Blenkinsop v Herbert - [2017] WASCA 87

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BLENKINSOP -v- HERBERT [2017] WASCA 87

CORAM: MURPHY JA
MITCHELL JA
BEECH J

HEARD: 6 FEBRUARY 2017

DELIVERED : 5 MAY 2017

FILE NO/S: CACV 59 of 2016

BETWEEN: JUDITH ANNE BLENKINSOP
Appellant
AND
JEFFREY LAURENCE HERBERT
First Respondent
SCOTT FREDERICK BLENKINSOP
Second Respondent
ROSS ALEXANDER BLENKINSOP
Third Respondent
TRACEY ANN JAKOVICH
Fourth Respondent
KIM ROSINA HOLLAND
Fifth Respondent
CHRISTINE MARION THURTELL
Sixth Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :ALLANSON J
File No  :CIV 2074 of 2013

Catchwords:

Equity and trusts - Guardian or protector - Discretionary powers of trustee of a discretionary trust subject to requirement of consent of guardian - Nature of guardian's powers - Whether guardian's powers are fiduciary - Court's power to remove the guardian - Whether guardian should be removed

Legislation:

Nil

Result:

Appeal dismissed

Category: A

Representation:

Counsel:

Appellant:     Mr M D Cuerden SC & Mr C R Bailey
First Respondent           :     No appearance
Second Respondent      :     Mr W C J Zappia
Third Respondent          :     In person
Fourth Respondent        :     No appearance
Fifth Respondent           :     No appearance
Sixth Respondent          :     No appearance

Solicitors:

Appellant:     Williams & Hughes
First Respondent           :     No appearance
Second Respondent      :     Scott Blenkinsop Legal
Third Respondent          :     In person
Fourth Respondent        :     No appearance
Fifth Respondent           :     No appearance
Sixth Respondent          :     No appearance

Case(s) referred to in judgment(s):

Berger v Lysteron Pty Ltd [2012] VSC 95
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Blenkinsop v Blenkinsop Nominees Pty Ltd [2015] WASC 463
Blenkinsop v Blenkinsop Nominees Pty Ltd [No 2] [2016] WASC 61
Bridge Trustees Ltd v Noel Penny (Tribunes) Ltd [2008] EWHC 2054 (ch)
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Commissioner of Stamp Duties (NSW) v Way [1951] UKPC 2; (1951) 83 CLR 570
CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98
Elovalis v Elovalis [2008] WASCA 141
Gartside v Inland Revenue Commission [1968] AC 553
Gonzales v Claridades [2003] NSWCA 227; (2003) 58 NSWLR 20
Great Western Railway Co v Bater [1922] 2 AC 1
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589
In re Beatty [1990] 1 WLR 1503
In re Coomber [1911] 1 Ch 723
In re Hayes Settlement Trusts [1982] 1 WLR 202
In re Penrose [1933] 1 Ch 793
In re Phillips [1931] 1 Ch 347
In re Triffitt's Settlement [1958] 1 Ch 852
In the Matter of the Bird Charitable Trust and Bird Purpose Trust [2008] JRC 013
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
Johnson v Unisys Ltd [2001] UKHL13; [2003] 1AC 58
Letterstedt v Broers (1884) 9 App Cas 371
LGSS Pty Ltd v Egan [2002] NSWSC 1171
Lutheran Church of Australia v Farmer's Cooperative Executors & Trustees Ltd [1970] HCA 12; (1970) 121 CLR 628
McLean v Burns Philp Trustee (1985) 2 NSWLR 623
McPhail v Doulton [1971] AC 424
Mercanti v Mercanti [2016] WASCA 206
Mettoy Pension Trustees v Evans [1990] 1 WLR 1587
Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572
Morice v Bishop of Durham (1805) 10 Ves Jun 522
Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425
Palmer v Ayres [2017] HCA 5
Peters' American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457
Pilmer v The Dulce Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Pope v DRP Nominees Pty Ltd [1999] SASC 337; (1999) 74 SASR 78
Qantas Airways Ltd v Christie [1998] HCA 18; (1998) 193 CLR 280
Rawcliffe v Steele [1995] Manx LR 426 (Isle of Man)
Re A and B Trusts [2012] JRC 169A
Re Burton [1994] FCA 388; (1994) 126 ALR 557
Re Callen (1918) 18 SR (NSW) 218
Re Dilke [1921] 1 Ch 34
Re Dion Investments Pty Ltd [2014] NSWCA 367; (2014) 87 NSWLR 753
Re Freiburg Trust [2004] JRC 056
Re Hart's Will Trusts [1943] 2 Ch D 557
Re Hazeldene's Trust [1908] 1 Ch 34
Re M Settlement [2009] JRC 140
Re Papadimitriou [2004] WTLR 1141
Re The Circle Trust; HSBC International Trustee Ltd v Wong [2006] CILR 323
Re v R Family Trust [2009] JRC 109
Re Z Trust [1997] CILR 248
Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation [1993] HCA 1; (1993) 178 CLR 145
Rinehart v Welker [2012] NSWCA 95
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45
Scaffidi v Montevento Holdings Ltd [2011] WASCA 146
Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709
Simonsen v Legge [2010] WASCA 5
Sykes v Cleary [1992] HCA 60; (1992) 176 CLR 77
Templeton v Leviathan Pty Ltd [1921] HCA 55; (1921) 30 CLR 34
The Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd [1922] HCA 62; (1922) 31 CLR 421
The National Trustees, Executors and Agency Co v Boyd [1926] HCA 44; (1926) 39 CLR 72
Turner v Turner [1984] Ch 100
Vatcher v Paull [1915] AC 372
Vestey's (Lord) Executors v Inland Revenue Commissioners [1949] 1 All ER 1108
Way v Commissioner of Stamp Duties (NSW) [1949] HCA 37; (1949) 79 CLR 477
Whishaw v Stephens [1970] AC 508
REASONS OF THE COURT:

Introduction

This appeal concerns the proper construction and administration of two discretionary family trusts: The Blenkinsop Family Trust (Trust No 1) and the Blenkinsop Family Trust No 2 (Trust No 2). Regrettably, the trusts have become a subject of deep‑seated division among members of a family. The appellant appeals against the primary judge's rejection of her application to remove the guardians of each trust.
For the reasons that follow, we would dismiss the appeal. In essence, we do not accept the appellant's primary contention that the primary judge erred in failing to find that the powers of the guardians are fiduciary.

The trusts

As all of the relevant individuals have or had the surname Blenkinsop, it will be convenient to refer to parties by their first names. We intend no disrespect in doing so. William Frederick Blenkinsop is referred to in the evidence as 'Fred', and we will do so in these reasons.
The two trusts were established during the lifetime of the appellant Judith's late husband Fred, who died in 2004. Fred was a farmer who owned various properties and also engaged in some other businesses. Judith and Fred had five children, Scott, Ross, Tracey, Kim and Christine, who are, respectively, the second to sixth respondents.

