what is being done enures for the benefit of their estate. The course taken by the trustees of J. M. Smith increases the corpus of the estate of Lucy for the benefit of the plaintiff's children, and the plaintiff enjoys the increase of income. But the plaintiff complains of the indirect and remote consequences-consequences which are not even necessary, but rest in the discretion of Aitken and Noall-consequences which do not hurt Alice, which do not hurt Lucy's estate, but which indirectly and remotely affect him- self by affecting the discretion of Lucy's trustees. The plaintiff is not fighting for his aunt, but for himself he is fighting against his children, and he complains that the trustees do not consider his interest, although he is not an object of the power, or even a beneficiary under the will.

But it is urged (statement of claim, paragraph 9 (d) ) that the effect of the reduction to £100 is to throw the additional burden in providing a sufficient sum for the maintenance of the de- fendant, Alice Smith, upon the estate of Lucy Smith, and thereby to substantially reduce the amount of income payable" under the will of Lucy. This language is inaccurate. There is no addi- tional burden thrown on the estate of Lucy; and the discretion of the trustees of Lucy remains "absolute and uncontrolled" as before. The allowance from Lucy's estate is not automatically increased, and it may or may not be increased at the discretion of Lucy's trustees. The true way of stating the facts is, I suppose, that the reduction of the allowance under the will of J. M. Smith since Lucy's death is a new fact which the trustees of Lucy's estate take into account when fixing their own allowance to Alice. But how can B.'s trustees, or B.'s beneficiaries, have any cause of action against trustees under will A. for acting in a way which influences or may influence the trustees of will B. in exercising their powers ? There is no nexus of obligation be- tween the two sets of trustees as to the allowance to Alice. Each set of trustees is accountable to its own beneficiaries and to no

9 CLR 838

others; and as to any injury resulting from any breach of trust

or misconduct the trustees are accountable to the beneficiary whom they injure, and to no others. They have to carry out the trusts of their own instrument, and have no other duties: Cowley V. Hurtslonge 1. If, as is alleged, enough income is not paid to Alice under the will of J. M. Smith, no one is entitled to bring an action except Alice.

A good test of what I have stated-that Alice has the sole right to complain of the insufficiency of the allowance--occurs to me. There is no doubt that Alice could release to the trustees of J. M. Smith all her claim to the allowance out of the £800: Quisque renuntiare potest juri pro se introducto. A benefi- ciary who is sane and adult can put an end to a special trust created of property or income in his favour-can " break the trust -and can compel the trustees to obey his own directions instead of the directions of the will Wharton v. Masterman 2. Now, suppose that Alice released her interest-all of it, what could the trustees of Lucy say ? The discretionary trust in favour of Alice contained in Lucy's will would remain, and would have to be carried out, although there would be no longer any prospect of any assistance from the estate of J. M. Smith and the trustees or beneficiaries of Lucy's Smith's will would have no ground of complaint. Such an instance shows clearly that those claiming under Lucy Smith's will have no locus standi to insist on the performance of the trust for maintenance contained in the will of J. M. Smith. The whole direction for maintenance can be put an end to without asking their leave.

I am quite unable to see what the equitable doctrine of contribution has to do with this case. Where a creditor calls on surety A. to pay the debt, surety A. is entitled to call on surety B. to contribute. But here there is no debt: here there is no creditor, no surety, no obligation to pay. Simply, under two independent wills, two distinct sets of trustees have two distinct powers which even differ in their terms and scope. The trustees have not incurred any debt to Alice-much less to the plaintiff.

