Wendt v Orr - [2004] WASC 28

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WENDT & ORS -v- ORR & ANOR [2004] WASC 28

CORAM: COMMISSIONER JOHNSON QC

HEARD: 13, 17 & 18 FEBRUARY 2003

DELIVERED : 4 MARCH 2004

FILE NO/S: CIV 1896 of 2000

BETWEEN: DOUGLAS RONALD WENDT
LYNETTE DOROTHY JOHNSTON
LORRAINE McCARTHY
Plaintiffs
AND
GEORGE STANLEY ORR
First Defendant
JOAN AGNES WENDT
Second Defendant

Catchwords:

Wills - Trustees - Breach of Duty - Whether profit on share sales capital or income - Extrinsic evidence - Review of executor's discretion - Payment of legal fees from the estate - Removal of executor - Reimbursement to estate of distribution and legal fees

Legislation:

Income Tax Assessment 1937

Inheritance Act 1972
Trustees Act 1962

Property Law Act 1969

Result:

Orders for repayment to the estate of the distribution to the defendant and legal fees and for removal of the executor

Category: B

Representation:

Counsel:

Plaintiffs:     Ms C L Tan and Ms M Van Der-Kwast
First Defendant             :     Mr D Jones
Second Defendant         :     Mr P Mendelow

Solicitors:

Plaintiffs:     Dwyer Durack
First Defendant             :     Lewis Blyth & Hooper
Second Defendant         :     Edwin Abdo & Associates

Case(s) referred to in judgment(s):

Alcock v Public Trustee (1936) 53 WN (NSW) 192
Allhusen v Whittell (1867) LR 4 Eq 295
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Bakewell v Holme (1943) 44 SR (NSW) 150
Bouch v Sproule (1887) 12 App Cas 385
Brennan v Permanent Trustee Co of NSW Ltd (1945) 73 CLR 404
Carver v Duncan [1983] 1 WLR 494
Chambers v Smith (1846) 2 Coll 742
Chapman v Browne [1902] 1 Ch 785
Cock v Smith (1909) 9 CLR 773
Commissioner of Income Tax (Qld) v Brisbane Gas Company (1907) 5 CLR 96
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Dibbs v Goren (1849) 11 Beave 483
Drummond v Drummond [1999] NSWSC 923
Eisner v Macomber (1919) 64 L Ed 521
Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199
Field v Peckett (No 3) (1861) 29 Beav 576
Flegeltaub v Telstra Super Pty Ltd [1998] VSC 144
French v Davidson (1818) 56 ER 550
Fysh v Coote [2000] VSCA 150
Gava v Grljusich, unreported; SCt of WA; Library No 960010; 11 January 1996
Gleeson v Fitzpatrick (1920) 29 CLR 29
Gordon v Australian and New Zealand Theatres Ltd (1940) 40 SR (NSW) 512
Hardoon v Belilios [1901] AC 118
Hardwick v Hardwick (1873) LR Eq 168
Hawkins v Hawkins (1920) SR (NSW) 550
Higgins v Dawson [1902] AC 1
Hill v Crook (1873) LR 6 HL 265
Hiscocks (decd) v Hiscocks (1839) 5 M & W 363
Howe v Earl of Dartmouth (1802) 1 W & T 68
Hughes v National Trustees, Executors and Agency Co of Australasia Ltd (1979) 143 CLR 134
In re Armitage; Armitage v Garnett [1893] 3 Ch 337
In re Beddoe; Downes v Cottam [1893] 1 Ch 547
In re Chapman; Cocks v Chapman [1896] 2 Ch 763
In re Davis (decd) [1953] VLR 639
In re Ezekiel Barton's Trust (1868) LR 5 Eq 238
In re Hart (decd); Trustees Executors & Agency Co Ltd v Brash [1954] VLR 239
In re Roper's Trusts (1879) 21 Ch D 272
In re Stuart; Smith v Stuart [1897] 2 Ch 583
In re Weall; Andrews v Weall (1889) 42 Ch D 674
In re Whitely; Whitely v Learoyd (1886) 33 Ch D 347
In re Wilkinson (decd); Elders Trustee & Executor Co Ltd v Henley [1954] VLR 48
Jones v Dunkel (1959) 101 CLR 298
Karger vPaul [1984] VR 161
Letterstedt v Broers (1884) 9 App Cas 371
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
McLaughlan & Anor v Prince & Anor [2002] WASC 274
McRobert v McRobert (1920) 27 CLR 331
Mercedes Benz v ANZ & Anor, unreported; CCA NSW (Palmer J); 50549 of 1990; 5 May 1992
Miller v Cameron (1936) 54 CLR 572
National Trustees Executors & Agency Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373
Nestle v National Westminster Bank plc (Chancery Division HCt, 29 June 1988)
Palairet v Carew (1863) 55 ER 222
Partridge v Equity Trustees Executors and Agency (1947) 75 CLR 149
Perpetual Trustee Co Ltd v Holt (1895) 11 WN (NSW) 141
Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78
Pope v DRP Nominees Pty Ltd [1998] SASR 6933
Porteous v Rinehart (1998) 19 WAR 495
Price v Loaden (1856) 52 ER 955
Re Aitken and Barron's Bill of Costs; Ex parte Perpetual Trustee Co Ltd (1932) 49 WN (NSW) 224
Re Beloved Wilkes' Charity (1851) 3 Mac & G 440
Re Burbidge (No 2), unreported; SCt of NSW (Young J); 6442 of 1992; 25 June 1993
Re Corbett's Settlement (1907) 24 WN (NSW) 30
Re Grimthorpe [1958] 1 WLR 381
Re Havill (decd) [1968] NZLR 1116
Re Hay's Settlement Trust [1982] 1 WLR 202
Re Londonderry's Settlement [1965] Ch 918
Re Mulligan (decd) [1998] 1 NZLR 481
Re Pauling's Settlement Trusts (No 1) [1964] Ch 303
Re Roberts (1983) 70 FLR 158
Re Smith [1971] 1 OR 584
Re Stanhill Development Finance Ltd (In liq) [1966] VR 499
Re Turner [1897] 1 Ch 536
Re Whitehouse [1982] Qd R 196
Re Wrightson (1908) 1 Ch 789
Re Wynn (decd); Public Trustee v Newborough [1952] 1 All ER 341
Rowds v Bibb [1900] 2 Ch 107
Shelton v Anna Kilsby as Executor of the Estate of the Deceased & Ors [2000] WASC 180
Sinclair v Lee & Anor [1993] Ch 497
Sinnott v Hockin (1882) 8 VLR 205
Smith v Chambers (1847) 2 Ph 221
Standard Insurance Co Ltd (In Liq) v Sidey [1967] NZLR 86
Tanti v Carlson [1948] VLR 401
Tierney v King [1983] 2 Qd R 580
Tipperary Developments Pty Ltd v The State of Western Australia, unreported; SCt of WA; Library No 960620; 31 October 1996
Tonkin v Western Mining Corporation Ltd & Anor, unreported; SCt of WA (Scott J); Library No 960302; 31 May 1996
Tonkin v Western Mining Corporation Ltd (1998) 10 ANZ Ins Cas 61‑397
Turner v Hancock (1882) 20 Ch D 303
United Overseas Bank v Jiwani [1976] 1 WLR 964
Walker v Stones (2000) 4 All ER 412
Worrall v Harford (1802) 32 ER 250

Case(s) also cited:

Re Tempest (1866) LR 1 Ch App 485
Scott v National Trust [1998] 2 All ER 705
Swanson v Emmerton [1909] VLR 387

COMMISSIONER JOHNSON QC:

INDEX

Introduction 7

Background 7

The Will 10

The Issues 12

Section 94 of the Trustees Act 13
The use of extrinsic evidence to determine the 16

intentions of testator
The power of the Court to review the exercise 19

of a discretion by an executor
Whether the profit on the sale of shares is income 25

or capital under the Will
Whether profit on the sale of shares can be classified by the 33

executor as income pursuant to cl A3 of the Schedule to the Will
The executor's duty of impartiality 38
The payment of executor's and beneficiaries' legal fees from 41

trust property

Evidence on behalf of the Plaintiff 44

Evidence on behalf of the First Defendant 45

Evidence of the Second Defendant 56

Whether the executor has breached his duty in distributing 64

the profit from share sales to the income beneficiary
Whether the executor has breached his duty in paying his own 68

and the income beneficiary's legal fees with respect to the

matters the subject of this claim
Whether the moneys in dispute should be repaid 69

to the estate and, if so, by whom
Removal of the executor of the appointment 79

of a co-executor

Conclusions 82

Introduction

This is an application pursuant to s 94(1) of the Trustees Act 1962 brought by the capital beneficiaries of a deceased estate for orders reviewing the decision of an executor to treat the profit on the sale of shares of the estate as income for distribution to the income beneficiary. A review is also sought of the executor's decision to pay legal fees from the estate to himself and to the income beneficiary.
The relief sought is repayment of the moneys by the income beneficiary or, alternatively, by the executor, together with interest. Further, an order is sought that the first‑named plaintiff be appointed as co‑trustee of the estate with the executor. Alternatively, the executor is to be restrained from selling any shares of the estate without the express approval of the capital beneficiaries. The application also calls for the income beneficiary or, alternatively, the executor to personally pay the costs of these proceedings.

