In the Estate of MARILYN SHIRLEY GRAHAM (DECEASED) - [2009] SASC 278

SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction)
In the Estate of MARILYN SHIRLEY GRAHAM (DECEASED)
[2009] SASC 278
Judgment of The Honourable Justice Gray
4 September 2009
SUCCESSION - WILLS, PROBATE AND ADMINISTRATION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - GENERALLY - GENERAL PRINCIPLES OF CONSTRUCTION - ASCERTAINMENT OF TESTATOR'S INTENTION AS EXPRESSED OR IMPLIED BY WORDS OF WILL
Application for advice and directions pursuant to section 69 of the Administration and Probate Act 1919 (SA) - construction of will of Marilyn Shirley Graham - clause 5 created testamentary trust for the benefit of husband of deceased - whether trust fund comprised both the remaining liquid assets and the home property - construction of phrase "cessation of independent living" - construction of "no longer requiring financial support" - duty on Public Trustee to ascertain these matters - factors to be considered by Public Trustee - powers of Public Trustee to sell home property under will and pursuant to statute.
Held: trust fund comprises both liquid assets and the home property - clause 5 of will provides Public Trustee with power to sell home and purchase alternative accommodation - sections 12 and 28 of the Trustee Act authorise Public Trustee to sell home and purchase alternative accommodation - entitlement of husband of deceased ceases at his death, the cessation of independent living, when no longer requiring financial support or on his written declaration - Public Trustee obliged to assess from time to time whether husband of deceased capable of independent living and his financial situation.

In the Estate of MARILYN SHIRLEY GRAHAM (DECEASED)
[2009] SASC 278
Testamentary Causes Jurisdiction
GRAY J.

This is an application for advice and directions pursuant to section 69 of the Administration and Probate Act 1919 (SA).
Introduction
Marilyn Shirley Graham died on 25 February 2004. She was survived by her husband Jack Richard Graham and her three adult children, Deborah Kay Browne, Karen Lisa O’Connell and Paul John Bethune. All were children of earlier marriages.
The deceased died leaving a Will dated 29 May 2003, appointing Peter Vardon Fairweather and Karen Lisa O’Connell as executors and trustees. Clause 5 of the Will constitutes a testamentary trust for the benefit of Mr Graham.
Probate was granted to Mr Fairweather on 15 July 2004 with leave reserved for Ms O’Connell to apply for probate as the alternate executor named in the Will. On 2 August 2006, Mr Fairweather retired from his position as trustee of the testamentary trust and appointed Ms O’Connell as the new trustee, pursuant to Part 5 of the Trustee Act 1936 (SA). On 4 January 2008, Public Trustee was appointed the new trustee of the testamentary trust by Ms O’Connell.
The difficulties leading to the application for directions relate to the proper construction of the Will, the terms of the testamentary trust created by the Will and Public Trustee’s obligations and powers as trustee.
The Testamentary Instrument
As noted, the Will established a testamentary trust for the benefit of Mr Graham. Clause 5 provided:
5.I GIVE AND BEQUEATH an amount equal to my remaining liquid assets other than my home property and furnishings situated at 16 Empire Avenue Salisbury Downs in the State of South Australia which may be occupied by my husband on the basis described hereunder: (hereinafter referred to as “the Trust Fund” which expression includes all accumulations and accretions) unto my Trustees UPON TRUST to hold the Trust Fund for during the lifetime of my Husband JACK RICHARD GRAHAM whilst he is capable of independent Living or otherwise in need of financial support and to invest the Trust Fund:
5.1     in any investment authorized by law as a trustee investment;
5.2     in any of the public stocks or funds or government securities or semi-governmental securities of any State of the Commonwealth of Australia or any Territory thereof;
5.3     upon the security of immovable property in any part of the world;
5.4     in or upon the stocks funds chares debentures debenture notes mortgages unsecured notes securities or issues of any body corporate or municipal body registered in the United Kingdom or any State or Territory of the Commonwealth of Australia.