Trust No 1

Trust No 1 was created by deed dated 1 July 1973. The initial trustees were Fred and Judith.
By supplemental deed of settlement dated 25 September 1996 the original trust deed was varied by substituting a trust deed annexed to the supplemental deed of settlement as the trust deed for Trust No 1.
The supplemental deed of settlement confirmed that Blenkinsop Nominees Pty Ltd was appointed the sole trustee (the Trustee) of the trust with effect from 16 April 1981. The deed creates two classes of objects, referred to Primary Beneficiaries and General Beneficiaries. The Primary Beneficiaries are the five children of Fred and Judith, their children and remoter issue, and their respective husbands, wives, widowers and widows for the time being.[1] Judith is a General Beneficiary, as are the Primary Beneficiaries. The 'Vesting' day is 1 August 2023; alternatively, such earlier day as the Trustees may appoint with the consent of the Guardian if there is at the time of such appointment a Guardian, and if there is then no Guardian, without any consent; alternatively such later date as the Trustee may appoint but being within the limitation period provided by law.
[1] In the Deed, Fred is referred to as 'Frederick William' rather than as 'William Frederick'. Nothing turns on the evidently inadvertent reversal of Fred's names.
Fred and Judith were the two directors of Blenkinsop Nominees, until Fred's death in 2004.
Many of the powers conferred on the Trustee under the supplemental deed were to be exercised only with the consent of the person or persons defined as the Guardian. The schedule provided for the role of Guardian in the following terms:
Frederick William Blenkinsop during his life or any person who he may by deed or will appoint and failing appointment then Judith Anne Blenkinsop during her life or any person who she may by deed or will appoint and failing appointment then the Primary Beneficiaries jointly during their lifetimes and thereafter the survivors thereof during his or her lifetimes and thereafter any person whom he or she or they unanimously may appoint and in the absence of unanimity no such appointment shall be made.
The same provision was made for the position of Appointor.
Trust No 1 creates, broadly speaking, a discretionary trust in respect of both income and capital with a power of accumulation of income. Subject to the need for the consent of the Guardian, the discretions conferred on the Trustee are extremely broad. Clause 2(e) provides that the expression 'as the Trustee thinks fit' gives the Trustee the widest and most absolute and unexaminable discretion including the power to prefer any one or more Beneficiaries to the total exclusion of any other or others of them. However, the breadth of that discretion is, in certain respects, qualified by the need for the consent of the Guardian for the effective exercise of certain powers.
A number of provisions conferring powers on the Trustee state that if there is a Guardian then in existence, the consent of the Guardian is required. These include the following powers of the Trustee:
(1)To bring forward the vesting day of the trust (cl 1(k)(ii)).
(2)To change the proper law of the deed (cl 3(b)).
(3)To pay, apply or set aside the net income of the Trust Fund (as identified in the Deed) for an accounting period to or for the benefit of one or more General Beneficiaries (cl 5(a)).
(4)The power of advancement enabling the capital payment or loan of capital of the Trust Fund to General Beneficiaries (cl 8).
(5)To pay or transfer the whole or any part of the Trust Fund to the trustee of any settlement under which all or any of the Primary Beneficiaries are beneficiaries (cl 14).
(6)To, by deed, revoke, alter or amend the trusts or confer any new additional powers on the Trustee, or vary, delete or amend any of the Trustee's power (cl 17).
Two of the Trustee's other powers require the consent of the Guardian, but these powers are qualified by the condition that, if there is no Guardian in existence, the Trustee shall have no such power:
(1)The power of appointment with regard to the trusts of capital (cl 6(a)).
(2)The power to add to, or exclude persons from, General Beneficiaries or Primary Beneficiaries (cl 9).
Clause 5(b) provides that the Trustee shall hold so much of the income of the Trust Fund as the Trustee shall not apply, pay or set aside pursuant to the power in cl 5(a) in trust for the persons successively described in pars (a), (b) and (c) of cl 6 as though each date of the accrual of such income were the Vesting Date and such persons shall be deemed to be presently entitled thereto.
Clause 6 deals with the Trust Fund as from the Vesting Date. Clause 6(a) and (b) provides that as from the Vesting Date the Trustee shall stand possessed of the Trust Fund and its income as from the Vesting Date:
(a)In trust for such of the General Beneficiaries for such interests and in such proportions and for one to the exclusion of the other or others as the Trustee may (with the consent in writing of the Guardian whilst there is a Guardian in existence) by instrument in writing revocable or irrevocable before the Vesting Day appoint PROVIDED ALWAYS that the Trustee shall not without such consent revoke any revocable appointment AND PROVIDED FURTHER that if there is no Guardian in existence the Trustee shall have no such power of appointment;
(b)In default of appointment pursuant to (a), in trust for such of the Primary Beneficiaries as shall be living at the Vesting Day and if more than one as tenants in common in equal shares absolutely PROVIDED ALWAYS that if any Primary Beneficiary shall not be then in existence on the Vesting Day but shall leave him surviving a child or children or widow or widower who shall be then in existence then such child or children and widow or widower shall take as tenants in common in equal shares the share which such Primary Beneficiary would have received had he or she been in existence on the Vesting Day and subject thereto. (emphasis added)
Clause 6 deals with the circumstance where, for any reason, some or all of the Trust Fund has not been disposed of in accordance with the trusts under the instrument. It provides:
(c)If for any reason whatsoever any part or parts of the Trust Fund shall not be effectively or validly disposed of by the trusts declared by this Deed or by any Deed from time to time varying altering or adding to such trusts the Trustee shall stand possessed of such part or parts of the Trust Fund as aforesaid for the persons (but excluding all Excepted Persons) who would have comprised the statutory next of kin of the Guardian firstly named in the Schedule [ie, Fred] on the hypothesis that such Guardian (whether or not he is in fact alive on the Vesting Day) had died on the day immediately preceding the Vesting Day domiciled in the place of residence of the Trustee hereinbefore named (whether or not such Trustee is in office on such day) and if more than one then as tenants in common in equal shares absolutely any resulting trust to the Settlor being hereby expressly negatived. (emphasis added)
There are a number of provisions protecting the Trustee from liability in the exercise of its powers. Clause 12 contains a number of provisions which attenuate or displace in a number respects the conflicts rule to which the Trustee would otherwise be subject. Clause 13(d) provides that the Trustee shall 'not be personally liable for the consequence of any error or forgetfulness whether of law or in fact on the part of any of the Trustees or their legal or other advisors or generally for any breach of duty or trust whatsoever unless it shall be proved to have been committed, made or omitted in personal conscious fraudulent bad faith by the Trustee …'.
Clause 13(g) provides that subject to any express provision to the contrary, 'every discretion vested in the Trustee shall be absolute and uncontrolled and every power vested in it shall be exercisable at its absolute and uncontrolled discretion and the Trustee shall have the like discretion in deciding whether or not to exercise any such power. No Trustee shall be responsible for any loss or damage occasioned by the exercise of any discretion or power … or by failure to exercise any such discretion or power or for any loss or damage accruing as a result of concurring or refusing or failing to concur in any exercise of any power or discretion'.
Clause 13(i) provides that any Trustee who is a solicitor or accountant or any firm of which he may be a member shall be entitled to make all usual and proper charges for, in effect, work done in connection with the administration of the trust. Clause 13(j) provides that any Trustee may from time to time charge and retain out of the Trust Fund 'such Trustee's commission as it may think fit', but not exceeding 5% of the income of the trust in any accounting period.
There are no equivalent provisions in favour of the Guardian, save in one respect in cl 17. Clause 17 provides:
The Trustee may from time to time and at any time or times with the consent in writing of the Guardian (which consent he may in his absolute discretion give or withhold without thereby incurring any liability) by deed wholly or in part revoke, alter or amend the trusts hereby declared as to the whole or any part or parts of the Trust Fund or confer any new additional powers on the Trustees or vary, delete or amend any of such powers PROVIDED THAT the Trustee shall not revoke, alter or amend the whole of such trusts as to the whole or any part of the Trust Fund unless it shall by the same deed by which the same is effected declare other Trusts of the Trust Fund or the part thereof to which any such revocation, alteration or amendment extends in favour of the Primary or General deed beneficiaries or some of them with or without a like power of revocation and re‑settlement PROVIDED THAT none of the Excepted Persons shall by reason of any such alteration … acquire any interest in the Trust Fund … PROVIDED FURTHER that nothing in this Clause … shall permit any trust [or] trusts to continue beyond the limitation period provided by law. (emphasis added)

Trust No 2

Trust No 2 is created by deed of settlement dated 25 October 1993. Silverglade Pty Ltd was appointed to the office of the trustee, the holder of which is referred to as the Trustee. The Vesting day is 30 June 2072, subject to variation as provided for in Trust No 1. The Primary Beneficiaries are the children of Fred and Judith. General Beneficiaries include the Primary Beneficiaries, Fred and Judith, and a wide range of other relatives of Fred or Judith. General Beneficiaries also included a range of other corporate, charitable and educational entities.
Fred and Judith were the directors of Silverglade from October 1993 until Fred's death in 2004.
The provisions relating to distributions of income and capital, and other provisions requiring the consent of the Guardian are substantially identical to those in the Trust No 1 deed. The provision as to the identity of the Guardian is in the following terms:
(a) William Frederick Blenkinsop and Judith Anne Blenkinsop jointly during their lifetimes; and
(b) on and from the death of the survivor of William Frederick Blenkinsop and Judith Anne Blenkinsop such person or persons as the survivor may by deed or will nominate; or
(c) on and from the death of the survivor of William Frederick Blenkinsop and Judith Anne Blenkinsop if no nomination is made by deed or will by the survivor or if the nominee has died or ceased to be in existence or is unwilling to act as Guardian of this trust, then the personal representative of the survivor.
The provision in the schedule as to the office of Appointor was in identical terms.
Under this deed the Trustee also has the benefit of provisions similar to those referred to in [17] ‑ [19] above. Again, there are no equivalent provisions in in favour of the Guardian, save for cl 17.

The deeds of variation

On 1 August 2011, the Trustee of each trust executed a deed to vary the schedule to the respective trust deeds as follows:
The below mentioned variations are made pursuant to the powers given to the Trustee by the Trust Deed. The wording in the schedule to the Trust Deed under the heading GUARDIAN and APPOINTOR is replaced by the following wording in this Deed of Variation and any part of the Trust Deed that conflicts with the following wording in this Deed of Variation is to be read down in favour of the wording in this Deed of Variation.
APPOINTOR and GUARDIAN shall mean:
JUDITH ANN BLENKINSOP and her children, KIM ROSINA HOLLAND, SCOTT FREDERICK BLENKINSOP, TRACEY ANN JAKOVICH, CHRISTINE MARION BLENKINSOP (also known as CHRISTINE MARION THURTELL) and ROSS ALEXANDER BLENKINSOP ('the children of JUDITH ANN BLENKINSOP') acting JOINTLY AND UNANIMOUSLY and in the event that any or all of the children of JUDITH ANN BLENKINSOP are unable to act as appointor and guardian then their spouse shall take their place provided that their spouse shall have both the legal capacity and mental capacity to act as appointor and guardian.
Judith gave consent, as Guardian and Appointor, to these variations, by signing each deed.[2]
[2] Guardian reasons [22].

