Pedley-Smith v Pedley-Smith

[1953] HCA 27

Foil p

ACTfelo

(2001)79 SASR331

88 C.L.R.]

OF AUSTRALIA.

177

[HIGH COURT OR AUSTRALIA.]

PEDLEY-SMITH AND OTHERS . . .

A p p e l l a n t s ;

D e f e n d a n t s ,

AND

PEDLEY-SMITH AND ANOTHER

R e s p o n d e n t s .

P l a in t if f a n d

D e f e n d a n t ,

ON APPEAL FROM THE SUPREME COURT OF

NEW SOUTH WALES.

Power of appointment— Will— Special power to beneficiary to appoint in favour

H. C. OF A.

of her “ issue ”— Adopted children— Power exercised in their favour— Power

1953.

created before but exercised after adoption— Validity and effectiveness of exercise

Sy d n e y ,

of power— Objects of power— Possibility of unborn children qualifying by birth—■

Future rights— Propriety of determining the question— Child Welfare Act, April

24,

1939-1952 (N.S.W .) [No. 23 of 1939—AM. 9 of 1952), s. 168.*

May 8.

Dixon C.J.,

Where a special power of appointment is created in favour of a beneficiary to appoint to her “ issue ”, and the beneficiary subsequently adopts children

Williams,

Webb, Pullagar and

and appoints in their favour, the appointment is not a valid and effective Taylor JJ.

exercise of the power.

The proj)riety of determining a question relating to future rights under the exercise of a pow'er of appointment, having regard to the possibility of children coming into existence who qualify by birth and not adoption as objects of the power, discussed.

Decision of the Supreme Court of New South Wales {Roper C.J. in Eq.) affirmed.

A p p e a l from the Supreme Court of New South Wales.

By his will, dated 2nd March, 1934, Arthur Dolby Pedley (here­ inafter called “ the testator ” ) provided, inter alia, that the residue of his estate should be held upon trust for certain beneficiaries in varying shares. One of these beneficiaries was the appellant,

Cecelia Grace Mary Macky Pedley-Smith.

The testator, in cl. 11,

then declared :—“ that any gift of any share in my residuary trust

* The provisions of this section are set out on pp. 178, 179 {post).

VOL. LXXXVIII.—12

178 HIGH COURT

[1953.

H.C. oy A.fund shall not vest absolutely in any beneficiary named but shall be

1953.retained and invested by my Trustees upon the following trusts

P e d l e y -

namely :—

Smith

(a) The income thereof shall be paid to the beneficiary named

V.

P e d l e y -during his or her life and where such beneficiary is female for her Sm it h .separate use during coverture and without power of anticipation.

(b) From and after the decease of such beneficiary the capital and the income thereof shall be held upon trust for such one or more of his or her issue immediate or remote born before the expira­ tion of twenty one years after his or her death as he or she may by deed with or without power of revocation and new appointment or by will or codicil appoint.

(c) In default of any such appointment or in so far as any such appointment may not extend such capital and income shall be held upon trust for all the children or any the child of such beneficiary who attain the age of twenty one years and if more than one equally between them as tenants in common.

(d) If after the death of such beneficiary such share shall not vest absolutely in some person or persons under the preceding trusts then after the death of such beneficiary such share shall be held in trust for such person or persons as such beneficiary shall by Will or codicil appoint and in default of appointment in trust for such beneficiary’s next of kin according to the Statutes of Distri­ bution as if such beneficiary had died intestate—”

On 9th February, 1935, the testator made a codicil to his will, but its terms are not relevant to this report. The testator died on 12th February, 1935.

By Order of Adoption, dated 13th May, 1941, made under the provisions of the Child Welfare Act 1939-1940 (N.S.W.) the appellant, C. G. M. M. Pedley-Smith and her husband adopted the other two appellants, both of whom were born on 10th July, 1940. By deed of appointment, made on 22nd September, 1949, C. G. M. M. Pedley-Smith purported to exercise the special power of appointment vested in her by the will of the testator in favour of her two adopted sons. The adopting parents had no natural children.

Section 168 of the Child Welfare Act, 1939-1952, provides ;— “ When an order of adoption is made, for all purposes civil and criminal, and as regards all legal and equitable rights and liabilities, the adopted child shall be deemed to be a child of the adopting parent, and the adopting parent shall be deemed to be a parent of the adopted child, as if such child had been born to such adopting parent in lawful wedlock, and the order of adoption shall terminate

88 C.L.R.] OF AUSTRALIA.

179

all rights and liabilities existing between the child and his natural

parents other than the right of the child to take property as heir

or next of kin of his natural parents or of their lineal or collateral

P e d l e y -

kindred :

Sm ith

V.

Provided always that such adopted child shall not by such adoption—

P e d l e y -

Sm it h .

(a) acquire any right, title, or interest in any property under any deed, will, or instrument whatsoever made or executed prior to the date of such order of adoption unless it is expressly so stated in such deed, will, or instrum ent;

(b)

be entitled to take any property limited to the heirs of the body of the adopting p aren t;

(c) be entitled to take any property as next of kin to any lineal

or collateral kindred of the adopting p aren t;

(d)

be entitled to take any property as next of kin to any child of the adopting parent.”

On 6th September, 1950, the trustee of the will of the testator took out an originating summons in the equitable jurisdiction of the Supreme Court of New South Wales for the determination of the following question :—“ Whether upon the true construction of the Will and Codicil of the (testator) and in the events which have happened the Deed of Appointment made the twenty second day of September One thousand nine hundred and forty nine by the said Cecelia Grace Mary Macky Pedley-Smith purporting to exercise in favour of the abovenamed infant defendants the special power of appointment conferred upon her by sub-clause (b) of clause 11 of the said Will is a valid and effective exercise of the said power.” The appellants and a person to represent the next of kin of C. G. M. M. Pedley-Smith were named as defendants. On 14th August, 1952, the Supreme Court {Roper C.J. in Eq.) gave judgment, answering the question submitted in the negative.

