Re White; Tweedie v Attorney-General
[2003] VSC 433
•30 October 2003
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| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PROBATE JURISDICTION
No. 54660
IN THE MATTER OF the Will and Estate of JOSEPH WHITE, deceased
| IAN FIELDING TWEEDIE and ORS | Applicants |
| v | |
| THE ATTORNEY-GENERAL FOR THE STATE OF VICTORIA | Respondent |
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JUDGE: | KELLAM J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 4 September and 30 October 2003 | |
DATE OF JUDGMENT: | 30 October 2003 | |
CASE MAY BE CITED AS: | Re Joe White, deceased | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 433 | |
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ADMINISTRATION AND PROBATE – Trustees – Application for increase in commission by trustees – Charitable trust involving substantial assets administered by trustees for annual remuneration – Remuneration of trustees fixed by will £250 per year – Whether the Court has power to increase remuneration of trustees where the testator has provided for the remuneration of the trustees by will – Remuneration increased to 3.5% of annual net income of the trust – Role of Attorney‑General in proceedings involving charitable trusts – Administration and Probate Act 1958 s.65.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr P.P. Bravender-Coyle | McKean and Park |
| For the Respondent | Mr R.E. Cook | Victorian Government Solicitor |
HIS HONOUR:
This is an application brought by summons dated 24 April 2003 whereby the applicants, who are the trustees of the estate of Joseph White, deceased, seek an order that the remuneration allowed to the applicants under the will of the deceased be increased.
Background
The deceased died on 30 June 1959 leaving a will and three codicils, probate of which was granted on 28 October 1959. Probate was granted to the brother and to a nephew of the deceased, and to three other persons who were the executors and trustees named in the will. All of the original executors and trustees are now deceased, the last survivor of these having died in March this year.
By his will and codicils, the deceased, after giving certain specific legacies and bequests, and subject to the payment of his debts and testamentary and other expenses, gave the residue of his estate to his trustees to hold as a separate fund to be called the “Joe White Bequest” (“the Bequest”) and to stand possessed of the income derived from it upon trust to pay certain specified annuities which were set out in clause 5 of his will and subject to the trusts in relation to such annuities:
“(a)to divide such income in each year amongst such public hospitals, public benevolent institutions or public benevolent societies in Victoria (being institutions or societies which are in law charitable or the purposes of which are in law charitable) and in such proportions as my trustees shall in each year or from time to time determine, or
(b)to apply such income in each year to or for such religious or public scientific or public educational purposes in Victoria (being religious or public scientific or public educational purposes which are charitable purposes in law) and in such proportions as my trustees shall in each year or from time to time determine, or
(c)to divide or apply the same in each year among or to all or any of the said charitable institutions, societies or purposes included in (a) or (b) above.”
The four current trustees of the Bequest are the applicants. They are Ian Fielding Tweedie, who has been a trustee since 25 June 1969; Ian Stanley Fraser, a trustee since 26 October 1977; John Bruce Hannaford, a trustee since 26 October 1977; and Andrew Charles Fielding Tweedie, a trustee since 5 April 1991.
The assets of the Bequest in the hands of the trustees as at 30 June 2002 consisted of shares and other assets to the net value of $17,057,577. The net income for the financial year ending 30 June 2002 was $913,740.
The beneficiaries of the trust now are –
(a)the charitable purposes referred to in paragraph 3 above; and
(b)ten surviving annuitants.
Of the annuitants, the deceased’s daughter receives an indexed annuity which is currently $45,299 per annum and the other nine annuitants receive annuities totalling $6,600 per annum.
By clause 8 of his will, the deceased provided that each of the trustees should receive a remuneration of £250 (i.e. $500 since the adoption of decimal currency) per annum as remuneration for administering the Bequest. No doubt that was adequate remuneration during the early years of the administration of the Bequest having regard to the size of the estate at that time, the income of the Bequest at that time and the time, skill, care and attention required to manage the assets, which at that stage consisted principally of shares in Joe White Maltings Limited.
No previous application for increase in the remuneration of the trustees or for the allowance of commission in respect of the estate or the Bequest has been made by the trustees in the period of forty-four years since Probate was granted.
The Evidence
The application is supported by affidavits of each of the trustees and an affidavit sworn by Professor Neville Norman, an Associate Professor of Economics at the University of Melbourne and an academic and independent consultant economist.
The affidavit sworn by Ian Faulding Tweedie establishes that during the financial year ending 30 June 2002 the Bequest, after payment of the annuities referred to above, distributed an amount of $851,000 to ninety‑three different charitable institutions and societies. The affidavit in addition establishes that the management of the trust fund has in recent years become more complex. By his will, the deceased had expressed a wish that the trustees maintain his shareholding in Joe White Maltings Limited. Originally the trustees adhered to those wishes, but after the amendments to Part I of the Trustee Act 1958 came into effect in January 1996,[1] the trustees considered that it was not prudent to have all the assets of the trust invested in one company and the investment portfolio was diversified. In October 1999, the Guiness Peat Group Pty Ltd made a takeover offer for 50% of each shareholder’s holding in Joe White Maltings Limited. The trustees considered it prudent to accept the offer so as to maintain the value of the corpus of the trust and as a result, approximately $5,000,000 was invested in a diversified portfolio. In late 2002, Ausbulk Limited announced the takeover of Joe White Maltings Limited and the trustees devoted a considerable amount of time in late 2002 considering whether to accept the takeover offer. The offer was accepted. Currently the trustees are involved in investing a sum of approximately $11,500,000 which was received by reason thereof. This will result in an even greater diversification in the investment portfolio and a corresponding increase in the burden of the trustees in managing it.