Both before the primary judge and on appeal there was no challenge to the validity of the variation, although before the primary judge the applicants asserted that there was an issue as to validity that did not arise for resolution but which provided context.

The proceedings before the primary judge: an overview

In July 2013, Judith, with the support of Christine, commenced proceedings under s 77 of the Trustees Act for orders replacing the trustees of the trust, and for the removal of the Guardian. Blenkinsop Nominees Pty Ltd was Trustee of Trust No 1, Silverglade was Trustee of Trust No 2, and Judith and the five children were directors of each of the trustee companies.
The proceedings were heard over three days in November 2013. The evidence relating to the replacement of the Trustees, which was ultimately unopposed, was completed in that period. However, further hearing days were required to complete the evidence on the question of whether the Guardian of each trust should be removed. The primary judge determined that it was appropriate to deal first with the application to appoint a replacement trustee to each trust.
In the circumstances, and with the consent of Judith and the five children, the primary judge determined the question of whether the trustees of the trusts should be replaced, delivering reasons and making orders to that effect in December 2015.[3] The primary judge ordered that the trustees of the two trusts be removed and replaced by an independent trustee.
[3] Blenkinsop v Blenkinsop Nominees Pty Ltd [2015] WASC 463 (Trustee reasons).
Following two further days of hearing in December 2015, the primary judge delivered reasons for decision dismissing the application for the removal of the Guardian.[4] It is from that decision that Judith appeals.
[4] Blenkinsop v Blenkinsop Nominees Pty Ltd [No 2] [2016] WASC 61 (Guardian reasons).

Events from 2009

The following outline is taken from the two sets of reasons delivered by the primary judge. There is no challenge to any of his Honour's factual findings.
Following Fred's death in 2004, Judith became the Guardian and the Appointor of each trust.
For some years following Fred's death Judith and Christine were the directors of the two trustee companies. During this period the trusts were essentially operated for the benefit of Judith, with little attention being given to distinguishing between trust and personal assets.[5] In or about 2009, the family began a process designed to achieve equality between the family members in both the governance of the trusts and the entitlement to assets.
[5] Trustee reasons [39].
The intended arrangement was to be achieved by a series of steps to ensure Judith and the children had equal shareholding in the trust companies, were the directors of the trust companies, and were to be jointly Guardian and Appointor.[6] The intention was that the trust deeds were to be amended by deeds of variation. Following the issue of shares to the children the shareholders would execute a shareholders agreement to give effect to the aims of the arrangement, including a trust distribution policy.[7]
[6] Trustee reasons [42].
[7] Trustee reasons [43].
In early 2009, those of the children who had not previously been directors of the trust companies were appointed as directors.[8] At a meeting on 14 March 2009 the board resolved to issue two shares to each of the children. That decision was not implemented until August 2011.[9]
[8] Trustee reasons [48].
[9] Trustee reasons [49], [51].
In August 2011, the deed of variation for each trust was executed by Scott and Ross as directors of each company, and signed by Judith as Guardian and Appointor. The primary judge noted that there was factual controversy about the circumstances in which Judith signed those documents and the validity of the variations, but it was not necessary to resolve those questions in the Trustee reasons.
On 5 March 2012 the boards of both trustee companies resolved to execute the proposed shareholders agreement. However that was never done.[10]
[10] Trustee reasons [52].
From 2012, there were significant personal conflicts between various members of the family, particularly between Scott and Ross. It is not necessary to recount the primary judge's outline of various aspects of that disputation.[11]
[11] Trustee reasons [52] ‑ [78].
At a directors' meeting on 28 June 2013 resolutions were passed, over the dissent of Christine and Judith, that the income of the trust be distributed solely to Kim, and that Christine be removed as a signatory to the trust accounts of any undistributed income and capital of the trusts.[12] The following day the resolutions were confirmed by a majority of directors, with only Judith and Christine opposing them.[13] However, the resolutions could not be given effect because under the terms of each trust deed a resolution to distribute the income of the trust required the consent of the Guardian.[14]
[12] Trustee reasons [78].
[13] Trustee reasons [78] ‑ [79].
[14] Trustee reasons [80].
In July 2013, Judith commenced the primary proceedings. Christine supported Judith's application.
On 10 September 2013, the parties signed a deed of settlement by which they agreed to arrange measures designed to enable the trusts to continue to function, at least in the short term, with the then trustees. Terms of the settlement included that the parties agree that each of them is a Guardian and an Appointor of each trust and will at all times act jointly and unanimously.

The primary judge's reasons

The primary judge identified, in the Guardian reasons, that he was dealing with a limited issue, namely whether the court could and should remove the six persons who occupied the office of Guardian of each trust. (We will refer to those six persons as the guardians.) The primary judge recorded that the application did not question the validity of the guardians' appointments, or call for any determination of whether the powers of the Guardian are subject to obligations to act within the scope of the power and not act in fraud in the power. Nor did the application invite attention to whether any particular conduct of the guardians might be challenged on any such basis.[15]
[15] Guardian reasons [4].
The judge summarised the factors relied on by the applicants as follows:
1.The relationships within the Blenkinsop family have broken down to the extent that they cannot act jointly. This led the court to remove the trustee companies.
2.There is a position of conflict by reason of all guardians also being beneficiaries. The applicants rely particularly on the fact that, for Trust No 1, the original guardian (Fred) was not a beneficiary and such a conflict was not contemplated by the trust deed.
3.The number of guardians, with the requirement that they act jointly and unanimously, is impractical.
4.The guardians have demonstrated that they are unable to agree on the proper administration of the trusts and act unanimously.
5.Distributions by the trustee companies have been improperly vetoed in the past.
6.Because of the requirement of unanimity, the wrongdoing of one guardian infects all.
7.Those parties who are guardians have acted in a manner which gives rise to real concern about their fitness to remain 'in another fiduciary or quasi-fiduciary role'. In particular, they may seek to use their powers for their own self-interest. The applicants particularly attack conduct of the third defendant.[16]
[16] Guardian reasons [25].
The primary judge recorded that there did not appear to be any Australian case where the court had removed a person appointed to exercise powers under a trust deed other than the trustee. His Honour referred to a series of decisions of courts of the Isle of Man, Jersey and the Channel Islands.[17]
[17] Re The Circle Trust; HSBC International Trustee Ltd v Wong [2006] CILR 323; Re Freiburg Trust [2004] JRC 056; Re Papadimitriou [2004] WTLR 1141; Rawcliffe v Steele [1995] Manx LR 426 (Isle of Man); Re v R Family Trust [2009] JRC 109 (Jersey); Re A and B Trusts [2012] JRC 169A (Jersey).
The judge summarised the effect of the decisions as being based on the principle that where a person holds office and exercises powers under a trust that are of a fiduciary nature, the court may remove the person from office on similar principles to those applicable to removal of a trustee. The decisive issue is whether the protector owed fiduciary duties to the beneficiaries as a whole.[18] His Honour also referred to the decisions in Bridge Trustees Ltd v Noel Penny (Turbines) Ltd;[19] LGSS Pty Ltd v Egan[20] and Berger v Lysteron Pty Ltd.[21]
[18] Guardian reasons [37].
[19] Bridge Trustees Ltd v Noel Penny (Tribunes) Ltd [2008] EWHC 2054 (Ch).
[20] LGSS Pty Ltd v Egan [2002] NSWSC 1171 [108] ‑ [113].
[21] Berger v Lysteron Pty Ltd [2012] VSC 95 [67] ‑ [85].
The primary judge concluded that the present case turned on the proper construction of the trust deed. He identified two critical questions in the resolution of the application to remove the guardians:
(1)did the settlor objectively intend the powers of the Guardian to be fiduciary in the sense that they must be exercised for the benefit of the beneficiaries; and
(2)did the settlor intend that the trust might operate without a Guardian, having regard to the identity of the Guardians and the obligation that they act jointly and unanimously.[22]
[22] Guardian reasons [46].
His Honour proceeded on the assumption that the court had power to remove the Guardian exercising fiduciary powers pursuant to a trust deed, saying that 'the circumstances in which [any such power] should be exercised have not arisen'.[23]
[23] Guardian reasons [47].
The primary judge dealt with the question of whether the Guardian was intended to be a fiduciary in respect of the powers conferred on the Guardian.[24] His Honour accepted the applicants' submission that the question of interpretation must be decided in the light of the circumstances existing when the power was conferred. He referred to the applicants' submission that the court must consider the proper construction of the deed having regard to the position when Fred was Guardian of Trust No 1 and Fred and Judith of Trust No 2. However, the primary judge observed that the present guardians were not appointed by Fred or Judith, but rather were directly appointed, and their powers conferred by amendment to the trusts. His Honour found that the circumstances altered fundamentally when the deeds were varied, observing that while he had regard to the deeds prior to variation, when considering the circumstances at the time the power was conferred on the present Guardians the relevant time is the time of the deeds of variation.[25]
[24] Guardian reasons [48] ‑ [60].
[25] Guardian reasons [49].
His Honour found that the following five matters supported the conclusion that the trust deeds as varied did not reveal an objective intention that the individual Guardians could exercise their powers only in the interests of the beneficiaries and not in their own interests:
(1)The powers are conferred by deed of trust and for the execution of the trusts.
(2)The Guardian's powers are not conferred on the trustees. The Guardian's role is supervisory. The Guardian has no power to initiate anything but only to grant or withhold consent where the Trustee would otherwise have an absolute unexaminable exercise of discretion.
(3)With the exception of the power to change the proper law of the trust, the powers conferred on the Trustee that require consent of the Guardian, broadly speaking, are powers under which the trustee may prefer one or more of the beneficiaries to the exclusion of others.
(4)The guardians are all beneficiaries.
(5)Any decision of the guardians to grant or withhold consent to a particular action of the trustee will affect one or more of the guardians in their capacity as beneficiaries. The intention of the deeds as varied is that a preference for one or more of the beneficiaries can only be with the consent of them all.[26]
[26] Guardian reasons [51] ‑ [55].
His Honour found that the intention of the deed of trust as varied, in conferring the power of guardians upon beneficiaries, is to allow each of them to have a right to consent or withhold consent to decisions of the trustee that might benefit only one or more of them. None of them was obliged to disregard their own interest as a beneficiary under the trust.[27]
[27] Guardian reasons [56].
The primary judge recognised that, in so concluding, he was departing from the position adopted by all of the parties in the proceedings before him.[28] The third defendant, Scott, had characterised the Guardian's power to give or withhold consent as a power to be exercised in favour of a class of objects including the holder of the power, accepting that the role of Guardian was fiduciary but contending the obligations of the fiduciary were limited. The judge observed that a concession by one party 'cannot confer power the court does not have'.[29]
[28] Guardian reasons [57] ‑ [60].
[29] Guardian reasons [60].
The judge then turned to the second major issue he had identified. He found that to remove the Guardians, so that there was no Guardian, would be to effect a substantial amendment of the trusts constituted under the trust deed. His Honour found that the intention of the trust deed is to have the Trustee's discretion to prefer beneficiaries be subject to the requirement of joint and unanimous consent.[30]
[30] Guardian reasons [62].
In conclusion, the primary judge referred to and adopted the findings made in the Trustee reasons as to the dysfunction in the relationships between the family members. His Honour observed that the number of Guardians and the requirements that they act jointly and unanimously may be impracticable, as was indicated by their previous inability to act unanimously. Nevertheless, his Honour found that to remove the Guardians on that ground would be to disregard the intention of the deeds, the intention being to fetter the discretion of the Trustee in this way.[31]
[31] Guardian reasons [65].
His Honour recognised that it was possible that the same problems that led to the removal of the trustees may afflict the arrangements then in place. Self‑interest of one or more of the Guardians may hinder the Trustee in administering the trusts, at considerable cost to the estate and, ultimately, to the detriment of all beneficiaries. However, his Honour found that, for the reasons he had given, that was how the trust was intended to operate. The grant of the remedy sought would be a substantial departure from the terms of the trust, and the primary judge was 'not satisfied that it can be done'.[32]
[32] Guardian reasons [67].

