Shares in joint stock companies-Expediency-Order-General or specific- Trustee Act 1925-1942 (N.S.W.) (No. 14 of 1925-No. 26 of 1942), 88. 14, 81. 1951,

Investments of trust funds by trustees are not finally limited to the securities authorized by S. 14 of the Trustee Act 1925-1942 (N.S.W.) or the trust instrument; under S. 81 of that Act, the Court may, if satisfied that it is MELBOURNE,

expedient in the interest of the trust property as a whole SO to do, authorize 1952,

trustees to invest trust funds in shares in the capital of selected joint stock companies registered on the stock exchange, and to vary and transpose any such investments from time to time.

So held by Dixon, Williams and Webb JJ. (Fullagar and Kitto JJ. dissenting).

In re Strang, (1941) 41 S.R. (N.S.W.) 114; 58 W.N. 108, disapproved. 'Expediency " discussed. Decision of the Supreme Court of New South Wales (Roper C.J. in Eq.): In re Riddle, (1951) 68 W.N. (N.S.W.) 201, reversed.

APPEAL from the Supreme Court of New South Wales.

An application was made by way of originating summons under S. 81 of the Trustee Act 1925-1942 (N.S.W.) to the Supreme Court of New South Wales in its equitable jurisdiction, by John Goddard Riddle, Norman Robert McDowell and Enid Maud Cooper Warnock, the trustees of the will of Sir Ernest Cooper Riddle, deceased, for an order (i) that they be at liberty to postpone the conversion of a number of shares in certain public companies, and Commonwealth

85 CLR 203

Government stock; (ii) that they be authorized to retain those investments and to re-invest the proceeds of the conversion of any such investments or any other investments for the time being of the estate in shares in the capital of any of sixteen named companies, particulars of which were furnished by affidavits (iii) that they be authorized to vary and transpose any such investments from time to time and (iv) that they be granted such further or other order as to the judge seemed fit.

The summons was served upon Anthony Cooper Riddle and Cynthia Geraldine Riddle, both of whom were infants under the age of twenty-one years.

In a joint affidavit sworn on 5th April 1951 the trustees John Goddard Riddle and Norman Robert McDowell, solicitors, deposed to the following effect. The testator, Sir Ernest Cooper Riddle, died on 28th February 1939. His will, probate of which was granted to Perpetual Trustee Co. (Ltd.) on 28th June 1939, was in the following terms: "I give devise and bequeath all my property real and personal whatsoever and wheresoever situate unto my Trustee upon trust as to the income for my wife for her life and upon her death or should she predecease me upon trust as to the first half share of such income for my daughter Enid for her life and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Riddle v Riddle

Details

AGLC: Riddle v Riddle [1952] HCA 12
Case: [1952] HCA 12
Decision Date: 14 March 1952

CaseChat Overview and Summary

The appellants, trustees of the will of Sir Ernest Cooper Riddle, sought an order from the Supreme Court of New South Wales to authorise them to retain certain existing share investments and to reinvest proceeds in shares of selected public companies, as well as to vary and transpose such investments. The respondents were infant beneficiaries. The testator's will did not contain specific investment powers, leaving the trustees bound by the limited investments authorised by the Trustee Act 1925-1942 (N.S.W.).

The primary legal issue before the High Court was whether Section 81 of the Trustee Act 1925-1942 (N.S.W.) empowered the Court to grant trustees authority to invest in shares of public companies, even when such investments were not permitted by the trust instrument or the Act itself. This involved determining the scope of the Court's discretion under Section 81 and whether the prevailing economic conditions, particularly inflation, constituted sufficient grounds for authorising such investments. A further issue was whether the decision in *In re Strang* (1941) 41 S.R. (N.S.W.) 114, which suggested a stricter test for authorising such investments, was correctly applied by the lower court.

The High Court, by majority, held that Section 81 of the Trustee Act was intended to grant the Court broad powers to authorise trustees to make investments beyond those permitted by the trust instrument or general law, provided it was deemed "expedient" in the interests of the trust property as a whole. The Court reasoned that the concept of expediency was flexible and encompassed financial and business considerations, and that the prevailing inflationary conditions presented a compelling case for authorising investments in shares of reputable public companies to preserve the real value of the trust capital and income. The Court disapproved of the restrictive interpretation in *In re Strang*, finding that the section did not require proof of special advantages or disadvantages peculiar to a specific estate, nor did it preclude authorising investments that might be beneficial to multiple estates.

The appeal was allowed, and the matter was remitted for rehearing. The Court found that the Supreme Court had erred in refusing to consider authorising investments in shares based on the reasoning in *In re Strang*. While the High Court indicated that the specific terms of any order would be a matter of discretion for the Supreme Court, it affirmed that the power to authorise such investments under Section 81 was available if expediency was demonstrated.

Orders