Saunders v Vautier [1841] EWHC J82 confirmed that, where all beneficiaries of a trust are adults and not under any disability, they may require the trustee to transfer the legal estate and bring the trust to an end. This principle, known as the rule in Saunders v Vautier, has been affirmed in later common law decisions.
Richard Wright established the trust in Saunders v Vautier for his great-nephew, Daniel Wright Vautier. Income was to be accumulated until Vautier reached 25, with maintenance payments permitted during his minority.
Upon attaining majority, Vautier applied for transfer of the trust property. The Master of the Rolls referred the matter to the Lord Chancellor to allow other residuary legatees to contest the prior maintenance order.
The Court held that Vautier was entitled to the trust property. The beneficiary’s entitlement took precedence over the settlor’s directions as to the trust’s duration.
Lord Cottenham LC held:
“I think that principle has been repeatedly acted upon; and where a legacy is directed to accumulate for a certain period, or where the payment is postponed, the legatee, if he has an absolute indefeasible interest in the legacy, is not bound to wait until the expiration of that period, but may require payment the moment he is competent to give a valid discharge.”
The Court confirmed that a beneficiary’s entitlement overrides the settlor’s directions concerning the trust’s duration.
The Court considered whether an earlier maintenance order, even if incorrect, prevented the Master of the Rolls from determining the application. It held that the prior order did not preclude consideration of the application.
The rule in Saunders v Vautier generally applies where a sole trustee holds property on a bare trust for a sole beneficiary, such as when a remainderman becomes absolutely entitled after the death of a tenant for life. The principle is not limited to these circumstances. Where there are multiple beneficiaries, all must be adults and not subject to disability.
Early termination may be sought to end an accumulation trust before the specified age or to distribute capital by agreement between a tenant for life and remainderman, particularly in response to changes in revenue law. The rule applies to both discretionary and fixed trusts.
If a trust deed provides for distribution at a specified age, but all beneficiaries attain adulthood and legal capacity before that time and unanimously agree, they may require the trustee to transfer the trust assets and terminate the trust under the rule in Saunders v Vautier.
Discretionary Trusts
Application of the rule to discretionary trusts requires caution. At the time of Saunders v Vautier, a complete list of beneficiaries was required for validity. Following McPhail v Doulton [1971] AC 424, this is no longer necessary. As a result, not all discretionary trusts can be terminated by beneficiaries under the rule. If all beneficiaries cannot be identified with certainty, the necessary adults of full capacity cannot jointly consent to termination, and the Saunders v Vautier principle cannot operate. Where there is uncertainty about the identity or number of beneficiaries in a discretionary trust, practical steps should be taken.
Beneficiaries who believe they may be entitled should seek advice to clarify their status. Trustees should consider seeking the direction of the Court. In such cases, trustees may apply for judicial advice or a determination of the class of beneficiaries. Beneficiaries may also make enquiries or bring proceedings to establish their rights. These steps ensure that any attempt to terminate the trust addresses whether all persons entitled have been identified, protecting both beneficiaries and trustees from later challenge.
Where all beneficiaries are sui juris and absolutely entitled, they may require the trustees to terminate the trust and distribute the trust property as agreed.
Saunders v Vautier in Australia
The rule in Saunders v Vautier was adopted in Australia by the High Court in 2005 in the case of CPT Custodian Pty Ltd v Commissioner of State Revenue ([2005] HCA 53) confirming that unit holders—even when holding all the units—are not the equitable “owners” of land held within such unit trusts for land tax assessments. When considering the phrase entitled to any land for any estate of freehold in possession in the Act’s definition of “owner,” this crucial statutory construction must not be overlooked while examining Saunders v Vautier.
The Court of Appeal considered the rule as overriding the Deed’s provisions on termination. Because at each relevant 31 December there was a potential for the holder of all issued units to end the trusts, the unit holders were deemed to have an estate of freehold in possession under the statutory definition.
Recognises an equitable principle
In Beck v Henley [2014] NSWCA 201, the NSW Court of Appeal explained that the so-called ” rule in Saunders v Vautier” is not, strictly speaking, a rule created by the decision itself. As confirmed by the High Court in CPT Custodian Pty Ltd v Commissioner of State Revenue (2005), the principle had existed in equity long before Saunders v Vautier was decided and was reflected in earlier authorities and legal texts. Rather than creating a new doctrine, the case recognised an established equitable principle.