I am quite ready to apply old principles to novel circumstances, but one must see to it that they fit. According to Lord Redes-

11 Dow., 361, at pp. 378-380. 2(1895) A.C. 186, at p. 198.

9 CLR 839

dale, this right of a surety to sue his co-surety is really a kind of short cut-the result of the privity of contract between the creditor and each surety. When the surety is sued by the creditor he can say to him :- Give me the benefit of your securities against the other securities; put me in your place." (Stirling v. Forrester 1 ). But here is no debt, only a dis- cretionary power. Alice is not suing either the plaintiff or Lucy's trustees and if she were, there is no common obligation, or, indeed, any obligation to pay-only the obligation to exercise a discretion. Alice could not, if she wished it even, transfer the benefit of this obligation to Lucy's trustees. I do not lay stress on the point that we have here the unusual position of a bene- ficiary in an estate suing the trustees of another estate. Usually the executors or the trustees represent all the interest in an estate as against strangers. But in this case Aitken is the executor of Lucy, and, as he is one of the trustees of the will of J. M. Smith, he cannot sue himself. The executor, the person who has to collect the assets for Lucy's estate, is the only neces- sary party in an action against the executors of another estate but here the beneficiaries must sue, or no one can sue. If, there- fore, Lucy's estate has any actionable grievance against the trustees of J. M. Smith, affecting the plaintiff directly, I am of opinion that the present plaintiff could bring an action in some- thing like the present form. But in the present case there is no actionable grievance. If the executors of Lucy were quite dis- tinct from the executors of J. M. Smith, there is no wrong of which they could complain. Even if there is damnum direct or indirect, immediate or remote, to the plaintiff, there is no injuria. My opinion is therefore that the plaintiff has no cause of action for any insufficiency in the allowance to Alice.

But I proceed now to consider the merits of the complaint. shall consider the merits as if the action were brought by Alice herself, relying on the facts and instances set out in paragraph 9 of the statement of claim.

It is alleged in paragraph 9 (a) that Vincent Smith is "greatly benefited" by the reduction from £400 to £100, "and that his interest and duty therefore conflict." He is benefited to the

13 BI., 575, at p. 590.

9 CLR 840

extent of £150 per annum in this very large estate, but Lucy Smith's estate is benefited to exactly the same extent, for he and Lucy are the residuary legatees. It is true that his interest and his duty conflict. But we are not dealing with a claim to have Vincent Smith removed from the trusteeship; and he has been placed by the testator in a position in which his duty as to the allowance must conflict with his interest as residuary legatee. The testator trusted the brother to do what is right for the sister, and the mere fact that there is a conflict of duty and interest, and that any saving in the allowance enures to his benefit as well as for the benefit of Lucy's estate, is not sufficient to establish that Vincent Smith, in consenting to the reduction, is not acting honestly within the limits of his discretion. The fact that Vin- cent is benefited by the exercise of discretion is, of course, evidence to be weighed; but the learned primary Judge has weighed it and found it insufficient to prove impropriety, and I agree with him. The words used in Portland v. Topham 1 are applicable to the case where a mere donee of a power indi- rectly departs from the objects and purposes of the power; they are not applicable to a case such as the present where the donee must necessarily be pecuniarily affected by the exercise of the power.

As for 9 (b), the charge against Emmerton, he is the solicitor for Vincent Smith, but there is no reasonable ground, SO far as the facts appear, for accusing him of concurring in the reduction with the object of benefiting Vincent Smith as his client.

The charge against Aitken in paragraph 9 (c) is the charge that has been most pressed because, as I think, of a quaint misunder- standing as to the duty of trustees. It is said that Aitken allowed himself to be "overborne" because he was in the minority but no joint trust could be carried out unless individual trustees allowed themselves to be "overborne." It seems that Aitken wanted to allow £400; Vincent Smith £200 per annum; and Emmerton nothing; and the three agreed to put the allow- ance at £100. As Vincent Smith put it to Aitken, 'I'm an interested party, and you are interested, and Mr. Emmerton is neutral; and therefore his opinion should be followed." Aitken

111 H.L.C., 32.

9 CLR 841

thought this was "a feasible way to look at it," and, as he says, he gave way." The truth is that all the trustees must concur in any step taken. The position of a trustee is like that of a Cabinet Minister. He must act with his colleagues, and take the responsibility of their joint acts, even when he disapproves; but if the matter of difference is SO serious that he cannot bring him- self to concur, he should retire. Under the Victorian Trusts Act 1896, sec. 5, Aitken could have retired without even coming to the Court or appointing a new trustee. The testator is entitled to have that course followed which meets with the consent of all his trustees-their joint consent-the one resultant of individual wills. It would be absurd to expect that the resultant joint will should coincide with the direction of each of the individual wills. In this case Aitken was consulted and consented-gave a grudging assent.