[1]The Trustee and Trustee Company (Amendment) Act 1995 amended the Trustee Act 1958 so as to enable trustees, subject to the trust instrument, to invest in any form of investment. Section 8(1) of the Trustee Act (as amended) provides that trustees must, in exercising their powers of investment, have regard to a number of matters including “the desirability of diversifying trust investments”.
Ian Tweedie is now 78 years of age. The last surviving executor and original testamentary trustee, Colin Stanley Fraser, died on 3 March 2003. Mr Tweedie deposes that the remuneration of $500 per annum did not in the past cause any difficulty to the trustees because the trustees had accepted appointment either out of a sense of personal loyalty to the deceased, or by reason of their many years of service with Joe White Maltings Limited. However, subsequent to the takeover by Ausbulk Limited, Joe White Maltings Limited was, at its own request, de‑listed from the Australian Stock Exchange as from 31 December 2002. As a result of the takeover by Ausbulk Limited, the close connection which formerly existed between Joe White Maltings Limited and the Bequest has been severed. Thus it cannot be anticipated that future trustees will accept the onerous duties of management of the trust out of a sense of loyalty either to the deceased or to, what was in effect, his company.
Clause 7 of the will provides for a minimum of four trustees with power to maintain the number at five. By his affidavit, Mr Tweedie expresses concern that the level of remuneration is insufficient to attract suitable men and women to replace the present trustees, when by reason of illness or infirmity, they are forced to retire.
Ian Stanley Fraser, who was employed by Joe White Maltings Limited for 40 years from 1962 and who was its managing director at the time it was de‑listed, was appointed as a trustee of the Bequest in October 1977. He is now aged 59 years and shares the concern expressed by Ian Tweedie that the current level of remuneration is such that difficulty is likely to be experienced in attracting suitable men and women to replace the trustees when they are forced to retire.
John Bruce Hannaford, who was employed by Joe White Maltings Limited for 40 years between 1957 and 2001 and who has been a trustee of the Bequest since 26 October 1977, is now 64 years of age. He deposes to his concerns that the current level of remuneration is likely to create difficulty in attracting suitable persons to be trustees.
Andrew Charles Fielding Tweedie, who has been employed by Joe White Maltings Limited for 29 years and who was appointed as a trustee of the Bequest in April 1991 has sworn a similar affidavit in support of the application.
The affidavit of Professor Norman establishes that in his opinion the present value of the sum of £250, by comparison with 1960, is a minimum of $9,000.
The Joinder of the Attorney‑General
By summons dated 29 April 2003, the applicant sought that the Attorney‑General of the State of Victoria be joined to the proceeding. On 3 July 2003, Redlich J ordered that the Attorney‑General be added as a respondent to the proceeding to represent the interests of the charitable purposes described in paragraph 5 of the will.
The application was then adjourned to 15 August 2003 to enable the instructions of the Attorney‑General to be obtained. No such instructions were obtained by that date and the proceeding was further adjourned to 4 September 2003 when it came on before me in the Practice Court. As no instructions had been obtained from the Attorney‑General by that date the application was further adjourned. Doubtless the matter was complicated and unusual, but in circumstances where the matter had been adjourned several times I considered it appropriate that the matter come back before me for determination. The matter finally came back before me today when Mr Cook of counsel, who appears for the Attorney-General, informed me that his instructions are that the Attorney‑General does not consent to, nor does he oppose, the application.
It is apparent that the role of the Attorney‑General in proceedings such as these is a “special position”.[2] The Attorney‑General is a necessary party to proceedings involving charitable trusts. He or she is the proper party to represent the State as parens patriae.[3] Furthermore, the Attorney‑General, when joined as a defendant, has the legal obligation to represent the absent parties. He or she is not in the position of an ordinary plaintiff seeking redress for a private wrong, but rather has as one of his or her duties, the representation of the interest of the charities. Mr Cook informed me that the Attorney‑General has been involved in negotiations with the representatives of the trustees. However, the Attorney‑General does not make any submissions (other than relevant to the cost of his inspection of annual accounts to which I refer further below) in relation to the matter before the Court.
[2]See F.M. Bradshaw The Law of Charitable Trusts in Australia, Butterworths 1983 p.164.
[3]Re Zundolovich; Perpetual Executors and Trustees Association of Australia Ltd v Gallagher [1938] VLR 57.
Nevertheless, as stated above, the Attorney‑General does not oppose the application of the trustees that the commission to be allowed to the trustees of the Bequest under clause 8 of the will be increased to a total of 3.5% of the annual net income of the Bequest for the financial year ending 30 June 2004 and for each financial year thereafter or until further order of the Court.