Background

The following facts were not in dispute between the parties.
The plaintiffs have an interest in remainder under the Will of Donald Clarence Wendt ("the deceased"). The deceased died on 4 September 1997 leaving a will dated 6 December 1995 ("the Will"). The first defendant, George Stanley Orr, is the executor and trustee of the Will. The second defendant, Joan Agnes Wendt, is the wife of the deceased, the income beneficiary under the Will and the sister‑in‑law of the first defendant. For ease of reference I will refer to the first and second defendants by name.
The deceased and Mrs Wendt were married on 21 June 1973. They had commenced cohabitation approximately 11 years earlier when the deceased moved into Mrs Wendt's house in Bunbury. The deceased retired approximately seven years after they married. Mrs Wendt had no knowledge of the amount of the deceased's income prior to his retirement, but understood that his post‑retirement income was derived from interest on investments.
The domestic arrangements following the deceased's retirement were that Mrs Wendt kept the house and the deceased paid the accounts. Mrs Wendt paid for food, clothing and linen from her own funds and the deceased paid rates, taxes, electricity and water costs. The deceased did not pay rent. Approximately four years prior to his death, the deceased suffered a serious stroke. Mrs Wendt cared for him until his death. Mrs Wendt still resides in her Bunbury home.
Mr Orr was granted probate of the Will by this Court on 6 November 1997. The estate included, inter alia:
(i)shares and/or options in Elders Limited, Savage Resources Limited ("Savage"), Carnarvon Petroleum NL, First Australian Resources NL, Hargreaves Resources NL ("Hargreaves"), Westralian Farmers Co‑operative Ltd, Wesfarmers Ltd ("Wesfarmers") and Qantas Airways Ltd ("Qantas");
(ii)an aluminium boat and trailer;
(iii)a demountable home;
(iv)WA Government Bonds to a total value of $166,000 with bonds to the value of $114,000 due to mature on 1 December 1998.
Mr Orr purchased the boat and trailer from the estate on or about 20 January 1998 for the sum of $1500. Prior to the purchase, repairs had been effected to the boat which were paid out of the estate at a cost of $589.15. The issue of whether the demountable home was wholly owned by the estate was a matter of dispute between the beneficiaries. Ultimately, Mr Orr allowed Mrs Wendt to purchase the demountable home by paying to the estate half the value of the home. No claim is made in relation to the purchase by Mr Orr of the boat or the purchase by Mrs Wendt of the demountable home. The issues are raised, and have been dealt with in the course of the trial, as going to Mr Orr's conduct as an executor and his credibility generally.
Mr Orr kept a journal in which he recorded all transactions in relation to the administration of the estate. The following entries appear in the journal:

DATE	ENTRIES	$
03.12.98	Maturity of investment WA Treasury Corporation	114,000.00
17.12.98	Purchase 45,000 Optus shares	132,970.80
19.01.99	Sale of 45,000 Optus shares	165,084.75
20.01.99	Joan Wendt - Income from investment of purchase and sale of shares $45,000 in Optus	32,113.95
05.02.99	Purchase of 5000 CW/Bank shares	119,759.45
31.03.99	Purchase 30,000 Optus shares	111,640.95
01.04.99	Sold 5000 CW/Bank shares	130,500.00
09.04.99	Joan Wendt – income profit from sale of CWBank shares	9,631.30
02.07.99	Purchase 10,000 Optus shares	35,256.83
17.12.99	Optus sale of 40,000 shares	194,334.00
17.12.99	Joan Wendt income from sale of 90,000 Optus shares	47,436.22

The journal also reveals that in April 1999 the Savage shares were compulsorily acquired for a cash settlement resulting in a profit to the estate of $87.19. The Hargreaves shares were compulsorily acquired in December 1999 for a monetary loss of $364.40 and for shares in Durban Roodeport Deep Ltd ("Durban"). The Durban shares still form part of the estate, as do the other shares in the estate at the time of the grant of probate.
It can be seen from the journal that during the 1998‑1999 financial year Mr Orr purchased Cable and Wireless Optus Limited ("Optus") shares and then sold them for a profit of $32,113.95. He also purchased Commonwealth Bank Ltd ("CBA") shares and then sold them for a profit of $9631.30. The gross profits from the Optus share sale were distributed to Mrs Wendt on 10 January 1999. The gross profits from the CBA share sale were distributed to Mrs Wendt on 9 April 1999. During the 1999‑2000 financial year Mr Orr purchased 40,000 Optus shares and later sold them for a profit of $47,436.22. The gross profit was distributed to Mrs Wendt on 17 December 1999. The term “gross profits” described the profits on the share sale less the costs of the share trading but without deduction of capital losses.
On 6 July 2000 the plaintiffs commenced these proceedings. During the period 9 May 2000 to 17 May 2001 Mr Orr has authorised the payment from estate funds of legal expenses in relation to the issues the subject of these proceedings. The payments, and the person on whose behalf they were made, are summarised as follows:
First named plaintiff                  $2,080.10
Mrs Wendt  $1,666.50
Mr Orr  $13,533.80
In total, up to 17 May 2001, Mr Orr authorised payments on behalf of himself and Mrs Wendt in the sum of $15,200.30.

The Will

The following clauses of the Will are relevant to the issues to be decided in this case:
"4.1Subject to clause 4.2, I give the whole of my estate to my Executor on trust:
4.1.1to give George Stanley Orr $4,000.00 (four thousand dollars) if he acts as my Executor;
4.1.2 …
4.1.3to sell my tools, furniture, any motor vehicles … any boats … and transportable/demountable home in Augusta …
4.1.3.1my Executor and beneficiaries may buy at a fair value any of these assets at public auction or by private contract or treaty on the same terms my Executor may grant to a purchaser from my estate;
4.1.4to pay the income from the balance of my estate to my wife JOAN AGNES WENDT during her lifetime;
4.1.4.1my wife JOAN may apply to my Executor to be paid part of the capital if she can establish that her income (including the income she derives from my estate) is insufficient for her reasonable needs;
4.1.5to give the residue of my estate equally to such of my children DOUGLAS RONALD WENDT, LYNETTE MAY JOHNSTON and LORRAINE McCARTHY (being the children of my marriage to DOROTHY MAY HUGHES) as survive me;
…
4.3I have not given more to my wife JOAN because I believe I have given her much during my life and I believe she will be able to look after herself sufficiently with the assets and income she has and the income she derives from my Will."
Clause 8 of the Will confers on the executor, in addition to the powers he has at law, the powers, rights, discretions and the indemnity set out in the schedule to the Will ("the Schedule").
The provisions of the Schedule relevant to this claim are as follows:
"A.My Executor may in his discretion:
…
3.determine whether receipts or outgoings are capital or income or partly income or capital so as to bind the beneficiaries even though the receipts are from a company that has made a decision on the matter;
D.I declare my Executor will not be liable for any loss not attributable to:
1. his dishonesty; or
2.the wilful commission by him of any act known by him to be a breach of trust."

The Issues

A number of different issues require resolution in order to conclude the dispute which has arisen in the administration of the deceased's estate. Some are essentially legal in nature and concern the construction of relevant clauses of the Will and a consideration of the Court's powers to review the conduct of a trustee. The following issues fall within this category:
i. The jurisdiction of the Court to review the executor's actions under s 94 of the Trustees Act 1962;
ii.The use of extrinsic evidence to determine the intentions of the testator;
iii.The power of the Court to review the exercise of a discretion by an executor;
iv.Whether profit on the sale of shares is income or capital under the Will;
v.Whether profit on the sale of shares can be classified by the executor as income pursuant to cl A3 of the Schedule to the Will;
vi.Executors/trustees’ duties and entitlement to obtain directions from the Court;
vii.The payment of executor’s and beneficiaries’ legal fees from trust property;
The next category involves the determination of whether there has been in this case any breach of duty. Such a determination necessarily requires an assessment of the evidence and the making of factual findings. The following issues fall within this category:
viiiWhether the executor has breached his duty in paying to Mrs Wendt the gross profits from the sale of shares;
ixWhether the executor has breached his duty in paying both his own and the second defendant's legal expenses in relation to the matters the subject of this claim.
The final category of issues addresses the effect of any finding that the executor has acted in breach of trust. The issues are:
xWhether the money in dispute should be repaid to the estate:
(i) by the First Defendant;
(ii) by the Second Defendant.
The issue of whether the second defendant should reimburse the estate involves a consideration of the application of s 65(8) of the Trustees Act.
xiRemoval of the executor or the appointment of a co‑executor.

