Thornley v Boyd - [1925] HCA 41

36 CLR 526

THORNLEY AND OTHERS

DEFENDANTS,

BOYD AND OTHERS

RESPONDENTS.

DEFENDANT AND PLAINTIFFS,

ON APPEAL FROM THE SUPREME COURT OF Will-Construction---( of income-Sheep station carried on by trustees-Sale for

purpose of winding up business-Profits on sale of sheep-Corpus or income. MELBOURNE,

A testator, who during his lifetime had carried on the business of a grazier Oct. 19,20, 29.

on four stations, three of which were freehold, by his will gave all his property, which substantially consisted of the stations and the sheep thereon, to his trustees on trust for sale and conversion and investment. He directed that the trustees should hold the whole of the proceeds upon trust to pay the income to his children in certain shares and after their deaths upon trust for their children. He also directed that the trustees were not to sell his real estate until ten years after his death; he empowered them to postpone the sale of his real estate and the conversion of his personal estate in their discretion, and he authorized them to lease or manage and work his real estate, and for that purpose to use any sheep or stock and plant belonging to the estate or to purchase sheep, stock or plant. The trustees carried on and worked the stations for some years after the expiration of the ten years.

Held, that, on a sale by the trustees of one of the stations and the sheep thereon for the purpose of putting an end to that business, none of the profit realized on the sale of the sheep was income, but that the whole of the proceeds of sale was corpus.

Decision of the Supreme Court of Victoria (Full Court): In re Thornley; Boyd v. Thornley, (1925) V.L.R. 569 47 A.L.T. 52, affirmed.

36 CLR 527

APPEAL from the Supreme Court of Victoria.

William Boyd and the Union Trustee Co. of Australia Ltd., the trustees of the will and estate of Nathan Thornley, by originating summons sought a determination of the question (among others) whether, having regard to the construction of the will, the whole or any and what portion of the amounts realized at the clearing sales of live-stock belonging to the estate, held on 4th February 1924 on the station known as Woperana and held on 31st May 1924 on the station known as Warrambeen respectively, should be appropriated to corpus. The defendants to the summons were the sons and daughters of the testator, namely, Edmund Ashworth Thornley, Geoffrey Prestwick Thornley, Edith Theresa Boyd, Florence Louisa Nicholson and Violet May Lillies, and Douglas Thornley Boyd on behalf of himself and the other grandchildren of the testator. The material provisions of the will and the other facts are stated in the judgments hereunder.

The Full Court, to which the summons was referred, answered the question by declaring in effect that in the case of each sale the whole of the sum by which the amount realized at the sale exceeded the value at which the sheep stood…

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 Thornley v Boyd

Details

AGLC: Thornley v Boyd [1925] HCA 41
Case: [1925] HCA 41
Decision Date: 29 October 1925

CaseChat Overview and Summary

The parties to this appeal were the sons and daughters of the testator, Nathan Thornley (appellants), and the trustees of his will, William Boyd and the Union Trustee Co. of Australia Ltd., along with a grandson representing the grandchildren of the testator (respondents). The dispute concerned the characterisation of profits realised from the sale of sheep on two stations, Woperana and Warrambeen, which were part of the testator's estate. The trustees had carried on the grazing business on these stations for some years after the testator's death, in accordance with powers granted in the will. The question before the High Court of Australia was whether the excess of the sale proceeds of the sheep over their book value should be treated as corpus or income of the estate.

The central legal issue was whether the profits derived from the sale of sheep, when the stations were being wound up and sold, constituted income or corpus of the testator's estate. The appellants argued that these profits represented income earned from the carrying on of the grazing business, akin to trading stock in other commercial enterprises. They contended that any increase in the value of the sheep, realised upon sale, should be treated as income for the life tenants. Conversely, the respondents argued that the proceeds of the sale, including any excess over book value, were corpus, as the sales were not part of the ordinary course of business management but rather a realisation of capital assets for the purpose of winding up the estate.

The High Court, affirming the decision of the Supreme Court of Victoria, held that the profits realised from the sale of the sheep were corpus and not income. The Court reasoned that the testator's will established a primary trust for sale and conversion of his entire estate. While the trustees were empowered to manage and work the stations, and to use the sheep for that purpose, the sheep themselves remained part of the corpus of the estate. The sales in question were not made in the ordinary course of managing the business to generate annual income, but rather for the purpose of winding down the business and realising the assets. Therefore, any excess of the sale proceeds over the book value of the sheep was considered an accretion to capital, not income distributable to the life tenants. The Court applied the principle that profits from the sale of capital assets, even if employed in a business, are generally corpus unless the testator's will specifically directs otherwise.

The High Court dismissed the appeal, ordering that the costs of the appeal be paid by the appellants.

Orders