With power at the discretion of my Trustees to vary or transpose any investments into or for any other or others of any nature hereinbefore authorized and to vary the terms of or property comprised in any such security for the purpose of providing my said husband with accommodation and maintenance suitable for his needs whilst he is capable of independent living AND UPON his death or cessation of independent living or no longer requiring financial support or upon his written declaration that he no longer requires the benefit of the Trust Fund the balance of the Trust Fund then remaining shall form party of my residuary estate.
Clause 6 provided that the residue should be divided among the deceased’s adult children. Clause 9 and 10 provided the trustee with power to deal with the estate:
9.I EMPOWER my Trustees without being responsible for loss (including liability for taxation on capital gain) caused by so doing:
9.1     to postpone the sale calling in and conversion of the whole or any part or parts of my estate for such a period as to them may seem proper; and
9.2     to retain in the state of investment in which it is at the time of my death any of my estate notwithstanding that the same shall not be invested in securities authorized by law as trustees securities or may be of a hazardous wasting or reversionary nature.
10.I DIRECT that all moneys coming to the hands of my Trustees and requiring investment under the trusts of this my Will may be invested upon any of the investments authorized for Trustees by the Laws of the Commonwealth of Australia and any of the Australian States and in addition thereto upon any of the stocks shares (whether preference or ordinary and whether fully or partly paid up) options debentures debenture stock bonds registered notes loans (whether accrued or otherwise) or other securities of any limited liability company (not being a mining Company) carrying on business in Australia.
The home property at Salisbury Downs referred to in clause 5 was valued at $225,000.00. The assets of the estate had a total value of $419,677.43.
At issue is the proper construction of clause 5. The adult children named as beneficiaries of the estate and Public Trustee hold opposing views as to aspects of the construction of clause 5.
As a consequence, Public Trustee sought the Court’s direction as to the composition of the trust fund created by clause 5 of the Will and in particular, whether the trust fund comprised all of the estate’s assets. Public Trustee further sought direction as to the factors upon which the operation of the trust fund would be terminated such that the residue would pass to the residuary beneficiaries, whether the Will grants Public Trustee the discretion to determine whether Mr Graham is capable of independent living and in need of financial support, what factors Public Trustee ought to take into account in exercising any such discretion and whether the Will permits Public Trustee to convert the home property in order to purchase alternative accommodation for Mr Graham.
The Background Facts
By statutory declaration dated 25 February 2009, Mr Graham deposed to his financial position. He is a recipient of a Service Pension from the Department of Veteran’s Affairs at the current single person rate of $1,124.20 per month. He has a sum of money invested which returns an income of approximately $90.00 per month. Mr Graham’s expenses include $60.00 per month for Meals on Wheels, approximately $40.00 per month for cleaning expenses and approximately $20.00 per month to cover day-to-day expenses.
Ms Browne indicated that although she and Mr Bethune had no objection to Mr Graham being entitled to the use of the home property during his lifetime, they objected to any sale of that property or reduction of the value of the capital of the estate, for Mr Graham’s benefit.
By affidavit dated 5 May 2009, Ms Browne outlined reasons for opposing any right of Public Trustee to deal with the estate of the deceased in such a manner as to diminish the corpus of the estate.
Ms Browne deposed that the deceased and Mr Graham jointly purchased a property at Two Wells in 1987. That property was sold during January 2004, and the proceeds of sale were divided almost equally between the deceased and Mr Graham. The home property the subject of clause 5 was purchased on 21 November 1996. The deceased during her lifetime informed Ms Browne that Mr Graham made no financial contribution toward that purchase. Pursuant to a Deed of Assignment dated 21 November 1996, Mr Graham assigned the whole of his right to title and interest in the Contract for the purchase of the home property, to the deceased.