It is apparent that the Bequest has been well served by loyal trustees for many years for little remuneration. It is apparent that the task of managing the Bequest is now a most substantial and onerous one. I accept that the concern expressed by each of the present trustees about the difficulty that might be experienced in obtaining suitably qualified persons to be trustees in the future is, in the circumstances, a proper concern. The Bequest requires persons accustomed to management with a good understanding of financial matters to be trustees. The Bequest should have the capacity to attract persons who are possessed of more than ordinary experience and acumen as trustees. However, that said, and notwithstanding that the Attorney‑General does not oppose the order sought, I must nevertheless be satisfied that the order is a proper order to be made and that the Court has the power to make the order sought. In this regard, I express my gratitude to Mr Bravender‑Coyle of counsel who appears on behalf of the applicant trustees and who prepared detailed written submissions for me.
The Position of the Annuitants
Obviously, before such an order as proposed is made, consideration must be given to the position of the annuitants. I am satisfied on the material before me that in circumstances whereby the daughter of the deceased receives an indexed annuity, which is currently $45,299 per annum, and the other annuitants receive annuities totalling $6,600 per annum and in circumstances where the net value of the assets of the trust as at 30 June 2002 was $17,057,577 and the net income of the trust for that financial year exceeded $913,000, that the interest of the annuitants will not be affected in any way by any increase in the remuneration of the trustees as proposed. It should be noted that the effect of the will is that the annuitants are to be paid in priority to the charities. That will continue to be the case.
Does the Court have power to make the Order sought?
Section 65 of the Administration and Probate Act 1958 (“the Act”) provides:
“It shall be lawful for the court to allow out of the assets of any deceased person to his executor, administrator or trustee for the time being such commission or percentage not exceeding five per cent for his pains and trouble as is just and reasonable.”
However, notwithstanding the apparent width of s.65 of the Administration and Probate Act and the criteria for the exercise of the court’s discretion that the amount awarded must be “just and reasonable”, Mr Bravender‑Coyle very properly, pointed out to me that there is high Victorian authority to the effect that the court does not have the authority to make the order sought.
The decision in Winter Irving v Winter
In Winter Irving and Anor v Winter and Ors[4] the Full Court of the Supreme Court of Victoria decided that notwithstanding the provisions of s.26 of the Administration and Probate Act 1890, ordinarily the court would not grant commission to a trustee where the testator has by his will provided remuneration to his executors or trustees for their pains and trouble. It should be noted that s.26 of the Administration and Probate Act 1890 as considered by the Full Court in Winter Irving and Anor v Winter and Ors was in terms very similar to those of s.65 of the Administration and Probate Act 1958.
[4](1907) VLR 546.
In the period between the enactment of the Administration Act 1872 (which preceded the 1890 Act and contained the same provisions by s.25 as s.26 of the 1880 Act) and the decision of the Full Court in Winter Irving v Winter, the issue of whether the court has power to make an award of additional remuneration to a trustee or executor in circumstances where the trustee had by will fixed the level of remuneration, arose in a number of cases before single judges of the Court.[5] In some of those cases the court held that the executor or trustee was barred from receiving an award of additional remuneration, but in other cases it was held that there was such an entitlement in those circumstances. As Vance on Executors Commission states “Many of these early cases are reported very briefly and without any lengthy discussion of earlier authorities, and it is difficult to discern any governing principle. The position becomes confused when we find the same Judge granting commission in some cases, while refusing it in others”.[6]
[5]Will of Pender (1873) 4 AJR 141; Re Rolfe, deceased (1874) 5 AJR 92; Will of Kay (1876) 2 VLR (IP & M) 94; Estate of Riley (1878) 4 VLR (I.P. & M.) 28; Estate of Sargood (1878) 4 VLR (I.P. & M.) 43; Will of Bell (1880) 6 VLR (IP & M) 100; Will of Richmond (1882) 8 VLR (IP & M) 22; Will of Stanway (1883) 9 VLR (I.P. & M.) 36; Will of Hutchings (1889) 15 VLR 419; Re Stronell (1893) 19 VLR 64; and Will of Lee (1902) 28 VLR 510.
[6]Vance, Executors Commission, Law Book Company, 1969 p.23. For a helpful discussion of the search for “governing principle” in the early cases see pp.23-27.
The issue was examined by the Full Court on several occasions before Winter Irving v Winter. Indeed such remuneration was allowed by the Full Court in Will of Millin.[7] In a later decision in the Will of Lee[8] Holroyd J described the decision of the Full Court in the Will of Millin as:
“ … a plain decision that the Court had the right under s.25 of the Administration Act 1872 to grant such commission as it thought fit as a reward for the services of executors or trustees.”
[7](1875) 2 VLR (IP & M) 86
[8](1902) 28 VLR 510 at 516.
In the Will of Fellows[9] commission was refused by the Full Court to executors to whom a legacy had been given by the testator with a statement in his will that it was “for the trouble they will have in the execution of the trusts”.
[9](1879) 5 VLR (IP & M) 85
In the Will of Howell [10]the testator had fixed the remuneration of the trustees. The question submitted to the Full Court upon the reference of A’Beckett J at first instance was:
“If the Court is of the opinion that the commission provided for by the will of Richard Howell is an inadequate remuneration for his services ought it in the exercise of its judgment under s.26 of the Administration and Probate Act 1890 to allow the executors any other commission?”
The Full Court (consisting of Holroyd ACJ, A’Beckett and Hodges JJ), in its unanimous judgment[11] answered the question in the affirmative, stating its answer to be “in exact accordance with the language of s.26 of the Administration and Probate Act” and also with the judgment of the court in the Will of Millin.
