Estate of Chaddock (Deceased)

[2025] NSWSC 463

Supreme Court

New South Wales

Medium Neutral Citation:

Estate of Chaddock (Deceased) [2025] NSWSC 463

Hearing dates:

8 May 2025

Date of orders:

15 May 2025

Decision date:

15 May 2025

Jurisdiction:

Equity

Before:

Richmond J

Decision:

See [51]

Catchwords:

SUCCESSION — Construction — Life interest — Respective rights of life tenant and remaindermen

TRUSTS — Construction — Life interest — Trustee’s power to secure alternative residence for beneficiary

Legislation Cited:

Succession Act 2006 (NSW)

Trustee Act 1925 (NSW)

Trustee Amendment (Discretionary Investments) Act 1997 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351

Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234

Fell v Fell (1922) 31 CLR 268; [1922] HCA 55

Foskett v McKeown [2001] 1 AC 102

Frith v Cartland (1865) 71 ER 525

Garrett v Yiasemides [2004] NSWSC 828

In the Will of Sherriff [1971] 2 NSWLR 438

Parry v Haisma [2012] NSWSC 290

Perrin v Morgan [1943] AC 399

Public Trustee v O’Donnell [2008] SASC 181

Sinclair v Lee [1993] Ch 497

Texts Cited:

B Edgeworth, Butt’s Land Law (7th ed, 2017, Law Book Co)

GE Dal Pont, Law of Succession (3rd ed, 2021, Lexis Nexis)

JD Heydon and MJ Leeming, Jacob’s Law of Trusts in Australia (8th ed, 2016, Lexis Nexis)

P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters)

Category:

Principal judgment

Parties:

Allan Gregory Porter as trustee of the Estate of the late Dorothy Clara Eastment Chaddock (Plaintiff)

Audrey Florence Chaddock by her tutor Robert Cady (First Defendant)
Beryl Kathleen Donaldson by her tutor Rodney Donaldson (Second Defendant)
Elizabeth Joan Scott (Third Defendant)
Warwick James Laird (Fourth Defendant)
Marilyn Barbara Cady (Fifth Defendant)
Pamela Joy Fail (Sixth Defendant)
Judith Ann Elliott (Seventh Defendant)
Bronya Joan Homan (Eighth Defendant)
Leslie Ralph Johnson (Ninth Defendant)

Representation:

Counsel:
M Pringle (Plaintiff)

Solicitors:
Coleman Greig (Plaintiff)

File Number(s):

2024/00453995

Publication restriction:

Nil

JUDGMENT

1. By a summons filed on 6 December 2024, the plaintiff seeks declaratory relief regarding the proper construction of cll 3(a) and 4 of the last will of Dorothy Chaddock (the deceased) made on 10 July 1981 (the will) who died on 16 March 1996. Clause 3(a) confers on one of the deceased’s daughters, Audrey Chaddock (Audrey), a right to occupy the deceased’s property at 6 Lorraine Place, Merrylands (Merrylands property) and cl 4 confers a power to sell the property in order to provide alternative accommodation for Audrey. What is at issue in these proceedings is the nature of the rights conferred on Audrey by those provisions.

2. The plaintiff, Allan Porter, is the trustee under the will. Each of the beneficiaries under the will has been joined as a defendant, has been served with the application and has indicated that he or she does not wish to be heard on the application.

3. The principal relief sought in the summons is as follows:

1.   A declaration that on the proper construction of clauses 3(a) and 4 of the Will dated 10 July 1989 of Dorothy Clara Eastment Chaddock, the clauses create a life estate in the estate realty situate at and known as 6 Lorraine Place, Merrylands in the State of New South Wales being the land contained in Lot 4 of Deposited Plan 30998 (“the Merrylands property”) for the benefit of the Deceased’s daughter, Audrey Florence Chaddock.