Ms Browne submitted that it would not be proper for Public Trustee to invest the trusts of the estate of the deceased in such a manner that would cause a loss to the corpus of the estate. Further grounds for objection were outlined. Ms Browne claimed that Mr Graham had failed to disclose details of his personal assets to the deceased during her lifetime, but the deceased during her lifetime informed Ms Browne that Mr Graham had substantial assets and dealt with those assets in a manner that diminished his assets without benefiting the deceased. Ms Brown highlighted that Mr Graham deliberately abandoned his right, title and interest in the purchase of the home property, by the Deed of Assignment. Ms Browne further outlined that no authority was given in the Will to allow for the diminishing of the trust fund, and no authority or power of sale to authorise the sale of the home property. However, no satisfactory evidential basis for a finding that Mr Graham had assets beyond those he deposed to in his Statutory Declaration of 25 February 2009 was provided to the Court.
Hearing of the Matter
The submissions of the parties
Counsel for Public Trustee submitted that the trust fund comprised both the remaining liquid assets and the home property. Counsel for Ms Browne agreed with this construction.
Public Trustee contended that the terms of clause 5 conferred a right of occupation of the home property on Mr Graham whilst he remained capable of independent living. However, Public Trustee considered that the entitlement under clause 5 would end if Mr Graham ceased to be in a state of “independent living” despite any continuing requirement for “financial support”. According to Public Trustee, the terms of clause 5 make clear that the dominant intent of the deceased was that Mr Graham was not to benefit from the trust fund after the cessation of independent living, despite the fact that such a construction would appear to be a surprising statement of intent.
Public Trustee further submitted that while Mr Graham is capable of independent living, Public Trustee is entitled to convert the home property, as clause 5 of the Will contains an express power to vary or transpose the investments provided for in that clause. If the terms of clause 5 were found not to be wide enough, counsel submitted that sections 28B, 6 and 12 of the Trustee Act 1936 (SA) empowered Public Trustee to sell the home property if a sale were to be required for the maintenance of Mr Graham. These sections and their application are discussed later in these reasons.
On the hearing of the matter, counsel for Public Trustee informed the Court that there is no present intention to deal with the home property, and if that situation arose, the residual beneficiaries would be consulted.
As noted, counsel for Ms Browne agreed that the trust fund comprised both the liquid assets and the home property. However, counsel contended that despite the home property’s inclusion in the trust fund, clause 5 contemplates that the home property would be dealt with differently than the liquid assets.
Counsel for Ms Browne submitted that the home property is independently identified as a specific bequest to be available for Mr Graham to occupy during his lifetime while he is capable of living there. It was said that the use of the words “other than my home property and furnishings situated at … Salisbury Downs” expressly excluded the home property from the liquid assets to which the powers of investment in clause 5 applied. The segregation of the home property from the liquid assets did not remove it from the trust fund.
Counsel for Ms Browne submitted that the right of occupation of the home property is not limited to when Mr Graham is capable of independent living or only while he is in need of financial support. According to counsel, these qualifications only apply to the investment trust that comprises the liquid assets. It was submitted that the discretion granted to the trustee to vary or transpose investments from time to time should be limited to the liquid assets, otherwise it would nullify the life interest if that right also applied to the home property. Counsel acknowledged that this construction only allows for the liquid assets and income from the home property to be applied for the maintenance of Mr Graham, beyond the terms of his right to occupy the home property. It was further acknowledged that the liquid assets and any rental income from the home property were modest when contemplating the costs of maintaining an elderly person, and such income could be expended during the remainder of Mr Graham’s life. However, counsel submitted that if Mr Graham were to live beyond the expenditure of those assets, the terms of the Will did not permit the costs of his maintenance being met from the sale proceeds of the home property. If such circumstance arose, counsel accepted that according to this construction, Mr Graham’s maintenance would suffer.