[10][1906] VLR 223
[11]Holroyd ACJ, A’Beckett and Hodges JJ at 224.
The next decision to follow the Will of Howell was Winter Irving v Winter where Cussen J at first instance[12] considered that he was bound by the earlier decision of the Full Court, In the Will of Howell to allow commission. The decision of Cussen J was then appealed.
[12]Winter Irving and Anor v Winter and Ors (1907) VLR 229.
On appeal the Full Court, consisting of Madden CJ, A’Beckett, Hodges and Hood JJ, decided to reconsider the previous authority of the Will of Howell and the question of whether or not the court could grant additional remuneration to trustees in circumstances where the testator had by his will provided remuneration. The facts of the case were that the testator, who had died in February 1885, had provided that each of the trustees (one of whom was the plaintiff) should be entitled to a sum of £200 per annum until the youngest child of the testator turned twenty-one years. Substantially, the trust property consisted of a large sheep and cattle station which was operated by the trustees up until the youngest child of the testator turned twenty-one years, and for some time thereafter, during which time considerable trouble and responsibility was exercised on the part of the trustees in the sale of the property.
The result of the decision of the Full court in Winter Irving v Winter was that the unanimous decision of the Full Court a year earlier in the Will of Howell, said by Madden CJ to have obstructed "the line of consistent authorities" and repudiated the rule "long established and acted upon", was overruled.[13] The Will of Fellows was followed as laying down the correct principle as being that , “The wishes of the testator ought to settle the amount of remuneration to executors where his intention is clearly expressed”.
[13]At 564.
In his judgment, A’Beckett J concurred with the opinion of the Chief Justice that the Full Court had incorrectly decided the Will of Howell although he did suggest that "exceptional circumstances" would justify the court in exercising its powers under s.26 in some circumstances.[14]
[14]At 566.
However, Hodges J, in his judgment said[15]:
“I have read the judgment of the Chief Justice and in substance agree with it, and desire only to add that I am not prepared to limit the discretion which the Court has to exercise under s.26, to any class of cases or to say that in any class of cases the Court must refuse – as in my opinion there may be cases where the Court may allow to the executor a commission in passing his accounts although the testator has made provision for what he is to get”.
[15]At 566.
Accordingly, if the decision of the majority of the Full Court in Winter Irving v Winter is still good law, the Court, on one view, has no power to award any increase in remuneration to the trustees of the Bequest because of the decision of the Full Court in that case that, if the testator has “in clear and distinct terms measured the amount of the remuneration to be received by his executors, and they accept his view by proving and acting under the will, the court ought to enforce his intentions.”[16] The relationship between this principle and s.26 of the Administration and Probate Act 1890 was explained further by Madden CJ when he said[17]:
“Section 26 is wide in the terms by which it confers jurisdiction to grant commission whenever the court thinks it just and reasonable to give it, but the practice I have mentioned was well-known to the legislature as universal, and as having prevailed in the English and Victorian courts for a great while, ………I therefore think that the right to commission is not independent of the clear wishes of the testator.”
The submissions of the applicants that Winter Irving v Winter is not binding precedent
[16]See p.564.
[17]At pp.564-565.
First, Mr Bravender-Coyle submits that s.65 of the Act gives the Court a discretion to be exercised in unrestricted terms (other than as to a limit upon quantum of remuneration not exceeding 5%). He submits that the decision in Winter Irving v Winter fetters the discretion given to the Court by that section. He submits that it is now clear that where Parliament has given an unfettered discretion to a court, that discretion cannot be fettered by judicial decision. In Irving v Carbines[18] the Full Court said[19]:
“As Bowen LJ said in Gardner v Jay (1885) 29 Ch D 50, at 58 ‘ … when a tribunal is invested by Act of Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view of indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not fetter the discretion of the judge why should the Court do so?’ … and as Kay LJ said in Jenkins v Bushby [1891] 1 Ch 484 at 495 ‘ … the Court cannot be bound by a previous decision, to exercise its discretion in a particular way, because that would be in effect putting an end to the discretion’.”
[18][1982] VR 861.
[19]At 865.
Subsequently, in Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd[20] the Full Court gave consideration to the question of whether a discretion given by Parliament to a single judge of a superior court should be the subject of restrictions imposed by judicial decisions. Fullagar J (with whom McGarvie and Ashley JJ agreed) said[21]:
“If the legislature leaves that which is expressed as an absolute and unfettered discretion to a court, it is in my opinion not for the court to set restrictions upon the discretion for future cases; far less is it for an appellate court to purport to bind every single judge of the donee court in all future cases as to how the discretion is to be exercised in various stipulated kinds of case, that is to say, stipulated by the court. In the first place, to do so amounts purely and simply to judicial legislation. Secondly, it is judicial legislation of a most objectionable kind, for the judiciary is on the very face of things saying the very opposite to that which the Parliament has enacted; what the two have respectively said are irreconcilable; where the Parliament has said in virtually the plainest terms available to it that the discretion is to be unfettered, the appellate boundaries must be placed upon the discretion in the hands of the judge who is the donee of the discretion. The objectionable character does not lie merely in the unwarranted usurpation by the judiciary of the legislative function, with all that this entails, with the affairs of the citizens ruled by judicial officers whom the citizens cannot elect or dismiss. It lies also in the unspoken assumption that the court laying down the guidelines for all future cases is not merely wiser than any future exerciser of the discretion, but is also prescient and omniscient. Thirdly, to lay down restrictions seems to me to be at once a yielding to temptation and a sign of weakness, as if the court does not have enough confidence in the court, or in those who sit at first instance, to allow so potent an instrument of justice as a general discretion to be wisely and justly wielded or used. It is one thing for an appellate court to exercise sparingly or restrictively its own discretion – to allow appeals to itself – according to its own ‘guidelines’ so as to protect from the floodgates, because it is at liberty to depart from its own guidelines; it is however quite another thing to enact judicially guidelines binding as rules of law upon a judge who is by the legislature empowered to grant leave to the court.”
