Perpetual Trustees Victoria Ltd v Barns
[2012] VSCA 77
•2 May 2012
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2011 108 | |
| IN THE MATTER OF an application under s 63A of the Trustee Act 1958 and IN THE MATTER OF the Will and Estate of JOHN FREDERICK BARNS, DECEASED BETWEEN | |
| PERPETUAL TRUSTEES VICTORIA LIMITED (ABN 47 004 027 258) | Appellant |
| and | |
| TIMOTHEA BARNS | Respondent |
| and | |
| THE ATTORNEY-GENERAL FOR THE STATE OF VICTORIA | Second Respondent |
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JUDGES: | BUCHANAN and BONGIORNO JJA and WILLIAMS AJA | |
WHERE HELD: | MELBOURNE | |
DATES OF HEARING: | 7 February 2012 | |
DATE OF JUDGMENT: | 2 May 2012 | |
MEDIUM NEUTRAL CITATION: | [2012] VSCA 77 | |
JUDGMENT APPEALED FROM: | [2011] VSC 314 (Robson J) | |
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TRUSTS – Testamentary trust – Testator’s widow and daughter life tenants of residuary estate – Gift over for charitable purposes – Income from residuary estate insufficient to meet living expenses of daughter – Trustee power to advance capital for benefit of widow – Arrangement to vary trust to give trustee power to advance capital for benefit of daughter – Daughter lacking capacity to consent to arrangement – Application by trustee under s 63A Trustee Act 1958 for approval of arrangement on behalf of daughter – Attorney-General a respondent not opposing application – Role of Attorney-General in proceeding – Attorney-General representing Crown as protector of charity – Intention of testator to provide for daughter – Appeal allowed – Section 63A Trustee Act 1958.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Ms K McMillan SC with Mr P J Pascoe | Maddocks |
| For the Respondent | Mr T P Warner | DLA Piper Australia |
| For the Second Respondent | Mr R T Waddell | Victorian Government Solicitor’s Office |
BUCHANAN JA:
I agree with Williams AJA.
BONGIORNO JA:
I also agree with Williams AJA.
WILLIAMS AJA:
The appellant (‘Perpetual’) is a trustee appointed by the will, dated 18 May 1983, (‘the will’) of the late John Frederick Barns (‘the testator’). The first respondent, Ms Barns, is the only child of the testator and the surviving life tenant in relation to his residuary estate. She suffers from a form of autism. She is represented in this appeal by Dr Kim Power, who has been appointed her Administrator by the Victorian Civil and Administrative Tribunal. The Attorney-General is the second respondent and represents those who might benefit under the trusts for charitable purposes created by the will.
Ms Barns is entitled to the income from the residuary estate for life, but that income is insufficient for her needs. Because she is incapacitated, she is unable to give her consent to an arrangement varying the trust upon which the residuary estate is held to allow for access to capital to meet her needs.
Perpetual applied to a judge of the Court for an order under s 63A of the Trustee Act 1958 approving, on her behalf, an arrangement varying the trust by amending clause 5 of the will, to permit Perpetual to advance capital to her from time to time (‘the arrangement’). Perpetual made the application because Ms Barns lacked the necessary funds to do so.
In the alternative, Perpetual sought an order empowering it to advance capital to Ms Barns under s 63 of the Trustee Act.
The Attorney-General did not oppose the applications. He declined to
consent, submitting that it would be inappropriate to do so, in all circumstances.
Both applications were refused.[1] Perpetual appeals only against the refusal of its application for relief under s 63A.
[1]Re Estate of Barns [2011] VSC 314.
The will
I now turn to the will. It appoints Perpetual as one of three trustees of the testator’s estate. Perpetual is now the sole remaining trustee.
Clause 4 (a) of the will provides for the residuary estate to be held upon certain trusts for the testator’s wife and then continues as follows:
(b)After the death of my said wife (but subject nonetheless to the provisions of clause 6 hereof) to hold the income of my residuary estate for my daughter TIMOTHEA BARNS during her lifetime; and
(c)After the death of the survivor of my said wife and daughter to hold as well the capital as the income of my residuary estate for such of the general charitable purposes or charitable organisations in Victoria which are specified in Section 21 Probate Duty Act 1962 or any amendment thereof in such shares as my trustees in their absolute discretion think fit and in default of appointment for the LORD MAYOR’S FUND.