Counsel for Ms Browne further submitted that there is no authority granted to the trustee to take any action that might reduce or diminish the capital assets of the estate. It was said that the general power to “invest the trust fund” in clause 5 should be read subject to the mandatory directive contained in the Will that the home property “may be occupied”. These latter words infer that the home property is to be retained in the present state to ensure that the right of occupation specified by clause 5 is available to Mr Graham. Counsel contended that as regards the home property, the powers in clause 9 should be read subject to the life estate and only upon the determination of that life estate either voluntarily or upon the death of Mr Graham, would the trustee be entitled to exercise the power of sale of the home property. According to counsel for Ms Browne, the authority to invest provided by clause 10 of the Will is limited to the investment of “moneys”.
Although the powers in section 6 and 12 of the Trustee Act were acknowledged, counsel for Ms Browne submitted that the power in section 6 authorising a Trustee to invest trust funds should be read subject to the specific directive creating and continuing the existence of the life estate. According to counsel, section 12 should also be read down so that the life estate would not be diminished or lost in any way except as provided in the Will, as that clause provides those powers “subject to the instrument creating the trust”.
Both counsel agreed as to the meaning of “cessation of independent living”, and “no longer requiring financial support”, although as noted, counsel for Ms Browne contended that these qualifiers only applied to the liquid assets rather than Mr Graham’s right of occupation of the home property. Counsel also agreed that the term “cessation of independent living” is to be given its ordinary meaning. Independent living is a matter of degree. If Mr Graham lived in a form of accommodation where he was largely responsible for the basics of ordinary living and largely self-sufficient, this would not be cessation of independent living. According to counsel for Public Trustee, such independent living need not be in the home property referred to in clause 5 – it could be some other form of accommodation such as in a unit in a retirement village. Counsel suggested that the concept of “independent living” does not necessarily preclude some level of assistance being provided to Mr Graham by others, although situations of high-level assistance and care such as those found in a nursing home would probably necessitate a finding that Mr Graham was not living independently. Counsel accepted that some forms of retirement unit living despite involving some level of shared facilities would still amount to “independent living” for the purposes of clause 5.
In relation to the phrase “no longer requiring financial support”, counsel agreed that Mr Graham’s entitlement under clause 5 ceases if financial support is no longer required. Counsel suggested that whether such support is required is a matter to be judged by the trustee as a matter of objective fact to be determined in the reasonable opinion of the trustee. The trustee would have a duty to make enquiries of Mr Graham from time to time to ascertain his financial position so as to satisfy itself whether or not Mr Graham requires financial support. It was accepted that if Mr Graham had separate assets, and income from those assets such that he could accommodate and maintain himself adequately at his own expense, this would arguably terminate any entitlement under clause 5.
Consideration of the matter – the construction of clause 5
Clause 5 of the Will is poorly drafted. However it appears clear that the testator’s intention was to benefit Mr Graham during his lifetime, particularly by the provision of accommodation. The construction of clause 5 is to be considered having regard to this intent.
The trust fund the subject of clause 5 comprises both the liquid assets and the home property. As excerpted above, the introductory words of clause 5 provide:
I GIVE AND BEQUEATH an amount equal to my remaining liquid assets other than my home property and furnishings situated at 16 Empire Avenue Salisbury Downs in the State of South Australia which may be occupied by my husband on the basis described hereunder: (hereinafter referred to as “the Trust Fund” which expression includes all accumulations and accretions) unto my Trustees UPON TRUST…
Arguably, the words “other than my home property” exclude the home property from the definition of the trust fund because those words operate by way of exception or qualification to the words which appear immediately before. However, when reading clause 5 as a whole, the home property clearly appears to form part of the trust fund in addition to the “remaining liquid assets”. The qualifying words “other than my home property…which may be occupied by my husband on the basis described hereunder” appear to be an expression of the testamentary intention to provide Mr Graham with the right of occupation of the home property, and that the trustee holds the home property as part of the trust fund subject to that right of occupation, which is more fully described later in clause 5.