Section 94 of the Trustees Act

The defendants submit that the plaintiffs' application fails at the jurisdictional threshold. It is said that the power conferred on the Court by s 94 of the Trustees Act is limited to circumstances in which the trustee is exercising a power conferred by the Act and does not extend to the exercise of powers conferred by the trust instrument.
Section 94(1) of the Trustees Act is in the following terms:
"Any person who has, directly or indirectly, an interest, whether vested or contingent, in any trust property, and who is aggrieved by any act, omission or decision of a trustee in the exercise of any power conferred by this Act, or who has reasonable grounds to apprehend any such act, omission or decision of a trustee by which he will be aggrieved, may apply to the Court to review the act, omission or decision, or to give directions in respect of the apprehended act, omission or decision, or to give directions in respect of the apprehended act, omission or decision; and the Court may require the trustee to appear before it, and to substantiate and uphold the grounds of the act, omission or decision that is being reviewed, and may make such order in the premises as the circumstances of the case require." [emphasis added]
Part IV of the Act (s 27 to s 57) sets out the general powers conferred on trustees under the Act. Section 17 confers a further power to invest and reinvest trust funds and to vary or realise an investment, unless expressly prohibited by the instrument creating the trust.
Support for the defendants' position can be found in a number of legal texts. In Dal Pont's "Annotated Trustee & Trustee Companies Legislation" (1997 Edition) the learned author states, at [8.10]:
"… The Western Australian provision (ie section 94) is limited to where the applicant is aggrieved by virtue of the exercise of a power conferred under the Trustee's Act, not one conferred by the trust instrument or the general law. If the trustee is exercising only the power conferred by the trust instrument the section cannot be invoked: see Re Havill (Decd) [1968] NZLR 217 at 223."
In "Hardingham & Baxt, Discretionary Trusts" (2^nded) the learned authors state, at page 118, in dealing with s 94 of the Act:
"… the section only countenances the review of powers conferred by the Act itself. In most discretionary trusts, the powers held by the trustees will be conferred, not by any act, but by the instruments creating them. Once again, the provision could be made more acceptable by amending it so that it extends to 'any power conferred by this Act or by the instrument (if any) creating the trust'. Such words are to be found in the Queensland provision."

In determining the scope of s 94, it is useful to consider the case of Re Havill (decd) [1968] NZLR 1116 which is relied upon by the author of Dal Pont's "Annotated Trustee & Trustee Companies Legislation". The Court there dealt with a power to appropriate property conferred on the trustees both by the Trustee Act 1956 (NZ) and by the Will. The trustees' notice of appropriation and partition expressly stated that they had exercised powers vested in them under both the Will and the Trustees Act. Section 68 of the Trustees Act provided that any person who is beneficially interested in any trust property and who is aggrieved by any act or omission or decision of a trustee "in exercise of any power conferred by this Act" may apply to the Court to review the act or omission or decision. Macarthur J held (at 223) that if the trustee "is exercising only the power conferred by the trust instrument, clearly s 68 may not be invoked" (emphasis included).
It is certainly the case, as submitted on behalf of the defendants, that there are a number of provisions in the Trustees Act which are consistent with a legislative intention to preserve the supremacy of the instrument creating the trust: see, for example, s 19(1) and s 105(3) of the Act. However, I do not consider that Re Havill (decd) is authority for the broader proposition that, where a power is contained in both the trust instrument and in the Trustees Act, the trustee can be said to be exercising only the power conferred in the trust instrument, thereby excluding the operation of s 94. In my view, the right to review a decision conferred by s 94 of the Act should not be unduly confined and s 94 may be invoked where the power being exercised appears both in the Trustees Act and in the trust instrument.
That conclusion does not dispose of this issue. It is necessary to consider the actual power said to have been exercised before a decision can be reached as to whether the Court has jurisdiction under s 94 of the Trustees Act.
On behalf of the defendants it is said that the discretionary power conferred by cl A3 of the Schedule to the Will ("cl A3") to determine whether receipts or outgoing are capital or income is not a power that falls within ss 27 ‑ 57 of the Act. The plaintiffs argue that the fact that the Trustees Act also gives extensive powers, including the power in s 17 to invest, re‑invest and realise an investment of trust funds, means that the executor was also exercising a power conferred under the Trustees Act. Of course, s 94 contains an additional requirement that the application be brought by a person who is "aggrieved by any act, omission or decision of a trustee in the exercise of any power conferred by this Act”. It is necessary then to identify the conduct of which complaint is made. If the conduct is the exercise of the discretion under cl A3 to classify profits on share sales as income for the purpose of distribution, then, in my view, that conduct does not fall within s 17 simply because the funds in question result from an investment. Nor would it fall within the provisions of Pt IV of the Trustees Act. The consequence is that s 94 of the Trustees Act would not apply.
However, the conduct of which the plaintiffs complain is the distribution of the profits from the share sales to Mrs Wendt as income from the estate. Distribution of the funds of the estate is a fundamental aspect of an executor's role and integral to the various powers and duties contained in the Trustees Act, in particular the power under s 17 to invest and realise an investment of trust funds. In my view, this application is properly brought under s 94 of the Trustees Act.
Even if I am wrong in that conclusion, it does not follow that the plaintiffs' action fails at the outset. This Court has an inherent jurisdiction to supervise trusts and trustees and make appropriate orders to protect the interests of beneficiaries of a trust, including making orders compensating for breaches of trust: "Principles of the Law of Trusts", Ford and Lee, ch 17; "Law of Trusts in Australia", Jacobs, 6th ed, [2203] at p 660; Pope v DRP Nominees Pty Ltd [1998] SASR 6933 at [57] and [59]. The finding that s 94 of the Trustees Act has no application simply means that the plaintiffs' action will be governed by equitable rules rather than the terms of the statute: Tonkin v Western Mining Corporation Ltd (1998) 10 ANZ Ins Cas 61‑397 and Tonkin v Western Mining Corporation Ltd & Anor, unreported; SCt of WA (Scott J); Library No 960302; 31 May 1996 at 10.
This action was commenced by originating summons rather than by writ, as would be the case if the Court's equitable jurisdiction were invoked. In my view, this variation in the initiating process has not caused prejudice to the defendants. I consider that the issues were adequately defined by the originating summons, as amended, and the affidavit material filed. Further, a hearing was held at which the parties were given the opportunity to call and to question witnesses. For these reasons, I consider it appropriate to proceed to determine this matter, regardless of whether the Court is exercising its statutory or inherent jurisdiction.

The use of extrinsic evidence to determine the intentions of testator

At trial, the plaintiffs challenged the admissibility of evidence of statements allegedly made by the deceased of an intention to have the estate administered so as to maximise the benefit to Mrs Wendt. My ruling was that the evidence was relevant to the issue of the exercise of the executor's discretion and therefore admissible. The issue of whether the evidence was also admissible for the purpose of identifying the testator's intentions was left for determination at the conclusion of the hearing.
The plaintiffs maintain their position that the extrinsic evidence of the intentions of the testator is inadmissible. They rely on the general principle of interpretation that, if the words of the Will are clear, the Court will not admit evidence to demonstrate that the testator used the words in anything other than their natural and ordinary meanings: Hiscocks (decd) v Hiscocks (1839) 5 M & W 363, 367 ‑ 370; Hardwick v Hardwick (1873) LR Eq 168; Shelton v Anna Kilsby as Executor of the Estate of the Deceased & Ors [2000] WASC 180 at [4].
As Lord Shand stated in the House of Lords decision of Higgins v Dawson [1902] AC 1 (at 9):
"I agree with His Lordship in thinking that even if it could be shown that the intention of the testator was something different from the language of the Will, that intention would not prevail, but the language of the Will must settle the rights of the parties."
See also Lord Davey in Higgins v Dawson, above, at 11; McRobert v McRobert (1920) 27 CLR 331 at 333.
It is conceded that where the words of the Will are not clear, the Court can apply the "armchair principle" and look at the testator's habits of speech, family, property, friends and acquaintances so that the Court may read the Will from the position of the person making it. However, the plaintiffs maintain that the Court may not accept extrinsic evidence of the testator's direct intentions, even in cases of ambiguity: Hiscocks (decd) v Hiscocks at 367 ‑ 370; Hardwick v Hardwick; Shelton v Anna Kilsby as Executor of the Estate of the Deceased at [4].
The only other circumstance in which extrinsic evidence may be adduced is in the very limited situation where the evidence resolves an "equivocation" as to what property or person is referred to in the Will: Hiscocks (decd) v Hiscocks at 367 ‑ 369. In Hiscocks (decd) v Hiscocks the Court concluded (369):
"It appears to us that in all other cases, parol evidence of what was the testator's intention ought to be excluded, upon this plain ground, that his will ought to be made in writing; and if his intention cannot be made to appear by the writing, explained by the circumstances, there is no will."
On behalf of the first defendant it is said that the evidence can be relied upon to assist in the categorisation of the profits as income. Reliance is placed on the statement of Barwick CJ in Hughes v National Trustees, Executors and Agency Co of Australasia Ltd (1979) 143 CLR 134 at 137 where his Honour said:
"Evidence of the reasons given by a testator or a testatrix for making or not making a provision by will are, in my opinion, admissible as evidence of those reasons. Such statements are not evidence of the facts they assert: they provide evidence only of the subjective attitude or beliefs of the testator or testatrix."
In my view, this statement is not authority for the proposition that evidence of the intention of a testator is admissible for the purposes of interpreting a Will. The statement of Barwick CJ was made in the context of determining whether the distribution of a testatrix's estate made adequate provision for the proper maintenance and support of her son. He observed (at 138):
"When attempting to decide what a particular testator or testatrix ought as a just and wise father or mother to have done, those reasons which that testator or testatrix actually entertained for his or her decision cannot, it seems to me, justly be ignored. Of course, if the evidence in the matter does not support such reasons, they cannot be acted upon simply because the deceased asserted or entertained them."
I consider the statement of Barwick CJ to have no relevance to the admission of extrinsic evidence in the interpretation of a testamentary instrument. The statement cited on behalf of the first defendant does not bear an interpretation which would contradict the long line of authority rendering that type of evidence inadmissible. That being the case, as the plaintiffs rightly observe, the defendants have failed to refer to any authorities which would make the statements of the deceased admissible as to his testamentary intention.
In my view, the words of the Will are clear and unequivocal. Mrs Wendt was to have the income for life and the plaintiffs were to have the capital. If Mrs Wendt required additional funds she was entitled to make an application to receive a portion of the capital of the estate: cl 4.1.4.1. The terms "capital" and "income" have natural and ordinary meanings. It would not be appropriate to receive evidence to suggest that the term "income", when used in the Will, is to be given other than its ordinary meaning. If the deceased intended something else, he should have instructed his solicitors to address those intentions in drafting the Will.