[20][1992] 2 VR 505.
[21]At 512 – 513.
Secondly, Mr Bravender‑Coyle argues that an exercise of discretion similar to that under s.65 of the Act would not now be regarded as being fettered by any term of the will in relation to remuneration of a trustee in other common law jurisdictions. Thus he argues Winter Irving v Winter is no longer good law. In this regard his submission has the support of the two learned authors of “Principles of the Law of Trusts” who state:[22]
“ … it is submitted that those cases in which the courts have restricted the remuneration allowable to the trustee to that provided for by the trust instrument are either cases in which it was considered that the remuneration provided was sufficient, or cases where the court considered that greater weight was to be attached to the wishes of the settlor than to the well-being of the trust property or the welfare of the beneficiaries. This latter consideration is outmoded.”
[22]Ford and Lee, Principles of the Law of Trusts, LBC, 1996 para [13200].
It is clear that at least since 1981 the law in England has been that the Court has discretion to increase remuneration to a trustee irrespective of whether or not there is provision for remuneration made by the will of the testator. In Re Duke of Norfolk’s Settlement Trusts, Earl of Perth v Fitzalan‑Howard[23] Fox LJ stated:
“As to principle, it seems to me that if the court has jurisdiction, as it has, upon the appointment of a trustee to authorise remuneration though no such power exists in the trust instrument, there is no logical reason why the court should not have power to increase the remuneration given by the instrument.”[24]
[23][1982] 1 Ch 61.
[24]At 79.
In the same case, Brightman LJ said:
“If the court has an inherent power to authorise a prospective trustee to take remuneration for future services, and has a similar power in relation to an unpaid trustee who has already accepted office and embarked upon his fiduciary duties on a voluntary basis, I have some difficulty in appreciating the logic of the principle that the court has no power to increase or otherwise vary the future remuneration of a trustee who has already accepted office. It would mean that, if the remuneration specified in the trust instrument were lower than was acceptable to the incumbent trustee or any substitute who could be found the court would have jurisdiction to authorise a substitute to charge an acceptable level of remuneration, but would have no jurisdiction to authorise the incumbent to charge precisely the same level of remuneration. Such a result appears to me bizarre, and to call in question the validity of the principle upon which it is supposedly based.”[25]
[25]At 80.
The level of remuneration established by will would not have fettered the discretion for the Court to award a higher sum in South Australia since 1867. It was held in the Will of Taylor[26] that a legacy given to executors would not prevent the Court from awarding compensation for their pains and trouble. More particularly, in Re Johnson[27] and in Re Salom[28] it was held that the Court had jurisdiction, in a proper case to award trustees commission in excess of the amount nominated by the testator in the will.
[26](1867) 1 SALR 13.
[27][1924] SASR 31.
[28][1929] SASR 387.
In Western Australia in Will of Stratton, (dec’d)[29] in circumstances not dissimilar to those now before me, it was held that the Court had the jurisdiction to exercise such jurisdiction.
[29][1981-82] WAR 58.
In New Zealand, a similar view has been adopted in a series of decisions since 1884.[30] In the case of Re Allen McLean, deceased[31] the Chief Justice of New Zealand, Stout CJ, said in the course of delivering the judgment of the Court of Appeal:
“The proper rule to be applied is, we think, that where the testator has left to his executors a legacy which he might reasonably consider a fair allowance for their services in administering his estate, having regard to the trouble and responsibility he expected to be imposed on them when discharging this duty, that legacy ought to be treated as being prima facie adequate remuneration for their services. If in such a case the executors desire to obtain further remuneration, the onus lies on them of showing clearly that the remuneration allowed is inadequate, or that there are special circumstances in connection with the administration which probably were not in the contemplation of the testator when he fixed the amount of the legacy bequeathed to his executors, and which justify an additional allowance”
[30]Re Proctor (1885) NZLR 3 SC 126; Re Chavannes (1898) 16 NZLR 639; Re Langlands (1901) 21 NZLR 100; Re Sir Douglas McLean, dec’d (1934) NZLR 1074; Re McCormack dec’d (1938) NZLR 777.
[31](1912) 31 NZLR 139 at 141.
In my respectful opinion that statement accords with sound common sense and carries with it more flexibility than the somewhat more rigid approach of the Victorian Full Court only five years earlier in Winter Irving v Winter.
The position in New South Wales, Tasmania and Queensland does appear to be more equivocal than that in England, South Australia, Western Australia and New Zealand.