If the home property did not form part of the trust fund, it would form part of the “rest residue and remainder” of the estate of the deceased pursuant to clause 6 of the Will, and consequently be held by the trustees upon the trusts declared in clause 6 immediately for the three named adult children of the deceased. Having regard to the intention of the testator, as expressed in clause 5, to provide a right of occupation to Mr Graham in respect of the home property, the suggested construction should be rejected. Accordingly, it is only when Mr Graham’s right of occupation ends “upon his death or cessation of independent living or no longer requiring financial support or upon his written declaration that he no longer requires the benefit of the trust fund”, that “the balance of the Trust Fund…shall form part of [the] residuary estate”. Until the home property forms part of the residuary estate to be applied in accordance with clause 6, the home property forms part of the trust fund, which under clause 5 is conveyed to the trustees to hold on the trusts declared therein.

If the home property did not form part of the trust fund it would mean that the power of investment, given by clause 5 to the trustee, applies only in respect of the liquid assets and not in relation to the home property. It would also mean that the power which clause 5 grants to the trustee to vary those investments for the purpose of providing Mr Graham with accommodation and maintenance, would apply only in relation to the liquid assets and not in relation to the home property. Such an interpretation is unduly narrow and tends to defeat the stated purpose for which the power of alteration of investments is conferred. It would mean that the principal asset of the estate could not be sold and transformed into another asset.
The effect of such an interpretation would be to prevent the trustees from selling the home property and using the proceeds to fund other accommodation more suited to the needs of Mr Graham. Such a narrow interpretation of the term “trust fund” would appear to defeat the intention of the testator to benefit Mr Graham. This supports the conclusion that the trust fund comprises both the liquid assets and the home property.
It is also for these reasons that the construction contended for by counsel for Ms Browne, that the powers to vary or transpose the investments are limited to the liquid asset, should be rejected. Although to construe the Will as granting the Trustee powers to vary or transpose the home property potentially nullifies the life interest in that residence, not to do so would not accord with the clear intention of the testator to benefit Mr Graham for the remainder of his life. As noted, if the construction contemplated by counsel for Ms Browne were favoured and if there was a shortfall in expenses beyond which the liquid assets or income from the home property could provide, the maintenance of Mr Graham would suffer.
The powers provided by clause 5 apply to all elements of the trust fund. It is artificial to segregate the home property in the way contended for by counsel for Ms Browne.
Consideration of the matter - Powers of Trustee
The general position is that a trustee has no power to sell trust property except under an authority expressly or impliedly
As noted, counsel for Ms Browne submitted that the terms of clause 5 are limiting in that they identify a specific place of residence where Mr Graham is to reside and as a consequence, the home property would not be subject to the power of investment provided by clause 5 until such time as the life interest has determined.
As outlined, the home property forms part of the trust fund for the purposes of clause 5 of the Will. That clause provides the trustee with express power to sell the home property. The power provided to the trustee in clause 5 to invest the trust fund in “any investment” and to vary or transpose “any investment” applies to all assets forming the trust fund whether in their original state upon the death of the deceased or as subsequently invested by the trustee. Once the composition of the trust fund has been determined to include the home property, these powers apply to that property. As counsel for Public Trustee submitted, this wider view of the word “investment” is consistent with the use of the term in clause 9 of the Will. As a consequence, the Trustee has express power under clause 5 to sell the home property in order to realise funds.
“Invest” in the context of an investment clause has been defined as “to apply money in the purchase of some property from which profit or interest is expected and which property is purchased in order to be held for the sake of the income which it will yield”;[1] “investment of trust funds” has similarly been defined to mean “the laying out of trust moneys in acquisition of property with the object or purpose of obtaining some return by way of income or pecuniary return for the benefit of those ultimately entitled.”[2] Accordingly, a power to invest could encompass the purchase of real estate as an investment[3], however such power is unlikely to authorise the purchase of a property, not as an investment, but as a residential property for Mr Graham to live in.[4]
[1]    Re Wragg [1919] 2 Ch 58.
