Beck v Henley  NSWCA 201
Ami and Tami were the residuary beneficiaries of a trust created by their mother’s will. The two siblings were absolutely and indefeasibly entitled to the trust property.
The residuary estate included 2 class A shares and 1 class B share in a private company. The class A shares were the only voting shares, and only 4 class A shares in total had been issued by the company, so the 2 class A shares together effectively conferred 50% of the shareholder voting power.
Ami directed the trustee to transfer half of the shares to him, but Tami opposed the transfer. The trustee sought judicial advice pursuant to section 63 of the Trustee Act 1925 (NSW).
Tami argued that the distribution would cause prejudice to her because splitting the shares would affect the voting power in the circumstances of the case. However, the primary judge found no special circumstances prevented the rule in Saunders v Vautierfrom applying to this case. This rule gives absolutely entitled beneficiaries the power to demand a transfer of property to them. Consequently, at first instance the trustee was directed to transfer the shares as requested.
On appeal, the Court of Appeal affirmed the primary judge’s decision. The Court of Appeal held that shares are specifically severable without prejudice and directed the trustee to transfer half of the parcel of shares to Ami as requested.
Of note for future cases, the Court of Appeal agreed with earlier case law in finding that an unequal outcome of division would defeat the Saunders v Vautier rule, but a mere loss of control or value would not.