Grounds of appeal

Judith, the appellant, relies on two grounds of appeal.
First, she contends that the primary judge denied her procedural fairness in departing from the agreed position of the parties who took an active part in the hearing that the court had power to remove the Guardians, without first informing the parties and giving them an opportunity to be heard.
Secondly, she contends that the primary judge erred in law in concluding that the court did not have power to remove any of the Guardians.
Counsel for the appellant accepts that success on ground 1 does not lead to success on the appeal; the appeal turns on ground 2.[33] The parties' oral submissions concentrated on ground 2. We will do the same.
[33] Appeal ts 4 - 5.

Extension of time

The appellant filed the appeal almost three months outside the appeal period. Consequently, she requires an extension of time to appeal.
The power to grant an extension of time to appeal is a broad one to be exercised in the interests of justice having regard to all the circumstances of the case. The principles are well known and are stated in Simonsen v Legge.[34] Major factors include the length of the delay, the reasons for the delay, the prospects of success on the appeal, and the extent of any prejudice to the respondent.
[34] Simonsen v Legge [2010] WASCA 238 [8].
As we have said, the delay was a little under three months. The explanation for the delay is explained in Judith's affidavit.[35] In essence, although she wished to appeal the primary decision, she did not have the financial capacity to do so until she settled a claim against professional advisers who had acted for her previously. No respondent asserts prejudice as a result of the delay.
[35] Affidavit of Judith Anne Blenkinsop, 23 June 2016.
In the circumstances, we would grant the extension of time.

Appellant's submissions

The appellant's submissions may be summarised as follows:
1.On a proper construction of the trust deeds, the powers of the Guardian were fiduciary[36] in the sense and to the extent that the Guardian is obliged to actively consider, from time to time, honestly and in good faith, whether to exercise the power to give consent.[37] Further:
[36] Appellant's submissions [50].
[37] Appeal ts 7 ‑ 8, 108.
(a)the duty arises whenever the trustee makes a decision that requires the Guardian's consent;[38]
[38] Appeal ts 8.
(b)the duty is owed:
(i)in the case of some of the powers, such as the power to change the proper law, to all objects of the trust; and
(ii)in the case of other powers, such as the power to distribute income or capital or to exercise the power of advancement, to the person or persons in whose favour the trustee has determined to exercise the power;[39]
[39] Appeal ts 9, 26 ‑ 27, 41 ‑ 42, 68 ‑ 69.
(c)in considering whether to consent, the Guardian must have regard to the interest of others, but is not required to disregard his own interests.[40] The appellant accepted that, in making the decision, in the end, the Guardian can make the decision based on their own self‑interest.[41] However, the appellant submits that the Guardian can only do that having first taken into account the interests of others.[42]
2.The nature of the Guardian's duty was not altered by the deed of variation in August 2011. That deed changed the identity of the Guardians, but not the nature of the Guardian's powers. The primary judge erred in focusing exclusively upon the position after the variation of August 2011.[43]
3.At least so long as the Guardian's power has the fiduciary element referred to in 1 above, the court has a broad power to remove a Guardian.[44]
4.The criterion in exercising the court's power is to ensure the proper and effective administration of the trust.[45] The ability of the trustee to make a distribution, or an advance, should it choose to do so, is necessary for the effective operation and administration of the trust.[46] For the trust to operate by annual distribution of income under the default provision due to the Guardian's inability to agree or consent to a distribution, is not the effective operation of the trust.[47]
5.The judge dismissed the application on the ground that the court did not have power, because the Guardian's power was not fiduciary.[48] In so finding, the primary judge wrongly implicitly rejected or overlooked the fiduciary obligation of the Guardian (referred to in 1 above) to consider whether to exercise the power of consent.[49]
6.The appellant accepts that there has been no breach by the Guardian of the duty to consider whether to exercise the power of consent.[50] That is because the dysfunction in family relationships meant that, while family members constituted the board of the trustee companies, decisions were not able to be made that required the consent of the Guardian. In any event, as can be seen in the court's exercise of jurisdiction to remove a trustee, it is not necessary to show that a breach of duty has occurred.[51] Here, the power should be exercised because the history of dysfunction shows a sufficient probability that the obligation to consider whether to exercise the power of consent will not be complied with to mean that it is in the bests interests of the beneficiaries to remove the Guardian.[52]
7.Because the primary judge decided the matter on a question of power, he did not make the factual findings necessary to decide whether that case was established. The matter should be remitted to the primary judge to make necessary findings to determine whether the application should be upheld on that ground.[53]
[40] Appeal ts 22, 27.
[41] Appeal ts 26 ‑ 30, 33 ‑ 34, 40, 57.
[42] Appeal ts 26 ‑ 30, 33 ‑ 34, 40.
[43] Appellant's submissions [62] ‑ [66]; appeal ts 36, 49 ‑ 50, 53.
[44] Appellant's submissions [42]; appeal ts 24 ‑ 26, 43 ‑ 44, 108.
[45] Appeal ts 12.
[46] Appeal ts 18 ‑ 19, 47 ‑ 48.
[47] Appellant's submissions [88], appeal ts 18, 47.
[48] Appeal ts 36, 38 ‑ 39, 44.
[49] Appeal ts 39, 44, 111.
[50] Appeal ts 14.
[51] Appeal ts 12, 110.
[52] Appeal ts 24, 25 ‑ 26, 30, 108 ‑ 110.
[53] Appeal ts 19 ‑ 20, 21, 30, 107 ‑ 108.