From this decision appeal was taken to the High Court.

G. E. Barwick Q.C. (with him N. H. Bowen) for the appellants. The question is whether the appointees by the adoption have acquired any right in any property under any instrument executed prior to the order for adoption. The matters excluded from the early words of s. 168 of the Child Welfare Act 1939-1952 (N.S.W.) are things happening by the adoption itself. What the adoption must effect is an acquisition : it must be a right in property : it should be under a deed executed prior to the date of the order for adoption. The adopted children did not acquire the right by adop­ tion, and, for the purposes of s. 168, the property passes under the

180 HIGH COURT

[1953.

H. C. OF A, deed of appointment, and not by the will. For some purposes 195;?.appointments are read into the will creating the power, but

P e u l e y -there is authority to say that this is not done where the question

iSm it ii

arises as to which instrument it is under which the property passes.

V.

I’edley-The adoption brought the children into the class of “ issue ” for the })iirposes of cl. 11 (b) of the will. By the adoption they woultl also l)Ccome “ children ” within the meaning of cl. 11 (c). By entering the class of “ issue ” within cl. 11 (b) they acquired no right, title, or interest in any property, because the objects of a special power have no interest until the appointment takes place. By entering the class of children within cl. 11 (c) they did acquire a contingent interest in property : s. 168, proviso (a) would be effective to preclude their enjoying that property. The objects of a special power have no interest, no property, until the exercise of the power : Duke of Marlborough v. Lord Godolphin (1) ; Muir v. M uir (2) ; Re Dowie’s Will Trusts (3). Roper C.J. in Eq. asked whether the adopted children could have become entitled to the property without the adoption. That is not the correct construction of the section. I t could be said that they took the property by the appointment, because without it they would not have been entitled. If the legislature was thinking of interests which arose only because of a past event, this situation is outside the purview of the legislation. If there is a power of appointment wide enough, to include adopted children, then the legislature is satisfied to say that when the appointor exercises the power after the adoption he can decide whether he will appoint to the adopted children or not. The legis­ lature directs the provisos in s. 168 to closed situations into which the adoption projects the adopted child, and gives him an interest without more.

[D ix o n C.J. : The creation of a special power of appointment gives the appointees some rights, e.g., that the power be exercised bona fide. They may have no rights in property. Have they a locus standi to complain of a breach of trust ?]

The standing or interest to approach the court is not a “ right, title, or interest in any property.” If the legislature wanted to exclude this case they could have used a phrase such as “ entitled to acquire ”, as in provisos (b), (c) and (d). Proviso (a) is distinct from the other cases. The exclusion should be read narrowly because it is an exclusion from a wide principle. Clause 11 (c) of the will creates a contingent interest in the children’s children.

(1) (1750) 2 Ves. 61, at p. 78 [28

(2) (1943) A.C. 468, at pp. 476-478,

E.R. 41, at p. 52j.

480, 483 et seq.

(3) (1949) Ch. 547, at pp. 552-554.

88 C.L.R.] OF AUSTRALIA.

181

[D ixon C.J. ;

The power is for the benefit of children or remoter

issue. The gift over on default is to grandchildren. Would the

1953.

Act exclude children of adopted children from the gift over ?]

P e d l e y -

Sm ith

Children, when they come into existence, attain an immediate interest by virtue of cl. 11 (c). Assume that when the interest

V.

P e d l e y -

arises on the exercise of the power it arises under the w ill; neverthe­

Sm it h .

less these children did not by the adoption acquire an interest in property. The appointor can make the choice of including the adopted children or not. Further, for the purposes of this section, the interest of the appointees is not an interest under a deed executed prior to the order for adoption: Pte Rush; Warre v. Rush (1) ; Re Dickinson’’s Settlements ; Bickersteth v. Dickinson (2) ; in Re De La Bere’s Marriage Settlement Trusts ; De La Bere v. Public Trustee (3) the grant was such a one as to be covered by the power. So here. There is a discretion delegated by the testator as to whether the adopted children take or not. The policy of the Act is that instruments executed before the adoption should not be upset by the intrusion of the adopted children. If the power in the will is construed as wide enough to include adopted children, then it cannot be said that the testator did not intend that they should take.

[Fullagab J . : If the gift were £1000 to the children of Grace, that would not include adopted children, by virtue of proviso (a). Is not the principle the same if the testator gives a power of appoint­ ment 1]

No. He leaves someone to exercise the discretion. In re Fletcher; Barclays’ Bank Ltd. v. Living (4) does not apply, because there is no evidence as to the possibility of issue. In re De La Bere’s Marriage Settlement Trusts (5) is authority for the proposition tha t the interest arises under the appointment. Muir v. Muir (6) and Re H off; Carnley v. Hoff (7) are directed to specific statutory words, e.g. “ in virtue of ” . In re B atty ; Public Trustee v. Bell (8) is explicable on the ground that the court thought that the trusts there set up were set up before the Act, and that the Act should be confined to trusts created after i t : Re Leigh’s Marriage Settlement; Rollo v. Leigh (9). These cases would say that within the meaning of proviso (a) the right of the adopted children to the property arises under the deed of appointment.

(1) (1922) 1 Ch. .302, a t p. 308.(6) (1943) A.C. 468.

(2) (1939) Ch. 27, a t p. 30.(7) (1942) Ch. 298.

(3) (1941) Ch. 443, a t p. 447.(8) (1952) Ch. 280, a t pp. 283, 284.

(4) (1949) Ch. 473.(9) (1952) 2 All E.R. 57, at pp. 59-60.

(5) (1941) Ch. 443.

182 HIGH COURT

[1953.

H.C. or A.[Dixon C.J. referred to Attorney-General v. Chapman (1); Charlton

1953.V. Attorney-General (2) ; Attorney-General v. Smythe (3); and

Pedlet-

Attorney-General v. Floyer (4).]

Sm ith

In each case some statutory provision would be under considera­

V.