2.   A declaration that on the proper construction of clause 4 of the Will dated 10 July 1989 of Dorothy Clara Eastment Chaddock, the phrase “surplus moneys” refers to the balance of the nett [sic] proceeds of sale of the Merrylands property which remain in the estate after the purchase of alternative accommodation for the Deceased’s daughter, Audrey Florence Chaddock, by the Trustee.

3.   An order that the Plaintiff is to hold the surplus moneys from the sale of the Merrylands property in trust for the life tenant, Audrey Florence Chaddock, during her lifetime.

4. The plaintiff was represented at the hearing by Margaret Pringle of counsel. Following a request of the Court at the hearing, the plaintiff provided a further affidavit on 13 May 2025 dealing with the alternative accommodation obtained for Audrey.

5. Without any disrespect intended, I will refer to Audrey by her first name in these reasons.

The terms of the will

6. The will contains only two operative clauses, cl 3 and cl 4. Under cl 3 the whole of the deceased’s real and personal estate would pass to her husband but if he predeceased her, as in fact occurred, she gave her estate to her trustees upon trust as follows:

(a)   SUBJECT TO CLAUSE 4 hereof as to the premises situated at No. 6 Lorraine Place Merrylands wherein I presently reside together with all my articles of household use or ornament [contents] for my daughter AUDREY FLORENCE CHADDOCK for and during her lifetime she maintaining the premises in tenantable repair keeping the same insured to the full insurable value paying all rates taxes and other outgoings affecting the same and making the monthly payments payable by me to the War Service Homes Division and from and after her death UPON TRUST for such of my daughters as shall survive me and Audrey Florence Chaddock if more than one as tenants in common in equal shares PROVIDED ALWAYS AND I DECLARE that if any of my daughters shall have died in my lifetime or the lifetime of the said Audrey Florence Chaddock leaving a child or children surviving me and the said Audrey Florence Chaddock such child or children shall take and if more than one equally between them the share which his her or their deceased parent would have taken under this my Will had she so survived me and attained a vested interest.

(b)   As to the rest and residue of my real and personal estates UPON TRUST for such of my daughters other than the said Audrey Florence Chaddock as shall survive me if more than one in equal shares PROVIDED ALWAYS AND I DECLARE that if any of my daughters shall have died in my lifetime leaving child or children surviving me such child or children shall take and if more than one equally between them the share which his her or their deceased parent would have taken under this my Will had she so survived me and attained a vested interest.

7. Clause 4 deals with the situation, which arose in the present case, of the need to sell the Merrylands property in order to provide alternative accommodation for Audrey. It provides:

I DECLARE that my Trustees may upon a request in writing from my daughter the said AUDREY FLORENCE CHADDOCK sell my premises known as No. 6 Lorraine Place Merrylands and out of the proceeds purchase another dwelling house or residence to be held by them together with any surplus moneys arising out of such sale and purchase upon the same powers and trusts and for the same persons as are hereinbefore declared in Clause 3 of the Will.

8. In relation to cl 3(b), in addition to Audrey, the daughters of the deceased were Beryl Kathleen Donaldson (the second defendant), Margaret Porter (the mother of the plaintiff who is now deceased), Barbara Laird (now deceased) and Joan Johnson (now deceased).

9. The beneficiaries who are contingently entitled to the interest in the remainder under cl 3(b) are (a) the second defendant; (b) the issue of Margaret Porter, who are the third defendant and the plaintiff; (c) the issue of Barbara Laird, who are the fourth and fifth defendants; and (d) the issue of Joan Johnson, who are the sixth to ninth defendants.

Background

10. On 28 June 1996, probate of the will was granted to Allan William Porter, one of the two executors named in the will (the other named executor having renounced). The inventory of property annexed to the grant of probate identified the property owned by the deceased at her death as the Merrylands property with an estimated value of $150,000, a bank account at Westpac with a balance of $7,229, jewellery and the furniture at the Merrylands property.

11. The deceased was survived by Audrey, who had lived with her parents at the Merrylands property since birth, having never married or had children, and had provided care to the deceased before she died.