The rule in Saunders v Vautier confers a power on beneficiaries, not a duty on trustees. Where all beneficiaries are adults with absolute, vested and indefeasible interests, they may require the trustee to transfer the trust assets, irrespective of the settlor’s or testator’s intention for the trust to continue. Exercise of this power terminates both the trust and the trustee’s office.
United States, Canada & New Zealand
In the United States, the rights of absolutely entitled beneficiaries generally prevail over the settlor’s wishes. However, courts may give weight to the settlor’s intentions regarding continued enjoyment of trust property. Restrictions in a trust instrument, such as directions about timing of sale or rights of first refusal, do not usually prevent adult beneficiaries from exercising the Saunders v Vautier power.
In Canada and New Zealand, the rule has also been adopted as part of the common law, allowing beneficiaries of full age and capacity to call for the trust property and terminate the trust once they are all absolutely entitled. Courts in these jurisdictions may apply the rule concerning local statutory requirements or policy considerations, but the core principle remains consistent with English law.
The Saunders v Vautier power is subject to several limitations, including:
- The trust property is indivisible or cannot be distributed without unfair prejudice to other beneficiaries.
- Not all beneficiaries are of full age and capacity, or some are subject to disability.
- There is a risk of prejudice to non-consenting beneficiaries if only some seek termination.
- The precise class of beneficiaries cannot be ascertained, or there is uncertainty regarding the beneficiaries entitled.
Trustees retain rights of indemnity, reimbursement and exoneration for properly incurred liabilities and must exercise these rights in accordance with fiduciary obligations. A trustee cannot refuse termination solely to preserve personal benefits such as remuneration or control. When beneficiaries request early termination of a trust under the rule in Saunders v Vautier, trustees have procedural duties to ensure all requirements are satisfied before proceeding. Including confirmation that all beneficiaries are adults, of full capacity, and absolutely entitled, and verifying their unanimous consent.
Uncertainty about the class of beneficiaries or their entitlement, or if the trustee is unsure about the propriety of acting on the beneficiaries’ request, the trustee is protected from potential liability by seeking directions from the Court. Judicial approval or guidance ensures the interests of all beneficiaries are properly addressed.
Limitations and Partial termination.
Partial termination is permitted only where practical and where remaining beneficiaries are not unfairly prejudiced. Relevant considerations include whether the trust property can be conveniently divided and whether division would reduce its value or adversely affect others. Courts are generally reluctant to allow partial termination where the property consists of indivisible assets such as land, artworks or livestock. Shares are considered divisible and can usually be transferred separately without affecting value.
Courts may refuse early termination under Saunders v Vautier where special circumstances exist, even if the trust property is divisible. Special circumstances are not exhaustively defined and depend on the facts of each case. Examples include
- ongoing litigation,
- unresolved tax liabilities,
- statutory compliance issues,
- adverse effects on third parties, or
- a clear intention that the trust continue for a particular purpose.
Special circumstances may also arise where
- a minor beneficiary is expected to reach majority soon, or
- where termination would disrupt pending asset sales or agreed distributions.
The concept extends to any factual matters affecting beneficiaries’ interests or trust administration.
In contested cases, the central issue is whether non consenting beneficiaries face prejudiced if some beneficiaries to terminate the trust. Assessment of potential prejudice is the primary consideration for trustees when responding to a Saunders v Vautier direction affecting only part of the trust property.
Earlier authorities on the Saunders v Vautier principle generally involved proceedings for final declarations of beneficiaries’ rights, rather than applications for judicial advice to trustees. A significant procedural distinction when considering the Court’s role and the appropriate approach to reviewing those decisions.
Howell v Kelly
In Howell v Kelly [2026] NSWSC 400, the Court considered claims by beneficiaries under the Will of Harry Edmund Hector Howell against Rosemary Edythe Kelly and Sunglade Pty Ltd. The dispute concerned financial and property arrangements during the final years of Harry’s life.
The plaintiffs advanced two principal claims.
- The first was for an account of money or equitable compensation against Rosemary (the Account Claim). Although initially pleaded on several alternative legal bases, the plaintiffs narrowed the claim during the hearing.
- The second was for a declaration that Sunglade Pty Ltd held a one-half beneficial interest in the Naremburn property on trust for Harry’s estate (the Trust Claim).