Pedley-

tion. lie Hoff (5) does not affect this case. Section 168 has a

tSMITIf.counterpart in the Infants Act, 1908-1952 (N.Z.), s. 21. See Birhs, Legal Relationship of Parent and Child, 1st ed. (1952), Ch. X, at pp. 237, 265 et seq., and p. 272 for amendments to the section. Adopted child is “ issue ”. In re a Deed of Trust; Peddle v. Beattie (6) ; Re Kingi ; Thompson v. Kingi (7) ; Re Stevenson ; Public Trustee v. X (8) ; Re Allen ; Miller v. Allen (9); Re James (10). Section 168 does not say that the adopted children could not have any interest in any existing document.

K. S. Jacobs, for the respondent next of kin. I t is not contested that “ issue ” in a will can include adopted children in a proper case, but apart from s. 168 of the Child Welfare Act 1939-1952 (N.S.W.) they could not be “ issue”. They cannot be “ issue” because of the application of part only of the section, but because of the application of the whole of it. They could not be “ issue ” in a will where to give that construction would not be to give effect to the proviso of s. 168. The special power is not wide enough to include adopted children. The purpose of s. 168 is to leave unaffected the devolution of interests or of property indicated in instruments already in existence at the date of adoption. If there is a gift to a class, to add to the class is to alter the devolution, and equally so where there is a power to choose between members of a class. I t is not necessary to consider whether the interest has vested under the will apart from the power of appointment. The question is merely whether an indicated class in an earher document was intended to be altered in any way by the act of adoption. [He referred to In re Pearson; Equity Trustees Executors & Agency Co. Ltd. V. Michaelson-Yeates (11).] The Adoption of Children Act 1920-1945 (Tas.), has terms of similar import. The New Zealand decisions have to be read in the light of the proviso in the N.S.W. and Tasmanian sections. “ By such adoption ” means “ by reason

or by virtue of such adoption ” .

I t does not mean “ by the act

(1) (1891) 2 Q.B. 526, at p. 633.(7) (1937)

N.Z.L.R. 1025.

(2) (1879) 4 App. Cas. 427.(8) (1944) N.Z.L.R. 301,

(3) (1862) 9 H.L.C. 497 [11 E.R. 823].(9) (1948) N.Z.L.R. 1235.

(4) (1862) 9 H.L.C. 477 [11 E.R. 814].(10) (1937) 39 W.A.L.R. 113.

(5) (1942) Ch. 298.(11) (1946) V.L.R. 356, at p. 362.

(6) (1933) N.Z.L.R. 696.

88 C.L.R.] OF AUSTRALIA.

183

H. C. OF A.

of adoption at the time of adoption

If “ by such adoption ”

were left out of the section, the legislature’s intention would not

1953.

be evidenced. The same applies to provisos (b), (c) and (d). In

P e d l e y -

proviso (d), if the adopting parent were the grandparent, it would

Sm ith

V.

be possible for the adopted child to take an interest as the next of P e d l e y -

kin of the child of the adopting parent, if the words “ by such

Sm it h .

adoption ” were not included.

Also, children by the act of adoption

could be excluded from other successions open to them. Roper C.J. in Eq. tested it by saying that if you find that the sine qua non of taking is the act of adoption, then the taking is “ by such adoption ” . If the adoption is part of the chain of causation, then the taking is “ by such adoption ” .

[T a y l o r J. :

Proviso (a) would apply to a will even though the

testator was still alive.]

There is no obligation on a testator to change his will unless he wants to include the adopted children. This makes it clear that “ by such adoption ” does not refer to the act of adoption acquiring the interest. If the adoption takes place before the death of the testator, the adoption does not create any interest in the adopted child at a l l ; the will could be altered. If the appellants’ argument is correct, the adopted child would take, because the adoption did not create a right, title or interest, but only a spes successionis. The section was not to affect any instrument in which the maker had not addressed his mind to the question. The appellants disclaimed the idea of time in their argument, but if no element of time is introduced into it, the argument is not open. “ By such adoption acquire ” must refer to one of two things : any element in the chain of causation, or one particular element in the chain—- time.

[T a y l o r J. :

The only way property can be acquired “ by such

adoption ” is by virtue of this section. The proviso was not included

to protect the adopted child.]

Yes. Adoption is a continuing state, in which the child remains. The appellants’ second main argument was that the interest of the adopted children was acquired not under the will, but under the deed of appointment exercising the power. The considered opinion is to be found in Muir v. Muir (1). Lord Romer distinguishes between the act of the interest arising and the instrument under which the interest is taken (2). The interest taken under a special power of appointment is taken under the original instrument (3). The case cannot be distinguished on the basis that it dealt with a

(1) (1943) A.C. 468.(3) (1943) A.C., a t p. 483.

(2) (1943) A.C., at p. 481.

184 HIGH COURT

[1953.

H.C. OF A.case arising on the rule against perpetuities. In the later cases

1953.the exact words seem to have been given a different meaning where

P e d l e y -they appear in English Acts : see

Muir v. Muir, per Lord ThanJeerton

yMlTlI

(1), per Lord Wright (2). Any of the other decisions must be read

V.

