March 2012

Wills & Estates Law Update - trustees successfully avoid removal, new tax rulings

Trustees Successfully Defend Court Challenge

Bartier Perry recently acted for two trustees of a testamentary charitable trust who successfully defended a Court challenge by three charity residuary beneficiaries to end the trust or have the two trustees replaced as trustees (Sir Moses Montefiore Jewish Homes & Ors v Perpetual Trustee Company Ltd & Anor [2012] NSWSC 210).

Facts

Rupert Michaelis died on 11 December 1984.  He left a Will dated 21 July 1981.  The executors and trustees of the estate were Perpetual Trustee Company Ltd (Perpetual) and Mr Rupert Rosenblum (Mr Rosenblum).

Clause 5 of the deceased’s Will provided for his residuary estate to be held on trust to pay the income in equal shares in perpetuity to Sir Moses Montefiore Jewish Home, Wolper Jewish Hospital and NSW Trustee Jewish War Memorial (the Charities).

The Charities commenced legal proceeding against the trustees.  The Charities sought a declaration that they were entitled to the capital of the residuary estate in equal shares by operation of the principle in Congregational Union of NSW & Thistlethwayte (1952) 87 CLR 375.  Alternatively, the Charities sought an order appointing the president or chairman respectively of each of the Charities as trustees of the deceased’s estate in substitution for the present trustees pursuant to s 70 of the Trustee Act 1925 (NSW) (Act), or in exercise by the Court of its inherent power to regulate trusts.

An important fact in the case was the Charities accepted that the trustees had acted properly in discharging their duties as trustees since the deceased’s death and the trustees were entitled to the commission and fees that had been paid to them.

The Will interpretation principle in Thistlethwayte’s case

There is a principle of construction of wills that a gift of income in perpetuity carries with it an absolute interest in the capital of the trust fund to which a person is entitled to call for.  In Thistlethwayte’s case, the High Court held that the principle of construction applies to charitable trusts.  The beneficiary is entitled to the capital of the trust fund unless there is an express or implied contrary intention from the will that the beneficiary is only to take the income.

There have been a number of subsequent cases, especially in the Supreme Court of Victoria, that have held that proof of a contrary intention is more readily found where the beneficiary is a charity.  One such case relied on in argument for the trustees was The Melbourne Jewish Orphan and Children’s Aid Society Inc v ANZ Executors and Trustee Company Limited [2007] VSC 26.

After a careful construction of the deceased’s Will, Ball J found that the deceased did not intend to make a gift of capital to the Charities.  Therefore, the trust was to continue and the Charities were not entitled to call for the capital of the residuary estate.

Should the trustees be replaced?

This issue concerned whether it was “expedient” to appoint new trustees in place of the existing trustees, in circumstances where it was accepted that the existing trustees had acted properly in discharging their duties as trustees.  The Court held that the existing trustees should not be replaced.  The deceased’s objectives in establishing the trust were not jeopardised by the actions of the existing trustees who were entitled to charge commissions and fees for their work as trustees.
 

Revised Office of State Revenue Ruling
Land Tax and the Principal Place of Residence Exemption

The Office of State Revenue has issued revised Revenue Ruling No. LT82 version 2, dealing with the principal place of residence (PPR) exemption from land tax.  The revised ruling takes effect from 13 March 2012.

The revised ruling, amongst other things, continues the PPR exemption for up to two years after the death of the owner of the land who was eligible for the PPR exemption immediately before the death of that owner.  An extension of the PPR exemption beyond two years after the owner’s death may be granted by the Chief Commissioner of State Revenue, in certain circumstances

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.

Principal author: Gerard Basha