Michael v Callil

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*.