I confess that for some time I was under the impression that Emmerton, whose opinion had most weight in the decision of the trustees to give Alice only £100 per annum, was inexplicably stingy. Stinginess on behalf of his trust is of course no ground for interference with his exercise of discretion; there must be some actual fraud or impropriety. It is not what the Court thinks fit, but what the trustees "think fit," that settles the amount to be paid to Alice Re Boys 1. But although mere dissatisfaction on my part as to the allowance is nothing to the point, I must say, in justice to the trustees, that I have changed my impression. Mr. Aitken also thought that the allowance was insufficient; but I strongly suspect that in pressing for the £400 per annum for Alice from J. M. Smith's estate, Aitken did not fully realize the circumstances. " If Alice Smith had been with- out relations or friends," he says, " I would have allowed her the whole £800." That opinion was not shared by the other trustees, and is not confirmed by the facts. During the life of Lucy, Alice lived with her at Castlefield, which belonged to Lucy; but Alice had no right to be there and could legally be turned out by Lucy at any moment; and the trustees allowed Lucy £400 per annum for Alice. Treating this sum as a rough equivalent for residence and board, pocket money and conveniences at Castle-

141 Sol. J., 111.

9 CLR 842

field, Lucy found the other £400 which, it appears, were required

to keep Castlefield going. But on the death of Lucy the position was materially changed. Under Lucy's will, Alice had now a right to the use of Castlefield and the furniture; and, in addition, the trustees of Lucy were to apply SO much as they think fit in and towards the rents, outgoings and upkeep of Castlefield, and in and towards the maintenance and personal support of Alice. It does not appear that Mr. Aitken took into account the fact that the privilege of the residence and furniture was no longer to enter into the computation of the allowance or the fact that Lucy meant Alice to get more of her (Lucy's) property than she had been getting during Lucy's life. Emmerton's reason for reducing the allowance was, according to Aitkin, that there was an ample provision made under the will of Lucy. Under J. M. Smith's will the trustees could refuse to allow Alice anything, if they thought fit. Under Lucy's will the trustees have to allow Alice something. The learned primary Judge says that Emmerton thought that the real object of Lucy's will was to relieve her father's estate from the cost of the maintenance of Alice. This is a view which the trustees might honestly and fairly take, although Aitken never saw the matter in that light; and they were certainly not bound to take into consideration the interests of the plaintiff under an instrument with which they had nothing to do.

Pars. 9 (d), (e), (g) do not add anything material to the case. Par. 9 (d), indeed, boldly asserts that the "object" (presumably the object of the trustees of J. M. Smith), as well as the " effect " of the reduction is to throw additional burden on the estate of Lucy Smith and thereby to substantially reduce the plaintiff's income. If this means that the trustees' object is simply to injure the plaintiff by reducing his income, the suggestion is not supported by evidence, and is indeed absurd. If it means that the trustees are seeking to relieve their own estate M. Smith's-at the expense of Lucy's, then there is no wrong done. For a trustee is entitled-is often in duty bound-to be selfish for his trust estate. He holds property for his beneficiaries; and the right to be selfish is of the essence of property. Trustees having power to build may put up small tenements on their