12. On 7 January 2003, Audrey appointed Robert Cady as her attorney by an enduring power of attorney.

13. The original trustee of the trust created by cl 3(a) of the will was Allan William Porter. On 16 August 2005, he executed a deed by which he retired as trustee and appointed his son, the plaintiff, as the new trustee of the estate. The deed was registered on 30 November 2005.

14. By mid to late 2020, it had become apparent to the plaintiff and a number of family members that Audrey (who was now 88 years old) was unable to continue to occupy the Merrylands property given her age and state of health. It was decided that the Merrylands property should be sold and Audrey should move into a retirement village.

15. On 22 September 2020, Audrey entered into a Residence and Accommodation Agreement (R&A Agreement) with Southern Cross Care (NSW & ACT), the operator of the John Woodward Residential Aged Care Facility. The agreement confers on her the right to occupancy of a room at the Cardinal Gilroy Village, Merrylands West, and use of the communal areas for the rest of her life. The agreement required her to pay a refundable accommodation deposit (RAD) of $550,000 and ongoing fees for her care.

16. The RAD was paid by Audrey as to $250,000 from her own funds and as to the balance of $300,000 by a loan made to her by the plaintiff under the Deed referred to below sourced from the proceeds of sale of the Merrylands property.

17. On 20 August 2021, Audrey made a request in writing (through her attorney) that the Merrylands property be sold and in late 2021 a contract for the sale of the Merrylands property for a price of $765,000 was entered into. Completion of the contract occurred on 20 January 2022. The net proceeds of sale totalled $746,855.84 which was deposited into the trust account of the plaintiff’s solicitor.

18. On 28 June 2022, the plaintiff and Audrey, by her attorney, executed a Deed of Loan and Family Arrangement (Deed) which provided for the plaintiff to make a loan to Audrey in the sum of $300,000 for the purpose of paying the balance of the RAD to the Cardinal Gilroy Village, and Audrey, as borrower, gave a direction to the plaintiff, as lender, to pay the amount of the loan to an account in the name of Southern Cross Care (NSW & ACT) (cll 3.3 and 3.4). The loan was made by payment to Southern Cross Care (NSW & ACT) on 28 June 2022.

19. Under cl 6.1 of the Deed, the loan is repayable in full on the earlier of relevantly, Audrey’s death or her exit from the retirement village. Under the terms of the R&A Agreement, the RAD is refundable (less permitted deductions) in these circumstances (cl C7 and cl D14).

20. On 6 December 2024, the plaintiff’s solicitors commenced these proceedings by Summons in order to clarify how the remaining balance of the estate’s account of some $400,000 being the ‘surplus funds’ following the sale were to be dealt with. The plaintiff’s position was that it should be invested to produce income for Audrey’s benefit. Some of the beneficiaries under the will had previously indicated a contrary view as to the proper construction of cll 3 and 4 of the will which was that the proceeds of sale should be divided equally between the five daughters of the deceased and that, if they are no longer living, then to their respective children.

Issues

21. The issues which arise are:

1. whether cl 3 confers on Audrey an equitable life estate or a mere personal right of occupation;

2. whether cl 4 authorised the sale of the Merrylands property and the acquisition of the alternative accommodation for Audrey;

3. whether the plaintiff is to hold the surplus moneys from the sale of the Merrylands property in trust for Audrey, as the life tenant, during her lifetime.

Principles

22. The starting point for the construction of a will is the following statement of Viscount Simon LC in Perrin v Morgan [1943] AC 399 at 406:

…the fundamental rule in construing the language of a will is to put on the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case — what are the “expressed intentions” of the testator.