In New South Wales, the cases demonstrate that the doctrine of disclaimer or renunciation applies, viz, assuming that the will provides for remuneration or a legacy by way of remuneration, an executor or testamentary trustee may decline to accept the legacy and apply to the court for commission. If he proves the will, then he is deemed to have made an election and it is too late for him to renounce it.[32]
[32]Re Blake (1878) 1 SCR (NS) NSW 253; Re Fullerton’s Will (1885) 6 LR (NSW) (P & D) 15, 1 WN (NSW) 140; Estate of Burdekin, dec’d (1901) 1 SR (NSW) (B & P) 1, 18 WN 156; Re Pauton (1909) 26 WSN (NSW) 51; Re Wheelehan (1912) 29 WN (NSW) 98; Will of Morrison (1933) 50 WN (NSW) 88 at 90; Will of Oddie [1976] 1 NSWLR 371.
However, it has been recognised by the common law in New South Wales that special circumstances will entitle the Court to exercise jurisdiction to grant remuneration to trustees notwithstanding that the testator has made provision for such remuneration by will such as “where the bequest is so small as to be illusory".[33]
[33]Will of Steele (1915) 15 SR (NSW) 247, 32 WN (NSW) 66; Will of Kerrigan (1935) 35 SR (NSW) 242;
In Tasmania, it has been held that there is no power, notwithstanding the inadequacy of any provision by will, to authorise the payment of any additional remuneration to the trustees: Re Medwin.[34] It should be noted, however, that s.58 of the Trustee Act 1989 (Tas) provides that it is lawful for the Supreme Court to allow just and reasonable compensation to a trustee only in “any case in which there is not in the instrument creating the trust … any provision for remunerating a trustee”. However, in Re Stewart,[35] where the will provided that “the commission of income payable to my trustees shall not exceed the sum of One hundred pounds each per annum”, Burbury CJ (following Re Birch, Campbell v Union Trustee Co of Australia Ltd[36]) awarded corpus commission on the basis that the words of the will did not preclude this.
[34](1919) 15 Tas LR 74 (FC).
[35][1964] Tas SR 309.
[36][1924] VLR 510.
In Queensland, the common law recognises that the court may increase remuneration fixed by the will where there are special circumstances, once again such as where the legacy provided or remuneration is so small as to be illusory.[37]
[37]Re Murphy, dec’d (1928) QSR 1 (FC).
Furthermore, in Re Lack[38] McPherson J held, that in the absence of an indication of the testator’s intention to the contrary, there is no presumption of law that a legacy given to a person named as executor is, if accepted by him or her, prima facie to be regarded as exhausting a right to apply for, and the court’s power to grant, commission for time and trouble taken in performing duties as executor or trustee of the will.
[38][1983] 2 Qd R 613.
Conclusion
The first question to be decided is whether or not a single judge of the Supreme Court of Victoria has jurisdiction to increase the remuneration of trustees of trusts established by will, in circumstances where the will fixed the remuneration. If the only issue before me was the issue of the construction of s.65 of the Act, I would have no doubt that in a proper case, the section grants an unfettered discretion to allow such remuneration as is fair, just and reasonable in all the circumstances of that case, irrespective of the rate of remuneration established by the will.
Mr Bravender‑Coyle argues that the exercise of the discretion granted by s.65 of the Act cannot be fettered by the decision of the Full Court in Winter Irving v Winter. In particular, he submits it is clear that Winter Irving v Winter was decided on the basis of a “practice” which had been (although as is apparent, not always) followed by the Courts of England and Victoria. As Madden CJ made clear in Winter Irving v Winter, he relied upon a practice that had "prevailed in the English and Victorian Courts for a great while…"[39]
[39]At 564 – 565.
However, notwithstanding the fact that the practice of not awarding any increase in trustees commission, may on one view, be seen as fettering a discretion, it is apparent that the practice was a matter relied upon by Madden CJ in terms of statutory construction. He said:[40]
“Further, the practice has prevailed and been acted on for nearly a quarter of a century in Victoria, since the Administration Act 1872 was passed, and the Legislature has never sought to alter it, thus indicating that the practice has been in accordance with its intentions…..”
[40]At 565.
In circumstances where the Full Court of this Court has construed legislation, which is almost identical to the legislation now before me, in such a manner, and in accordance with a long line of authority, I am inclined to think that it would be better for the Court of Appeal of this Court, if it thought fit, to overrule a previous decision of the Full Court, than for me to accept the arguments now before me that the decision is no longer good law. The same applies, in my view, to the no doubt compelling argument that other common law jurisdictions have taken a course different from that of Winter Irving v Winter. However, no party has sought that a special case be stated for the decision of the Court of Appeal, and for the reasons which follow, I consider that to be unnecessary in this instance.
It should be observed that Winter Irving v Winter has been the subject of later consideration on at least two occasions by single judges of this Court.
In Re Birch, Campbell v Union Trustee Co of Australia Ltd[41] the will provided for a fixed amount of income commission for the executors and trustees. The executors and trustees who proved the will applied for additional remuneration. Schutt J[42] accepted Winter Irving v Winter as laying down the rule to be applied, but he held that the terms of the will did not prevent him from awarding corpus commission, as distinct from income commission. That option is excluded by the words of clause 8 of the will of the testator in this case, and, in any event would not be appropriate as the intention of the trustees in this proceeding is not to benefit themselves, but to enable suitable men and women to replace them as trustees.
