Fischer V Nemeske: The Dissenting Judgements – Part 3
Kiefel J’s Dissent
This is the final part of my three part series commenting on Fischer V Nemeske, specifically the dissenting judgements. Kiefel J considered that for the capital to be applied, and the corpus distribution to be effective, there needed to be some identified property that was set aside. She distinguishes Vestey on the basis that the property the subject of the distribution was identified, namely an amount of cash.
North P went on to say that it “is sufficient if it is allocated to them in terms which makes the parts of the income so allocated the separate property of each infant”. In this case, it is not possible to say that it was intended that Mr and Mrs Nemes were to become absolutely entitled to any property of the Trust.
No New Trust
Her Honour sets out her position that there must be a separate trust with identifiable assets in order for there to be an application and that the absence of a separate trust means that there is not the basis for giving rise to a debt:
When the trustee in Ward made the declaration and recorded the application of the funds in the accounts of the trust, the monies were effectively taken from the existing trust and the trustee thereafter held them on a new trust for the infant beneficiaries. McCarthy J in Ward, who agreed with North P, made an observation to this effect, and noted that this was hardly an unusual occurrence in the administration of trusts.
Gordon J’s Dissent
The dissent of Gordon J considers that the asset revaluation reserve is a mere accounting entry and is not in of itself property:
The 1994 Resolution purported to deal with “the asset revaluation reserve” and to distribute “the entire reserve if any”. But the asset revaluation reserve was not “part of” “the capital or income of the Trust Funds”.
The “asset revaluation reserve” was an accounting entry which recorded, in the accounts of the Trust, an unrealised accretion in the value of the Shares at a particular point in time.
Distinguishing Clark v Inglis
Her Honour considered that an unrealised gain is capable of being income, but then distinguished Clark v Inglis:
Her Honour’s reasons for distinguishing include:
- First, the trustee of the discretionary trust was given a binding discretion to determine whether any property or moneys held by it constituted capital or income.
- Second, there was no direction which required income and profits to be paid, transferred or handed over to any beneficiary.
- Third, the terms of the trust deed were in other respects significantly different.
Power of Advancement
The power of advancement might be exercised by moving the property to a new trust (a resettlement of part of the trust for the benefit of one or more named objects) or by simply transferring the property directly to the beneficiary without the process of cash advancement and sale.
Certainty of Subject Matter
Her Honour then picks upon an important trust law requirement of certainty of subject matter – the need to identify the trust property that is resettled to effect the distribution. If there is an entitlement to an amount of shares equal to the monetary sum distributed then because of the potential fluctuation of the value of the shares the amount:
Even if the Trustee had purported to effect the distribution by a resettlement – settling a new trust for Mr and Mrs Nemes absolutely for $3,904,300 worth of the Shares – that trust would fail for want of certainty of subject matter. The value of the Shares necessarily fluctuated. The money value alone would be an insufficiently certain criterion to identify what specific portion of the Shares was held on the new trust.
Final Analysis
As will be apparent, the fundamental difference between Vestey, Ward and Chianti and the present appeal is that whereas in those three cases, absolute title to trust assets was transferred or vested…
Second, a beneficiary may maintain an action for money had and received against a trustee only where there remains nothing for the trustee to do except to pay over the money to the beneficiary and the trustee admits itself to be indebted to the beneficiary.
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