Fox v Waller[2023] QSC 169

SUPREME COURT OF QUEENSLAND

1. [1]
   This is an application for a declaration as to whether an express power of appropriation conferred by the will of the deceased, John Lewis Waller, is subject to, and limited by, certain provisions of the Trusts Act 1973 (Qld) (the Act). 
2. [2]
   The application has been brought pursuant to s 6(1) of the Succession Act 1981 (Qld).  That provision confers jurisdiction on the court to “hear and determine all matters relating to the estate and the administration of the estate of any deceased person” and “to make all such declarations … as may be necessary or convenient” in that respect.  In the circumstances set out in [3] to [15] below, I am satisfied that the declaratory relief sought by the applicants is necessary or convenient for the administration of the estate of the late Mr Waller.

Background

3. [3]
   The application has been brought by the executors of the estate of the late Mr Waller.
4. [4]
   The late Mr Waller died on 27 August 2019.
5. [5]
   Probate of the will, made on 6 November 2013, was granted to the applicants on 20 December 2019.
6. [6]
   The respondents to the application are:

   1. (a)
      the adult children of the late Mr Waller;
   2. (b)
      each one of three trustees and also a principal beneficiary of a testamentary trust constituted under the will (the other two trustees of both of the separate trusts being the applicants);
   3. (c)
      each (along with the other respondent) the equal beneficiary in respect of the personal effects of the late Mr Waller. 
7. [7]
   Each of the testamentary trusts is (along with the other testamentary trust) an equal beneficiary of:

   1. (a)
      a specific gift under the will of a property referred to in the materials as the Beckwith Street property; and
   2. (b)
      the residue of the estate.
8. [8]
   Prior to his death, the late Mr Waller commenced the process of applying for subdivisional development approval in respect of the Beckwith Street property.
9. [9]
   Following the grant of probate, after consulting with and obtaining the consent of both respondents, the applicants continued the subdivision process.  That subdivision has proceeded in stages.  Stage 1 involved subdivision of the property into five lots: lots 10 and 11 (referred to in the materials as the western super lots); lots 12 and 13 (referred to in the materials as the eastern super lots); and lot 14 (referred to in the materials as the house lot, which contains the former residence of the late Mr Waller).  As their name suggests, the western super lots and the eastern super lots are capable of being further subdivided.  Stage 2 involves the further subdivision of each of the western super lots into three residential lots.  The work required to complete the Stage 2 subdivision has commenced but has not been completed.  Stage 3 would involve the future subdivision of the eastern super lots into residential lots.
10. [10]
    From August 2022, each of the respondents informed the applicants that they wished for the western super lots, the eastern super lots and the house lot to be dealt with in different ways in the administration of the estate.  The nature of those differences is not relevant to the determination of this application.  What is presently relevant is that the applicants have formed the view that relations between the two respondents have deteriorated to the point where the prospect of them cooperating in respect of those matters or reaching agreement in their various capacities is bleak.
11. [11]
    The will contains an express power of appropriation in cl 19.1.15, which is in the following terms:

1. “19.
   Powers

1. 19.1
   My Executors may in their discretion:

…

1. 19.1.15.
   without the consent of any beneficiary, partition or appropriate any asset of my estate in or towards the satisfaction of a legacy or a share of any person or persons in my estate, and in doing so the following provisions apply:

1. 19.1.15.1
   the value of any such asset shall be that agreed by those of my beneficiaries affected or, if my Executors are satisfied that no value can be agreed in this way, the value shall be that determined by an independent valuer appointed by my executors for the purpose.

