Analysis of Fischer v Nemeske: Gageler J’s Judgement

Continuing on from part one of the discussion on Fischer v Nemeske, in which the conventional view of present entitlement and the controversial majority judgement of French CJ and Bell was discussed. The other Judgement in the majority is Gageler J will be considered, but his reasoning didn’t necessarily accord with French CJ and Bell J.

Nature of “Apply”

To start with, His Honour is a succinct description of the nature of “apply” and how it relates to both capital and income and vests an interest when an amount is applied:

The power, relevantly, is to “apply” any part or parts of the whole of the capital or income of the Trust Funds so as to bring forward the benefit of part or parts of the Trust Funds in respect of which any beneficial interest would otherwise remain future and contingent.

Analysis of Vestey and Ward

He then analyses Vestey and Ward, and avoids mischaracterizing them as “resettlement” cases:

Once it is accepted – as it was in In re Baron Vestey’s Settlement; Lloyds Bank Ltd v O’Meara and in Commissioner of Inland Revenue v Ward– that a trustee can “apply” trust property to the advancement of a specified beneficiary by resolving to allocate trust property unconditionally and irrevocably to the benefit of that beneficiary, it is difficult to see any reason in principle why such an unconditional and irrevocable allocation of trust property must take the form of an alteration of the beneficial ownership of one or more specific trust assets.

The allocations in each of those cases were of specified proportions of a single monetary amount which stood to the credit of a bank account which the trustee held as trust property at the time of the resolution. The allocations were held to be sufficient to result in the specified beneficiaries to whom the allocations were made each obtaining an immediate absolute beneficial entitlement to the sums so allocated.

North P’s View in Ward

Mr. Orr’s next submission was that as the declaration of the respondent was made two days before the date which had been adopted by the respondent over a period of years for the preparation of the yearly accounts of the trust, the trustee was in no position to determine what income was available for distribution or accumulation until 31 March 1963…

Turner J’s Perspective

Turner J in Ward places a different view on Vestey – that the distribution was not in relation to an incalculable income, but instead was a distribution of the cash that the trustees in Vestey held in bank accounts:

The essential differences between that case and the one before us appear to me to be, first, that the income with which the trustees purported to deal by resolution in Vestey’s case was in the hands of the trustees in the form of cash…

Gageler J’s Analysis

That the common law cause of action can arise where the trustee holds the relevant assets on a bare trust is alone sufficient to demonstrate that the coming into existence of the common law cause of action is not inconsistent with the continuing existence of a trust…

Conclusion

In my view, Gageler J holds that it is necessary for an application to be in relation to some specifically identifiable assets. This is more in line with Turner J in Ward and the judgements of Kiefel J and Gordon J. What his view adds as a unique gloss in Fischer is that the specific assets can be the totality of the trust fund, and that there is a calculable vested interest in those assets.

In my view, this seems to be quite reconcilable to White v Shortall which resolved the identification of trust assets for fungibles by giving a proportionate interest in the undivided whole:

On and from the making of the resolution, the Trustee continued to hold such trust assets as might from time to time comprise the Trust Funds subject to an immediate unconditional obligation on the part of the Trustee to account to Mr and Mrs Nemes.