Smith v Perpetual Trustee Co Ltd and Delohery

The appellant, H. C. Smith, was entitled to an interest under his grandfather's will, which contained a forfeiture clause stipulating that any assignment or charge of his benefit would cause it to lapse. Smith, indebted to various creditors including his solicitor, Mr. Delohery, executed a power of attorney in favour of Delohery authorising him to collect moneys from the estate for the purpose of paying Smith's debts. Concurrently, Smith wrote to the trustees of the will, the respondent Perpetual Trustee Co. Ltd., instructing them to pay all future income and corpus to Delohery, whose receipt would suffice. The intention of both Smith and Delohery was to establish a principal-agent relationship. The Supreme Court of New South Wales had held that these documents constituted a forfeiture of Smith's interest.

The High Court of Australia was required to determine whether the power of attorney and the letter to the trustees, individually or collectively, amounted to an assignment or charge of the appellant's interest under the will, thereby triggering the forfeiture clause. Additionally, the court considered whether a writ of foreign attachment subsequently issued against the appellant's property in the hands of the trustees also operated as a forfeiture.

The Court reasoned that for a forfeiture to occur, the documents must, in form or substance, constitute an assignment or charge. It held that the documents, when viewed in light of the parties' intentions, did not demonstrate an intention to assign or charge the appellant's interest. The primary intention was to create a revocable mandate for an agent to collect and distribute funds, rather than to divest the appellant of his proprietary rights. The fact that Delohery was a creditor did not, in itself, transform the agency into an irrevocable assignment, particularly as the appellant had taken care to avoid any action that would result in forfeiture. The Court also found that the writ of foreign attachment, being an interlocutory order, did not operate as a forfeiture.

Consequently, the High Court allowed the appeal, reversing the decision of the Supreme Court. It declared that the executed documents and the writ of foreign attachment did not, either separately or together, constitute an assignment or charge that divested the appellant of his interest under the will.