1. 19.1.15.2
   my Executors need not take into account any differences in value of particular assets to particular beneficiaries other than the value of the assets as determined in accordance with Clause 19.1.15.1; …”

12. [12]
    The applicants have deposed that they are uncertain as to whether they are entitled to exercise that power of appropriation conferred by the will.  The stated reasons for that uncertainty are that:

    1. (a)
       the Beckwith Street property appears to be a specific gift under the will;
    2. (b)
       on a literal reading of ss 31(1) and 33(1)(l)(i) of the Act, an appropriation should not be made where it would adversely affect any specific gift;
    3. (c)
       an exercise of the express power of appropriation conferred by the will would adversely affect the specific gift of the Beckwith Street property.
13. [13]
    The applicants have also expressed uncertainty as to whether, in the event they are entitled to exercise the power of appropriation under cl 19.1.15 of the will, they are obliged to do so in conformity with requirements set out in s 33(1)(l)(ii) of the Act.
14. [14]
    It is this uncertainty which has caused the applicants to make the present application.
15. [15]
    The applicants have deposed that, save for the respondents and the testamentary trusts established under the will for their benefit, all beneficiaries under the will have received their legacies in full.  Interim distributions in equal amounts have been paid to each of the testamentary trusts.  Further, the balance of each of the testamentary trusts interests in the residuary estate is sufficient to enable the applicants to make any offset payment required to ensure that any exercise of the appropriation power in a manner which is uneven as between the two testamentary trusts is fair.

Sources of an executor’s power of appropriation

16. [16]
    A power of appropriation allows for specific assets to be transferred, or appropriated, to a beneficiary in or towards satisfaction of that beneficiary’s share in the estate without the necessity for conversion.^[1]  It has been said that it amounts, in effect, to a sale of assets to a beneficiary with the value of the appropriated assets then set off against what would otherwise have been that beneficiary’s share in the estate.^[2]
17. [17]
    There was agreement between the parties that an executor’s power to appropriate assets of an estate to a beneficiary may come from three sources:

    1. (a)
       under the general law an executor may, with the agreement of a beneficiary or the authorisation of the court, appropriate assets in specie to a beneficiary in part or whole satisfaction of the beneficiary’s entitlement;^[3]
    2. (b)
       the will may confer an express power of appropriation on the executor and, in those circumstances, the extent of the power depends upon the proper construction of the will;
    3. (c)
       s 33(1)(l) of the Act confers the power of appropriation on executors^[4] subject to certain limitations, relevantly:

1. (i)
   the appropriation must not adversely affect a specific gift: s 33(1)(l)(i);
2. (ii)
   the appropriation is not effective until notice of it is given to all persons interested in the appropriation so that they may have the opportunity to apply to the court to challenge the appropriation: s 33(1)(l)(ii).

18. [18]
    I have already set out, at [11] above, the express power of appropriation conferred by cl 19.1.15 of the will in this case.  The question of statutory construction which the applicants seek to have the court resolve is whether the limitations set out in ss 33(1)(l)(i) and (ii) of the Act:

    1. (a)
       apply, by reason of the words in s 31(1) of the Act, to express powers of appropriation conferred in a trust instrument; or
    2. (b)
       apply only to the statutory power of appropriation conferred by s 33(1)(l).

Relevant provisions

19. [19]
    The application of the provisions of the Act is set out in s 4, relevantly as follows:

3. 4
   Application

3. (1)
   …

3. (2)
   Nothing in this Act shall preclude a settlor from conferring on a trustee or other person exercising the powers of a trustee under this Act any powers additional to or larger than those conferred by this Act.

3. (3)
   Any additional or larger powers so conferred shall, as far as may be, notwithstanding anything in this Act, and unless a contrary intention is expressed in the instrument (if any) creating the trust, operate and be exercisable in the like manner and with all the like incidents effects and consequences as if conferred by this Act.

3. (4)
   The powers conferred by or under this Act on a trustee are in addition to the powers given by any other Act and by the instrument (if any) creating the trust; but the powers conferred on the trustee by this Act, unless otherwise provided, apply if and so far only as a contrary intention is not expressed in the instrument (if any) creating the trust, and have effect subject to the terms of that instrument.