The power of the Court to review the exercise of a discretion by an executor

This issue falls to be addressed in the context of the executor's assertion that the distribution to Mrs Wendt of the gross profits of the sale of shares was made in the exercise of the discretion conferred on him by cl A3.
It is a well‑established principle that, subject to one exception, the exercise by a trustee of a discretionary power will not be examined or reviewed by the Courts so long as the essential component parts of the exercise of the particular discretion are present: Karger v Paul [1984] VR 161, per McGarvie J, at 163 ‑ 164. The exception is that the validity of the trustees' reasons will be examined and reviewed if the trustees choose to state their reasons for their exercise of discretion: Karger v Paul(supra) at 164; Re Londonderry's Settlement [1965] Ch 918 at 928 ‑929, per Harman LJ; Re Beloved Wilkes' Charity (1851) 3 Mac & G 440.
The essential component parts are present if the discretion is exercised by the trustees:
(a)in good faith;
(b)upon real and genuine consideration; and
(c)in accordance with the purposes for which the discretion was conferred.
(Karger v Paul (supra) at 164).
The effect of the principle in Karger v Paul is that, when it is established that the essential component parts of the exercise of the discretion are present, a trustee is not bound to disclose information which may bear upon or affect the exercise of his or her discretion. The application of this principle arose in the course of the hearing. An objection was taken on behalf of the second defendant to cross‑examination of Mr Orr regarding his decision to distribute the profit from the share sales to Mrs Wendt. The decision in Karger v Paul was relied upon as authority for the proposition that a trustee cannot be questioned on any matter pertaining to the exercise of his discretion unless he has given reasons for his decision.
It is apparent from the decision in Karger v Paul that before the principle therein stated takes effect a threshold requirement must be met, and that is that the discretion has been exercised by the trustee in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. They are described by McGarvie J at p 164 as "essential component parts of the exercise of the discretion". In my view, a close reading of Karger v Paul makes it clear that the case is not authority for the proposition that a trustee cannot be cross‑examined in relation to the exercise of the discretion. It merely determines the purpose to which such evidence can be put. As McGarvie J noted (at 164):
"In my view, in this case it is open to the Court to examine the evidence to decide whether there has been a failure by the trustees to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. As part of the process of, and solely for the purpose of, ascertaining whether there has been any such failure, it is relevant to look at evidence of the inquiries which were made by the trustees, the information they had and the reasons for, and manner of, their exercising their discretion. However, it is not open to the Court to look at those things for the independent purpose of impugning the exercise of discretion on the grounds that their inquiries, information or reasons or the manner of exercise of the discretion, fell short of what was appropriate and sufficient. … The issues which are examinable by the Court are limited to whether there has been a failure to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred."
To summarise the position set out in Karger v Paul, once the whole of the evidence establishes that the exercise of the discretion was in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred, it is not open to the Court to rely on that evidence to impugn the exercise of the discretion: per McGarvie J at 166. Counsel for the second defendant also relied on the authority of Flegeltaub v Telstra Super Pty Ltd [1998] VSC 144 which purports to follow the decision in Karger v Paul. In that case a party challenging the decision of a trustee was not entitled to administer interrogatories designed to elicit from the trustee its reasons for making the determination which it did, and also the state of its mind at the time it did so. I have some difficulty with the decision in Flegeltaub. In my view, it appears to follow only part of the decision in Karger v Paul, with the result that it would be impossible to determine whether the threshold test had indeed been met. For that reason I would respectfully decline to follow it.
I consider the correct interpretation or application of the principle is that, once the threshold test has been met, a limitation is imposed on the use of any evidence obtained under cross‑examination. In my view, that is an entirely different proposition to precluding an opposing party from testing under cross‑examination the circumstances surrounding the making of the decision.
The practical operation of the principle in Karger v Paul, in particular what I have described as the threshold test, requires further consideration. I accept the second defendant's submission that the authorities establishing the principle reflect a public policy consideration not to interfere with discretionary judgments of a trustee unless made in bad faith, without real or genuine consideration, or contrary to the purpose of the trust. It is implicit in this statement of principle that, provided the exercise of the discretion is bona fide with no improper motive, it is immaterial that the Court, if it knew all the facts known to the trustees, would not have acted in the same way as the trustees; it is not open to the Court to substitute the Judge's opinion for that of the trustee as to the manner in which the discretion should have been exercised: Karger v Paul (supra) at 165; Re Londonderry's Settlement at 936 ‑ 937, per Salmon LJ.
Consistent with that approach, the Court will presume that the trustee has acted bona fide and the applicant for review bears the heavy onus of showing that the exercise of the trustee's discretion was invalid: Tierney v King [1983] 2 Qd R 580 at 583, per Matthews J; Gordon v Australian and New Zealand Theatres Ltd (1940) 40 SR (NSW) 512; "Jacobs Law of Trusts in Australia", 6th ed, [1616].
Of course, the critical question is the type of conduct which would meet the threshold test. In "Trusts & Powers", D M McClean (1989), the author (at 57 – 58) referred to the following examples of conduct which might invalidate a discretionary decision:
"A discretion is exercised invalidly when it is done with mala fides. So too, a valid exercise of discretion is not made where the discretion has been exercised in a way which is perverse, arbitrary, capricious, wanton, irresponsible, mischievous or irrelevant to any sensible expectation of the settlor. A decision which is merely unreasonable is not invalid, although the difference between an unreasonable decision and a perverse or capricious decision is obviously a matter of degree."
The author also concedes that, strictly speaking, there is a distinction between mala fides and the types of conduct referred to in the authorities from which the examples given are drawn (at 58). Practically speaking, whether conduct is found to be mala fides will depend on the meaning attributed to the term. In the context of the exercise of discretionary powers mala fides has been held to include refusal to recognise that a discretion exists (Re Smith [1971] 1 OR 584), making a decision for an ulterior motive or purpose (Re Pauling's Settlement Trusts (No 1) [1964] Ch 303), and a refusal to take relevant considerations into account (Cock v Smith (1909) 9 CLR 773): see "Jacob's Law of Trusts in Australia", 6th ed, at [1610]. In Tierney v King at 583 Matthews J, with whom Kelly and Macrossan JJ agreed, also noted with approval the proposition referred to by Fry J in In re Roper's Trusts (1879) 21 Ch D 272 that in order to overturn a decision it must be shown that the trustee has not exercised a "sound discretion". As Megarry VC observed in Re Hay's Settlement Trust [1982] 1 WLR 202 at 209, where a trustee is given a power, he is bound to exercise it in a responsible manner according to its purpose. It is also the case that the Court will intervene where it is plain that the trustees have simply never addressed themselves to the sound exercise of the discretion which the testator has placed in them: French v Davidson (1818) 56 ER 550.
It can be seen that a wilful act of dishonesty is not an essential element of the threshold test. There are many circumstances, too numerous to identify, which will invalidate a decision made in the exercise of a trustee's discretion and justify the intervention of the Court. In my view, those circumstances include the making of a decision which is, objectively, so wholly unreasonable on all the facts of the case that it would be unjust to allow it to stand.
It was submitted on behalf of the second defendant that the principles to which I have referred apply equally to applications under s 94 of the Trustees Act. Section 94 confers on the Court the power to review the act, omission or decision of a trustee in the exercise of any power conferred by the Trustees Act. In exercising that power, the Court may require the trustee to appear before it, and to substantiate and uphold the grounds of the act, omission or decision that is being reviewed "and may make such order in the premises as the circumstances of the case may require". It is clear from the precise terms of the section that the Court has a discretion to make any order as the circumstances of the case may require. Counsel for the second defendant concedes that the right to review a decision conferred by s 94 of the Act should not be unduly confined, but submits that the Court should be guided by these principles, in particular the threshold test set out in Karger v Paul (supra). There is authority for the proposition that the object of a statutory provision to review the exercise of a trustee's discretion is not the substitution of a Judge's opinion for that of the trustee: see Tierney v King at 582 ‑ 583, per Matthews J, a decision under s 8 of the Trusts Act 1973 (Qld) which is in terms equivalent to s 94 of the Trustees Act. There is also authority for the proposition that the traditional reluctance of the courts to interfere with the discretionary acts of private trustees, and the very good reasons for that approach, operate as a practical limitation on the Court's statutory power of review: Re Whitehouse [1982] Qd R 196, per Macrossan J, at 204. To that extent, at least the operation of s 94 is consistent with the general law. However, the extent to which the balance of the general law on the review of discretionary powers is of application to a review under s 94 remains open to debate. In "Hardingham & Baxt, Discretionary Trusts", 2nd ed, the authors state (page 118):
"Finally, section 94(2) gives rise to difficulties in that it leaves open the question as to what sort of conduct on the part of the trustee amounts to a breach of trust in this context. Will the trustee be in breach of trust for making an unreasonable decision?"