9 CLR 843

block, even though thereby they depreciate the value of adjoining land held by other persons. Trustees have often, in the interest of their trust, to put a "blackmail" price on a strip of land which an adjoining owner is compelled to buy. Trustees holding by assignment a burdensome lease must, frequently, assign it over to a man of straw, even though thereby they injure the estate of the lessor. So far as the duties of these trustees are concerned, there is not the slightest ground for the assertion, SO often iterated in this case, that the trustees ought to do the fair thing" as between the two estates. Their duty is to do what is best for their own estate. There is nothing that the law recognizes as either dishonest or unfair in trustees saving their estate from as much expenditure as they can, and paying out only what they have to pay. The case of In re Perkins: Brown v. Perkins 1 is no authority to the contrary. One estate-not two-was there dealt with and the Court merely adjusted between tenant for life and remainderman the burden of a debt of the testator-the burden of a covenant for an annuity. From an ethical point of view it may be true that "property has its duties as well as its rights." But SO far as the Courts are concerned, there are no such duties, unless such duties as are expressly laid down, for instance, by Acts relating to rabbits or thistles. The Court has no power to add to these duties because it thinks that it knows what would be the proper thing to do.

Par. 9 (f) as to the defendant Noall being broker and agent of Vincent Smith, and as to his interest and duty therefore conflict- ing, has been rightly scouted in the Court below.

On such materials the plaintiff asks the Court to declare that the trustees of J. M. Smith have reduced the allowance for Alice improperly. It is not alleged that the discretion was not exer- cised at all, but that it was exercised improperly and in the breach of their duty as trustees. An attempt was made in this case to convince us that in pars. 4 and 10 of the statement of claim the plaintiff has made the case that no discretion was exercised. These paragraphs raise the case that the payments of the allowance have been made out of income instead of corpus before Lucy's death (par, 4), and after Lucy's death (par. 10); but

1(1907) 2 Ch., 569.

9 CLR 844

they raise these facts as matters of bookkeeping, and not as

pointed to the exercise of discretion. The trustees would obviously have allowed the same sum for Alice whether they resorted to corpus or to income. The whole case as to the exercise of discretion is contained in par. 9. This paragraph states that since the death of Lucy the trustees have reduced this allowance to £100 a year that the plaintiff "submits" (not " alleges ') the reduction was improper and unreasonable and an unfair exercise of the discretion " by reason of the following facts and instances" (a), (b), (c), (d), (e), (f), (g). I have no hesitation in treating the case as to the allowance being insufficient as confined to these seven facts and instances. It is clear that the burden of proving any corrupt or improper motive lies on the plaintiff, and that he has not discharged the burden.

It thus becomes almost immaterial to consider the precise limits of the power of the Court to interfere with trustees in the exercise of a discretionary power. But as the matter has been closely argued, I ought to say that, in my opinion, the law is substantially correct as laid down in Simpson on Infants, 3rd ed., p. 250; and that if the decision of Malins V.C. in In re Hodges Davey v. Ward 1 is to be regarded as asserting a right in the Court to substitute its discretion for the discretion of the trustees, on the mere ground that the Court would itself act differently, then that decision is contrary to equitable principles. Not what the Court "thinks fit," but what the trustees think fit" is to govern. So the will says, "such part as my trustees think fit." There might be cases SO glaring that the Court could say that the trustees could not be exercising their discretion honestly for the benefit of their beneficiaries; but there is no impropriety, such as the law recognizes, when the trustees seek to relieve their own estate if possible by leaving it to another estate to bear a greater share of the burden. The case has not arisen which could justify the Court in substituting its discretion for the discretion of the trustees.

I am of opinion that the learned Judge was perfectly justified in dismissing this action, SO far as regards this, the main, question.