23. In the same case, Lord Romer said at 420:

… I take it to be a cardinal rule of construction that a will should be so construed as to give effect to the intention of the testator, such intention being gathered from the language of the will read in the light of the circumstances in which the will was made. To understand the language employed the court is entitled, to use a familiar expression, to sit in the testator’s armchair. When seated there, however, the court is not entitled to make a fresh will for the testator merely because it strongly suspects that the testator did not mean what he has plainly said …

24. This fundamental principle was recently stated by White JA (with whom Gleeson JA agreed) in De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351 at [50]:

The object of construction of a will is to give effect to what can be ascertained, having regard to admissible extrinsic evidence, the testatrix intended by the words she used: Fell v Fell (1922) 31 CLR 268 at 273–274; [1922] HCA 55; Perrin v Morgan [1943] AC 399 at 406, 416. The intention of the testatrix is to be determined from the language of the will read in the light of the circumstances in which it was made. The Court is entitled to sit in the “testatrix’s armchair” to understand the language she employed: Hatzantonis v Lawrence [2003] NSWSC 914, [7] ff (Bryson J).

25. The ‘armchair principle’ referred to in the above passages was summarised by White J (as his Honour then was) in an earlier decision, Parry v Haisma [2012] NSWSC 290 at [10] (emphasis in original):

There was no real controversy about the admissibility of extrinsic evidence for the purpose of construing the will. In Higgins v Dawson [1902] AC 1 the House of Lords said that evidence of surrounding circumstances could only be adduced where there was ambiguity (at 7, 8 and 11) and endorsed a very narrow approach to finding ambiguity (at 10). That approach is not consistent with the current approach to construction of wills (Perrin v Morgan [1943] AC 399) and was not urged in the present case. Evidence of the circumstances surrounding the testatrix was admissible to assist in the construction of the will so that the court could place itself “so to speak, in [the testatrix’s] arm-chair and consider the circumstances by which [she] was surrounded when [she] made [her] will to assist … in arriving at [her] intention” (Boyes v Cook (1880) 14 Ch D 53 at 56; Allgood v Blake (1872–73) LR 8 Exch 160 at 162). As it was put in Allgood v Blake (at 162):

“The general rule is that, in construing a will, the Court is entitled to put itself in the position of the testator, and to consider all material facts and circumstances known to the testator with reference to which he is to be taken to have used the words in the will, and then to declare what is the intention evidenced by the words used with reference to those facts and circumstances which were (or ought to have been) in the mind of the testator when he used those words. … the meaning of words varies according to the circumstances of and concerning which they are used.”

26. As part of the process of construction it is necessary to consider the terms of the will as a whole and seek to ascertain the basic scheme which the deceased had conceived for dealing with his or her estate and then to construe the will, if possible, to give effect to that scheme: Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234 at [19].

27. Isaacs J in Fell v Fell (1922) 31 CLR 268; [1922] HCA 55 at 273-275 identified a number of principles of construction, including relevantly the following (citations omitted):

(1)    “Every will must by law be in writing, and it is a necessary consequence of that law that the meaning must be discovered from the writing itself, aided only by such extrinsic evidence, as is necessary in order to enable us to understand the words which the testator has used”

(2)    “The instrument … must receive a construction according to the plain meaning of the words and sentences therein contained. But … you must look at the whole instrument, and, inasmuch as there may be inaccuracy and inconsistency, you must, if you can, ascertain what is the meaning of the instrument taken as a whole in order to give effect, if it be possible to do so, to the intention of the framer of it” …

(3)    “If the will shows that the testator must necessarily have intended an interest to be given which there are no words in the will expressly to devise, the Court is to supply the defect by implication, and thus to mould the language of the testator, so as to carry into effect, as far as possible, the intention which it is of opinion that the testator has, on the whole will, sufficiently declared”…

(4)    An inference cannot be made “that did not necessarily result from all the will taken together” … A necessary inference is one the probability of which is so strong that a contrary intention cannot reasonably be supposed …

(5)    “[The Court] cannot give effect to any intention which is not expressed or plainly implied in the language of” the “will” “You have no right to fancy or to imply, unless there be something within the four corners of the will which is not only consistent with the implication you make, but which could hardly stand, if at all, in the will, without that implication being made. That is what is called necessary implication, and legitimate implication, in contradistinction to gratuitous, groundless, fanciful implication” … 

28. Consistently with the second proposition stated by Isaacs J in Fell v Fell above, a word or phrase used in a will is given its ordinary and natural meaning, unless the context provided by the will as a whole or admissible extrinsic evidence indicates that the testatrix used it in a different sense or the ordinary meaning makes no sense in light of the surrounding circumstances, whereas a secondary meaning does make sense: GE Dal Pont, Law of Succession (3rd ed, 2021, Lexis Nexis) at [8.6]; P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [31.40(6)]. Where the ordinary meaning applies on this approach, it will be adopted even though the result of giving the word its ordinary meaning may appear harsh.