Account Claim
The plaintiffs alleged that during the four years Harry was in nursing care before his death, Rosemary withdrew over $1.28 million from joint bank accounts. The plaintiffs contend that these funds were beneficially owned by Harry, were withdrawn without his authority, were not applied for his benefit, exceeded any authority Rosemary had under Harry’s memorandum permitting reasonable living expenses, and breached her obligations as attorney under an enduring power of attorney.
The plaintiffs initially pleaded several causes of action, including breach of trust, fraudulent breach of trust, breach of fiduciary duty, and unconscionable conduct. During closing submissions, they abandoned the trust and fiduciary duty allegations. The plaintiffs then argued that Harry retained beneficial ownership of the joint account funds under a resulting trust, and that Rosemary acted unconscionably by taking advantage of Harry. At the same time, Harry was in a position of special disadvantage. The defendants accepted that this change in the plaintiffs’ legal case caused no prejudice.
Trust Claim
The plaintiffs also alleged that Harry contributed substantial funds towards redevelopment of the Naremburn property under a shared arrangement with Rosemary and Sunglade. That Rosemary caused Harry to make these contributions, Sunglade accepted and benefited from them, and that the parties did not intend for Rosemary or Sunglade to retain the full benefit of Harry’s contributions if the joint endeavour failed.
The plaintiffs submitted that Sunglade held a one-half interest in the property on constructive trust for Harry’s estate, and that it would be unconscionable for Sunglade to retain the full value of the property.
In final submissions, the plaintiffs reframed their case, contending that Harry’s beneficial ownership of the joint account funds gave rise to a common intention or joint endeavour constructive trust over the Naremburn property. In the alternative, if no constructive trust arose, they argued that Rosemary’s use of Harry’s funds conferred no benefit on him and constituted unconscionable conduct.
Defences
The defendants denied the plaintiffs’ allegations and initially relied on the equitable defence of laches, submitting that the plaintiffs delayed commencing proceedings after becoming aware of the relevant matters in 2017 and filing proceedings in 2021, which prejudiced the defence because Harry was no longer available to give evidence. The defendants abandoned the laches defence after the trial concluded.
Court’s Conclusions
The Court found that Harry’s estate was entitled to a one-half equitable interest in the Naremburn property under either a common intention constructive trust or a joint endeavour constructive trust. Enforcement of that interest was postponed to allow Rosemary to reside at the property for the remainder of her life or until the property was sold by agreement.
Alternatively, if the constructive trust did not bind Sunglade, the Court held that Rosemary would have been liable to pay equitable compensation to Harry’s estate of $1,002,110.35 plus interest.Further, if neither of those conclusions were correct, the Court would have found that Rosemary engaged in unconscionable conduct by transferring $1,002,110.35 from the parties’ joint Westpac accounts between April 2015 and April 2019, entitling Harry’s estate to equitable compensation with interest.
Subject to any contrary submissions, the Court determined that the defendants should pay the plaintiffs’ costs of the proceedings.
Howell v Kelly (No 2) [2026] NSWSC 753
Issues in Dispute
Following Howell v Kelly [2026] NSWSC 400 (the principal judgment), the parties submitted competing versions of the proposed short minutes of order.
Four issues required determination:
- the appropriate declarations and notations concerning the estate’s one-half equitable interest in the Naremburn property;
- whether Rosemary’s right to reside in the property should be conditional upon her paying rates and outgoings;
- whether the plaintiffs’ costs should be paid on an ordinary or indemnity basis; and
- whether the costs payable by Rosemary should be reduced because parts of the plaintiffs’ case were abandoned or reformulated.
In the principal judgment, the Court held that Harry’s estate was entitled to an equitable interest equal to one-half of the value of the Naremburn property. Recovery of that interest was postponed so that Rosemary could continue living there for life, or until the parties agreed to sell the property.
1. Appropriate Declarations or Notations
The plaintiffs sought additional notations that Harry’s estate had been fully administered and that the beneficiaries – Richard, Jeremy and Susan – had called for distribution of their interests. They also sought declarations that Sunglade held one-quarter of the property for Rosemary and one-quarter for Richard, Jeremy and Susan in accordance with Harry’s Will.