The decision of the Full Court of Queensland in Tierney v King dealt with a refusal by trustees to provide copies of an actuarial report on the value of the assets and liabilities of the trust. On that issue the Court applied the principle that trustees acting in good faith are not bound to disclose information which may bear upon or affect those reasons. I consider that Tierney v King is authority only for the application of that aspect of the general law to statutory rights to review the decisions of trustees. In my view, the obiter comments do not support the submission that a review under s 94 is constrained by all the principles of the general law. Indeed, Matthews J cites with approval (at 583) the conclusion of Macrossan J in Re Whitehouse that the statutory right to review a decision should not be narrowly construed. Macrossan J explained (at 203):
"By this I mean that the jurisdiction should not be read down or unduly confined. On the other hand, I think it would be wrong to suggest that although the jurisdiction to undertake a review is wide, the court would lightly interfere with a discretionary decision made by a trustee. The courts will continue to bear in mind that discretionary trust powers are vested in trustees for the purpose of decision by them and the traditional reluctance to interfere with their decisions will, for good reason, continue. If, notwithstanding this reluctance, a proper case is made out, then I do not doubt that the court has wide power. Speaking for myself, I am not persuaded that it is possible or advisable to attempt to limit in advance the ambit of cases in which the court will move under its new statutory power of review."
I respectfully concur with and adopt that approach to a statutory review of a trustee's conduct. Whilst the Court should remain reluctant to interfere with discretionary decisions of a trustee and should not substitute its own view of the correct conduct, intervention must occur in appropriate cases. The circumstances of such cases will vary, but include situations where the trustees have not in fact exercised the discretion, have not addressed themselves to the sound exercise of the discretion, have made a decision for an ulterior motive or purpose, or have refused to take relevant considerations into account, including the impact of the decision on a beneficiary or class of beneficiaries. In my view, all are examples of improper, unreasonable and irresponsible conduct justifying intervention by the Court pursuant to s 94 of the Trustees Act.

Whether the profit on the sale of shares is income or capital under the Will

There is no dispute that the moneys which the plaintiffs seek to have repaid are the profit that the executor generated by share trading in respect of shares he purchased and then sold on behalf of the estate. Neither is it disputed that the money used to purchase the shares was returned to the estate after distribution of the share trading profits to the second defendant. The issue for resolution is whether the profit constitutes capital or income for the purposes of distribution under the Will.
It is a well‑established principle of the interpretation of Wills that the words of the Will should be interpreted in the context in which they appear according to their usual or primary meaning: see "Wills & Intestacy in Australia and New Zealand", Hardingham, Neave & Ford, 2nd ed, at [1102]; Hardwick v Hardwick at 175; Shelton v Anna Kilsby as Executor of the Estate of the Deceased & Ors. As Gibbs J observed in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 ‑ 111:
"The whole of the instrument has to be considered ... and the meaning of every clause must, if possible, be construed so as to render them harmonious one with another …".
(See, also, Gleeson v Fitzpatrick (1920) 29 CLR 29 at 35, per Isaacs J.)
The plaintiffs submit that, in order to argue that the term "income" includes capital profit, it would be necessary to show that the Will so provides. Since the Will does not define income or capital, the words fall to be defined in terms of the Will, "as the Will is its own dictionary": Hill v Crook (1873) LR 6 HL 265. Further, as Dixon J stated in Brennan v Permanent Trustee Co of NSW Ltd (1945) 73 CLR 404 at 414 ‑ 415:
"The language of the testator must be read in a sense in which he himself appears to have attached to the expression that he used."
In this case, the terms "income" and "capital" are used in contradistinction in the Will: see cl 4.1.4 and cl 4.1.4.1.
The first and second defendants submit that the disputed amounts paid to the second defendant should be classified as income as they were produced from buying and selling shares with moneys from the estate with the intention of creating an income stream for the second defendant. It is also said that the profit made clearly falls within the ordinary English usage of "income" as outlined in the dictionary definitions. The Short Oxford English Dictionary defines "income" to mean:
"The (amount of) money or other assets received or due to be received from employment, business, investments, etc, esp. periodically or in the course of a year."
The Macquarie Dictionary (2nd ed, 1981) defines "income" as "the returns that come in periodically, esp. annually, from one's work, property, business, etc; revenue; receipts." "Capital" is defined in the Macquarie Dictionary as "the wealth, whether in money or property, owned or employed in business by an individual, firm, etc, an accumulated stock of such wealth". However, while funds may constitute income of the estate for certain purposes, it does not automatically follow that the same funds will constitute income for the purposes of distribution to beneficiaries under the terms of the Will.
In support of their argument, the first and second defendants rely on income tax cases and rulings. Section 6 of the Income Tax Assessment Act 1937 defines income in the following terms:
"[A]ny profit arising from the sale by the taxpayer of any property acquired by him for the purpose of profit‑making by sale or from the carrying on or carrying out of any profit‑making undertaking or scheme."
The Court was also taken to Taxation Ruling 92/3 which, in effect, holds that if intention to make a profit is a significant purpose of a profit‑making transaction, such profit constitutes income: see, for example, Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199 at 209 ‑ 210.
Myer Emporium Ltd ("Myer") acquired a company, later renamed Myer Finance Ltd ("Myer Finance"), to which it lent $80,000,000 pursuant to a loan agreement which provided that the principal would be paid to Myer on or before a specific date and also provided for interest payments to be made to Myer at the rate of 12.5 per cent per annum on specified dates and for specified amounts. Myer later assigned to Citicorp Canberra Pty Ltd ("Citicorp") the moneys due or to become due as the interest payments and interest thereon under the loan agreement. The consideration for the assignment was the sum of $45,370,000. Whether this sum was income or capital in the hands of Myer was the principal question on the appeal. The Court held (at 209 ‑ 210):
"Although it is well settled that a profit or gain made in the ordinary course of carrying on a business constitutes income, it does not follow that a profit or gain made in a transaction entered into otherwise than in the ordinary course of carrying on the taxpayer's business is not income. Because a business is carried on with a view to profit, a gain made in the ordinary course of carrying on the business is invested with the profit‑making purpose, thereby stamping the profit with the character of income. But a gain made otherwise than in the ordinary course of carrying on the business which nevertheless arises from a transaction entered into by the taxpayer with the intention or purpose of making a profit or gain may well constitute income. Whether it does depends very much on the circumstances of the case. Generally speaking, however, it may be said that if the circumstances are such as to give rise to the inference that the taxpayer's intention or purpose in entering into the transaction was to make a profit or gain, the profit or gain will be income, notwithstanding that the transaction was extraordinary judged by reference to the ordinary course of the taxpayer's business."
This decision must be considered in the context of the statutory definition which does no more than determine what will be taken to be income for the purposes of the Act. It does not necessarily change or determine the categorisation of the profit in any other context.
As counsel for the plaintiff submits, the common law definition of income makes no provision for subjective considerations. Even the courts have acknowledged the distinction to be drawn between decisions made in the context of trusts and those made in the taxation cases. In Commissioner of Income Tax (Qld) v Brisbane Gas Company (1907) 5 CLR 96 the Court observed (at 104):
"The majority of the learned Judges of the Supreme Court and the learned Judge of the Court of Review, thought the case was to a great extent governed by the principles laid down in Bouch v Sproule but that was a case between a tenant for life and remainderman, under the terms of a will by which the income was given to the tenant for life. Very different questions arise in a case of that sort. There, what the Court had to do was to discover what was the meaning of the testator's words. When he said that the tenant for life was to have the income, did he intend to cover the case of a division of past accumulated profits. Here the question is the construction of a taxing Act … . All we are concerned with is the interpretation of the Statute."
In contrast, when considering the meaning of the terms "capital" and "income" in the context of trusts, and particularly conflicts between income beneficiaries and capital beneficiaries, the courts have consistently concluded that the capital of the trust is what is held; the proceeds accruing from (rather than to) the capital is income. Increases in the value of a capital asset are part of the capital and the proceeds of the sale of such a capital asset (including any increase in value) are part of the capital.
In Sinclair v Lee & Anor [1993] Ch 497 shares had been left in a company and there was a reconstruction. The original shares were reduced in value but shares in another company were given instead. The Court held that the shares given were capital and not income. In reaching this conclusion, the Court noted (at 506):
"In the simplest of cases, there is, in principle, no difficulty in distinguishing between income receipts and capital receipts … . A is entitled to the income arising from lettings, after deducting outgoings properly payable out of income; or he may be entitled to occupy the building, such as a house and use it himself … . In the fullness of time the property will pass to B. If it has been sold meanwhile, B will obtain the benefit of any appreciation in the value of the property. A is entitled to any increases obtainable in rents but not to capital profits. This accords with the presumed intention of the testator or settlor, in the absence of any indication by him to the contrary."
And further (at 507):
"If the company were wound up, the ordinary person would regard the money distributed to the members as capital even though it included substantial sums of reserves representing accumulated undistributed profits. In a winding up, what the trustee shareholders receive takes the place in the trust fund of the shares themselves. The receipts are as much capital as would be the proceeds of sale if trustees had sold the shares."
The case of In re Armitage; Armitage v Garnett [1893] 3 Ch 337 concerned a gift of shares as residue with the income to be given to another beneficiary. The company was wound up and another company bought out the shares resulting in a profit. The proceeds of the shares were held to be capital even though they came out of a reserved dividend fund that could have been distributed as dividends if the company had chosen to classify that way. Lindley LJ stated (at 346):
"What does a man mean when he leaves shares to a tenant for life? He means that the tenant for life shall have the income arising from the shares in the shape of dividends or bonuses declared during the life time of the tenant for life. He does not mean that the tenant for life shall receive profits in any other sense. He does not mean him to have such profits, for example, as arise by a realisation of the shares; he never dreamed of such profits going to the tenant for life."
Lopez LJ expressed a similar view (at 347):
"When you have replaced the capital I think it perfectly clear that the balance which remains over and above is profit ... but I come to the conclusion beyond any doubt that this excess is to be regarded as capital and not as income and is not to go to the tenant for life. There is an argument in support of this view to which no answer has been given. It is admitted that if the shares had been sold by the executors: ₤9 5s. 6½d. per share before the sale en masse of all the shares to the new company the excess … per share would have been regarded as capital and would not have gone to the tenant for life. How does the fact that there has been a sale to this new company, instead of an ordinary sale in the market by the executors, convert that which would otherwise be regarded as capital into income."
The case of Re Mulligan (decd) [1998] 1 NZLR 481 concerned a breach of trust action against trustees who had complied with the wishes of the life tenant widow and invested exclusively in high interest mortgage investments which did not give any capital appreciation, but gave high income to the income beneficiary. The capital beneficiaries claimed, and the Court found, that there was a breach of the duty to act impartially by not investing some of the capital in equities like shares that would have appreciated in value and been a hedge against inflation. The failure to do so caused loss of appreciated value to the estate and to the capital beneficiaries. The implication was clearly that the capital beneficiaries would have received the capital appreciation, whereas the income beneficiary would only receive the income such as interest.
There are few cases which deal with circumstances similar to those which here apply. Most are concerned with issues such as whether payments or additions to property should be defined as capital or income. The Courts have, however, consistently maintained the stated definitions of "income" and "capital". Thus, it has been held that "capital" included:
(a)new shares issued out of the earnings of a company, even if a dividend could have been issued instead: In re Ezekiel Barton's Trust (1868) LR 5 Eq 238;
(b)distribution of accumulated profit as a bonus dividend if the accumulated profit had become part of the capital: Bouch v Sproule (1887) 12 App Cas 385; or where the shareholder is in practice required to direct the bonus dividend back in payment of new shares: Hawkins v Hawkins (1920) SR (NSW) 550;
(c)amounts paid to trustee shareholders by way of lawful reduction of capital or winding up: In re Armitage; Armitage v Garnett;
(d)where a company diluted the value of shares on a reconstruction and shares in another company were provided instead, the shares in the other company were treated as capital: Sinclair v Lee;
(e)bonus shares out of accumulated income: In re Wilkinson (decd); Elders Trustee & Executor Co Ltd v Henley [1954] VLR 48;
(f)proceeds of the sale of preferential rights to subscribe for shares or the shares acquired under the exercise of such rights: In re Wilkinson (except where the Will gave a specific direction for any profit to be held as income: In re Hart (decd); Trustees Executors & Agency Co Ltd v Brash [1954] VLR 239;
(g)the payment of amounts owing to a business run by the testator that would have been income if the testator was still alive and running the business: In re Davis (decd) [1953] VLR 639.
The defendants submit that the court should view the statements of principle in these authorities with some caution in applying them to the facts of this case. The difference in principle in In re Armitage; Armitage v Garnett is said to be that in that case the capital which produced the profit was not in the estate from the outset. Re Mulligan is distinguished on the basis that it deals solely with the issue of trustees investing in hazardous investments with the potential for loss to the residuary beneficiaries. Here, it is said that there has been no loss to the beneficiaries.
The cases of Re Barton's Trusts, Bouch v Sproule, Hawkins v Hawkins and Re Wilkinson are distinguished on the basis that the shares were already part of the estate. Here, the shares were subsequently purchased. The cases of Eisner v Macomber (1919) 64 L Ed 521 and Sinclair v Lee were also distinguished; the latter on the basis that it involved a share swap, hence, a swap in capital assets. It is asserted that the authority is, therefore, inapplicable to the circumstances of this matter.
It is the case that the cases quoted by the plaintiff in support of the proposition that profits on the sale of shares are capital rather than income relate to assets in the estate at the time of death. However, while the facts may differ in the cases to which I have referred, that difference does not, in my view, remove the relevance of the basic principles. There is one particular point of difference upon which the defendants seek to rely to distinguish these authorities; the distinction between selling existing shares in the estate, as opposed to taking cash from the estate to engage in a short burst of share market transactions to maximise the income stream. It is said that, in removing money from another type of investment in order to trade on the share market, the executor is simply swapping one form of income to the estate for another and doing so without detriment to the capital beneficiaries.
For myself, I consider the point of distinction to be of no relevance. After acquired shares are bought from the assets of the estate and become part of the assets of the estate. Everything that is in the estate at any point in time is property belonging to the estate which must be dealt with in accordance with the terms of the trust. I know of no authority which draws any distinction between after acquired assets and those which were in the estate at the time of a testator's death when it comes to distribution under the Will. Neither can I see any reason in logic why such shares should be treated differently.
The argument put by the defendants for classifying the profit as income also relies heavily on the assertion that the capital beneficiaries are in no worse position because the acquisition costs of the shares are returned to the estate following sale. This is a very narrow interpretation of detriment. It involves looking at the value of the estate at the time of death and excluding the potential for growth in capital. The capital of the estate may not be depleted, but neither is it growing. Further, if the share trading had been unsuccessful, the loss would be suffered by the estate. In that way, the residuary beneficiaries bear the risks, but obtain none of the benefits.
Further, I remain unpersuaded that no loss results to the estate in any real sense. Prior to sale, the shares form part of the capital of the estate. The value may change due to fluctuations in the market, but the asset has value and adds to the value of the estate as a whole. Once sold, unless the whole of the sale price is returned to the estate, the corpus of the estate does indeed suffer a loss, much in the same way as a downturn in the property or share market decreases the value of the capital to be distributed to residuary beneficiaries.