20. [20]
    The statutory power of appropriation is set out in s 33(1)(l), in the following terms:

1. “33
   Miscellaneous powers in respect of property

3. (1)
   Every trustee, in respect of any trust property, may—

…

3. (1)
   appropriate any part of the property in or towards satisfaction of any legacy payable thereout or in or towards satisfaction of any share of the trust property (whether settled, contingent or absolute) to which any person is entitled, and for that purpose value the whole or any part of the property in accordance with section 51; but—

1. (i)
   the appropriation shall not be made so as to affect adversely any specific gift; and

2. (ii)
   before any such appropriation is effectual, notice thereof shall be given to all persons not under a disability who are interested in the appropriation, and to the parent or guardian of any infant who is interested in the appropriation, and to the person having the care and management of the estate of any person who is not of full mental capacity, and any such person may within 1 month after receipt of the notice or, upon the person’s application to the court within that month, within such extended period as the court may allow, apply to the court to vary the appropriation, and the appropriation shall be conclusive save as varied by the court; …”

21. [21]
    That statutory power of appropriation is contained in Part 4 of the Act, titled “General powers of trustees”.
22. [22]
    The application of the provisions of Part 4 is set out in s 31.  Relevantly, s 31(1) provides:

“Except where otherwise provided in this part, the provisions of this part shall apply whether or not a contrary intention is expressed in the instrument (if any) creating the trust.”

23. [23]
    A similar form of words is used in other provisions which address the application of other parts of the Act.^[5]

Consideration

24. [24]
    The proper approach to statutory construction requires that the court’s consideration focus on the text of the relevant provisions, in context.^[6]  The task must begin with a consideration of the text itself, although the meaning of the text may require consideration of the context, which includes the general purpose and policy of the provisions and, in particular, the mischief it is seeking to remedy.^[7]
25. [25]
    The argument in favour of the construction identified in [18](a) above is that it follows from the plain meaning of the words used in s 31(1).  On that argument, in circumstances where s 33(1)(l) confers a power of appropriation which is proscribed by the limitations set out in ss 33(1)(l)(i) and (ii), a trust instrument which provides that the trustee is to have a more extensive power of appropriation^[8] expresses a “contrary intention” for the purposes of s 31(1).  If that is accepted, then the words used in s 31(1) mean that s 33(1)(l) shall apply despite that contrary intention.  The result is said to be that the statutory power of appropriation operates in lieu of the power expressed in the trust instrument.
26. [26]
    I am unable to accept that this is the proper construction of s 31(1) of the Act.  If it is accepted, it would result in an inconsistency between the operation of s 31(1) – to apply the limits on the statutory power of appropriation in ss 33(1)(l)(i) and (ii) to an express power of appropriation conferred by the trust instrument – and the words of s 4(2) which expressly preserve the ability of a settlor to confer powers on the trustee that are larger than the powers conferred by the Act.
27. [27]
    In Project Blue Sky Inc v Australian Broadcasting Authority,^[9] a majority of the High Court said:^[10]

3. “[69]
   The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.  The meaning of the provision must be determined ‘by reference to the language of the instrument viewed as a whole’. In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’. Thus, the process of construction must always begin by examining the context of the provision that is being construed.

3. [70]
   A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals.  Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions.  Reconciling conflicting provisions will often require the court ‘to determine which is the leading provision and which the subordinate provision, and which must give way to the other’.  Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.”