The plaintiffs argued that these orders would allow the beneficiaries to protect their interests by caveat and avoid the need to enforce their rights through Rosemary, or later through the executor of her estate. Relying on the principle in Saunders v Vautier, submitting that the beneficiaries were entitled to call for distribution and bring the testamentary trust to an end.
To successfully invoke the rule in Saunders v Vautier, it is essential that:
(1) the trust has been fully administered, so that nothing further remains except distribution;
(2) all beneficiaries are of full legal capacity (adults, not subject to disability);
(3) all beneficiaries are absolutely and indefeasibly entitled; and
(4) there is unanimous agreement among all beneficiaries to call for distribution or terminate the trust.
Rejecting Saunders v Vauntier
In rejecting the Saunders v Vautier submission on the basis that the requirements for early termination of the trust were not satisfied. The Court held that the beneficiaries could not call for distribution and the trust could not be brought to an end at that stage. The principal judgment had expressly postponed the right to recover the estate’s interest.
Howell v Kelly (No 2) [2026] NSWSC 753 was intended only to settle orders reflecting the principal judgment, not to determine new questions concerning the administration of the estate or termination of the trust. Those matters had not been pleaded, argued or determined, and the necessary evidence was not before the Court.
The estate could not be regarded as fully administered because it continued to hold an interest in the Naremburn property. The plaintiffs’ inability to lodge a caveat did not justify terminating the trust, and the overriding purpose in s 56 of the Civil Procedure Act 2005 did not confer any substantive right to do so.
Accordingly, the Court declined to make the additional notations and declarations sought by the plaintiffs. It made only a declaration reflecting the principal judgment: Sunglade held one-half of the value of the Naremburn property on trust for Rosemary in her capacity as executor of Harry’s estate.
2. Condition on Rosemary’s Right to Reside
The parties agreed that Rosemary should have exclusive possession of the Naremburn property for the remainder of her life, or until the property was sold by agreement. The plaintiffs sought to make that right conditional on Rosemary paying the rates and outgoings associated with the property.
The Court rejected the proposed condition. It had not been sought or argued at trial and did not form part of the principal judgment. Sunglade, as registered proprietor, was legally responsible for the rates and outgoings and would remain so.
The Court therefore declared Rosemary’s right to occupy the property without imposing the additional condition.
3. Costs and Indemnity Costs
The principal judgment stated that, subject to further submissions, the defendants should pay the plaintiffs’ costs. The remaining dispute concerned whether all costs should be awarded, whether they should be assessed on the ordinary or indemnity basis, and whether any reduction should be made.
Under rr 42.1 and 42.2 of the Uniform Civil Procedure Rules 2005, costs ordinarily follow the event and are assessed on the ordinary basis. The purpose of a costs order is primarily compensatory; it indemnifies the successful party for expenses incurred in litigation rather than punishing the unsuccessful party.
The Court may depart from the ordinary basis where there is a special or unusual feature, relevant misconduct, or an unreasonably rejected settlement offer.
Formal offers of compromise
A formal offer made under r 20.26 may attract the automatic consequences in r 42.14 where:
- the plaintiff makes a compliant offer;
- the defendant does not accept it; and
- the plaintiff ultimately obtains a result no less favourable than the offer.
In that situation, the plaintiff will ordinarily receive costs on the ordinary basis up to the relevant date and indemnity costs thereafter.
To be valid, the offer must
- clearly identify the claim and proposed orders,
- remain open for a specified period,
- state that it is made under the Rules, and
- exclude any amount for costs.
It must also be capable of acceptance so that judgment could be entered in accordance with its terms.
Calderbank offers
A Calderbank offer does not produce automatic costs consequences. It is one factor considered in the Court’s overall discretion.
Calderbank offers take their name from Calderbank v Calderbank [1975] All ER 333. They are generally made by letter marked “without prejudice except as to costs” and set out proposed terms for resolving the dispute.
Unlike a formal offer of compromise, a Calderbank offer gives the offeror greater flexibility and is not governed by prescribed procedural requirements. For example, the offer may include costs and may remain open for a relatively short period.
That flexibility, however, creates less certainty about the costs consequences of rejecting the offer. In particular, it may be difficult for the Court to determine whether the outcome obtained at judgment was more or less favourable than the terms offered. An offer that remains open for an unreasonably short period, without proper justification, is also unlikely to support an indemnity costs order.