Pedlev-

as decisions on the particular words involved, and not as derogating

SjUTlI.from the main principle as enunciated by Lord Romer. The wmrd “ arises ” in the section considered in Re Dickinson's Settlements (3) must be given its full effect if the case is to stand with Muir v. Muir (4). I t has no relevance in deciding under what in s t ru m ent the interest comes into existence. Re De La Bere’s Marriage Settlement Trusts (5) can also be distinguished. Simonds J. held that he could apply Re Dickinson’s Settle^nents (3), in which the word was “ arises ”. Re De La Bere’s Marriage Settlement Trusts (5) may not be an authority after Muir v. Muir{T). Re Batty {Q) and Re Leigh’s Marriage Settlement (7) are difficult to distinguish. In the one case, the main rule stated by Lord Romer is applied, and in the other, on language not dissimilar, the opposite decision is given; Re Leigh’s Marriage Settlement (7) may possibly be distinguished. The words in the proviso to the Act there in question were :—“ limitations or trusts created by an instrument coming into operation after the conmiencement of this Act.” There is a difference in language in the two cases. If they cannot be dis­ tinguished, then In re Batty (6), applying Muir v. Muir (4), must be preferred to the others. Where the moment of time is the factor to be considered in regard to the coming into existence of the interest, then the time of execution is the relevant time, and where words appear such as “ arising ”, “ created by an instrument ”, they refer to the execution of the power. If the chain of causation, and not time, is the relevant factor, then the original instrument is important, not the execution of the power. There is no reference to temporal content in Muir v. Muir (4). The effect of Evans v. Jennings (8) is that property obtained through the exercise of a special power of appointment is not acquired under that power, but under the instrument creating that power. The appellants sought to distinguish between the wording in proviso (a) and that in (b), (c) and (d), in that the latter do not refer to “ acquiring

The difference in wording is of little significance. The meaning would have been the same if the words in (a) had been used in the other provisos.

(1) (1943) A.C., at p. 477.(6) (1952) Ch. 280.

(2) (1943) A.C., a t p. 480.(7) (1952) 2 AU E.R. 57.

(3) (1939) Ch. 27.

(8) (1862) 1 Xe^v Rep. 178 [135 R.R.

(4) (1943) A.C. 468.931].

(5) (1941) Ch. 443.

88 C.L.R.] OF AUSTRALIA.

185

B. B. Riley, for the respondent trustee, adopted the argum ent of H. C. of A.

K. S. Jacobs, in the interests of possible unborn children.

,

P e d l e y -

Sm ith

G. E. Banvich, Q.C., in reply. To say that the policy of the section

V.

is to prevent any alteration in the devolution of property is to

P e d l e y - Sm it h .

substitute a vague phrase for the words of the section.

Adding to

the class of objects does not alter the devolution. The words in the Tasmanian and New Zealand sections would equally allow appoint­ ment to adopted children after the adoption, where the power was derived from an antecedent instrument. “ Would devolve ” is not the equivalent of “ might devolve ” , which the respondent must say it means. Where a person is adopted in the lifetime of the testator, he would be precluded by proviso (a) from a gift which automatically attached to him by the adoption. There are two views as to the meaning of the phrase “ by such adoption ” : (1) I t may mean by such order of adoption with its statutory consequences, or (2) by becoming the natural child of the adopting parent. By becoming a child of the adopting parents the adopted child acquired a vested interest in the gift over by virtue of cl. 11 (c) ; by 11 (b) he entered the class of objects of the power, and by doing so he acquired nothing. The question is not resolved

by asking whether the adoption is a sine qua non.

So is the birth

of the child. Re Pearson (1) does not touch this case. I t cannot be said to be true that for all purposes the execution of the power has to be read into the instrument creating the power. The cases fairly uniformly take the instrument of adoption as the significant one, except for Re Batty (2). In Re De La Bere’s Marriage Settlement Trusts (3) it is taken even further.

The statute is not concerned so much about a theory or a principle —it looks at a state of affairs and says that it is such a situation that it is improper to project an adopted child into it. In Evans V. Jennings (4), which, if anything, supports the appellants, the Vice-Chancellor did not resort to abstract principle, but took note of the facts and circumstances of the case. In the revenue cases the statute required the appointor to be regarded as in succession. Attorney-General v. Chapman (5) depended upon the special words in the statute in question.

Cur. adv. vult.

(1) (1946) V.L.R. 356.

(4) (1862) 1 New Rep. 178 [135 R.R.

(2) (19.52) Ch. 280.

931].

(3) (1941) Ch. 443.

(5) (1891) 2 Q.B. 526.

186 HIGH COURT

[1953.

H. C. OP A.

The Court delivered the following written ju dgm en t:—

1953.The question lor decision in this appeal is whether adopted

Ppnr.Er-children may take under an a])pointraent made after their adoption

Smith

in the exercise of a special power of appointm ent created before

V.

P edi.e y -th a t event, the objects of the special power being the “ issue ”

Sm ith .

of the adoptive parent.

May 8.The special power of appointment is created by the will of Arthur

Dolby Pedley who died on 12th February, 1935. By his will he declared trusts of specified shares of the residue of his converted estate in favour of certain beneficiaries one of whom is the appellant Mrs. Pedley-Smith. His will proceeded to settle the shares of the several beneficiaries by a provision applying to all the shares. Each share was settled upon trusts to pay the income to the bene­ ficiary for life and after his or her death to hold the capital and interest thereof “ upon trust for such one or more of his or her issue, immediate or remote, born before the expiration of twenty-one years after his or her death as he or she may by deed . . . or will . . . appoint In default of appointment there was a trust for the child or children of the beneficiary who should attain twenty-one, if more than one as tenants in common in equal shares. Finally, if after the death of the beneficiary the share should not vest absolutely in some person or persons (in other words if there were not children attaining twenty-one) the share should be held for such persons as the beneficiary might appoint under a general testamentary power of appointment and in default of any such appointment in trust for the beneficiary’s next of kin. Since it is the share of Mrs. Pedley-Smith that is in question, in the appli­ cation of the special and general powers she is the donee upon whom the powers are conferred, it is her issue who are the objects of the special power, and her children who are to take in default of appoint­ ment under the power. In point of fact Mrs. Pedley-Smith has had

no children.

But by an adoption order, made on 13th May, 1941,

under the provisions of the Child Welfare Act 1939-1940 (N.S.W.), she and her husband adopted twin boys who were born on 10th July 1940. On 22nd September, 1949, Mrs. Pedley-Smith executed a deed of appointment in purported exercise of the special power. By the deed she appointed that after her death her share under the will should be held upon trust for such of the two adopted sons as should be living at her death, if more than one equally between them. If either died in her lifetune leaving issue living at her death, then such issue should take per stirpes the share which the adopted son so dying would have taken if he had been living at her death. If the adoption brought the adopted sons within the class of objects

88 C.L.R.] OF AUSTRALIA.

187

of the special power, it is not denied that this exercise of the power

H. C. OF A.

1953.

would be valid.