28. [28]
    In my view, the construction identified in [18](a) above does not give sufficient weight to the context of s 31(1) within the Act as a whole, particularly its relationship with the provisions in s 4.
29. [29]
    I consider s 4 to be the leading provision in the Act for the purpose of determining the relationship between the provisions of the Act and the terms of a trust instrument.
30. [30]
    Sections 4(2) and 4(3) are directed to the conferral by a trust instrument of powers beyond those conferred by the Act.  Importantly, as already noted, s 4(2) preserves the ability of a settlor to confer powers on a trustee that are larger, or wider than, those conferred by the Act.
31. [31]
    Section 4(4) consists of two parts.  The first part, which confirms that the powers conferred by the Act are in addition to powers given by, relevantly, a trust instrument, is entirely consistent with the ability of a settlor pursuant to s 4(2) to confer powers on a trustee that are in addition to, or wider than, those conferred by the Act.  However, the first part of s 4(4) is expressed more broadly and is not limited to a situation falling within s 4(2).
32. [32]
    The second part of s 4(4), commencing from the word “but” addresses a more specific issue: that is, the extent to which a settlor may exclude the conferral of power by provisions of the Act and, thereby, limit the powers which the trustee would otherwise have had under the Act.  This second part of s 4(4) allows a settlor, through the express terms of the trust instrument, to exclude the conferral of power by the Act.  However, the settlor’s ability to exclude the operation of the statutory provisions is lost where “otherwise provided” in the Act; that is, where another provision of the Act creates an exception to the general position established by the second part of s 4(4). 
33. [33]
    Section 31(1), along with the other provisions referred to in [23] above, creates a relevant exception to the general position established by the second part of s 4(4).  The purpose and effect of s 31(1), and other relevant exceptions, is to define the extent to which the legislature has removed the ability of the settlor to exclude the conferral of power by the Act.  Viewed in that context, I consider s 31(1) to be subordinate to the provisions of s 4.
34. [34]
    Further, the argument expressed in [25] above does not give proper meaning to the term “contrary intention” having regard to the other words used in s 31(1) and the use of the same term in the second part of s 4(4).  The argument suggests that the relevant intention concerns the scope of the power granted to the trustee under the trust instrument.  However, both the words of s 31(1) and the use of the same term in the second part of s 4(4) make it plain that the intention being referred to is an intention as to the application of the provisions of Part 4; that is, whether a settlor intends to exclude the conferral of powers by a provision in that part of the Act.
35. [35]
    A trust instrument which confers a power that is larger or wider than a power conferred by the Act does not express a “contrary intention” in the sense that term is used in both the second part of s 4(4) and in s 31(1).  It does not express an intention to exclude the conferral of power by the Act and, thereby, limit the powers the trustee would otherwise have had under the Act.  In such a case, the provisions of Part 4 of the Act will, by reason of s 31(1), apply to confer the powers set out therein on the trustees.  However, pursuant to the first part of s 4(4), the powers so conferred by the Act are in addition to the powers given by the trust instrument and, further, by reason of s 4(2), do not operate so as to limit any powers given by the trust instrument that are larger or wider than the powers conferred by the Act. 
36. [36]
    This construction is also consistent with the language of s 33(1)(l) of the Act.  The word “but”, used immediately before subsection (i), indicates that the terms of subsections (i) and (ii) act to modify the body of s 33(1)(l) by imposing limits on the power set out therein.  Likewise, the reference to “the appropriation” in both subsections (i) and (ii) and, further, to “such appropriation” in subsection (ii) are plainly, in my view, references to an appropriation made in exercise of the power conferred by s 33(1)(l) and not an appropriation made in the exercise of some other power.
37. [37]
    To construe the operation of s 4 and s 31(1) in that way does not mean that s 31(1) has no work to do, whether in respect of the power of appropriation conferred by s 33(1)(l) or in respect of any other power conferred by the provisions of Part 4 of the Act.  The section will operate, as it was intended, in situations where a settlor purports to deny the trustee a power of a kind contained within Part 4 of the Act.  In those circumstances, s 31(1) would operate to remove the settlor’s ability to exclude the conferral of the relevant statutory power.
38. [38]
    Finally, this construction is consistent with statements made in the report of the Queensland Law Reform Commission,^[11] which preceded the enactment of the Act and to which consideration may be given to assist in the interpretation of the provisions.^[12]
39. [39]
    In addressing the provisions which were enacted as s 4, QLRC 8 relevantly stated:^[13]