It was submitted that the contrary interpretation that the profit is capital results in a detriment to the income beneficiary that may never have been intended by the testator. In my view, no such detriment arises. The income beneficiary obtains the income irrespective of the type of investment. If the profit is returned to the estate as capital and reinvested, the income stream to the income beneficiary is increased.
It is also said by the defendants that there is in the authorities no statement of principle which applies to the circumstances of this case. I consider one such statement to be the well establish obligation on a trustee to act strictly impartially and even‑handedly between income and capital beneficiaries. However, the defendants submit that this principle should be disregarded in the absence of an application alleging that the trustee is improperly acting to the advantage of one beneficiary over the other. The application not being of that type, it is said that the question of whether the profits constitute capital or income should be answered without reference to the consequence on the capital beneficiaries. There might be some merit in that submission if it were not the case that the defendants rely on the absence of any detriment to the estate in support of their argument that the profits should be considered income.
I have reached the conclusion that the authorities to which I have been referred correctly state the law in the context of trusts. I consider the cases dealing with income in the context of the taxation law not to be of assistance. I do not accept that the authorities can be distinguished on the basis of when the profit producing asset was acquired. Such a proposition is without authority. It would also permit executors to deliberately set out to advance one type of beneficiary over another, a practice which is undesirable and in conflict with decided cases on that issue.
I have no hesitation in concluding that, other than where a contrary intention is manifest, profits derived from trading in shares, even if the shares were acquired during the course of administration of the trust, is capital for the purposes of distribution.

Whether profit on the sale of shares can be classified by the executor as income pursuant to cl A3 of the Schedule to the Will