Clause 5 gives Perpetual the power to advance capital to the testator’s late wife:
5.I DIRECT that notwithstanding the trusts herein before contained concerning the Trust Fund my trustees may in their absolute discretion at any time or times and from time to time during the life time of my said wife raise any sum or sums out of the capital of my residuary estate and pay for the same to or for the benefit of my said wife freed and discharged from the said trusts.
It is clause 5 which it is proposed to vary by the arrangement.
Clause 6 empowers the trustees to pay any income not required for Ms Barns’ ‘adequate maintenance’ to the Mentally Retarded Citizens Welfare Association Centre or any other organisation caring for her full-time, and, otherwise, at their discretion to pay that surplus to institutions or organisations listed in s 78(1)(a) of the Income Tax Assessment Act 1936 (Cth) from time to time. By clause 7, the testator expresses the desire that preference be given to benefitting organisations carrying out research relating to mental retardation.
It is common ground that the testator intended to benefit his wife and Ms Barns before providing for the remainder of his estate to pass to charity. In this regard, there is no issue as to the charitable purposes for which the residuary estate was to be held upon trust, even though the Probate Duty Act 1962 was repealed on 7 June 2000.
Ms Barns’ circumstances
Ms Barns was living at the family home at the time of her mother’s death and subsequently moved into shared accommodation. That accommodation was unsuitable. Perpetual then purchased a unit for her and Ms Barns resided there at the time of the application.
Ms Barns needs intensive care and carers live with her in the unit. The judge below found that her expenses were approximately $245,000 per annum and the estate income was approximately $170,000. Perpetual estimated that, if $50,000 of the capital were advanced each year, and Ms Barns lived to 85, the corpus of the residuary estate, currently valued at $3.5m, would be worth some $5.6m. If it were kept intact, it would be valued at approximately $7.3m
The proposed variation
The arrangement was for clause 5 to be varied, to include the desired power to advance capital to Ms Barns by inserting the words in bold type, so that it would read as follows:
I DIRECT that notwithstanding the trusts herein before contained concerning the Trust Fund my trustees may in their absolute discretion at any time or times and from time to time during the respective life times of my said wife and daughter raise any sum or sums out of the capital of my residuary estate and pay for the same to or for the benefit of my said wife and daughter freed and discharged from the said trusts.
Section 63A
The application was made under s 63A(1)(a) of the Trustee Act 1958. It is relevantly in these terms:
63A Power of Court to vary trusts
(1)Where property, whether real or personal, is held on trusts arising, whether before or after the commencement of this Act, under any will settlement or other disposition, the Court may if it thinks fit by order approve on behalf of—
(a)any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of minority or other incapacity is incapable of assenting; or
(b)any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class (as the case may be) if the said date had fallen or the said event had happened at the date of the application to the Court; or
(c) any person unborn; or
(d)any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined—
any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees or managing or administering any of the property subject to the trusts:
Provided that except by virtue of paragraph (d) of this subsection the Court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.
The judgment
The learned judge accepted that, in giving approval to an arrangement, a court does not make the variation which is its subject.[2] He cited In re Holmden’s Settlement Trusts[3] where, in respect of the equivalent legislation in the United Kingdom[4], Lord Reid said:
Under the Variation of Trusts Act the court does not itself amend or vary the trusts of the original settlement. The beneficiaries are not bound by variations because the court has made the variation. Each beneficiary is bound because he has consented to the variation. If he was not of full age when the arrangement was made he is bound because the court was authorised by the Act to approve of it on his behalf and did so by making an order. If he was of full age and did not in fact consent he is not affected by the order of the court and he is not bound. So the arrangement must be regarded as an arrangement made by the beneficiaries themselves. The court merely acted on behalf of or as representing those beneficiaries who were not in a position to give their own consent and approval.[5]
[2]Ibid, [70]-[72].
[3][1968] AC 685.
[4]Variation of Trusts Act 1958 (UK).
[5]Ibid 701.