The question whether as a result of the adoption

they did become objects in whose favour the special power might P e d l e y -

be exercised was raised by an originating summons issued by their

Sm ith

V.

adoptive father as one of the trustees of the will of Arthur Dolby P e d l e y -

Pedley deceased. The summons came before Roper C.J. in Eq., Sm it h .

who decided that the adoption did not have this effect and declared

Dixon C.J. Williams J.

that the deed was not a valid and effective exercise of the power of

Webb J. Fiillagar J.

appointment. From this decision the present appeal is brought.

Taylor J.

I t win be seen tha t the question relates to future rights. Nothing appears as to the possibility of children coming into existence who qualify by birth and not adoption as objects of the power. If there be such a possibility, a decision in favour of the validity of the appointment that has been made would exclude the rights of a class who may, but have not yet, come into being. If there be no such possibility the question, as Roper C.J. in Eq. pointed out, really relates to the availability to Mrs. Pedley-Smith of the special, rather than the general, power of appointment, for the purpose of appointing her shares to her adoptive sons. The distinction is of great importance both for the purposes of New South Wales death duty and of Commonwealth estate duty, and that no doubt is why the question is propounded during the life of Mrs. Pedley- Smith.

A party was appointed to represent her next of kin who under the trusts of the testator’s will would take in default of children and in default of the exercise of the general power of appointment. This representation proved adequate in fact, however tenuous is the interest of the next of kin in the question at issue. But never­ theless the propriety of determining the question in the present state of affairs is open to doubt. I t is a matter upon which it will be enough to refer to In re Staples ; Owen v. Owen (1), and In the Will o f Sayer (2), where the considerations affecting such a question are discussed. Roper C.J. in Eq. was alive to the difficulty. His Honour said : “ There is . . . no doubt tha t in many respects the question is premature and its submission at this stage has some unsatisfactory features because of that. No objection has been taken to it being decided. In fact, all parties seek a decision upon it in this suit, and I think, though with some doubt, that there is sufficient present materiality in it to permit the Court to decide it, so that the first-named defendant will know whether the deed of appointment, so far as the trusts declared under it come into operation, has exhausted her power to appoint.”

(1) (1916) 1 Ch. 322; 114L.T.682.

(2) (1921) V.L.R. 95.

188 HIGH COURT

[1953.

H.C. OF A.In the result the conclusion which his Honour reached could

1953.prejudice no unascertained interest. As we are of opinion that

I ’e d lis y -this conclusion is correct, we shall no doubt be safe enough in

Sm it h

following the course the learned judge took of acceding to the desire

V.

P ehley-

of the parties and deciding the matter.

yMITU.The question whether the two adoptive sons can take under the Dixon C..T.

appointment made in the purported exercise of the special power

Williams J.

Webb J.

is governed by s. 1G8 of the Child Welfare Act 1939-1952 (N.S.W.).

lOillagni' J.

Taylor J.The first part of that section provides that when an order of adoption

is made, for all purposes, civil and criminal, and as regards all legal and equitable rights and liabilities, the adopted child shall be deemed to be a child of the adopting parent, and the adopting parent shall be deemed to be a parent of the adopted child, as if such child had been born to such adopting parent in lawful wedlock. On this part of the section it is said that the two adopted sons are “ issue ” and so become objects of the special power. That in law an adopted child must be considered the “ issue ” of the adopting parent has been decided in New Zealand under a similar provision : In re a Deed of Trust; Peddle v. Beattie (1) ; In re Btevenson; Public Trustee v. X (2) (cf. In re Kingi ; Thompson v. Kiyigi (3), where Myers C.J., as it seems, reserved the question for future consideration).

No doubt logic appears to require that if you “ deem ” a child to be born to a man or woman you must deem the child to be his or her issue. But the section is subject to a proviso which qualifies the effect of the “ deeming ”, and it is upon that proviso that the question really turns whether the two adopted children can take under an exercise of the special power. Before the proviso, however, there is another clause which should be mentioned, although it has no direct application to the case. What it says is that the order of adoption shall terminate all rights and liabilities existing between the child and his natural parents other than the right of the child to take property as heir or next of kin of his natural parents or of their lineal or collateral kindred. Then comes the proviso in four lettered paragraphs. I t is par. (a) that directly governs the question, and it is necessary to set it out ; “ Provided always that such adopted child shall not by such adoption—(a) acquire any right, title, or interest in any property under any deed, will, or instrument whatsoever made or executed prior to the date of such order of adoption unless it is expressly so stated in such deed, will, or instrument.”

(1) (1933) N.Z.L.R. 696.(3) (1937) N.Z.L.R. 1025, at p. 1029.

(2) (1944) N.Z.L.R. 301, at pp. 312­

88 C.L.R.] OF AUSTRALIA.

189

H. C. OF A.

The appointment could not result in the adopted sons acquiring an interest in the share of Mrs. Pedley-Smith except “ by such adop­

1953.

tion ” . For except “ by such adoption ” they could not qualify

P e d l e y -

as “ issue ” so as to be objects of the power. I t is only because,

Sm ith

V.

under the first part of the section, the adoption makes them her P e d l e y -

children that they could be capable of answering the description

Sm it h .

of issue.