29. Section 32 of the Succession Act 2006 (NSW) permits the admission of extrinsic evidence to assist in the construction of a will if the will or any part of it is meaningless or ambiguous. It was not suggested that it is relevant in the present case.

Equitable life estate or a mere personal right of occupation?

30. The plaintiff submitted that cl 3(a) conferred on Audrey an equitable life estate in the Merrylands property and not a mere personal right of occupation. I agree.

31. Clause 3(a) of the will requires the trustee to hold the Merrylands property ‘upon trust ... for [Audrey] for and during her lifetime’ subject to an obligation to maintain the property in tenantable repair etc, and then ‘from and after her death’, for her other daughters, per stirpes. The words ‘upon … trust for [Audrey] for and during her lifetime’ clearly indicate an intention to create an equitable life estate in the trust property in her favour: B Edgeworth, Butt’s Land Law (7th ed, 2017, Law Book Co) at [3.240]. Accordingly, no issue as to whether a mere personal right to reside at the Merrylands property rather than a life estate arises.

32. As a consequence of being the life tenant, Audrey was entitled to occupy the Merrylands property or, if it was rented out, to the net income from doing so (subject to complying with her obligation to maintain and repair the property, keep it insured, and pay rates, taxes and other outgoings). The rights of a life tenant were explained in Sinclair v Lee [1993] Ch 497 at 506 (in the context of a trust under a will of a parcel of shares in favour of the deceased’s husband for his life and after his death to her son) as follows:

If a testator or settlor creates successive interests, with an interest in income followed by an interest in capital, he intends that the person entitled to the income interest, A, shall have the benefits flowing from the use of the property or the income to be derived from it for the period of his life or whatever period the testator or settlor has marked out, but that the fund shall remain intact for the remainderman, B, in due course. A is entitled to the income arising from lettings, after deducting outgoings properly payable out of income; or he may be entitled to occupy the building, such as a house, and use it himself, duly discharging the outgoings. In the fullness of time the property will pass to B. If it has been sold meanwhile, the proceeds will be capital. Either way, in due course B will obtain the benefit of any appreciation in the value of the property. A is entitled to any increases obtainable in rents, but not to capital profits. This accords with the presumed intention of the testator or settlor, in the absence of any indication by him to the contrary.

Whether clause 4 authorised the sale of the Merrylands property and the acquisition of the alternative accommodation for Audrey

33. The plaintiff submitted that cl 4 authorised the sale of the Merrylands property and the application of part of the proceeds for sale to the payment of the RAD to provide Audrey with a residence appropriate to her needs.

34. Clause 4 of the will, by the use of the words ‘my trustees may’, confers two powers on the trustee. The first is a power to sell the Merrylands property on the written request of Audrey. This power was exercised by the plaintiff when he entered into and completed the contract for sale of the Merrylands property.

35. The second is a power to use the proceeds of sale of the property to ‘purchase another dwelling house or residence to be held by [the trustees] together with any surplus moneys arising out of such sale and purchase’ upon the same powers and trusts and for the same persons who are beneficiaries under cl 3. In my view, what this power authorises is the purchase by the trustee of another dwelling house or residence and not the transaction which was actually undertaken here, which involved the plaintiff making a loan of $300,000 to Audrey pursuant to the Deed funded from the proceeds of sale to enable her to pay the balance of the RAD. It was Audrey who acquired a right to occupy a unit in the retirement village pursuant to the R&A Agreement. The plaintiff acquired only the right to repayment of the loan under the Deed.