The judge noted that the Attorney-General had declined to consent to the variation in relation to any charity’s interest in the trust fund constituted by the residuary estate. He set out this passage from the judgment of Murray CJ in In re Vosz Public Trustee v Steele[6], upon which the Attorney-General had relied to explain his decision :
In the third place, although the Attorney-General has large powers in relation to charities, and in many cases is a necessary party to proceedings in the Court relating to charitable trusts, he has no independent authority to change the destination of a trust fund against the will of the testator. In certain cases the right to dispose of property left for charity is vested in the Crown, whose adviser in the matter the Attorney-General is, but in other cases the jurisdiction is in the Court.[7]
[6][1926] SASR 218.
[7]Ibid 233.
His Honour, nevertheless, decided that it would be inappropriate to consent to the arrangement on behalf of Ms Barns in the absence of the consent of those who would become entitled to the corpus of the residuary estate by appointment and the consent by, or on behalf of, the Lord Mayor’s Fund.[8] He concluded that the Court was being asked to give its approval, on Ms Barns’ behalf, to a variation of the trust, which, in his view, could not be effected by agreement on her part if she were not disabled.[9]
[8]Re Estate of Barns [2011] VSC 314 [72].
[9]Ibid [63].
The judge went on to hold that s 63A did not give the court the jurisdiction to make the order sought by Perpetual.
The appeal
Perpetual argues that the judge ought to have determined that there was a sufficient basis to invoke s 63A, when the Attorney-General was a party to the proceeding and did not object to the orders sought in the originating motion. Perpetual contends that consent on the part of the objects of the power of appointment or on behalf of the Lord Mayor’s Fund is not a pre-requisite to the exercise of the power under s 63A. The judge erred in law in concluding that it was.
Perpetual submits that the judge also erred by taking into account the irrelevant consideration of whether Ms Barns’ consent, were she not under a disability, would be sufficient to effect the variation proposed. Perpetual points out that its application was premised upon Ms Barns being a person under a disability who, for that reason, was unable to consent to the proposed arrangement.
The Attorney-General submits that there is no impediment to the grant of approval sought and he makes no submissions in opposition to it.
Discussion and conclusions
The judge recognised that an ‘arrangement’ under s 63A need not constitute an agreement. In Re Steed’s Will Trusts,[10] an ‘arrangement’ for variation of a protective trust was proposed by the plaintiff life tenant. The trustees opposed the proposal and the application for approval of the arrangement under s 1 of the Variation of Trusts Act 1958 (UK) was refused, for that reason. In the appeal, Lord Evershed MR (with whom Wilmer and Upjohn LJJ agreed) said:
… the language used by the judge seems to indicate that an arrangement must be in some sense inter partes, some kind of scheme which two or more people have worked out. I do not myself accept that. I think that the word ‘arrangement’ is deliberately used in the widest possible sense so as to cover any proposal which any person may put forward for varying or revoking the trusts.[11]
[10][1960] 1 Ch 407.
[11]Ibid 419.
The judge below also correctly characterised the application as one for approval of an arrangement (Perpetual’s proposal) on behalf Ms Barns, who could not consent to it herself because she lacked capacity. It was not one for an order which would itself vary the trust.[12]
[12]Re Estate of Barns [2011] VSC 314, [61].
Referring to the passage set out above[13] from Re Holmden’s Settlement Trusts[14], his Honour stated that Lord Reid had made the nature of the application clear. He also cited the following passage from the judgment of Hansen J in George v Kollias & Ors[15]:
40.An order of approval is and operates as a consent to the variation by those who by reason of being a minor or other incapacity or being unborn cannot consent as those who are sui juris can.
41.Under s 63A an arrangement cannot be approved unless the carrying out thereof would be for the benefit of those who cannot consent. … The context is that the court is empowered to approve an arrangement ‘on behalf of’ the members of a specified class. As Lord Denning MR said in Re Weston’s Settlements [1968] 3 All ER 338 at 342, [1969] 1 Ch 223 at 245, ‘in exercising its discretion, the function of the court is to protect those who cannot protect themselves’.”
An order approving an arrangement enables the sui juris parties to proceed to effect the variation by entering into a Deed as in this case proposed. The court order does not make the variation, it merely provides a consent to the arrangement by and on behalf of those who cannot otherwise give consent.
