Fischer v Nemeske Pty Ltd

The High Court of Australia considered an appeal concerning the exercise of a trustee's powers under a deed of settlement. The dispute involved the Fischers, who alleged that a distribution of an "asset revaluation reserve" by the trustee to Mr and Mrs Nemes was void. The executors of Mr Nemes' estate (the Loblays) cross-claimed against the trustee, asserting a debt owed to them in the amount of $3,904,300, representing the distributed reserve. The parties agreed to treat all documents as genuine and effective according to their terms.

The central legal issues before the High Court were whether the trustee had validly exercised its power under the deed of settlement to "advance" and "apply" trust capital or income to Mr and Mrs Nemes, and consequently, whether the trustee was indebted to Mr and Mrs Nemes' estate. This also raised the question of whether an action for money had and received was maintainable by the beneficiaries against the trustee.

The High Court, affirming the decision of the Court of Appeal, found that the trustee had validly exercised its power under clause 4(b) of the deed of settlement. This power allowed the trustee to earmark and use capital or income for the "advancement in life or benefit" of specified beneficiaries. The court held that the asset revaluation reserve, representing an accretion in the value of shares, constituted part of the trust's capital or income. The trustee's resolution to distribute this reserve to Mr and Mrs Nemes, and the subsequent crediting of their loan account, effectively created an immediate and absolute vested interest in them, thereby constituting a valid exercise of the power to advance and apply trust funds. This created a debt owed by the trustee, making an action for money had and received maintainable.

The appeal was dismissed with costs.