Amongst other things, the appellant seeks to rely, by way of analogy, on statements in a number of cases[54] to the effect that the trustees of a discretionary trust have a duty to consider, from time to time, whether to exercise the power of appointment of property among a class of objects.
[54] Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366 [79], [125], [137]; McPhail v Doulton [1971] AC 424, 456 - 457; Lutheran Church of Australia v Farmer's Cooperative Executors & Trustees Ltd [1970] HCA 12; (1970) 121 CLR 628, 652.
The appellant also relies on what is said in Thomas on Powers[55] to the effect that:
(a)a power is not necessarily a bare or personal power simply because the donee is one of the persons who may benefit by an exercise of the power; and
(b)there is no reason in principle why the donee of a fiduciary power cannot be authorised by an express declaration or direction of the settlor to exercise the power in the donee's own favour.[56]
55 Thomas G, Thomas on Powers (2^nd ed, 2012) [1.58], [12.16].
[56] Relying on In re Beatty [1990] 1 WLR 1503.
The appeal turns critically on the appellant's first and fifth propositions referred to in [65] above. We will begin with some general observations on the question of the court's power to remove a guardian of a trust.

The power of the court to remove a guardian

The appellant submits that a guardian under a trust deed is an office holder and that where powers conferred on a person (or persons) appointed to the office of guardian under a trust deed are properly characterised as fiduciary, a court of equity has power to remove that person (or those persons) from that office. She relies in that regard on what is said in Lewin on Trusts,[57] and a series of cases from Jersey, Cayman Islands, the Channel Islands and the Isle of Man. Scott accepts the proposition that if the guardian's role is 'fiduciary' in a character akin to that of a trustee, the court may remove the Guardian but by his notice of contention, contends that even if (which is denied) the Guardian in this deed was a 'fiduciary', the guardian's powers were not trust powers or powers in the nature of a trust, but rather were powers controlled merely by the doctrine of fraud on the power.[58] Scott contended, correctly, that a power may be the subject of the equitable doctrine of fraud on the power without being a 'fiduciary' power.[59]
[57] Tucker L, Le Poidevin N and Brightwell J, Lewin on Trusts (19^th ed, 2015) [29-046].
[58] Second respondent's submissions [60].
[59] See, for example, The Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd [1922] HCA 62; (1922) 31 CLR 421, 471; In re Penrose [1933] 1 Ch 793; Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589, 596 ‑ 597; LGSS Pty Ltd v Egan [107] ‑ [109]; Johnson v Unisys Ltd [2001] UKHL13; [2003] 1AC 58 [24].
Under trust law, the concept of a guardian or, as it is sometimes termed, protector, does not have a fixed meaning or content. The role of a guardian (if any) under a trust is as defined by the trust deed. Broadly speaking, the concept of guardian may refer to any person, distinct from the trustee, upon whom powers are conferred under a trust deed that enable some form of participation in the administration of the trust or disposition of the trust property.[60] The rights and duties of a guardian will be greatly influenced by the particular functions and powers conferred on the guardian, as well as by the terms of the trust instrument generally.
[60] Adopting the working definition proposed in Holden A, Trust Protectors (2011) [1.6] and following; compare Hubbard M, Protectors of Trusts (2013) [2.02].
In this light, caution is needed in proposing universal propositions about guardians generally, or about limits on the court's powers in relation to guardians.
The trust is a creature of equity.[61] The courts have long recognised and exercised their supervisory jurisdiction over the administration of trusts. The principles as to the degree of certainty needed for a valid trust are founded on the proposition that the execution of a trust is under the control of the court.[62] The court's principal duty is to see that trusts are properly executed.[63] Under the general law, and subject to exceptional circumstances, the primary rule is that the business of a court is to execute trusts, but not alter them.[64] While, under a discretionary trust, a member of a class of beneficiaries the subject of the discretion generally does not have a proprietary interest in the trust property, such a person has a right to seek the intervention of the court of equity to exercise its inherent jurisdiction to supervise and, if necessary, intervene in the administration of the trust.[65]
[61] Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation [1993] HCA 1; (1993) 178 CLR 145, 175 (in dissent, but not in relation to this); Palmer v Ayres [2017] HCA 5 [84].
[62] Morice v Bishop of Durham (1805) 10 Ves Jun 522, 539; Palmer v Ayres [84].
[63] Pope v DRP Nominees Pty Ltd [1999] SASC 337; (1999) 74 SASR 78 [45]; McLean v Burns Philp Trustee (1985) 2 NSWLR 623, 635; Letterstedt v Broers (1884) 9 App Cas 371, 386.
[64] Templeton v Leviathan Pty Ltd [1921] HCA 55; (1921) 30 CLR 34, 56, 65; Re Dion Investments Pty Ltd [2014] NSWCA 367; (2014) 87 NSWLR 753 [47]; Gonzales v Claridades [2003] NSWCA 227; (2003) 58 NSWLR 20, 211 [33] ‑ [34]; Re Hazeldene's Trust [1908] 1 Ch 34, 41; Heydon J D and Leeming M J, Jacobs' Law of Trusts in Australia (8^th ed, 2016) [1705].
[65] Palmer v Ayres [84]; Mercanti v Mercanti [2016] WASCA 206 [376]; Kennon v Spry [74], [125]; CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 [17]; Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709 [51]; Gartside v Inland Revenue Commission [1968] AC 553, 617 ‑ 618.
In a passage approved by the High Court in CPT Custodian v Commissioner of State Revenue,[66] the Privy Council said in Schmidt v Rosewood Trust Ltd[67] that the protection to which the object of a discretion under a discretionary trust is entitled, and the circumstances in which they may seek protection, will depend upon the court's discretion.[68] In exercising its powers to enforce due execution of a trust, for example by removing a trustee, the court forms a broad judgment as to the beneficiaries' best interests having regard to all the circumstances of the case.[69] In other words, the court has power to remove a trustee as an aspect of its broad power to enforce due execution of a trust.
[66] CPT Custodian v Commissioner of State Revenue [17].
[67] Schmidt v Rosewood Trust Ltd [51].
[68] Citing, among other cases, Gartside v Inland Revenue Commission (617 ‑ 618), McPhail v Doulton (456 ‑ 456) and Mettoy Pension Trustees v Evans [1990] 1 WLR 1587, 1617 ‑ 1618.
[69] Rinehart v Welker [2012] NSWCA 95 [173]; Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 580 ‑ 581; Letterstedt v Broers (386).
The principles we have stated underline the breadth of the court's jurisdiction in relation to the administration of trusts.
In light of all we have said, the proper characterisation of the guardian's powers may be better seen as an important, in some cases potentially decisive, consideration as to the exercise of discretion, rather than as a matter going to the existence of the court's powers. There seems to us to be much to be said for the proposition that the court has power to remove a guardian if that is necessary to secure, but not alter, the due execution of the trusts, and that other considerations go to discretion rather than jurisdiction. It is not necessary to decide whether that is so, because all parties accept that, in the circumstances of this case, if the primary judge's construction of the Guardian's powers as not fiduciary is correct, the appeal must fail.
The court's powers to supervise and, if necessary, intervene in the administration of a trust have been exercised in a variety of circumstances.
For example, in Pope v DRP,[70] the Full Court of the Supreme Court of South Australia upheld a decision to appoint a new trustee, notwithstanding that the trust deed conferred a power of appointment on the appointor. The Full Court held that the power arose both under statute and under the court's equitable jurisdiction.
[70] Pope v DRP [36] ‑ [50].
In Mettoy Pension Trustees v Evans,[71] under a pension trust, the power to augment benefits to employee members was vested in the employer company. When that company went into liquidation, it was held that the company could not exercise the power because the directors' powers had been displaced by the liquidator and the liquidator's duty was to creditors who would benefit in default of exercise. The court attached significance to the fact that the beneficiaries under the pension scheme were not volunteers. In the circumstances of that case, the court held that the power was fiduciary in the 'full sense' and that it was open to the court to take various measures, including to appoint a substitute to exercise the power, or direct representatives of classes to prepare a scheme, or even to direct the exercise of the power itself.
[71] Mettoy Pension Trustees v Evans (1617 ‑ 1618); approved in Schmidt v Rosewood Trust Ltd [51].
In Bridge Trustees Ltd v Noel Penny (Turbines) Ltd, the court considered an employer pension scheme under which funds were held on trust by a trustee. The defendant principal employer was vested with the power to direct the distribution of any surplus funds, but was not the trustee. The sole director of the defendant, who was also a beneficiary of the scheme, refused to exercise the power of distribution in circumstances where the employer was insolvent. The trustee of the scheme applied for an order that the court appoint it to direct the distribution of surplus assets in place of the defendant.
The court in that case observed that the power there was expressed in mandatory language, that the members were not in any real sense volunteers, and that the power was, as in Mettoy, a fiduciary power in the 'full sense'. The court held that:
(1)The defendant was, on a proper construction, bound to exercise the power, and had refused to do so.[72]
(2)It was within the court's inherent jurisdiction to execute the trust, to exercise the trust power or cause it to be exercised in whatever way and by whatever means it thought fit.[73]
(3)Just as the inherent jurisdiction of the court allows for the appointment and removal of trustees, the court's inherent jurisdiction gave it power to appoint a fit and proper person to exercise the fiduciary power vested in the defendant in place of the defendant.[74]
[72] Bridge Trustees Ltd v Noel Penny (Turbines) Ltd [18] ‑ [19].
[73] Bridge Trustees Ltd v Noel Penny (Turbines) Ltd [25], citing Lewin on Trusts (18^th ed, 2008) [30‑19] and [30‑25] ‑ [30‑26].
[74] Bridge Trustees Ltd v Noel Penny (Turbines) Ltd [27] ‑ [29].
In Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd, Sir Nicholas Browne‑Wilkinson VC also regarded as significant the distinction between a traditional family trust and a pension scheme trust where, in the latter case, the members are 'far from volunteers'. In that case, the company had a power to consent to amendments to the trust deed proposed by a committee of trustees in respect of a contributory pension fund for employees, pensioners and their dependants. It was held that the power was not fiduciary, in that the company was not required to disregard its own interests and to consent only by reference to the interests of the members. However, it was held that the company had an obligation to act in good faith in the exercise of the power to consent. That obligation of good faith included a requirement that the company consider in good faith any proposals put to it from time to time by the committee of trustees.[75]
[75] Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd (596 - 598).
The Vice‑Chancellor compared the pension scheme trust in that case with a traditional trust and said:
If this were a traditional private family trust there could be no question of any … limitation [on the relevant power]. A power vested in trustees to appoint a fund with the consent of X gives X an absolute right to give or withhold consent as he thinks fit, having regard to his own interests and without regard to the interest of the appointees or other beneficiaries. The question as framed in the originating summons ask, first, whether the right to give or withhold consent [by the company] is a fiduciary power … I agree with the concession [by counsel]: if this were a fiduciary power the company would have to decide whether or not to consent by reference only to the interests of the members, disregarding its own interest. This plainly was not the intention.
The decision in Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd was referred to by Austin J in LGSS Pty Ltd v Egan, who said:[76]
There may be an intermediate category between fiduciary powers on the one hand, and powers vested in a non-fiduciary but subject to the doctrine of fraud on a power on the other hand. In Lock v Westpac Banking Corp (1991) 25 NSWLR 593, at 605‑6, Waddell CJ in Eq quoted with approval the observations of Browne-Wilkinson V‑C (as his Lordship then was) in Imperial Group Pension [Trust] Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589 at 597 and held that a power of amendment of a superannuation trust deed vested in an employer with the consent of the trustee was subject to an implied obligation of good faith; that is to say, the power was subject to an implied condition that it be exercised honestly and in good faith, but it was not a fiduciary power.
[76] LGSS Pty Ltd v Egan [109].
The court's power to supervise the administration of a trust has been exercised in cases involving protectors of trusts in several cases in Isle of Man, Jersey and the Channel Islands on which the appellant relies.
In Rawcliffe v Steele,[77] the question was whether, under a trust deed by which certain powers were exercisable only with the consent of the protector, the fact that no protector had been appointed meant that the trust failed. In that case, the Protector was described in the instrument as the 'Protector of the Trusts' and the 'Protector of the Settlement'. The Protector was entitled to be given notice, full information and to participate in all trustee meetings. The Protector was an 'office' under the trust deed and the occupants of the office were entitled to charge fees. The Protector also had the power to appoint new or additional trustees.[78] Acting Deemster Hegart analysed the nature of the powers of the protector under that trust deed. He concluded that the protector's powers were of a fiduciary nature.[79] Further, he found that the court's inherent jurisdiction to appoint a new trustee extends by analogy to the power to appoint a person to exercise other fiduciary powers under the trust unless, on a proper construction, the individual characteristics of the person in whom the powers vested reveal that no substitute could properly be imposed.[80] Thus, on a principle analogous to the principle that a trust will not fail for want of a trustee, the court could appoint a protector in the same circumstances as it would appoint a trustee if a trustee was either not appointed or declined to act.[81]
[77] Rawcliffe v Steele [1995] Manx LR 426 (Isle of Man).
[78] Rawcliffe v Steele (511 - 512), (536).
[79] Rawcliffe v Steele (513).
[80] Rawcliffe v Steele (507).
[81] Rawcliffe v Steele (507), (530).
In Re Papadimitrou,[82] the Deemster Cain said that he was not prepared to say that the court does not have, under any circumstances, the inherent power to remove a protector, if that were necessary to protect the assets of the trust or to prevent the trusts failing, or if the continuance of a protector would prevent the trust being properly executed. However, he considered that the court would only do so in exceptional circumstances. See also Re A and B Trusts.[83]
[82] Re Papadimitriou [2004] WTLR 1141 [70] ‑ [71].
[83] Re A and B Trusts [2012] JRC 169A [6].
In Re Freiburg Trust,[84] the trust deed appointed a protector the consent of whom was required for the exercise of various powers of the trustee including the power to make appointments of income or capital. Under the deed, if at a relevant time there was no protector no consent was required. The protector was described in the instrument as an office holder, and that the office could be terminated and vacated in certain circumstances, including where the protector was of unsound mind or became a bankrupt. The court held that it had an inherent jurisdiction to remove a protector from office for due cause and that that power was an incident of the court's duty to protect the interests of beneficiaries, and to ensure that the intentions of the settlor were respected 'as far as may be possible and appropriate'.[85] The court held that the protector was in the position of a fiduciary.[86]
[84] Re Freiburg Trust [2004] JRC 056.
[85] Re Freiburg Trust [5] ‑ [6].
[86] Re Freiburg Trust [6].
In Re M Settlement,[87] the court said that the settlement creates the office of protector and that there was nothing to indicate that the protector's powers were personal. It characterised the powers of the protector under the trust in that case as fiduciary.[88] The court held that in such circumstances it had inherent jurisdiction to suspend the powers of the protector.[89]
[87] Re M Settlement [2009] JRC 140.
[88] Re M Settlement [16].
[89] Re M Settlement [17].
These cases illustrate the breadth of the court's powers to supervise the due execution of a trust. As we have said, in the present case the appellant accepts that the court had power to remove the Guardian only if the Guardian had a fiduciary power in the particular sense for which she contends. We turn to the question of whether the Guardian's powers are 'fiduciary' and, if so, in what respect or respects.