“Sub-clause (4) is intended to make it clear that the powers which it is proposed should be conferred on trustees are in addition to the powers conferred in the trust instrument or by any other Act. …

It is also intended to permit a settlor to exclude provisions of the proposed Act which may appear controversial, such as the statutory power to invest in various forms of security other than government stocks, etc. To this extent the provisions of the trust instrument, if to the contrary of the provisions of the proposed Act, will apply; but there are many provisions which, as a matter of policy, must prevail over the terms of the trust instrument, e.g. the trustee’s powers of sale, disposition and other dealing with the trust property specified in Part IV of the Bill. In the result, we have thought it advisable, in addition to cl. 4(4), to prescribe at the commencement of each Part the extent to which the provisions of that Part prevail over any contrary terms of the trust instrument.

Sub-clauses (2) and (3) will ensure that a settlor may, if he wishes, confer on his trustee even wider powers than those contained in the Bill.”

40. [40]
    This passage indicates that the “contrary intention” referred to in s 4(4), and in the application provisions such as s 31(1), is an intention to exclude the conferral of powers by provisions of the Act.  The final sentence of that passage indicates that the form of words used in provisions such as s 31(1) was not meant to limit the exercise of a power conferred by the trust instrument that is wider than a power conferred by the Act.
41. [41]
    As to the purpose and effect of s 31(1), QLRC 8 stated:^[14]

“… The provisions of Part IV of the Bill are concerned with the general powers of trustees with respect to trust property, and in particular with their powers of selling, leasing, mortgaging, insuring and otherwise dealing with trust property as well as conducting a business forming part of the trust property.

Clause 31(1) will make these provisions invariable, i.e. incapable of being excluded by the terms of the trust instrument.  In our view the adoption of this approach is plainly necessary: it accords with the policy of The Settled Land Act with respect to land, and of the general policy adopted here of extending to trust personalty the principle of full alienability and of enabling the form of the trust property to be varied to meet the exigencies and changing conditions of the times.  In this respect we find the policy underlying the provisions of the Western Australian legislation a little puzzling.  The Western Australian Trustees Act 1962 - 1968, in pursuance of the policy of assimilating settled land and trust personalty, has repealed the Settled Land Act in that State, and has conferred both on trustees and on persons who formerly would have possessed the statutory powers of a tenant for life the wide statutory powers of a trustee in dealing with trust property and settled land.  However, s. 5(2) of the Western Australian Trustees Act specifically provides that the powers conferred by the Act upon a trustee are, ‘unless otherwise stated’, applicable ‘if and so far only as a contrary intention is not expressed in the instrument (if any) creating the trust, and have effect subject to the terms of that instrument’.  The principal sections of the Western Australian Act which authorises sale and other dealings with trust property, including what was formerly settled land, are ss. 27 and 30, and these sections no not ‘otherwise state’. Hence, it is possible under s. 5(2) of the Western Australian Act for the settlor to exclude the statutory powers conferred by these and other sections.  This has the surprising result, as we understand the matter, that in Western Australia it has now become possible to settle land in such a way as to produce the forms of inalienability and other disadvantages of settlements of land which it was the avowed purpose of the settled land legislation to prevent.

We find it difficult to believe that this result was deliberately intended in Western Australia, and, in order to ensure that it does not prevail in Queensland, cl. 31(1) provides in effect that the provisions of Part IV will be overriding, so that the powers which are thereby conferred will be exercisable by trustees and others referred to in cl. 6 of the Bill irrespective of any purported prohibition in the trust or other instrument.  The powers conferred by Part IV are admittedly broad but they do not go far beyond those enjoyed by tenants for life under The Settled Land Act, and, like all such powers, those conferred by the ensuing provisions of this Part of the Bill will be subject to the controlling general requirement that ‘a trustee ought to conduct the business of the trust in the same manner that an ordinary prudent man of business would conduct his own’ …”