I t seems plain enough that the acquisition of the right,

Dixon C.J. Williams J.

title or interest was “ by such adoption ” within the meaning of the

Webb J. Dullagar J.

proviso. I t is no objection that the right, title or interest did not

Taylor J.

pass, was not acquired, at the moment of the adoption. The whole frame of the four paragraphs of the proviso, and indeed of the second part of the main provision of the section, shows that rights in property are included though they arise after the adoption, if otherwise they are of a required description. Thus in the second part of the main provision, when the right is preserved of the child to take property as heir or next of kin of his natural parents or of their lineal or collateral kindred, the reference is to rights which can only arise on the death of the natural parent or of the kindred, there being nothing in the meantime but a spes successionis. Indeed until such death the child cannot properly be described as heir or next of kin. Nemo heres viventis. In par. (c) of the proviso there is a partially corresponding or correlative provision that such adopted child shall not by such adoption be entitled to take any property as next of kin to any lineal or collateral kindred of the adopting parent, and in par. (d) it is extended to taking property as next of kin of any child of the adopting parent. These restrictions upon the operation of the main provision of the section look, of course, to rights arising from a death occurring in the future. This is necessarily true also of par. (b), which says that such adopted child shall not be entitled to take any property limited to the heirs of the body of the adopting parent. What par. (a) excludes is the acquisition of a right, title or interest in property under a deed will or instrument made or executed before the adoption order. But the interests appointed by the deed are surely acquired under the will creating the power within the meaning of the proviso. I t is no doubt true that the appointment must combine with the power before an interest passes to or is acquired by the appointees. But it is the will that marks out “ issue ” as the objects to which the testator’s bounty is confined, and the will is the assurance by which the property is imparted to the appointees once the power is exer­ cised. The adoption and the special power of appointment form two of the constituent elements of the appointee’s title. The evident purpose of par. (a) of the proviso is to prevent dispository instru­ ments already made in favour of children by birth receiving.

190 HIGH COURT

[1953.

If. (I OF A.

luiciuiHO. of tilo, adoption, an unintended operation in favour of adoptc'd cliildre.n. The wordH “ aecpiire under ” are quite apt to

P e d i . icy-apply to tiie HpeeiaJ j)owe.r in purHuance of which the appointment

S m I'I'II

i.s mad(!, arid hucIi a tliinj^ apyx'-ars clearly enough to fall within the

■(>.

|)olicy of f lic provi.sion.

d'he (piestion really is answered by the

I’lCDUOY-

S m i t i i .intvryiretation of the section. But the result also ensues from the [irinciyile governing the oy)eration of special powers of appointment.

VVlIllimiH ,1. IMxom

VV(ibl) J. The yirinciple is stated by Lord Romer in Muir v. Muir (1), in the

l''iillaKHr .1. Til y] or .1.following yiassage : “ My I^ords, if a yierson be given a general power

of ayiyiointment over certain yiroyjierty he is virtually the owner of that, proyierty. If and when he exercises the power the interests of his ayipointees come to them by virtue of and are created by the de('d of apyiointment. In the case of a special power it is very different. If, for example, proj:)erty be settled on trust for A for life and after his death on trust for such of A’s children or remoter issue and in such y)roj)ortions as B shall by deed appoint, B has no interest in the property whatsoever. He has merely been given the ])ower of saying on behalf of the settlor which of the issue of A shall take the pro])erty under the settlement and in what proportions. I t is as though the settlor ha.d left a blank in the settlement which B fills up for him if and when the y)ower of appointment is exercised. The a.y)y)ointees’ interests come to them under the settlement alone and by virtue of that document. These remarks apply equally well to the case where the donee of tlie power of appointment has, not only the power of saying which of the class shall take under the trust, but also the power of saying what interests, they shall take. 'Phis would be the case if, in the instance that I have given, the limitation a,fter A’s life interest were for such of the children or remoter issue of A in such projiortions and for such estates and interests as B shall by deed ay)j)oint. If and when B executes the power the settlement will, in accordance with the principle, be rea,d thereafter as if the yyroyierty had been thereby limited to the ay)])ointees for the several estates and interests specified in the d('ed of a])[)ointment.” (2).

This does not mean that the objects of a special power, the donee being under no duty to exercise it, take any interest before an intevrest is ayiyiointcd to theju. “ No statement of the princiy)le that I have (',ver seen ”, said Lord Romer “ has suggested that the ai)[)ointe(^s under an a.y)pointment in their favour take any interest in the subject-matter of the power until the apj)ointment takes effect. I t is, on the contrary, (piite plain that they do not, and that

is all that Jjord JIardwicke decided in the case in question

(3),

(1) A.C. 4(58.

(3) (1943) A.O., at p. 485.

(2) (li)43) A.C., at p. 483.

88 C.L.R.] OF AUSTRALIA.

191

H. C. OF A.

viz. Duke of Marlborough v. Lord Godolphin (1).

I t is in this sense

that the present Lord Chancellor spoke in In re De La Bere’s Marriage

1953.

Settlement Trusts ; De La Bere v. Public Trustee (2), when, referring P e d l e y -

to In re Dickinson’s Settlements ; Bickersteth v. Dickinson (3),

Sm ith

V.

and In re Rush ;

Warre v. Rush (4), his Lordship said ; “ In fact,

P e d l e y -

those cases are examples of a principle which seems to be perfectly

Sm it h .

clear, namely, that, where there is an instrument creating a power

Dixon C.J. Williams J.

and a later instrument exercising that power, the interest created

Webb J. Fullagar J.

by the exercise of the power arises under the later instrument, for,

Taylor J.

in fact, there never was such an interest until the power was

exercised so as to create it.” (5).

But while the interest arises under the later instrument in this sense it so arises because of the operative effect of the disposition contained in the instrument creating the power. I t would not be in accordance with principle to deny that the interest was acquired under that instrument. The old applications of the principle will illustrate its operation. Thus if the will creating the power devised to the donee an estate of freehold, as for instance an estate for life, and the donee appointed an estate in remainder to his heirs or heirs of his body, they would, under the rule in Shelley’s Case (6), operate as words of limitation and not of purchase. The strength of the illustration can be seen from the language in which the rule was laid down by the defendant’s counsel and agreed in Shelley’s Case (7) itself and adopted by Lord Macnaghten in Van Grutten v. Foxwell (8), viz., that “ I t is a rule in law, when the ancestor by any gift or conveyance takes an estate of freehold, and in the same gift or conveyance an estate is limited either mediately or immediately to his heirs in fee or in tail, that always in such cases, ‘ the heirs ’ are words of limitation of the estate and not words of purchase ” (9). So that the power and the appointment are considered for the purposes of the rule “ the same gift or conveyance ” , that is to say, the two instruments form parts of the same assurance. For a reason which, though not quite the same, is part of the same prin­ ciple, a t a time when a husband had not been enabled by statute to convey to his wife, he might nevertheless have exercised in her favour a special power created before the coverture by appointing an estate to her ; “ because the wife’s estate arises in such a case not out of the husband’s estate, but out of the seisin under the original instrument creating the power ” : Farwell on Powers,

(1) (1750) 2 Ves. 61 [28 E.R. 41].