But the plaintiff makes another complaint. He says that the

17 Ch. D., 754.

9 CLR 845

annual sum of £800 has been taken out of the income of the estate of J. M. Smith, and that it ought to have been taken out of the corpus. If (a) the plaintiff was entitled to the income of that estate, and if (b) the £800 ought to have been taken from the corpus, he might have just ground for his complaint. But, in the first place, I am strongly inclined to think the plaintiff is not entitled to this income, or to any part of it-that all that comes to the executor of Lucy from the estate of J.M. Smith, whether income or corpus of that estate, comes to Lucy's estate as corpus to be invested: and the plaintiff gets the income of such invest- ments as are made under her will. It appears that all the estate of J. M. Smith has been distributed except three mortgages- £800, £1,800, £40,527. These are held, no doubt, to meet the annuities of £800 and £500, amounting to £1,300 per annum and as the mortgages were properly taken, and are properly held, it is hard to see what right a tenant for life of Lucy's estate has to treat the interest on the mortgages as his income. I should not treat the interest on the mortgages as being fruit of the property of Vincent and Lucy, but as fruit of the testator's estate, which falls into the residue of that estate (subject to the payment of the annuities) by virtue of the fact that a "residue" includes all income and corpus, that is not otherwise given. But no argument has been addressed to us on this subject, and I do not like to pronounce on a subject not argued.

The question remains, has the plaintiff shown that the £800 per annum must be taken from the corpus ? In my opinion he has not. The trustees of J. M. Smith are entitled to resort to the whole estate not specifically given, including the income, for this annual sum; and there is no "residue and ultimate surplus until the annual sum has been provided. There are specific devises and annuities, and a legacy, and all the "residue and ultimate surplus," both capital and income, is given to Vincent Smith and to Lucy. The whole of the residuary gift is charged indifferently with the payment of the annuities, including the £800 per annum: Carmichael v. Gee 1. Nor can the trustees of the will of Lucy Smith compel the trustees of the will of J.M Smith to pay the £800 out of the corpus if the will of J. M. Smith

15 App. Cas., 588.

9 CLR 846

does not compel them to do SO. The secondary will cannot add

to the obligations of the trustees under the primary will. These trustees have to comply with the requirements of their own instrument, and of no other. Of course, under the primary will, it is the duty of the trustees to show their books, and to give all the information as to receipts and expenditure that they have. But they cannot be compelled to pay out of corpus and income, or compelled even to keep distinct accounts of corpus and income where their will does not make the distinction necessary.

As to the order proposed I do not think that the plaintiff was or is entitled to any account. He does not make any allegations in his claim which would justify the Court in ordering accounts. True, his prayer contains a prayer for "all necessary accounts and inquiries," but this was not pressed at the trial, and in any event it can only refer to accounts which are necessary for the objects of the action. There is no substantive relief to which the plaintiff is entitled, and for which the accounts would be neces- sary. I do not think that the plaintiff, or any of those claiming under the secondary will, can put the trustees of the primary will under any duties of accounting not imposed by the primary will.

Then it is proposed to ascertain the sum which would have been required at Lucy's death to purchase an annuity of £800 for the life of Alice, to calculate interest on that sum at 5 per cent., to charge half of the interest against Lucy's estate, and to pay the net balance to the plaintiff. The inquiry, as I understand it, is for the purposes of Lucy's estate only-to adjust accounts between the plaintiff and his children. But such an order is based on the assumption that it would have been the proper course for the trustees of J. M. Smith, on Lucy's death, to pur- chase such an annuity. In my opinion, not only was it not the proper course, but it would have been actually a breach of trust to do SO, without the consent of the parties interested-Alice, Vincent, and those claiming under Lucy. Alice could not be compelled to forego her charge on the whole remaining estate of J. M. Smith, corpus or income, for the covenant of any company or person, however wealthy. Where an annuity is charged upon property the Court will leave sufficient property to meet the

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annuity in all possible contingencies; but it never has distributed H. C. all the property and substituted a mere covenant. Nor can Vincent, or those claiming under Lucy, be compelled to submit to the deduction of the purchase money from the estate. They may prefer to let the will be carried out in due course, especially if the interest accruing on the mortgages in J. M. Smith's estate is above the rate to be obtained on Government securities. For these reasons, amongst others-I do not wish to over-elaborate- am of opinion that if the plaintiff claimed such an inquiry, even in an action as to Lucy's will, he would not be entitled to get it. Indeed, it is as yet doubtful whether it will benefit him -whether it will not injure him. In my opinion the learned primary Judge was perfectly right in dismissing the action, and the appeal should be dismissed.

