Michael v Callil - [1945] HCA 39

MICHAEL

CALLIL AND OTHERS

RESPONDENTS.

PLAINTIFFS AND DEFENDANTS,

ON APPEAL FROM THE SUPREME COURT OF Will-Trust for conversion-Pow to postpone-Residuary personality--Wasting

asset-Income or capital-Apportionment-Rule in Howe v. Lord Dartmouth- Assignment to testatrix by beneficiary under another will of right to receive income for life.

By her will M. specifically bequeathed certain chattels and devised and bequeathed the whole of her real and the residue of her personal estate (there- after in the will referred to as "my trust estate ") to her trustees on trust to distribute personal effects as directed, and to convert into money such part of the estate as should be required to pay debts, &., and certain legacies specified. The will then set out the legacies and a specific devise. It directed the trustees to stand possessed of "the rest and residue of my trust estate in trust to convert the same into money and after payment of debts, &., to invest the proceeds in securities authorized by law and to accumulate the income therefrom during the lifetime of W. (clause 11). It empowered the trustees "notwithstanding the directions to accumulate contained in clause 11

if they in their absolute discretion think fit so to do to advance out of the income of my residuary trust estate" during the life of W. stipulated maximum weekly sums (amounting in all to £18 a week) for the maintenance benefit and welfare of W.'s wife, a granddaughter and a grandson, and such sum as in their discretion they thought fit for the maintenance and benefit of W. during his life and directed the trustees to invest all income not 80 applied in authorized securities (clause 12). It directed the trustees on the death of W. to stand possessed of my residuary trust estate," subject to the payment of £5 a week to W.'s widow, upon trust for life tenants and remaindermen. It empowered the trustees to postpone conversion " of

72 CLR 510

my trust estate or any part thereof for such period as they shall in their absolute discretion think fit" and to " retain my trust estate in the same investments in which it is invested at the date of my death." M.'s husband, A., had predeceased her leaving a will by which he left his residuary estate on trust to pay the income thereof to M. for life and after her death to their son, W., for life. W. survived M. During M.'s life W. had become bankrupt, and M. had purchased from his trustee in bankruptcy his future life interest in A.'s estate. This interest was the most valuable asset in her estate; apart from it the estate had no substantial source of income. The periodical payments received by M.'s trustees on account of W.'s life interest were treated by them as income of M.'s residuary estate and applied accordingly. Otherwise the income of the estate would not have been sufficient for the payments contemplated by clause 12 of the will.

Held,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Michael v Callil

Details

AGLC: Michael v Callil [1945] HCA 39
Case: [1945] HCA 39
Decision Date: 13 December 1945

CaseChat Overview and Summary

The case of *Michael v Callil* concerned an appeal from the Supreme Court of Victoria regarding the administration of a deceased estate. The primary dispute involved how the trustees of the estate should treat periodical payments received from another estate, specifically the life interest of the deceased's son, Wadya, in his late father's residuary estate, which the deceased had purchased during her lifetime. The appellant argued that these payments constituted income of the deceased's estate and should be applied as such, while other parties contended they were capital and required apportionment.

The central legal issue before the High Court was whether the periodical payments received by the testatrix's trustees from her late husband's estate, pursuant to an assignment of her son Wadya's life interest, constituted "income" of the testatrix's residuary trust estate as contemplated by her will, or if they were capital that required apportionment between income and corpus. This question necessitated an examination of the testatrix's will, particularly clauses concerning the conversion of her estate, the accumulation and distribution of income, and the powers granted to her trustees, in light of established equitable principles governing the administration of trusts with successive beneficiaries, such as the rule in *Howe v. Lord Dartmouth*.

The majority of the High Court, comprising Rich, Starke, Dixon, McTiernan, and Williams JJ., held that the moneys received by the trustees on account of Wadya's life interest were to be considered "income of my residuary trust estate" within the meaning of clause 12 of the will. Consequently, these moneys were properly applied by the trustees in accordance with the provisions of that clause, without the need for apportionment as would typically be required if the rule in *Howe v. Lord Dartmouth* or *In re Chesterfield's (Earl) Trusts* were applicable. This decision effectively varied the order of the Supreme Court of Victoria, which had determined that apportionment was necessary. Latham C.J., however, dissented, opining that the moneys were capital in the hands of the testatrix's trustees and that the case warranted the application of the rule in *In re Chesterfield's (Earl) Trusts*.

Orders