Duncan v Cathels

This case concerned an appeal from the Supreme Court of New South Wales regarding the construction of an indenture of settlement. The dispute centred on the beneficial interest in the share of Bisset Fenwick, one of the settlor's eight children, following his death unmarried and without issue. The appellant, an executor of Bisset's will, sought a declaration that Bisset's share was vested in his executors, while the respondent, Charlotte Dunkley, a surviving child of the settlor, cross-appealed seeking a declaration that she was solely entitled to the corpus of Bisset's share.

The primary legal issue before the court was whether the initial disposition of Bisset's share constituted an absolute gift, subject to subsequent limitations, or whether the limitations effectively prevented an absolute gift from arising in the first instance. This required the court to consider the application of the rule in *Lassence v. Tierney*, which addresses situations where an apparent absolute gift is followed by qualifying trusts. A secondary issue involved the interpretation and operative effect of a proviso concerning the distribution of income if no person was entitled to receive it under the preceding trusts.

The High Court of Australia, allowing the appeal and dismissing the cross-appeal, held that the indenture created an absolute gift of Bisset's share in the first instance, making the rule in *Lassence v. Tierney* applicable. The court reasoned that while the shares of Charlotte, Peter, and Bisset were subject to subsequent provisions, these provisions were engrafted onto initial absolute gifts. As Bisset's share was not affected by any of the specified events that would trigger the subsequent trusts (such as bankruptcy or alienation), and as the proviso regarding income distribution was confined to the period during which preceding income trusts could operate and did not become operative in the events that occurred, the initial absolute gift to Bisset remained effective. The court found that the trial judge had erred in concluding that there was no absolute gift in the first instance.

Consequently, the High Court ordered that Bisset Fenwick's share or interest under the settlement was now vested in the executors of his will. The costs of all parties for the appeal and cross-appeal were to be paid out of Bisset's share on a solicitor-and-client basis.