[41][1924] VLR 510.
[42]At 514.
Exceptional Circumstances
However, of more significance in Re Dunne, Bingeman v National Trustees Executors and Agency Co Ltd[43] Lowe J considered circumstances whereby a testator left legacies of £300 to each of the plaintiffs in consideration of their acting as his executors and in lieu of any remuneration to which they might be entitled for such services. The testator left a large estate and the executors undertook a considerable amount of work over a number of years in administering it. Unfortunately, and by reason of a fall in value of assets over the period of administration, the pecuniary legacies given to the plaintiff trustees failed. Accordingly, they sought an order for 2½% commission on the corpus and income. Lowe J said:
“The decision in Winter Irving v Winter makes it clear, if there were any doubts about the question, that I have power to make the order now sought, and that where application is made to the Court for further remuneration the Court will, if there are exceptional circumstances, exercise that jurisdiction notwithstanding that the testator has in his will made provision for a legacy. In this case the testator in his will has provided a legacy of £300 to each of the applicants ‘in consideration of their acting as an executrix and executor of this my will and in lieu of any remuneration that they may be entitled to for such services’. In the actual result nothing has been, or can be, paid to either of them. This, I think, is a special circumstance which entitles me to allow them commission for their pains and trouble in administering the estate.”[44]
[43][1934] VLR 307.
[44]At 309.
Accordingly, it appears to me to be clear that if there are exceptional circumstances the Court is justified in exercising its discretion under s.65 of the Act, notwithstanding the fact that the testator made allowance in his will for the remuneration of the trustees. A’Beckett J said in Winter Irving v Winter[45]:
“I think that where … what is given to executors is given expressly as remuneration, and if there are no exceptional circumstances to justify the court in exercising its powers under s.26, the mere inadequacy of the remuneration provided by the testator is no ground for giving more than the testator intended to give.”
[45]At 566.
Thus, I am satisfied that notwithstanding the “governing principle” that “where the Court, as a matter of interpretation of the will, finds that the testator’s intention was that a legacy given to the executor should be his sole remuneration … the Court will not grant additional remuneration”,[46] the Court does have power to make an order granting an executor or trustee commission beyond that provided for in the will, if there are exceptional circumstances. Thus, if there are exceptional circumstances in the present case it is unnecessary for me to decide the matter on the basis submitted by Mr Bravender‑Coyle that the decision in Winter Irving v Winter cannot bind the exercise of my discretion or alternatively is no longer good law.
[46]Vance, op cit, at 27.
It is now over 44 years since the death of the deceased. The Bequest established by his will and held by his trustees now has assets in excess of $17,000,000. I accept that the degree of responsibility and skill to be exercised by the trustees is high and to a considerable degree proportionate to the value of the estate. The corpus and income of the Bequest is of significant magnitude.
The trust has an annual net income in excess of $900,000. Save for payment of a small number of annuities of relatively small value, the overwhelming proportion of the net income is distributed to charitable institutions. There is in this regard a significant public interest in the continued successful performance of the trust fund.
Each year the trustees distribute substantial funds to major hospitals, research institutes, homes for the elderly and blind, for the arts and education, to youth organisations and disability support organisations and to general charities. Accordingly, not only are the trustees entrusted with the onerous duties of prudent investment of a substantial sum of money, but they are additionally required to evaluate applications for funding carefully so as to ensure that any such application meets the criteria set out in clause 5 of the will and that the particular project under consideration has merit.
I am satisfied on the material before me that although the sum of £250 per annum was adequate remuneration for the trustees in the early years of the administration, it has for many years been totally inadequate by reason of inflation and by reason of the amount of time now required to administer a substantial fund involving a considerably more diverse investment portfolio than that contemplated by the deceased, and the requirement that the trustees consider carefully each charitable distribution from the income of the trust fund.
The fact that the trust fund has been well served over many years by persons who knew the deceased and or, were employed in senior management positions in Joe White Maltings Limited is a significant matter. I accept that the inadequate remuneration for their contribution over recent years has been of no concern to them by reason of their sense of personal loyalty to the deceased, or by reason of their many years of service in the company created by him. I accept that the takeover of that company means that the close connection between the Bequest and the company has been severed, with the consequence that the senior management of the company will in future not necessarily be the source of trustees with significant skill and experience in investment and management procedures.
I accept that in circumstances where each of the trustees has been a trustee for many years, the application now being made is not an application made in his personal interest, but is an application made solely for the benefit of the Bequest and for the benefit of the charitable institutions which will be in the future the beneficiaries of the continued good management of the trust fund.
The above matters establish clearly in my mind that there are exceptional circumstances in this case and that pursuant to s.65 of the Act I should exercise my discretion to allow an increase in the amount of remuneration paid to the trustees of the Bequest, notwithstanding the fact that the deceased fixed such remuneration in the sum of £250 per annum by his will.
As stated previously, the investment powers and obligations of trustees under Part 1 of the Trustee Act 1958 (as amended) have changed significantly since the judgment in Winter Irving v Winter, and of more significance, since probate of the will of the deceased was granted. That change has brought with it a commensurate increase in the burden and responsibilities of trustees such as those of the Bequest. It might be said therefore, that the change in powers and responsibilities alone constitutes an exceptional circumstance, although, as I have observed, I am satisfied in any event that exceptional circumstances are made out in this case.