42. [42]
    This passage indicates that the purpose of s 31(1) was to avoid problems that would arise if a settlor or testator retained the ability to exclude the conferral of the powers set out in Part 4 of the Act. 
43. [43]
    In respect of the appropriation power conferred by s 33(1)(l), QLRC 8 stated:^[15]

“Trustees have, as Lewin points out … certain wide but ill-defined inherent powers of appropriation.  In addition, a generalised statutory power of appropriation is conferred on trustee companies by section 28(1)(f) of the Trustee Companies Act 1968.  Limitations on the inherent power to appropriate including the following:-

1. (a)
   the consent of the beneficiary in whose favour the appropriation is proposed is necessary, but not that of the other beneficiaries;

2. (b)
   appropriation of securities is valid only if the securities in question are authorised and sufficient at the date of appropriation;

3. (c)
   appropriation is not possible unless the property sought to be appropriated has a definitely ascertainable or market value, and not where the valuation is fixed by the trustee himself …

Section 30(1)(k) of the Western Australian Act, following section 41 of the English Administration of Estates Act 1925 and, more particularly, section 46 of the New South Wales Trustee Act and section 31 of the Victorian Act, authorises appropriation of any part of the trust property in satisfaction of any legacy or share of the trust property, subject to the qualifications that (i) the appropriation shall not adversely affect a specific gift; and (ii) the appropriation shall not be effectual until notice has been given to all persons interested in the appropriation, or their guardians if they are infants.  The purpose of the latter provisions is, as s. 30(1)(k)(ii) itself makes clear, to enable such persons to apply to Court, which may vary the appropriation.

We recommend the adoption of this general statutory power: it will have the effect of extending the inherent power of trustees to effect appropriations and will greatly reduce unnecessary verbiage in wills and trust deeds.  The necessity for obtaining the consent of the beneficiary affected will be displaced by the duty to give notice to all the beneficiaries, but not to the trustee himself in another capacity, although in this instance the appropriation will not be effectual unless either the consent of all the beneficiaries or the approval of the Court is obtained …”

44. [44]
    This passage indicates that ss 33(1)(l)(i) and (ii) are directed to limiting the exercise of the statutory power conferred by s 33(1)(l).  There is nothing in that discussion which indicates that those subsections were meant to operate more broadly, including by limiting the exercise of a wider power of appropriation conferred by the trust instrument.
45. [45]
    For these reasons, I consider that the construction identified in [18](b) above is the correct construction.  That is, the limitations prescribed in ss 33(1)(l)(i) and (ii) of the Act apply to the power of appropriation conferred by s 33(1)(l) of the Act, but do not apply to, nor limit the exercise of, the grant of a wider power of appropriation in the will of the late Mr Waller. 

Orders

46. [46]
    The orders will be:

1. It is declared that on the proper construction of the Trusts Act 1973 (Qld), the express power of appropriation under clause 19.1.15 of the last Will and Testament of John Lewis Waller (deceased) executed 6 November 2013, in respect of the assets in the late Mr Waller’s estate being the subdivided lots (which were formerly the Beckwith Street property) gifted under clause 10 of the Will, being more particularly now described as:

1. (a)
   Lot 10 on SP 3267234 contained in Title Reference 51305815, Local Government of Redlands;
2. (b)
   Lot 11 on SP 3267234 contained in Title Reference 51305816, Local Government of Redlands;
3. (c)
   Lot 12 on SP 3267234 contained in Title Reference 51305817, Local Government of Redlands;
4. (d)
   Lot 13 on SP 3267234 contained in Title Reference 51305818, Local Government of Redlands;
5. (e)
   Lot 14 on SP 3267234 contained in Title Reference 51305819, Local Government of Redlands,

is not subject to nor limited by the provisions of ss 31(1)(l)(i) and (ii) of the Trusts Act 1973 (Qld).

2. The costs of all parties to the application are to be assessed on the indemnity basis and be paid out of the estate of the late Mr Waller.