Fenton v Perpetual Trustee Company (Limited)

This case concerned an appeal to the High Court of Australia from a decision of the Full Court of the Supreme Court of New South Wales. The appeal arose from an originating summons taken out by Perpetual Trustee Company (Limited), the executor and trustee of the will of Thomas Pinder Chapman. The dispute centred on the interpretation of the will's provisions for the accumulation of surplus income and a discretionary power granted to the trustee to apply portions of beneficiaries' shares for their maintenance, education, and advancement. The primary issue was whether this maintenance power could be exercised on income that accrued after the statutory period for accumulation under the Thellusson Act had expired.

The court was required to determine the legal effect of the testator's direction to accumulate surplus income beyond the period permitted by the Thellusson Act (now section 31 of the Conveyancing Act 1919 (NSW)). Specifically, the court had to ascertain whether the discretionary power to apply a beneficiary's "share," whether vested or contingent, for maintenance, education, and advancement could operate on income that accrued after the expiration of the twenty-one-year accumulation period. The central question was whether the maintenance clause was limited to previously accumulated funds or could be applied to current income as it arose, thereby preventing its accumulation and potential distribution as on an intestacy.

The High Court, by majority, affirmed the decision of the Supreme Court. The reasoning applied was that the Thellusson Act only voids the direction to accumulate income, leaving other dispositions in the will unaffected. The court held that the testator's maintenance clause was a valid power that could be exercised over the contingent shares of infant beneficiaries. To the extent that the trustee exercised this power to apply income for maintenance, education, or advancement, that income was not accumulated and therefore fell outside the operation of the Thellusson Act. The Act did not alter the testator's intention regarding the application of income for maintenance, but rather the direction to accumulate beyond the statutory limit was void.

The appeal was dismissed. The court ordered that the respondents' costs of the appeal, including the trustee's costs as between solicitor and client, be paid out of the estate. These costs were to be borne by the balance of current income arising during the remainder of the appellant's life that would otherwise pass as on an intestacy, with the trustee at liberty to retain such balance accordingly.