[2]    In the Will of Sherriff [1971] 2 NSWLR 438 at 442 (Helsham J).
[3]    Re Wragg [1919] 2 Ch 58.
[4]    Re Power [1947] Ch 572; In the Will of Sherriff [1971] 2 NSWLR 438; Re Peczenik’s Settlement Trust [1964] 1 All ER 339.
However, the express power provided by the terms of clause 5 to vary and transpose the investment for the purpose of providing Mr Graham with accommodation and maintenance suitable for his needs, expands the scope of the power beyond a power merely to invest and authorises the trustee to purchase an alternative house or property for the benefit of Mr Graham.
Consideration of the matter – Statutory Provisions of the Trustee Act
Alternatively, the provision of sections 28B, 6 and 12 of the Trustee Act 1936 (SA) may provide the trustee with the power to sell the home property and purchase alternative property.
Section 28B confers a power of sale of trust property on a trustee in certain circumstances. The power applies notwithstanding anything to the contrary contained in the instrument creating the trust. Section 28B(1) provides:
Where a trustee is authorised by the instrument, if any, creating the trust or by law to pay or apply capital money for any purpose or in any manner, he shall have and shall be deemed always to have had power to raise the money required by sale, conversion, calling in, or mortgage of all or any part of the trust property for the time being in possession held upon the same trusts as the capital money.
Section 12(1) provides for a power to purchase a dwelling house as a residence for a beneficiary:
(1)     Subject to the instrument 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.
The term 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.
Section 6 of the Trustee Act gives a general power to trustees to invest trust funds in any form of investments and at any time to vary an investment or realise an investment of trust funds:
A trustee may, unless expressly forbidden by the instrument creating the trust—
(a) invest trust funds in any form of investment; and
(b) at any time, vary an investment or realise an investment of trust funds and reinvest money resulting from the realisation in any form of investment.
It is convenient to begin the consideration of the relevant statutory provisions with section 6 of the Trustee Act. If this provision is not wide enough, sections 12 and 28 may provide alternative authority for the sale by the trustee of the home property.
Sections 6 and 12 were part of a new “Part 1” inserted into the Trustee Act in 1995 by the Trustee (Investment Powers) Amendment Bill. The purpose of the insertion was to expand the powers of trustees in relation to investments by moving away from the previous list of authorised investments which had been criticised for fettering investment and having the potential for misleading inexperienced trustees as the list approach embodied a basic presumption that those investments included on the list were “safe”. The insertion of Part 1 reformed the powers by moving towards a “prudent person” approach to investments.
The object of the reform can be gleaned from the following excerpt of the second reading speech, where the Deputy Premier said:[5]
The Bill gives Trustees power to invest in any property, unless the instrument creating the trust otherwise provides. A trustee exercising any power of investment, is required to exercise the care, diligence and skill that a prudent person of business would exercise in managing the affairs of others. A trustee whose profession, employment or business is or includes acting as a trustee or investing money on behalf of others is required to exercise the care, diligence and skill of a prudent person engaged in that profession, employment or business in managing the affairs of others. (This requires a higher standard for professional trustees).
[5] South Australia, Parliamentary Debates, House of Assembly, 11 April 1995, 2258.
The terms of section 6 make it clear that the trustee has the specified powers, “unless expressly forbidden”.
It has been held that a direction to keep trust funds and invest them in a particular way does not “expressly forbid” investment in securities authorised by the statute.[6] As such, there is no express prohibition against investing in a particular way, unless there are negative words prohibiting such investment. Although clause 5 provides a series of authorised trustee investments, there is no express prohibition that may be inferred from the terms of that clause preventing investment in other ways. Clause 5 does not create an obligation to retain the home property. As a consequence, section 6 of the Trustee Act arguably empowers the trustee to sell the home property and invest the moneys elsewhere. However the scope of authority conferred by section 6 is not sufficiently clear to rely on as a source of authority for Public Trustee to sell the home property.