The central issue is whether, in all the circumstances existing at the time, it was unreasonable for the recipient to reject or fail to accept the offer. The Court does not determine that question solely by comparing the offer with the eventual judgment.
In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298, the Court identified several relevant considerations:
- the stage of the proceedings when the offer was made;
- the period allowed for consideration;
- the degree of compromise contained in the offer;
- the recipient’s prospects of success at that time;
- the clarity of the offer’s terms; and
- whether the offer warned that indemnity costs would be sought if it was rejected.
Accordingly, an effective Calderbank offer clearly states the proposed settlement terms, explain why the offer is reasonable by reference to the evidence and applicable law, and allows the recipient sufficient time to consider it.
A Calderbank offer also states that it is made in accordance with the principles in Calderbank, warning that, if it is not accepted and the offeror later achieves a more favourable result, the letter will be relied upon in support of an application for indemnity costs.
To justify indemnity costs, the offer represents a genuine compromise, and it must have been unreasonable for the recipient not to accept it. The party seeking indemnity costs bears the burden of establishing unreasonableness.
The assessment is made prospectively, based on the circumstances existing when the offer was made, rather than with hindsight following judgment.
Relevant considerations include:
- the stage of the proceedings;
- the time allowed to consider the offer;
the degree of compromise;
- the offeree’s prospects of success at the time;
the clarity of the offer;
- whether indemnity costs were expressly foreshadowed;
- whether all relevant evidence had been served;
- whether the scope of the dispute remained uncertain;
- whether the offeror’s case later changed;
- whether the offer contained conditions; and
- the complexity of the proceedings.
An unreasonable rejection is made on clear grounds. The fact that the offeree ultimately achieved a worse result than the offer does not, by itself, justify indemnity costs.
4. Costs Discount
The defendants argued that Rosemary should not be required to pay all of the plaintiffs’ costs because several aspects of their pleaded case were later abandoned or reformulated. They submitted that Rosemary should pay 90% of the plaintiffs’ ordinary costs, or another proportion the Court considers appropriate.
Civil Procedure Act
Section 98 of the Civil Procedure Act 2005 gives the Court a broad discretion to determine who must pay costs, the extent of that liability, and whether costs should be assessed on an ordinary or indemnity basis. The Court may award costs for particular stages of proceedings, specify a proportion of assessed costs, or order payment of a fixed amount. Although this discretion is broad, it must be exercised judicially and consistently with the compensatory, rather than punitive, purpose of costs orders.
During the trial, the plaintiffs changed the basis of their case concerning the joint bank accounts. They no longer alleged that Rosemary held the funds on bare trust, fraudulently breached trust obligations, converted the money to her own use, or breached her fiduciary duties as Harry’s attorney. Instead, they argued that Harry held the beneficial interest in the funds, that his contributions to the Naremburn property gave rise to a constructive trust, and, alternatively, that Rosemary had engaged in unconscionable conduct.
Although relying on these changes, the defendants had expressly accepted during the hearing that the reformulation of the plaintiffs’ case caused them no prejudice. They also did not identify any prejudice arising from the abandonment of the trust, conversion and fiduciary-duty claims.
The Court therefore found no basis for departing from the usual rule that costs follow the event. The plaintiffs had been entirely successful in obtaining the substantive relief awarded in the principal judgment, and the abandoned or varied claims had not caused the defendants any demonstrated additional expense or procedural disadvantage.
Accordingly, the Court declined to apply a percentage reduction to the plaintiffs’ costs. The defendants were ordered to pay the plaintiffs’ costs of the proceedings in full on the ordinary basis.
Final Order
The Court ordered that:
- Sunglade holds one-half of the value of the Naremburn property on trust for Rosemary in her capacity as executor of Harry’s estate.
- Despite that equitable interest, Rosemary is entitled to exclusive possession of the property for the remainder of her life and may permit other persons to live there during her lifetime.
- No steps may be taken to recover the estate’s equitable interest until the earlier of:
- Rosemary’s death; or
- an agreement between Sunglade and Rosemary, as executor of Harry’s estate, that the property be sold.
- Rosemary and Sunglade must pay the plaintiffs’ costs of the proceedings on the ordinary basis, as agreed or assessed.
The $50,000 paid into Court by the plaintiffs as security for the defendants’ costs must be released to the trust account of the plaintiffs’ solicitors, or as otherwise directed by them.