36. The plaintiff’s power as trustee to undertake the transaction must be found, instead, in the Trustee Act 1925 (NSW). Section 14DA provides:

(1) Without limiting section 14C and subject to the instrument (if any) creating the trust, a trustee may—

(a)   purchase a dwelling-house for a beneficiary to use as a residence, or

(b)  enter into any other agreement or arrangement to secure for a beneficiary a right to use a dwelling-house as a residence.

(2)   Despite the terms of the instrument (if any) creating the trust, a trustee may, if to do so would not unfairly prejudice the interests of other beneficiaries, retain as part of the trust property a dwelling-house for a beneficiary to use as a residence.

(3)   A dwelling-house purchased, retained or otherwise secured for use by the beneficiary as a residence may be made available to the beneficiary for that purpose on such terms and conditions consistent with the trust and the extent of the beneficiary’s interest as the trustee thinks fit.

(4)   The trustee may retain a dwelling-house or any interest or rights in respect of a dwelling-house acquired under this section after the use of the dwelling-house by the beneficiary has ceased.

(5)   In this section,   dwelling-house includes—

(a)   any building or part of a building designed, or converted or capable of being converted, for use as a residence, and

(b)   any amenities or facilities for use in association with the use of a dwelling-house.

37. Section 14DA was enacted to overcome the decision in In the Will of Sherriff [1971] 2 NSWLR 438. Being remedial legislation, it is to be given a liberal and beneficial construction: Public Trustee v O’Donnell [2008] SASC 181 at [64]. It and associated provisions extending the powers of trustees were introduced into the Trustee Act by the Trustee Amendment (Discretionary Investments) Act 1997 (NSW) which commenced on 13 March 1998, but applies to trusts created before or after that date: Trustee Act, Schedule 2, cl 3.

38. Importantly, the power conferred by s 14DA(1)(b) is not limited to the purchase of a dwelling-house or residence (in contrast to cl 4 of the will), and extends to an agreement or arrangement to secure for a beneficiary a right to use a dwelling-house as a residence. The word ‘secure’ should be given its ordinary meaning. The dictionary definition of ‘secure’ as a verb relevantly includes: ‘8. to get hold or possession of; obtain; 9. to make secure from danger or harm; make safe; 10. to make secure or certain; ensure.’: Macquarie Dictionary, 3rd ed (1997). This conveys the central idea of the ordinary meaning of the word in this context.

39. In my view, the entry into and performance by the plaintiff of the Deed was authorised by s 14DA(1)(b), because the Deed is ‘an agreement or arrangement to secure for [Audrey] a right to use a dwelling-house as a residence’. The word ‘dwelling-house’ is defined in subsection (5) to include part of a building designed for use as a residence and hence includes a unit in the retirement village. It is clear that it is not necessary for the trustee to acquire title to the relevant dwelling-house or the occupancy right, but rather it is sufficient that the trustee has entered into an agreement or arrangement to secure for the beneficiary that occupancy right. That is what has occurred in the present case. The payment of the balance of the RAD payable by Audrey under the R&A Agreement of $300,000 funded by the loan under the Deed secured to her the occupancy right to her room in the retirement village because it was a condition of obtaining that right that the RAD be paid in full.

40. While s 14DA(1) is expressed to operate subject to the terms of the will, there is nothing in the terms of the will which would preclude the application of that section to the trust created by cl 3(a) of the will. In particular, cl 4 merely confers a power on the trustee to purchase a replacement property suitable for Audrey while she is capable of independent living and does not, expressly or by implication, exclude the power conferred by s 14DA which enables the trustee to enter into an alternative arrangement to secure for her accommodation when, as now, she is no longer capable of living independently.

41. The exercise of the trustee’s power under s 14DA is subject to the requirement that the trustee observes his obligations of prudence: Trustee Act, ss 14A and 14C; Garrett v Yiasemides [2004] NSWSC 828 at [20]. I am satisfied that the plaintiff did so in the present case.