[6] Re Burke [1908] 2 Ch 248.
Although section 6 of the Trustee Act may provide the trustee with the power to sell the home property, the question arises whether the provision provides authority to purchase a smaller or otherwise more suitable dwelling for the benefit of Mr Graham, or purchase something in the nature of a right of tenure in a nursing home. The statutory power to invest has generally been treated as power distinct from that to purchase property[7] and as earlier noted, the meaning of “invest” does not generally authorise the purchase of a house in order for beneficiaries to live in. Section 6 is not sufficient to rely on as a source of authority for Public Trustee to purchase an alternative residence for Mr Graham, particularly having regard to the fact that this power is expressly provided by section 12 of the Trustee Act.
[7] Snow & Ellis v Attorney-General (SA) & Public Trustee (1989) 51 SASR 330 at 335 (White J)
As noted above, section 12 was inserted by the Trustee (Investment Powers) Amendment Bill. The availability of this section is “subject to the instrument creating the trust”. Clause 5 does not contain any express prohibition. Although counsel for Ms Browne contended that the operation of section 12 is fettered as it is “subject to” the life estate provided by clause 5, this contention is of limited weight. The alternative contention is compelling - that the clear intention of the deceased to provide for the maintenance of Mr Graham implicitly encourages the utilisation of the powers provided in section 12.
Clause 5 empowers the trustee to use its investment powers in respect of the trust fund to provide accommodation suitable for Mr Graham’s needs while he is capable of independent living. The plain language of the clause does not limit this to the home property. As a consequence, section 12 provides statutory power to the Trustee to either purchase another form of residence or alternative arrangement for the benefit of Mr Graham.
In Garrett v Yiasemides,[8] Campbell J discussed the New South Wales section equivalent to section 12 of the Trustee Act and its relationship with the general power of investment:[9]
[8]    Garrett v Yiasemides [2004] NSWSC 828.
[9]    Garrett v Yiasemides [2004] NSWSC 828 at [19]-[20].
The power conferred by cl 8 of the will is one which, possibly, might not extend to permit the trustees to purchase vacant land, and to then erect a house on it, at least in circumstances where the trustees did not have an assurance that the costs of construction could all be met. However, the powers of the trustees of the estate (and it appears, on the evidence, that they are now trustees) include the powers of investment arising under the Trustee Act 1925. There was a radical change in policy concerning which investments are permissible for trustees to make, which was effected by the enactment of the Trustee Amendment (Discretionary Investments) Act 1997. That Act, which commenced on 13 March 1998, made amendments to the investment provisions of the Trustee Act 1925. In broad and excessively simple terms, a trustee may, since the commencement of that Act, invest trust funds in any form of investment, provided that the trustee is prudent in so doing, and observes any specific restrictions or obligations in the trust instrument. The trustee is also under a specific duty to have regard to a list of factors set out in s 14C Trustee Act 1925. 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.
This section is one which was enacted to overcome the decision of Helsham J in In the Will of Sherriff [1971] 2 NSWLR 438. It is wide enough to authorise the trustees investing trust moneys in the purchase of a fractional interest in the land, and in advancing the money towards the erection of a house on it, to secure for a beneficiary a right to use the house as a residence, provided always that in so doing the trustees observed their obligations of prudence. It is not clear, on the evidence before me, as to whether the obligation of prudence has or has not been observed in making this particular expenditure of trust money. In the circumstance where I am now proposing to leave the existing trustees of the will as trustees, if it were to happen that there had been a departure from prudence in allowing the investment to be made in the first place, this is a matter concerning which Grace might possibly have a remedy if she were to suffer loss in consequence.