Are the Guardian's powers under the trust deeds fiduciary?

In general terms, a power is an authority to take a step which affects rights and obligations.[90] Powers include both administrative and dispositive powers.[91] Administrative powers include powers such as the powers of sale or investment. Dispositive powers, including powers of appointment, are powers held by a person who is not the absolute owner of property, where the exercise of the power affects the beneficial ownership of property.[92]
[90] Jacobs' Law of Trusts in Australia (8^th ed, 2016) [2.46].
[91] Jacobs' Law of Trusts in Australia (8^th ed, 2016) [2.46]; Thomas on Powers (2^nd ed, 2012) [1.13] ‑ [1.14].
[92] Jacobs' Law of Trusts in Australia (8^th ed, 2016) [2.46]; Thomas on Powers (2^nd ed, 2012) [1.14] ‑ [1.15].
Powers may take effect by virtue of the common law, eg, the authority given by a principal to an agent pursuant to a power of attorney, or in equity, eg, powers of appointment over trust property.[93]
[93] Thompson Reuters, Ford and Lee: Principles of the Law of Trusts, (2016) vol 1 (147‑10‑16) [5.6230], [5.6290]; Thomas on Powers (2^nd ed, 2012) [1.14].
The appellant submits that on a proper construction of the trust deeds, the powers of the Guardian were fiduciary[94] in the sense and to the extent that the Guardian is obliged to actively consider, from time to time, honestly and in good faith, whether to exercise the power to consent to a decision of the trustee that requires consent in order to be effectual.[95]
[94] Appellant's submissions [50].
[95] Appeal ts 7 ‑ 8.
The appellant asserts a tripartite classification of powers along the following lines:
(a)where there is no duty to consider whether to exercise the power, and the only limit is fraud on the power - the appellant describes this as a 'mere power';
(b)where the holder has a duty to actively consider from time to time whether to exercise the power - the appellant describes this a 'fiduciary power'; and
(c)where the holder has a duty to exercise the power - the appellant describes this as a 'trust power'.