[13]Para [14].
[14][1968] AC 685, 701.
[15][2007] VSC 46.
Whilst the learned judge characterised the application in accordance with the cited authorities, he also considered it relevant that the Court was being asked to ‘approve the variation of a trust that could not be varied by the agreement of Ms Barns if she was capable of assenting to the variation’.[16] If this demonstrates that he was concluding that jurisdiction under s 63A is limited to the situation in which, but for the incapacity of a beneficiary or object of a trust, that trust can be varied in accordance with the principle in Saunders v Vautier[17], he erred.
[16]Re Estate of Barns [2011] VSC 314, [63].
[17][1841] Cr. & Ph. 340; 41 ER 482.
Buckley J’s decision in Re Suffert’s Settlement provides an example of a case where an order of the type sought by Perpetual was made under the equivalent United Kingdom legislation[18], in the absence of consent from all those who might potentially benefit under a trust created by a settlement. The court was there asked to approve an arrangement to vary the terms of a settlement trust, on behalf of unascertained members of a class of unborn persons who might become entitled on the applicant’s death as her surviving next of kin.
[18]Section 1 of the Variation of Trusts Act 1958 (UK).
The applicant had two living cousins who were sui juris and who, if she had died at the date of the making of the application, would have been amongst her next of kin. They had not consented to the application and were not parties to the proceeding.
Buckley J held that he could not approve the arrangement on behalf of the two cousins because they fell within the statutory exception relating to persons who would be members of the class if, when the application was made, the date had fallen or the event had happened which would trigger their inclusion in the class. He did, however, approve the arrangement on behalf of the other unascertained potential members of the class, noting that ‘the trustees [would] not be free, except at their own risk, to treat the trusts as effectively varied until they [had] obtained the consent of those two persons who [had] contingent interests in the fund.’[19] It would appear arguable that all the potential next of kin, including those who did not consent, would have potentially been disadvantaged by the arrangement which reduced the amount of the trust fund then amounting to some £ 8300 to £ 500.
[19][1961] Ch 1, 6.
Buckley J reached a similar conclusion in Re Moncrieff’s Settlement Trusts.[20] There, the applicant settlor had sought approval of a proposed arrangement for the variation of settlement trusts, on behalf of persons who might ultimately be included as members of the class of her next of kin, were she to die a widow and intestate. The applicant’s adopted son was a respondent to the application. Buckley J granted the application and approved the scheme on behalf of all who might become interested in the trust fund, except the respondent son, who was excluded under the statutory exception because he would have been the settlor’s sole next of kin, had she had died a widow and intestate at the date of the application.[21]
[20][1962] 3 All ER 838.
[21]Ibid 839.
Further, s 63A does not expressly make the court’s power conditional upon consent by those beneficially or otherwise interested under the terms of the trust. To the contrary, sub-s 63A(1) confers a discretionary power to approve an arrangement ‘(by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto)’.
The authorities to which the Court was referred do not support any such limitation. Indeed, Re Longman’s Settlement Trusts[22] provides an example of a case in which an order was made under the United Kingdom legislation[23], when part or all of the trust fund might be held on charitable trusts and the Attorney-General had not opposed, rather than consented to the order.
[22][1962] 2 All ER 193.
[23]Section 1(1) of the Variation of Trusts Act 1958 (UK).
The learned judge erred in law in concluding that he lacked the power to make the order sought under s 63A, in the absence of consent by the Attorney-General on behalf of those entitled to benefit under the charitable trusts established under clause 4(c) of the will.
Should the arrangement be approved?
In determining whether an order under s 63A(1)(a) should have been made and now should be made, the Court must first be satisfied that the arrangement was and is both for Ms Barns’ benefit and a fair and proper one overall.[24] It must take into account the purpose of the trusts and the intention of the testator.[25] The Court should engage in ‘a business-like consideration of the arrangement, including the total amounts of the advantages which the various parties obtain, and their bargaining strengths’.[26]
[24]In re Remnant’s Settlement Trusts [1970] 1 Ch 560, 565 (Pennycuick J); George v Kollias & ors [2007] VSC 46, [41] (Hansen J)
[25]Re Burney’s Settlement Trusts [1961] 1 All ER 856, 858 (Lord Wilberforce); see Re Keysborough Blue Danube Soccer Club [2003] VSC 119, [35] (Ashley J).