The consequence of the conclusion that the profit on the sale of shares is capital is that, in order for Mrs Wendt to have an entitlement to the profits, the Will would have to specifically provide for it.
On behalf of the defendants, it is submitted that cl A3 authorises the executor to classify the profit as income and distribute it to Mrs Wendt. It is said that the issue of what is income and what is capital depends very much on the particular circumstances of each case and the very purpose of cl A3 is to avoid disputes as to categorisation. Clause A3 provides the executor with the discretion to determine whether receipts or outgoings are capital or income or partly income or capital so as to bind the beneficiaries. It is said that the effect of the clause is to give the executor the power to decide "in a situation such as this" whether profits constitutes income. In fact, if this interpretation is accepted, it gives to the executor the power to arbitrarily determine, in any circumstances, whether receipts or outgoings are capital or income. Such a discretion would be unfettered and cannot be reviewed by the Court unless the trustee has failed to meet the threshold requirements set out in Karger v Paul. In effect, on the defendants' submission, cl A3 confers a power to override testamentary intention.
It is further said that there exists no reason to believe that the testator did not intend the power to operate in this fashion. I consider that one reason would be the conferral on Mrs Wendt under cl 4.1.4.1 of the Will of a right to apply to be paid part of the capital if she can establish that her income is insufficient for her reasonable needs. The conferral of such a right is, in my view, inconsistent with a power in the executor to categorise capital as income for the purpose of distribution to the income beneficiary. I am unpersuaded by the defendants' argument that because cl A3 requires the income beneficiary to establish need, the two provisions serve different functions. In my view, the existence of different requirements does not equate with different functions. Indeed, it is the very fact that, as reflected in cl 4.1.4.1, the testator considered it necessary for the income beneficiary to establish need before being given access to the capital of the estate which militates against the conclusion that cl A3 may properly be construed as conferring on the trustee a general discretion to distribute capital to the income beneficiary. In other words, the terms of the Will itself are inconsistent with the interpretation of cl A3 advanced on behalf of the defendants. The interpretation advanced would render cl 4.1.4.1 superfluous.
In written submissions the first defendant also relies on and refers to a statement of Murray J in Tipperary Developments Pty Ltd v The State of Western Australia, unreported; SCt of WA; Library No 960620; 31 October 1996. His Honour's words are misquoted in the written submissions. The correct statement is in the following terms (at 9):
"The trust deed establishes the trust in what may be described as a relatively usual form. The corporate trustee is given very wide powers of a business character. … It has wide powers of investment and it may allocate receivables to capital or income. … The trust is in that form which is usually described as discretionary in relation to the distribution of income among classes of discretionary beneficiaries, withholding any such distribution, capitalising income and otherwise acting in accordance with the powers and duties of a trustee."
It is apparent from a reading of the case that the above quotation is a mere recitation of the primary terms of the trust under consideration. The trust, being a discretionary trust, included an express discretion in relation to the distribution of income amongst classes of beneficiaries. The issue before the Court was the question of security for costs. In this case, no discretionary trust is created under the Will. In my view, the decision in Tipperary Developments Pty Ltd v State of WA is of no assistance in the interpretation of cl A3.
On behalf of the plaintiffs it is said that cl A3 should not be interpreted as conferring on the executor an unfettered power to define what is income and what is capital for all purposes. A different explanation for the purpose and a different interpretation of the scope of the clause is put forward.
As the plaintiffs assert, the clause is a standard one referred to in such texts as "Hutleys Australian Wills Precedents", Rowland and Tamsitt, 5th ed (1994), at 2614 ("Hutleys"). The text recommends the use of a clause in similar terms in order to overcome and exclude the difficulties created by the rule in Allhusen v Whittell (1867) LR 4 Eq 295 and Howe v Earl of Dartmouth (1802) 32 ER 56. In Allhusen v Whittell the Court held that, in order to achieve equity, it was necessary to adjust rights between the life tenants and remaindermen by ascertaining what part of the capital and income for the year would be required for payment of debts and other charges and make a calculation so that the life tenant only received the income arising from that part of the capital that was not required for the payment of those debts and liabilities (at 303). This requires the executor to engage in a complex calculation to work out the appropriate income that belonged to the capital of the estate and what was income from the net estate. The rule in Howe v Earl of Dartmouth has a similar purpose. It was held that there was a duty to convert wasting reversionary or hazardous assets and to invest in income bearing investments as part of the duty to act impartially. Even if the conversion to income bearing investment was not carried out in fact, the trustees were still expected to apportion the income as if, notionally, that conversion had been done and calculate a source of income provided for the life tenant (at 61 ‑ 62).
The author of "Hutleys" concludes that the simplicity of administration is best served by excluding the rule in Allhusen v Whittell. One method suggested is to give executors a discretion as to apportionment between capital and income, and the text includes a form to achieve that purpose which is in relevantly similar terms to cl A3: see also "Butterworths Australian Encyclopaedia Forms and Precedents" at s 2850, page 13,215 ‑ 13,216.
The meaning and purpose of the standard precedent clause is confirmed in the case of Re Wynn (decd); Public Trustee v Newborough [1952] 1 All ER 341 at 344 ‑ 347. In Re Wynn (decd) the relevant clause was in the following terms:
"I authorise and empower … my trustees to determine … whether any moneys are to be considered as capital or income … and I declare that every such determination … shall be conclusive and binding upon all persons interested under this my will or any codicil hereto."
It can be seen that this clause is in substantially similar terms to cl A3. The Court held that the purpose of such a clause was not, as had been contended, to give an unlimited discretion to the trustees to classify moneys as income or as capital, but merely to exclude the complexities of those particular rules.
As Danckwerts J stated (at 345):
"… but it seems to me that the clause does no more than exclude the rules in Howe v Earl of Dartmouth and Allhusen v Whittell, which settle the incidence of costs and expenses and other matters between beneficiaries, and it is well established, I think, that a testator may vary the rights of the beneficiaries taking under his will by excluding those rules."
The affidavit evidence of Mr Paonni supports the plaintiffs' argument that cl A3 was intended to have a more limited application than that submitted by the defendants and one consistent with overcoming the effects of the rules referred to in Re Wynn (decd). Mr Paonni clearly states that the powers set out in the Schedule were merely the standard range of powers that he includes in all Wills. Clause A3 can be contrasted with cl 4.1.4.1 which Mr Paonni was specifically instructed by the testator to include and would be unnecessary if cl A3 had the effect suggested by the defendants.
In Re Wynn (decd) the Court concluded (at 346):
"It seems to me that I am bound to hold, on the authority of Re Raven, that a provision which refers to the trustees the determination of all questions and matters of doubt arising in the execution of the trusts of a will, and which attempts to make the determination of the trustees conclusive and binding on all persons interested under the will, is void and of no effect, because it is both repugnant to the benefits which are conferred by the will on the beneficiaries and also because it is contrary to public policy as being an attempt to oust the jurisdiction of the court to construe the will and to control the administration of the testator's estate."
See also Re Davis at 1085.
Counsel for the first defendant submits that, if the effect of the clause is to oust the jurisdiction of the court as suggested by the plaintiffs, it would not be included in leading texts as a standard precedent. I consider this submission to have no substance. It is only if the clause is given the wider construction relied upon by the defendants that it could be said to attempt to oust the jurisdiction of the court, thereby invalidating the clause. The narrow construction put forward by the plaintiffs does not have that effect and is consistent with inclusion in any book of standard precedents.
I consider the plaintiffs' argument on this point, supported as it is by authority, to be compelling. At its highest, cl A3 gives the executor flexibility to determine what is income or asset in the very narrow circumstances outlined in the authorities to which I have referred. Any broader interpretation would render the clause void. The consequence is that if the executor did indeed rely upon cl A3 to determine that the profits of the share trading were income rather than capital and distribute it to the income beneficiary without consideration to the interests of the capital beneficiaries, this Court is entitled to intervene.

Executors/trustees' duties and entitlement to obtain a determination from the Court

In Re Mulligan (decd) Pankhurst J identified three general principles relating to the duties of trustees, two of which are directly applicable to this case. The first is the duty of trustees to act with due diligence and prudence in the discharge of their duties. Pankhurst J referred to what he described as the "classic statement" of Lindley LJ in In re Whitely; Whitely v Learoyd (1886) 33 Ch D 347 at 355:
"The duty of a trustee is not to take such care only as a prudent man would take if he had only himself to consider; the duty rather is to take such care as an ordinary prudent man would take if her minded to make an investment of the benefit of other people for whom he felt morally bound to provide."
As Pankhurst J observed (at 500):
"This passage serves to emphasise the importance of the subject matter of a trust. Protection of personal assets is different to the protection of a fund which belongs to beneficiaries. The purpose for which a trust fund is established commonly dictates a different approach as well."
Of course, loss of trust money or diminution in the real value of a trust fund does not, of itself, render a trustee liable. It must be shown that the loss or diminution arose from some failing on the part of the trustee, which can be properly characterised as a breach of trust.
The second general principle referred to in Re Mulligan (decd) is the duty of impartiality. Pankhurst J described the obligation of a trustee to act with strict impartiality and to endeavour to maintain a balance between the interest of life tenant and remaindermen as "elementary". After referring to Hoffmann J's statement of the impartiality concept in Nestle v National Westminster Bank plc (Chancery Division HCt, 29 June 1988) at 4 ‑ 5, Pankhurst J emphasised the concept of fairness as being a relevant factor when attempting to balance the competing interests of those to whom the duty is owed (at 501).
The duty of a trustee at law and in equity to act impartiality between beneficiaries has been reinforced by statute in Western Australia. Section 19(1) of the Trustees Act provides as follows:
"Any rules and principles of law or equity that impose a duty on a trustee exercising a power of investment including, without limiting the generality of those duties, rules and principles that impose -
(a)a duty to exercise the power of a trust in the best interests of all present and future beneficiaries of the trust;
(b)a duty to invest trust funds in investments that are not speculative or hazardous;
(c)a duty to act impartially towards beneficiaries and between different classes of beneficiaries; or
(d)a duty to take advice,
continue to apply except to the extent that they are inconsistent with this or any other Act or the instrument creating the trust."
In the circumstances of this case it is important to recognise that the duty to act impartially is not qualified by any expression of wishes which the testator makes to his designated executor during his life time: Tanti v Carlson [1948] VLR 401 at 405. In Re Burbidge (No 2), unreported; SCt of NSW (Young J); 6442 of 1992; 25 June 1993, Young J did not consider the decision in Tanti v Carlson to be authority for the proposition that an executor is not entitled to have regard to the wishes of the deceased not expressed in the Will. I respectfully agree with that view. As Young J observed (at 10):
"It is only when exercise of a discretion by a trustee in accordance with the deceased's wishes collides with some higher obligation that the wishes must be put to one side".
In this case the higher obligation is to act in accordance with the terms of the Will and impartially as between the classes of beneficiaries.
Further, while the obligation to be impartial and even‑handed between beneficiaries or classes of beneficiaries can be varied, it can only be done by express provisions in the trust document: Bakewell v Holme (1943) 44 SR (NSW) 150. However, not every provision affecting the respective interests of classes of beneficiaries will displace the duty of impartiality. In Rowds v Bibb [1900] 2 Ch 107 at 116 Lindley MR held that, in the context of a discretionary power to postpone conversion for such period as to the trustees shall seem convenient, the discretionary power was nothing more than a power in the nature of a power of management. The power did not displace the trustees' traditional duty of even‑handedness and authorise the trustees to prefer the interests of the remaindermen to those of the life tenants.
Even if cl A3 were to be interpreted as the first and second defendants assert, it is plain that, both at law and under statute, a general discretionary power conferred by the trust deed does not override the trustee's duty to be fair to and impartial between all beneficiaries. Clause 4.1.4.1 would, in my view, be an example of an exception created by the trust deed referred to in s 19(1) which would entitle a trustee to make a decision which operated to the benefit of one class of beneficiary and to the detriment of another. However, the questioned distributions were not made pursuant to that clause of the Will. I do not consider cl A3 to be an example of such an exception for the reasons to which I have already referred.
Because of the consequences of acting in breach of duty, a prudent executor who is unsure of the appropriate action to take will obtain legal advice and/or apply to the Court for a determination of the issue. In this way the executor avoids the risks inherent in himself deciding the respective rights of the beneficiaries or in exercising a power or discretion where the propriety of such exercise might afterwards be called in question by the beneficiaries: "Jacob's Law of Trusts in Australia", R P Meagher and W M Gummow, 6th ed, at [2132]. As Maughan AJ observed in Alcock v Public Trustee (1936) 53 WN (NSW) 192 (at 193):
"If all the persons interested be not sui juris and accessible, or if, being sui juris and accessible, they are not unanimous as to the course which the trustee or executor is to pursue, the latter should ask the Court for judicial advice as to his conduct. Such judicial advice if obtained upon a fair statement of the facts known to the executor or trustee will be a complete protection to him as against the beneficiaries and will entitle him to complete indemnity out of the trust estate which he is representing, although of course it will not in any way affect the adverse claimant either as to the subject matter of his claim or as to his costs."
An application to the Court for directions is available under the general law and under statute. Section 92(1) of the Trustees Act provides that any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee. In In re Beddoe; Downes v Cottam [1893] 1 Ch 547 Bowen J pointed out the rationale behind the entitlement to apply to the Court for directions and the relative ease with which such assistance can be obtained. He said (at 562):
"If a trustee is doubtful as to the wisdom of prosecuting or defending a lawsuit, he is provided by the law with an inexpensive method of solving his doubts in the interests of the trust. He has only to take out an originating summons, state the point under discussion, and ask the Court whether the point is one which should be fought out or abandoned. To embark in a lawsuit at the risk of the fund without this salutary precaution might often be to speculate in law with money that belongs to other people."