(6) (1581) 1 Co. Rep. 88b [76 E.R.

(2) (1941) Ch. 443.

199].

(3) (1939) Ch. 27.

(7) (1581) 1 Co. Rep., a t p. 104a

(4) (1922) 1 Ch. 302.

[76 E.R., a t p. 234].

(8) (1897) A.C. 658.

(5) (1941) Ch., a t p. 448.

(9) (1897) A.C., a t p. 667.

192 HIGH COURT

[1953.

H. 0. OF A.

3rd cd. (191(5), p. 328. A third illustration is afforded by the

11)53.

familiar rule that for the purpose of the rule against perpetuities

P e d i . isy-the remoteness of the limitations appointed must be determined

S mitii

as if they hail occurred in the instrument creating the special power.

r.

1’kim.e y -As the a.ssura,nce of the interest appointed by a special power is

yiMiTii.formed of the two instruments the principle thus illustrated cannot

Dixon C.J. make it wrong to say that the interest is acquired under both instru­

Willimus ,1.ments together. But it does make it wrong to deny that for such a

Wobl) ,1.

Dnlliijjai' .1.

Taylor 3.})urpose as that of s. 168 of the Child Welfare Act the interest was acquired under the instrument creating the power. In Attorney- General V. Ghaqnnan (I), Wills J. said ; “ A deed of appointment would do nothing of itself, and only owes its vitality to the instru­ ment creating it. I t is surely, under such circumstances, no stretch of language to say that property, the right to direct the application of which is created by deed A, but the specific direction of which is effected by deed B, passes under (not by) deed A.” (2).

I t is entirely consistent with this view to say as Chitty J. did in In re Earl of Devon’s Settled Estates ; White v. Earl of Devon (3), that children supposedly taking under an appointment made in the exercise of a special power would not, for the purpose of the Real Property Limitation Act 1871-1893 (Imp.) (37 & 38 Viet. c. 57—56 & 57 Viet. c. 54), “ claim by through or under or by the act of the appointor. They would claim under the settlor, and by the combined operation of the acts of the settlor and the appointor.” (4). The operation being thus combined, it is to be expected that, where for the purpose of some provision, whether contained in a statute or another instrument, a reference is made to the creation of proprietary interests,v there will be a question on the interpre­ tation of the statute or instrument as to which of the elements together forming the assurance the statutory or other provision should be taken to apply. There are not a few decided cases illus­ trating the variety of ways this may occur. In re Bellamy s Trust (5), turned upon a marriage settlement containing a covenant to settle after acquired property to which the wife or the husband in her right should become entitled “ under or by virtue of the last will ” of her father. Her father was the donee of a special power of appointment of which she was an object, and by his last will he appointed in her favour a share of the fund which was subject to the power. Page Wood V.C. said that the words in the covenant pointed only to property belonging to the father strictly

(1) (1891) 2 Q.B. 520.(4) (1896) 2 Ch., at p. 570.

(2) (1891) 2 Q.B., at ]). 532.

(5) (1862) 1 New Rep. 191 [135 R.R.

(3) (1890) 2 Ch. 502.

932].

88 C.L.R.] OF AUSTRALIA.

193

in his own right and not to tha t of which he was the mere instrument

H. C. OF A.

of distribution. Attorney-General v. Chapman (1), shows that for

1953.

the pm’pose of the stamp duties imposed by the Customs and Inland

P e d l e y -

Revenue Act, 1881-1889 (Imp.) (44 & 45 Viet. c. 12—52 & 53 Viet,

Sm ith

V.

c. 7), s. 38, upon “ property passing under ” a voluntary settlement, P e d l e y -

whereby an interest for life was reserved to the settlor, property Sm it h .

appointed under a power contained in a settlement reserving such

Dixon C.J. Williams J.

a life estate “ passed under ” the settlement.

Wills J. said (2), “ if

Webb .1. Fullagar J.

the House of Lords on three several occasions has applied in respect

Taylor J.

of succession duty the principle that the interest created by the power must be treated as arising under the deed creating the power, there would be abundant justification for our applying it to a question arising under ” the Customs and Inland Revenue Act, 1881. The decisions to which Wills J . referred are Lord Braybrooke v. Attorney-General (3) ; Attorney-General v. Floyer (4), and Charlton V. Attorney-General (5). They are decisions which turn very much on the interpretation of the not over simple statutory provisions which governed succession duty. But the point to be made is that in the end the question whether, for the purpose of a particular provision in a statute or in any other instrument, you are to take the power or the appointment depends very much on the scope and purpose as well as the language of the statute or other instrument. In Re Dickinson's Settlements (6), Crossman J. held that the appointment, not the power, was the document under which the interest of children arose within the meaning of s. 31 (5) of the Trustee Act 1925-1935 (Imp.) (15 Geo. 5. c. 19—26 Geo. 5. c. 2), which excludes the operation of s. 31 to give power to apply income for maintenance and other purposes “ where the instrument, if any, under which the interest arises came into operation before the commencement of this Act ” . The instrument which brought the interest into existence was of course the appointment, which doubtless might have provided for maintenance, and it may be supposed that it was intended that the power given by s. 31 should attach when trusts in favour of children were thus created.