GRIFFITH C.J. With regard to the reference made by my brother Higgins to deciding points not argued I think it right to say that I listened attentively to a very careful argument by Mr. Mitchell, of which I made an unusually full note (for me), on the question of the construction of the will of J. M. Smith. My note (13th September) is as follows :-" Appellant is entitled to income of half the residuary estate of J. M. Smith. The income of the residuary estate ought not to be diminished by the deduction of the £800 a year. Lucy is c. q. tr. of half of J. M.'s residuary estate and (entitled) to income of it.

The £800 is a charge on corpus and not on income. No refer- ence to income in the will.

A sufficient sum should be set apart from corpus to answer the £800. Half the income of the remainder should be paid to Lucy Smith's estate as income.

Bulwer v. Astley (1); In re Muffett Jones v. Mason (2). Appellants only liable for half the interest on such a sum." On two subsequent occasions I invited and obtained further argument from Mr. Mitchell on the point, which was also dis- cussed by Mr. Guest and Mr. Woinarski on the other side, who referred, amongst other cases, to Allhusen v. Whittell (3), and In re Perkins Brown v. Perkins (4).

(3) L.R. 4 Eq., 295. (2) 39 Ch. D., 534.

(4) (1907) 2 Ch., 596.

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All the points on which I have expressed an opinion were fully discussed in my hearing, and I have based my judgment entirely upon the arguments addressed to the Court.

Appeal allowed. Judgment appealed from discharged

and following judgment substituted :- Declare that for the purpose of determining the income oj Lucy Smith's estate as between the plaintiff Coel and his children it should be ascertained what sum would have been required at the death of Lucy Smith to purchase an annuity of £800 during the life of Alice Smith, that one half of the interest at 5 per cent. per annum upon the sum

SQ ascertained should be deducted, in every year from the income of her estate, and that subject to such deduction one half of the actual net income of the unconverted or undistributed estate of J. M. Smith should be deemed to be income of the estate of Lucy-Smith as if no payment in respect of such annuity had been actually made out of the income of the estate of J. M. Smith, and should be payable to the plaintiff subject to all prior charges upon it. Necessary accounts and inquiries for this purpose. Declare that the trustees of J. M. Smith's estate were and are respectively bound in every year to exercise an independent individual discretion as well as their joint discretion as to how much of the £800 should be allowed for the maintenance of Alice Smith out of that estate and in the exercise of that discretion to have regard to the intention of their testator that the burden of that maintenance should fall equally upon J. M. V. Smith and Lucy Smith and to the respective rights of the plaintiff and his children under the will of Lucy Smith and to the question what is a fair division of the burden of maintenance between the two estates. Costs of all parties SO far as the action relates to the first declaration and

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consequential accounts and inquiries to be paid H. out of the capital of Lucy Smith's estate. Infants' costs as between solicitor and client. Taxation to be deferred until general taxation of costs of the action. Cause remitted to the Supreme Court for further trial of issues of fact and decision of other questions of costs. Liberty to all parties to amend as they may be advised. Costs of appellants and infant respondents of this appeal to be paid out of the capital of Lucy Smith's estate. Other respon- dents to have their costs out of the capital of their respective estates. Costs of trustees' and infants' appeal to be taxed between solicitor and client. Solicitor, for appellants, J. W. Dixon. Solicitors, for the respondents, J. M. Smith &Emmerton; Madden &Butler; J. E. Dixon.

[1909] HCA 64

11 October 1909

Key Legal Topics

Areas of Law

Equity & Trusts

Contract Law

Civil Procedure

Legal Concepts

Fiduciary Duty

Remedies

Appeal

Jurisdiction

Standing

Breach