In Fysh v Coote [2000] VSCA 150 Ormiston JA noted at [25]:
"It is the inability to act independently and deal adequately with conflicts and potential conflicts which leads to the need to remove an executor. Where through incompetence or stubbornness an executor cannot cope, then it is proper, as often occurs, for an executor to hand over his or her duties or, if unwilling, for an order for removal to be sought and made against the executor."
Mr Orr, in his approach to managing the estate, has, in effect, created the dispute which this action is intended to resolve. It is apparent from his evidence that he is wholly unable to see the conflict between his role as executor, involving, as it does, a duty of impartiality, and his desire to maximise the benefit to the income beneficiary. In view of the findings that I have made concerning Mr Orr's conduct, I consider that it would not be appropriate for him to remain in the position as executor and trustee of the estate. It is essential that an independent trustee be appointed.
However, I would prefer to give the parties an opportunity to agree on the appointment of a trustee and for the matter to be further heard should an agreement not be reached.

Conclusions

For the reasons to which I have referred, the benefit to Mrs Wendt which amounts to the funds distributed to her, less tax, is to be returned by her to the estate. Half of the sum is to be paid as soon as possible. I will hear counsel for Mrs Wendt as to an appropriate time period for compliance with that order. The balance of the sums distributed to her, less tax, is to be the subject of a charge over her residential property in Bunbury and repaid on the sale of the property or the grant of any legal or equitable interest in the property to a third party. Mrs Wendt is to take all reasonable steps to obtain from the Australian Taxation Office that portion of the funds distributed which were paid in tax.
Mr Orr is to pay the tax and interest component of the loss to the estate, including interest on the funds distributed as legal fees. If the tax paid on the funds distributed is refunded by the ATO before the estate is reimbursed by Mr Orr, the amount representing the tax refund is to be paid by Mrs Wendt to the estate. If the tax paid on the funds distributed is not refunded by the ATO before the fund is reimbursed by Mr Orr, the amount representing the tax component is to be paid by Mrs Wendt to Mr Orr. If a refund is not forthcoming, the shortfall is to be paid by Mr Orr to the estate.
I appreciate that the profits, when returned to the estate and reinvested, would have yielded income which would have been distributed to Mrs Wendt and of which, through the actions of Mr Orr, she has not now had the benefit. However, irrespective of the fact that the profits distributed to her have to be repaid, Mrs Wendt has had the benefit of the profits for a considerable period of time. In the circumstances, I am not persuaded that it is appropriate to make an adjustment to take into account any increase in income which Mrs Wendt might otherwise have received.
As to the costs of the action, the general rules as to costs is that the costs of, and incidental to, all proceedings shall be in the discretion of the Court and the Court will generally order that the successful party to any action or matter recover his costs: O 66 r 1 of the Supreme Court Rules. Order 66 r 9 provides that a trustee who is party to any proceedings in his capacity as trustee shall, unless the Court otherwise orders, be entitled to the costs of proceedings. However, the entitlement to legal costs is qualified. Rule 9 further states that the Court may otherwise order only on the ground that the trustee has acted unreasonably or for his own benefit rather than for the benefit of the fund.
At common law the usual practice has been, if trustees think it necessary to appear in an action, to allow them their costs, leaving it to the taxing master to consider their position in fixing the amount of their costs: Gleeson v Fitzpatrick at 38, per Rich J. However, even at common law it is recognised that the right of a trustee to indemnification is not absolute. A recognised exception is where there has been impropriety which has been held to include an executor taking or defending proceedings in breach of trust, or conducting the proceedings in such a way that the Court, on a general view of the case, regards the executor's conduct as not honestly brought forward: Drummond v Drummond [1999] NSWSC 923, per Austin J, at par 45. While mistakes or errors in judgment would not disentitle a trustee to an indemnity, the beneficiaries are entitled to expect reasonable prudence on the part of the trustee, and failure to do so may result in a trustee being liable for his own legal fees: In re Weall; Andrews v Weall (1889) 42 Ch D 674 at 681. Because of the ease and comparatively small expense involved in obtaining directions of the Court, a trustee bears the onus of establishing an entitlement to costs where the trustee brings or defends an action unsuccessfully: In re Beddoe, per Bowen J, at 562. As Maughan AJ noted in Alcock v The Public Trustee at 193, having reviewed the possible courses open to an executor or trustee faced with uncertainty or dispute, "in every event there is some safety valve open to him".
In my view, the correspondence from the plaintiffs was sufficient to put the first defendant on notice that the plaintiffs objected to any distribution of capital to the income beneficiary. Any trustee, acting reasonably, would conclude that the plaintiffs would dispute the propriety of distributing the share sale profits to the income beneficiary if they were aware that the trustee was so doing. From that time, at the latest, it was incumbent on the executor to take some appropriate action to identify the true nature of his obligations and protect the interests of all beneficiaries. Yet, despite being put on notice and giving an undertaking that he would notify the plaintiffs if such were his intention, Mr Orr continued to distribute capital to Mrs Wendt. He declined to avail himself of any of the "safety valves" open to him. Indeed, he defended with considerable vigour the action brought by the plaintiffs which called his conduct into question.
There is no allegation or evidence that the first defendant acted for his own benefit. However, he deliberately acted to the benefit of one of the beneficiaries, a relative by marriage, and to the detriment of the other beneficiaries, as a result of which legal costs were incurred in bringing an action to remedy that injustice. To allow the first defendant to recover his costs from the estate would mean that the income beneficiary and the capital beneficiaries are deprived, respectively, of the income generated by capital used to pay the expenses and of the capital itself, thereby suffering additional loss. Further, if the capital beneficiaries are to meet their own costs or recover their costs from the estate, the plaintiffs will effectively be paying for the action they took to redress the wrong done to them. Given his conduct, I consider that the first defendant has no basis for resisting the application of the normal rule that costs should follow the event. The costs of the plaintiffs are to be paid by the first defendant without indemnity from the estate.
As I have previously indicated, I am not persuaded that the second defendant was in any way involved in Mr Orr's activities, although she did benefit from them. For that reason, I do not consider it appropriate for her to contribute to the costs awarded to the plaintiffs. Further, as that benefit will be removed as a result of this action, I do not consider it appropriate that she meet her costs. The first defendant should also pay the second defendants costs.
I will hear the parties on the appropriate orders to reflect the decision of the Court.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WENDT & ORS -v- ORR & ANOR [2004] WASC 28 (S)

CORAM: JOHNSON J

HEARD: 29 APRIL 2004

DELIVERED : 4 MARCH 2004

SUPPLEMENTARY
DECISION :3 MAY 2004

FILE NO/S: CIV 1896 of 2000

BETWEEN: DOUGLAS RONALD WENDT
LYNETTE DOROTHY JOHNSTON
LORRAINE McCARTHY
Plaintiffs
AND
GEORGE STANLEY ORR
First Defendant
JOAN AGNES WENDT
Second Defendant

Catchwords:

Costs - Executor's right to indemnity from the estate for costs of litigation commenced by beneficiary

Legislation:

Trustees Act 1962

Result:

Order that the costs of the litigation be paid to the plaintiffs and the second defendant by the first defendant without indemnity from the estate

Category: C