42. In so far as the balance of the proceeds of sale are concerned, again there is no express power in the will as to how this is to be invested. The trustee can take advantage of the broad power of investment created by s 14 of the Trustee Act which provides:

A trustee may, unless expressly forbidden by the instrument (if any) creating the trust-

(a)    invest trust funds in any form of investment, and

(b)    at any time vary any investment.

43. In the present case, the investment of the balance of the proceeds of sale in an interest-bearing account is authorised by s 14.

44. It is necessary when investing the surplus moneys for the plaintiff to bear in mind the obligations of prudence in s 14A and the requirements of s 14C, and also the need when making that investment to preserve the proper balance between the interests of the life tenant and remaindermen: JD Heydon and MJ Leeming, Jacob’s Law of Trusts in Australia (8th ed, 2016, Lexis Nexis) at [18-35].

Whether the surplus moneys from the sale of the Merrylands property are held in trust for Audrey, as the life tenant, during her lifetime

45. The plaintiff submitted that the surplus moneys from the sale of the Merrylands property were held on the trust created by cl 3(a) due to the concluding words of cl 4.

46. As the power in cl 4 of the will to use the proceeds of sale of the Merrylands property to purchase another dwelling house or residence was not exercised, the concluding words of cl 4 of the will that the relevant dwellinghouse or residence and any ‘surplus moneys’ will be held on the terms of cl 3 will not apply.

47. Nonetheless, on ordinary principles, where a trustee sells trust property and acquires other property with the proceeds of sale, pursuant to a power in the trust instrument or conferred by statute, the newly acquired property will form part of the trust fund to be held on the same trust as the property which was sold. As Page-Wood VC said in Frith v Cartland (1865) 71 ER 525 at 526: ‘But so long as the trust property can be traced and followed into other property into which it has been converted, that remains subject to the trust’. See also Foskett v McKeown [2001] 1 AC 102 at 108H per Lord Browne-Wilkinson and 127G per Lord Millett.

48. Accordingly, the rights conferred on the plaintiff pursuant to the Deed (including the obligation of Audrey to repay the loan) and the surplus moneys from the sale of the Merrylands property (and any investment made with those moneys) form part of the trust fund subject to the trust created by cl 3(a) of the will.

49. As a consequence of Audrey being the life tenant under the trust, she will be entitled to all income from the investment of the surplus moneys until the life estate comes to an end on her death. At that time, the loan under the Deed will be repaid and it together with the balance of the surplus moneys in their invested form will pass to the remaindermen under cl 3(a).

Costs

50. The plaintiff seeks an order for his costs on the indemnity basis to be paid out of the surplus moneys from the sale of the Merrylands property. The court has power to make such an order under s 93(3) of the Trustee Act and r 42.25 of the Uniform Civil Procedure Rules 2005 (NSW). The trustee has brought this proceeding reasonably, in order to clarify a question of construction of the trust instrument. Accordingly, it is appropriate that the plaintiff’s costs are paid out of the funds held in the bank account kept by the plaintiff for the surplus moneys from the sale and I will so order.

Conclusion

51. For the above reasons the Court will make the following orders:

1. DECLARES that on the proper construction of cll 3(a) and 4 of the will dated 10 July 1989 of Dorothy Clara Eastment Chaddock (the will), the first defendant was entitled to a life estate in the estate realty situate at and known as 6 Lorraine Place, Merrylands in the State of New South Wales being the land contained in Lot 4 of Deposited Plan 30998 (the Merrylands property) for her sole use and benefit during her lifetime.

2. DECLARES that the plaintiff is required to hold the surplus moneys from the sale of the Merrylands property (and any investment made with those moneys) in trust for the life tenant, Audrey Florence Chaddock, during her lifetime on the terms of cl 3(a) of the will.

3. ORDERS that the plaintiff’s costs calculated on the indemnity basis be paid from the property referred to in order 2.

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Decision last updated: 15 May 2025