There is room for criticism of the label 'fiduciary power' in relation to a donee who is not the holder of a fiduciary office.[96] Also, although it is unnecessary to examine the various taxonomies and terminology used (not always consistently) in the classification of powers, it should not be thought that we accept a tripartite classification along the lines asserted by the appellant.[97]
[96] See, for example, Finn PD, Fiduciary Obligations (1977) [627], [644]; Thomas on Powers (2^nd ed, 2012) [1.52]; referred to in Scaffidi v Montevento Holdings Ltd [2011] WASCA 146 [149].
[97] See, for example, as to powers of appointment: Jacobs' Law of Trusts in Australia (8^th ed, 2016) [2.46]; see also Philip Pettit, Equity and the Law of Trusts (12^th ed, 2012), 35 - 39.
Moreover, if analysis is immediately directed to whether a particular relationship, office or duty is fiduciary, there is a danger of circularity of reasoning. Where an instrument is the source of any alleged fiduciary relationship, the starting point is to construe the instrument.[98] Similarly, in determining whether a power conferred on a donee under a deed has a fiduciary character, and the nature and extent of the donee's fiduciary obligations in the exercise of the power, the starting point is to construe the deed. As Isaacs J said in The National Trustees, Executors and Agency Co v Boyd,[99] '[t]he answer is that everything depends upon the nature and terms of the power'.
[98] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 [91] ‑ [92]; Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 97.
[99] The National Trustees, Executors and Agency Co v Boyd [1926] HCA 44; (1926) 39 CLR 72, 84; see also, for example, Mercanti v Mercanti [321].
To say that a power is 'fiduciary' will not necessarily explain which particular fiduciary duties will arise in the exercise of the power.[100]
[100] In re Coomber [1911] 1 Ch 723, 728; Elovalis v Elovalis [2008] WASCA 141 [65]; Pilmer v The Dulce Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 [77.
Generally speaking, where, on a proper construction, the donee of the power is entitled to exercise the power for their own advantage or benefit and without regard to the interests of others, the exercise of the power is personal, and not attended by any fiduciary duty.[101] Where the donee of the power is, on a proper construction, obliged to act only in the interests of, and for the benefit of, one or more others, the power will be fiduciary.[102] Where a dispositive power is conferred on a donee who falls within the potential class of objects for the exercise of the power, the donee of the power is unlikely to be under any fiduciary duty.[103] Where however the power is an administrative power to appoint new trustees, the power on its proper construction may often be regarded as fiduciary.[104] Again, it will all depend upon the proper construction of the instrument, including the nature and purpose of the particular power.[105]
[101] Peters' American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457, 504; Mercanti v Mercanti [320(a)]; Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd (596).
[102] Mercanti v Mercanti [320(b)]; Way v Commissioner of Stamp Duties (NSW) [1949] HCA 37; (1949) 79 CLR 477, 492; LGSS Pty Ltd v Egan [108]; Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd (596); Re Callen (1918) 18 SR (NSW) 218, 226.
[103] In re Penrose [1933] 1 Ch 793, 803 - 806.
[104] Mercanti v Mercanti [397] and cases there cited.
[105] See, eg, Mercanti v Mercanti [321], [397] ‑ [398].
Where the donee of the power is found to be obliged to consider whether to exercise the power, that conclusion is generally expressed as an incident of the fiduciary character of the donee of the power,[106] rather than being analysed directly as a matter of construction.[107] On either analysis, it is the fiduciary duty of the donee that is the critical foundation of the duty to consider whether to exercise the power.
[106] See, for example, Lutheran Church of Australia v Farmer's Cooperative Executors & Trustees Ltd (652); LGSS Pty Ltd v Egan [107] ‑ [108]; Whishaw v Stephens [1970] AC 508, 518; In re Hayes Settlement Trusts [1982] 1 WLR 202, 209 ‑ 210; Turner v Turner [1984] Ch 100, 109 ‑ 110.
[107] Mettoy Pension v Evans (1614) may provide an example in the latter category.
Where the instrument in question, on its proper construction, reveals an intention by the settlor that the donee must exercise the power, or at least must consider whether to exercise the power having regard to the circumstances as they exist from time to time, that may point to it having a fiduciary character. Often, however, the instrument will be silent in that regard and the focus will be on whether it may be inferred that, when exercising the power, the donee of the power is obliged to act in, or have regard to, the interests of others to the exclusion of the donee's self‑interest.
If, on a proper construction, the donee of a power is entitled to exercise the power in their own interests, and without regard for the interests of others, there is no room for, or ground for finding, a duty on the part of the holder to consider whether to exercise the power. In such circumstances, no purpose will be served by the imposition of such a duty.
Perhaps in recognition of this, the appellant submits that, while the Guardian(s) can, ultimately, make the decision whether to consent based on their own self‑interest, they can only do so if they first take into account the interests of other objects of the trust.[108]
[108] Appeal ts 26 ‑ 30, 33 ‑ 34, 40.
In equity, the doctrine of 'fraud on the power' requires that the power must not be exercised for a purpose, or with an intention, beyond the scope of, or not justified by, the instrument creating the power.[109]
[109] Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425, 438, citing Lord Parker in Vatcher v Paull [1915] AC 372, 378. See also Lutheran Church of Australia v Farmer's Cooperative Executors & Trustees Ltd (652).
As already noted, a power may be subject to the doctrine of fraud on the power or an implied obligation of good faith without being a fiduciary power.[110]
[110] See [69].
A number of the differences between powers vested in a fiduciary such as a trustee, and powers vested in a non‑fiduciary which are merely subject to the doctrine of fraud on the power, were referred to in LGSS Pty Ltd v Egan.[111] The differences include, generally speaking, that in the former case, but not the latter, the power is open to review if the donee has failed to consider its exercise from time to time, or where there has been no real or genuine consideration given to the exercise of discretion.[112] The two are analogous however, in the sense that, in each case, the power must be exercised for proper purposes and in good faith.
[111] LGSS Pty Ltd v Egan [2002] NSWSC 1171 [107].
[112] LGSS Pty Ltd v Egan [107].
For these reasons, we begin with the question of construction as to whether, in deciding whether to consent, the Guardian is obliged to act in, or having regard to, the interests of the objects of the trust or a subset thereof.
The general principles relating to the construction of written contracts apply to the construction of a trust deed.[113] The principles relating to the construction of instruments were recently summarised in Black Box Control Pty Ltd v Terravision Pty Ltd.[114]
[113] Mercanti v Mercanti [72]; Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [53]; Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 [9] ‑ [10].
[114] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42].
The fact that the power is conferred under and by a deed of trust is itself a relevant consideration and may in itself be an indication that the power is fiduciary.[115] The nature of the instrument as a trust and the evident purpose of the trust may inform the true meaning of its terms.[116]
[115] Re Burton [1994] FCA 388; (1994) 126 ALR 557; Wiley v Burton (559); Berger v Lysteron [72], [84].
[116] Scaffidi [154].
In considering the construction question, attention should be directed to the proper purposes for which the power may be exercised, to the extent that is evident.[117]
[117] LGSS Pty Ltd v Egan [111] ‑ [112].
Where a power is conferred under a deed of trust, the nature and subject matter of the power will be an important consideration in the assessment of whether, on a proper construction, the power is to be exercised for the benefit of the beneficiaries or objects of a trust. For example, as noted earlier, a power to appoint a new or replacement trustee has generally been construed as having been conferred not for the purpose of advancing the personal interests of the appointor, but rather for the due execution of the trusts for the benefit of the objects of the trust.
In determining, on a proper construction, the purpose for which a power is conferred, and for whose benefit it may be exercised, the relationship of the donee of the power to the trusts may also be an important consideration. A power conferred on the trustee would ordinarily be conferred for the benefit of the beneficiaries as a whole, while a power conferred on a beneficiary is more likely to be conferred for the benefit of that beneficiary.[118] A power conferred on a third party who is not a beneficiary, and who is otherwise unconnected with the administration of the trust, might ordinarily be viewed as being conferred on the donee as fiduciary.[119] These considerations are just that: considerations; they are not determinative.[120]
[118] LGSS Pty Ltd v Egan [113].
[119] LGSS Pty Ltd v Egan [113] citing Scott on Trusts (4^th ed, vol 3, 1988) [185].
[120] LGSS Pty Ltd v Egan [114].
The significance of a power being given by the settlor to a beneficiary, as opposed to the trustee, or a third party to the trust, is also illustrated in the cases dealing with a power to direct investments under the trust.
The case of Re Hart's Will Trusts[121] concerned the powers conferred on a beneficiary to direct the trustees as to the investment of trust capital. In that case, the trustees were to hold the property on trust for the settlor's son (ESH) for life, and to 'invest the capital of the said trust fund in such investments … as [ESH] may from time to time direct … whether the [investments be] authorised by law … or not'.[122] ESH directed the trustees to purchase shares from himself. Justice Bennett prefaced his judgment by the statement that ESH 'may do what he likes provided he acts in good faith'.[123] It was held that he could direct the purchase of investments from himself, provided that he acted in good faith and provided the trustees were satisfied that a reasonable and proper price was offered. As was observed in Re Z Trust,[124] the rationale of the decision in Re Hart's Will Trusts, although not fully explained in the brief judgment, 'must have been that as the life tenant [ESH] was a beneficiary and given the power to direct, he could direct so as to benefit himself, provided he committed no fraud upon the power by acting in bad faith'.