[26]Re Van Gruisen’s Will Trusts [1964] 1 WLR 449, 450 (Ungoed-Thomas J).
There was ample evidence below as to the reasons for the arrangement for the proposed variation. There was also no issue relating to its evident benefit to Ms Barns and her real need for extra funds.
As for the testator’s intent: the will clearly indicates that he intended to provide for the care and well-being of his disabled daughter and, generally, to give priority to the needs of his widow and child over the interests of the nominated charities who might benefit after their respective deaths. Ms Barns is to have the income from the substantial residuary estate, after her mother’s death and any surplus is to go to a body caring for her full-time or to charity. The testator has also expressed the wish that the trustees would favour institutions carrying out research which, it would seem, might be of potential benefit to her.
Further, the testator does not appear to have anticipated the possibility of Ms Barns needing additional funds for her living expenses. Indeed, he has rather contemplated that there might be surplus income for distribution during her lifetime.
The Court must consider the benefits and disadvantages of the arrangement overall.[27] In determining whether to approve the arrangement on behalf of Ms Barns, the attitude of the Attorney-General is significant.
[27]George v Kollias & Ors [2007] VSC 46, [44] (Hansen J).
The trust established under clause 4(c) of the will is expressed to be for ‘charitable purposes’ or ‘charitable organisations’ and, in default of appointment, for the Lord Mayor’s Fund. As the Attorney-General submits, charitable trusts are trusts for purposes and not for persons, even though persons may benefit as a result of the purpose being fulfilled.[28] Further, ‘a gift for charitable institutions is prima facie a gift for charitable purposes’.[29] It is not disputed that the gift in clause 4(c) is for charitable purposes.
[28]Stratton v Simpson (1970) 125 CLR 138, 144 (Windeyer J); BSH Holdings Pty Ltd v Commissioner of State Revenue (2000) 2 VR 454, 456 [9] (Hansen J).
[29]Stratton v Simpson (1970) 125 CLR 138, 163 (Gibbs J (Barwick CJ and Menzies JJ agreeing).
In this proceeding, the Attorney-General represents the Crown as parens patriae, to act as the protector of charity in general and of any particular charities identified in clause 4 (c) of the will.[30] Perpetual does not seek an order binding him. In not opposing the order sought, the Attorney-General has adopted what he submits, and I accept, is the practice in non-contentious or administrative proceedings, where only the court can make final orders and where the Attorney-General does not intend to be bound by the order.[31] This is not a charity proceeding commenced by the Attorney-General nor is it one in which he is otherwise a party to a compromise which is to bind him, where his consent to orders might be required.[32]
[30]See Tudor on Charities, Sweet and Maxwell (9th ed, 2003 ) 381, [10-018].
[31]See Groser v Equity Trustees Ltd [2008] VSC 163, [11] and footnote 3 (Habersberger J); Williams, Mortimer & Sunnucks, Executors, Administrators and Probate (19th ed, 2008) para 39.06, footnote 16 .
[32]Tudor on Charities, Sweet and Maxwell (9th ed, 2003 ) 400, [10.043].
Despite the diminution of the fund ultimately to be held on trust for charitable purposes, there is no opposition from the Attorney General, representing the Crown as the protector of charity. Indeed, the Attorney-General submits that there is no impediment to the Court making the order sought. The estate is substantial and there is likely to be a significant sum left to be applied for charitable purposes at Ms Barns’ death. Further, it would seem that Perpetual is likely to be correct in asserting that there would be only a very slight risk of any future beneficiary arguing that it had exceeded its powers, either by accessing capital or by obtaining the order itself.
I agree with Perpetual that the arrangement accords with the evident intent of the testator and is a fair and proper one. The evidence clearly establishes Ms Barns’ immediate need for funds and it is appropriate, in these circumstances, to approve an arrangement to vary the terms of the trust to allow for necessary funds to be advanced by the trustee at its discretion to meet her living expenses and the costs of her care.
The appeal should be allowed and the Court should make the order sought by Perpetual, approving the arrangement on behalf of Ms Barns.
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