In Re Hoff (7), a case in which analogies to this may be found, Farwell J. held that s. 10 (2) of the Legitimacy Act 1926 (Imp.) (16 & 17 Geo. 5. c. 60), which provided that nothing in the Act should affect the operation or construction of any disposition

(1) (1891) 2 Q.B. 526.

(4) (1862) 9 H.L.C. 477 [11 E.R.

(2) (1891) 2 Q.B., a t p. .53.3.

814],

(3) (1861) 9 H.L.C. 150 [11 E.R.

(5) (1879) 4 App. Cas. 427.

(6) (1939) Ch. 27. (7) (1942) Ch. 298.

685],

VOL. LXXXVIII.— 13

194 HIGH COURT

[1953.

H.C. OF A.coming into operation before the commencement of the Act,

1953.prevented an appointment in favour of children, legitimated as a

Pum.Ev-result of the Act, under a power created before the Act, because the

S mitii

power was the disposition. Probably independently of s. 10 (2)

V.

Pioor.EY-the appointment could not have been effective : cf. s. 3 (1) {b). S m it h .In Re De la Berets Marriage Settlement Trusts (1), which has Dixon O..T. already been referred to, the c[uestion which Lord Simonds decided

Willimns ,1.arose upon an exception in a covenant to settle after acquired

Fulliiijar .1. W('l)l)

property. The covenant was contained in a marriage settlement.

Taylor J .

The exception excluded any property regarding which an intention was expressed in the instrument under which the property was acquired that it should be exempt from the covenant. Such an intention was expressed in an appointment made in pursuance of a power, and his Lordship held that it sufficed. For the purpose of the exception that instrument answered the description. Lord Simonds said : “ I think that it is reasonably clear that the instru­ ment under which the plaintiff acquired her share of the trust fund was the deed poll of appointment under which the power was exercised.” (2). But non constat that if the power had expressed such an intention, and the appointment had not done so, the interest would have fallen outside the exception. For the two instruments together form the assurance and the intent of the exception may well have been to exclude any interest assured to the wife on the express footing that it should not be caught.

There are two decisions of Roxburgh J. which should be mentioned, In re Edivards ; Lloyds Bank v. Worthington (3), and Re Dowie’s Will Trusts (4). But it is enough to say that each depends entirely on the interpretation of the instrument which made it necessary to choose between the power and the appointment.

The latest examples of such a question of interpretation are found in two decisions of Vaisey J. The first is Re Batty (5). The question for decision was whether or not the power of advancement which s. 32 of the Trustee Act 1925-1950 (Imp.) (15 Geo. 5. c. 19— 14 Geo. 6. c. 6) gives to trustees was applicable to certain trusts appointed by deed under a special power of appointment. The power of appointment was created before the commencement of that Act, but the exercise of the power took place after its commence­ ment. Sub-section (3) of s. 32 provides that the section does not apply to trusts constituted or created before the commencement

(1) (1941) Ch. 443.(4) (1949) Ch. 547.

(2) (1941) A.C., at p. 447.(5) (1952) Ch. 280.

(3) (1946) 175 L.T. 231.

88 C.L.R.] OF AUSTRALIA.

195

of the Act. His Lordship took the view that the trusts were

H. C. OF A.

constituted or created before the commencement of the Act because

1953.

the power was then created. The decision, although not unin­P e d l e y -

fluenced by Muir v. Muir (1), depended on the view Vaisey J.

Sm ith

V.

took of the purpose of the sub-section. I t may be suggested, with

P e d l e y -

great respect, that the subsection was concerned with the effect of

Sm it h .

trusts which had come into existence and, so to speak, were fixed

Dixon C.J. Williams J.

before commencement of the Act, and that it was for that reason

Webb J. Fullagar J.

the word “ constituted ” was used. The trusts were defined and

Taylor J.

made effective, and in that sense “ constituted ” by the appoint­ ment. His Lordship distinguished this case in the second of the two decisions, Re Leigh's Marriage Settlement; Rollo v. Leigh (2). The question there was whether s. 161 (1) of the Law of Property Act 1925-1950 (Imp.) (15 Geo. 5. c. 20—14 Geo. 6. c. 6) which abolishes the rule in Whitby v. Mitchell (3), applied to limitations made after the commencement of the Act by the exercise of a power of appoint­

ment created before its commencement.

Sub-section (2) of s. 161

provides that the section only applies to limitations or trusts created by an instrument coming into operation after the commence­ ment of the Act. The word “ created ” told in favour of the view that the deed of appointment was the instrument to be regarded. On the other hand the policy of the sub-section evidently was to preserve proprietary rights arising or capable of arising by reason of instruments already in existence, and the rule in Whitby v. Mitchell (3) controlled the scope and ambit of the power of appoint­ ment, and in that way defined the future children who might be made objects. Moreover the rule that the appointment must be read into the power had a specific and well known application to the very rule abolished. Vaisey J., however, preferred the view that as the appointment was the immediate cause of the trusts or limitations coming into existence, s. 161 applied. Again the decision necessarily turned on the meaning ascribed to the provision. The foregoing cases do not govern the construction or the applica­ tion of a provision like par. (a) of s. 168 of the Child Welfare Act,

1939. Nor do they affect the principle that the interests appointed are given by the power. The manner in which the principle was applied by the House of Lords in Muir v. Muir (1), confirms its application to the present case.

There is only one further observation to be made. I t is that the adopted sons clearly could not take in default of appointment under

(1) (1943) A.C. 468.(3) (1890) 44 Ch. D. 85.

(2) (l952) 2 All E.R. 57.

190 HIGH COURT

[1963.

H. C. OF A.

the trust in the will in favour of the children or child of the bene­

1953.ficiary, that is of Mrs. Pedley-Smith.

That is indisputably excluded

by the terms of par. (a) of the proviso to s. 168.

I t would be an

Pedley-

S mitii

odd result if they could take nevertheless as objects to which the

V.

power extends.

There seems to be no reason to doubt the correct­

Peoley-

SwiTU.

ness of the view taken by Roper C.J. in Eq.

The appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors : Sly & Russell.

G.D.N.