(emphasis added)
In light of the authority conferred on Public Trustee pursuant to section 12 to purchase a house or enter into arrangements for the benefit of Mr Graham, section 28B empowers the trustee to raise the required monies to exercise the power under section 12, through the sale of the home property.
One further matter
Public Trustee sought direction as to whether the Will grants Public Trustee discretion to determine whether Mr Graham is capable of independent living or in need of financial support.
It is convenient to first address the phrases “cessation of independent living” and then consider “no longer requiring financial support”. As earlier observed, counsel agreed as to the meaning of both of these phrases.
The submissions of counsel that “cessation of independent living” ought to be given its ordinary meaning, have weight. As observed by counsel, if Mr Graham lived in a form of accommodation where he was largely responsible for the basics of ordinary living and largely self-sufficient, this would not be cessation of independent living. Whether Mr Graham is capable of independent living is a matter of assessment from time to time. It is the duty of Public Trustee to make such assessment, having regard to factors such as the degree of self-sufficiency of Mr Graham and the degree of his mobility, and in particular the degree of care or assistance required.
The contentions advanced by counsel in relation to the phrase “no longer requiring financial support” also have weight. Public Trustee has an obligation to make enquiries of Mr Graham from time to time, to ascertain and assess his financial position. If the independent assets of Mr Graham were sufficient to provide accommodation and maintenance at his own expense, this would terminate the entitlement under clause 5 of the Will.
Absent matters that may raise concerns or put Public Trustee on enquiry, the statutory declaration provided by Mr Graham as to his financial position constitutes a sufficient basis for a determination that Mr Graham remains in need of financial support from the estate.
These provisions apply whilst Mr Graham is capable of independent living. As outlined in clause 5, Mr Graham’s entitlements under the Will come to an end on his death, the cessation of independent living, or when he no longer requires financial support, or upon his written declaration.
Conclusion
Public Trustee has sought advice and direction of the Court on a number of matters:
·The composition of the trust fund created by clause 5 of the will and in particular whether the trust fund comprises all of the assets of the estate.
The trust fund comprises all of the assets of the estate, including the home property.
·The factors upon which operation of the trust fund shall be terminated such that the residue shall pass to the residuary beneficiaries.
The entitlement of Mr Graham is to come to an end on his death or the cessation of independent living, or when no longer requiring financial support, or on his written declaration.
·Whether the Will grants Public Trustee the discretion to determine whether Mr Graham is:
-Capable of independent living
-In need of financial support
·What factors Public Trustee ought to take into account in exercising any such discretion.
-Whether the statutory declaration of Mr Graham constitutes sufficient basis for a determination that Mr Graham remains in need of financial support from the estate.
Public Trustee is under a duty to assess from time to time whether Mr Graham is capable of independent living and whether he is in need of financial support. With respect to whether Mr Graham is capable of independent living, Public Trustee is to have regard to factors such as the degree of self-sufficiency of Mr Graham and the degree of his mobility, and in particular the degree of care or assistance required. In regard to whether Mr Graham remains in need of financial support, Public Trustee is to assess whether the independent assets of Mr Graham are sufficient to provide accommodation and maintenance at his own expense. As noted, absent matters that may raise concerns or put Public Trustee on enquiry, the statutory declaration provided by Mr Graham as to his financial position constitutes a sufficient basis for a determination that Mr Graham remains in need of financial support from the estate.
· Whether the will permits Public Trustee to convert estate property, and in particular the Salisbury Downs property, in order to purchase alternative accommodation for Mr Graham.
Clause 5 of the Will provides the Trustee with power to sell that property and purchase alternative accommodation or enter into a maintenance arrangement suitable for the needs of Mr Graham whilst he is capable of independent living. Additionally and in the alternative, sections 12 and 28 of the Trustee Act authorise the Trustee to sell the home property and purchase an alternative “dwelling-house” or enter into an appropriate maintenance arrangement.