Prospective Commission
As Mr Bravender‑Coyle very properly made clear to me there are some old cases whereby the Court demonstrated a reluctance to order commission to trustees in the future.[47]
[47]Estate of Hine (1878) 4 VLR (IP & M) 64; Estate of Swan, Estate of Newton (1881) 7 VLR (IP & M) 49; and Will and Codicil of Short (1885) 11 VLR 634; Strauss v Wykes [1916] VLR 200..
However, notwithstanding such cases I have no doubt that the Court has power to make an order for payment of commission to trustees that will have effect in the future.
In Nissen v Grunden[48] the High Court in overruling a decision of the Full Court to the contrary, held that the Supreme Court of Victoria has power to grant commission, both past and future to executors, administrators and trustees for their pains and trouble if it is for the benefit of the estate.
[48](1912) 14 CLR 297 at 307 - 308.
Orders in relation to future commissions of trustees have been made by the Supreme Court of Victoria in Moore, dec’d, Moore v Moore.[49] Similar orders have been made in England in Re Duke of Norfolk Settlements Trusts, Earl of Perth v Fitzalan‑Howard[50] and in South Australia in Re Gambling.[51]
[49][1956] VLR 132.
[50][1982] 1 Ch 61.
[51][1966] SALR 134.
Quantum of "just and reasonable" remuneration.
The remaining question to be determined is whether the sum of future commission sought by the trustees of a total of 3.5% of the annual net income for each financial year to be shared amongst them in lieu of the sum of $500 each is “just and reasonable” as required by s.65 of the Act.
3.5% of the net income of the trust for the year ending 30 June 2002, would have been $31,980. Divided by four this sum would have allowed commission of $7,995 for each trustee and if there were five trustees the sum allowed to each would have been $6396. Such sums are less than sums calculated by reference to the movement in average full‑time all‑employee earnings for the period since the death of the deceased as calculated by Professor Norman. Professor Norman calculated that the sum of £250 as an annual earning in 1960 would now be $9,123.86. Furthermore, as is established by the exhibits to Ian Tweedie’s affidavit the sum of $250 in 1960 represented 0.926% of the net income of the trust of £26,987 in that year. The same sum represented 0.95% of the net income of the trust of £26,302 in 1961. Thus an award of 3.5% per annum in total would still be less than the proportion of the estate the five original trustees received in the early years of the administration of the trust. (i.e. 0.875% if there are four trustees and 0.7% if there are five trustees.)
In the event that no suitable trustees could be found in the future to administer the Bequest it would be necessary for the State Trustees Limited or another trustee company to be appointed as the replacement trustee. Under s.26(1) of the Trustee Companies Act 1984, trustee companies are entitled to charge up to 5.5% of the gross value of the estate as at the date that the trust is committed to their administration and up to 6.6% of the annual net income of the trust. In addition, s.40(13) of that Act provides that an additional sum of up to 1.1% may be charged in respect of any capital sum invested in the common fund of a trust company. In all the circumstances I have no hesitation in concluding that the total sum of 3.5% of net annual income to be shared amongst the trustees of the Bequest is just and reasonable.
The Orders to be made
Upon this proceeding coming before me today, I was advised that there was one issue in contest between the parties. I was informed by Mr Bravender‑Coyle that the parties had agreed that within three months of the end of each financial year the trustees would deliver to the Attorney‑General the financial statements of the Bequest for the preceding financial year and a schedule of distributions made from the trust for that year. I was further advised by Mr Cook that the Attorney‑General sought an order that the trustees pay from the income of the trust the reasonable costs and expenses incurred by the Attorney‑General in “noting the contents of” such financial statements. Mr Cook estimated the cost of such “noting” to be $300 this year. He did not draw to my attention the basis upon which I might have jurisdiction to make such an order and I have grave doubts as to my power to make an order for an unspecified sum to be paid out of the trust to a party other than that provided for by the trust instrument. In any event, it appears to me that even if such an order was within my power, it would not be appropriate in all the circumstances. The Attorney‑General has legal duties in relation to charitable trusts as established both by common law and the provisions of the Charities Act 1978 and in circumstances where members of the Victorian public are the major beneficiaries of the Bequest, I would decline to make such an order, even if I had power to do so.
Accordingly, the order I propose to make, having been informed that the trustees of the Bequest for the time being will:
(a)within three months of the end of each financial year deliver to the Attorney‑General the following documents, namely:
(i)financial statements of the trust for the preceding financial year; and
(ii)a schedule of distributions made by the trust for the previous financial year; and
(b)notify the Attorney‑General in writing if in any particular financial year there is a substantial change from the preceding year in their pains and troubles in administering the trust;
are as follows:
1.The commission of £250 allowed to each trustee of the Joe White Bequest under clause 8 of the will of the abovenamed deceased dated 8 December 1958 be increased to a total of 3.5% of the annual net income to be shared amongst the trustees of the Joe White Bequest for the financial year ending 30 June 2004 and for each financial year thereafter until further order.
2.The applicants’ costs and the respondent’s costs (including the respondent’s reserved costs) be taxed on a solicitor and client basis and be paid out of the corpus of the Joe White Bequest.
3.The applicants’ solicitors have leave to draw up this order for signing by a Judge pursuant to Rule 60.04(1).
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