Re McKenzie;

The High Court of Australia considered the application of the rule against perpetuities to a discretionary trust established by the will of the late Mr. McKenzie. The dispute concerned the validity of a trust created for the benefit of Mr. McKenzie's grandchildren and more remote issue, with the trustees having the power to distribute the income and capital of the trust fund amongst these beneficiaries. The primary question before the Court was whether the trust offended the rule against perpetuities, which requires that an interest must vest within a perpetuity period of 21 years after the death of a relevant life in being.

The central legal issue was whether the discretionary nature of the trust, coupled with the potential for beneficiaries to include individuals not yet born at the time of the testator's death and who might not be ascertainable within the perpetuity period, rendered the trust void from its inception. Specifically, the Court had to determine if the power of appointment granted to the trustees was sufficiently certain and if the objects of that power were capable of being ascertained within the perpetuity period.

The High Court held that the rule against perpetuities applies to the exercise of a power of appointment, not merely to the creation of the power itself. In this instance, the trust deed conferred a discretionary power on the trustees to distribute the trust property amongst a class of beneficiaries defined as Mr. McKenzie's grandchildren and more remote issue. The Court reasoned that because the class of beneficiaries could potentially include individuals born more than 21 years after the death of the last surviving grandchild living at the testator's death, the trust was void for remoteness. The principle applied was that a discretionary trust will fail if the beneficiaries are not ascertainable within the perpetuity period.

Consequently, the High Court declared the trust void and ordered that the trust property be held on resulting trust for the testator's next of kin.