[121] Re Hart's Will Trusts [1943] 2 Ch D 557.
[122] Re Hart's Will Trusts (557).
[123] Re Hart's Will Trusts (558).
[124] Re Z Trust [1997] CILR 248, 260 (Cayman Islands).
On the other hand, in Way v Commissioner of Stamp Duties (NSW)[125] (discussed below), a power conferred on a settlor/trustee to direct certain investments was held to be a fiduciary power to be exercised solely in the interests of the trust.
[125] Way v Commissioner of Stamp Duties (NSW) (490 ‑ 492) (High Court) and Commissioner of Stamp Duties (NSW) v Way [1951] UKPC 2; (1951) 83 CLR 570, 582 (Privy Council).
Both the above cases may be contrasted with the case of Vestey's (Lord) Executors v Inland Revenue Commissioners,[126] in which a power to direct investment was not conferred on a beneficiary, or a settlor/trustee, but was, rather, conferred on a non‑beneficiary, non‑trustee, 'authorised person'. The court found that it was significant that the 'authorised persons' were not beneficiaries and that over time, successor 'authorised persons' might eventually be strangers to the Vestey family and its interests. The court held that the power to direct investment was to be exercised solely with an eye to the benefit of the beneficiaries of the trust, and in that regard was a fiduciary power.[127]
[126] Vestey's (Lord) Executors v Inland Revenue Commissioners [1949] 1 All ER 1108.
[127] Vestey's v IRC (1115, 1120, 1132, 1142).
Even where a power is conferred on a trustee, the nature and extent of the fiduciary obligations attending its exercise may be the subject of special dispensation in the trust instrument. In Way v Commissioner of Stamp Duties (NSW),[128] the High Court said:
It is a rule of equity that a trustee must not place himself in a position where his interest and duty may conflict. He cannot therefore in the absence of a special dispensation in the trust instrument either sell his own property to the trust estate or purchase any property from the trust estate. (emphasis added)
[128] Way v Commissioner of Stamp Duties (NSW) (490 - 491).
In Way v Commissioner of Stamp Duties (NSW), the settlor was one of a number of trustees. Under the trust instrument the trustees had the power to purchase property from the settlor/trustee. The instrument further provided that, during the lifetime of the settlor, the settlor could direct the trustees to apply and appropriate any property, including trust property, in this manner. It was held that this provision authorised the trustees to apply and appropriate trust funds for the purpose of acquiring by purchase or exchange any real or personal property of the settlor/trustee. Accordingly, the provision involved dispensation from the rule that a trustee must not place himself in a position where his interest and duty may conflict. Nevertheless, the power conferred on the settlor/trustee to direct the other trustees to undertake such investments was 'at most a power as a trustee to control the exercise of the discretion by the trustees as a body and it [was] a fiduciary power which must be exercised in the interests of the trust property'.[129]
[129] Way v Commissioner of Stamp Duties (NSW) (492); cf Kennon v Spry [46] where French CJ said that the power of variation conferred on the settlor/trustee in that case was conferred in his personal capacity as settlor only, and was not a fiduciary power.
Similarly, in In re Beatty,[130] a case relied on by the appellant, the testatrix bequeathed all of her personal chattels (including valuable artworks) to her trustees, stating that the trustees should, within two years after her death, distribute the chattels 'among such … persons … as they think fit'. She requested the trustees to give effect to her wishes regarding the chattels 'of which they shall be aware', but not so as to create a trust or legal obligation in regard to them. Any chattels not so distributed would fall into the residuary estate. There was also a similar clause in relation to a bequest of a substantial legacy. In the two years following the widow's death, the trustees distributed chattels and money in accordance with the widow's wishes. The distributions included gifts to themselves. The residuary beneficiaries challenged the distributions. There was a term of the will that the trustees could exercise any power conferred by the will, notwithstanding that they may have a direct personal interest in the mode of its exercise. Justice Hoffman (as his Lordship then was) held that the powers conferred on the trustees were fiduciary powers of appointment.[131] Accordingly, the powers required the trustees to give (active) consideration to whether the powers should be exercised and to act honestly in accordance with what they considered to be the purpose for which the testatrix created the powers. His Lordship referred to the provision which entitled the trustees to exercise any power conferred on them, notwithstanding they may have a direct personal interest in the mode of its exercise, and observed that this arguably allowed the trustees, 'subject to having proper regard to their overall fiduciary duties', to make gifts to themselves.[132] In other words, even though the power of appointment was fiduciary (indeed, it was conferred on the trustees), the conflicts rule was arguably attenuated by the terms of the instrument.
[130] In re Beatty [1990] 1 WLR 1503.
[131] In re Beatty (1506).
[132] In re Beatty (1506).
The appellant submits that the 2011 variations of trust did not alter the character of the power of the Guardian. The variation changed the identity of the Guardian; the new Guardians were given the powers that had previously been conferred on the predecessor. The appeal can be decided on the basis of an assumption, favourable to the appellant, that the appellant's submissions in this respect are correct. In other words, in accordance with the appellant's submissions, the construction exercise is directed to the 1996 deed for Trust No 1 and the original 1993 deed for Trust No 2.
As we have said, the nature of the power, the person or persons in whom the power is reposed, and the relationship of that person or persons to the trust, are relevant to the construction question.
While the authors of Underhill and Hayton: Law of Trusts and Trustees,[133] identify a number of powers of guardians that might ordinarily be characterised as fiduciary, they recognise the position as different in the case of a protector's power to decide whether to consent to proposed distributions.
[133] Hayton D, Matthews P and Mitchell C, Underhill and Hayton: Law of Trusts and Trustees (18^th ed, 2010) [1.83].
In the case of In the Matter of the Bird Charitable Trust and Bird Purpose Trust,[134] the question was whether the power of the protector to appoint the trustees and to appoint a successor protector were fiduciary powers. The court found that they were. The court made the following observations with which we would respectfully agree:
The powers of a protector vary considerably from one trust to another. In some he may be given very limited power; and in others they may be extensive. It is a question of construction of the particular trust deed as to whether a particular power of a protector is fiduciary or not. It may well be the case that, in relation to a particular trust, some powers of a protector are fiduciary and others are personal.
[134] In the Matter of the Bird Charitable Trust and Bird Purpose Trust [2008] JRC 013.
In these trusts, the powers conferred on the Guardian are all of the same nature: the power to decide whether to consent to an exercise of power by the Trustee, thereby rendering effectual the Trustee's decision. The powers, by their terms and nature, are permissive rather than mandatory. No occasion arises for the exercise of the Guardian's power of consent unless and until the Trustee makes a decision of a kind to which the requirement for the Guardian's consent applies. They are effectively powers of veto. The language used by the settlor does not objectively reveal an intention that the Guardian in these trusts has a duty to consider, from time to time, whether to exercise those powers. Also, the powers are not expressed in terms of consent not being 'unreasonably' withheld, or consent being subject to the Guardian being 'satisfied' or having formed an 'opinion' as to a state of affairs. The Guardian's powers are very different from the active powers conferred on the Trustee and the implicit duties associated with such active powers. The Guardian has no power of disposition of property, but is only given the opportunity to decide whether the particular disposition or other decision determined by the Trustee should be given effect.[135] In relation to the Trustee's power of distribution of income under cl 5(a) and capital under cl 6(a), there are default provisions governing the position in the absence of appointment (cl 5(b) and cl 6(b)). Further, the Guardian in these trusts does not have a power to remove or appoint a new trustee. Also, the objects of the trusts are volunteers effectively relying on the bounty of Fred (and Judith).
[135] Even a power of veto given to a trustee in relation to the donee's exercise of a power of appointment amongst a class of objects including the donee himself or herself, has been characterised as conferred in order to enable the trustee to choose whether to give validity and effect to the appointment, but not so as to impose a duty on the trustee as regard the selection of the objects of the power. See Re Dilke [1921] 1 Ch 34, 42; In re Phillips [1931] 1 Ch 347, 354 ‑ 355; In re Triffitt's Settlement [1958] 1 Ch 852, 862 ‑ 863.

In our view, recognition of an obligation on the part of a Guardian to consider whether to exercise the power of consent would not sustain an order for removal of a Guardian in circumstances where:
1.while there had been a history of significant dysfunction, the appointment in December 2015 of an independent Trustee created a new environment for the exercise of the Guardian's power of consent;
2.there was no evidence of any failure by a Guardian to consider a request for consent from the Trustee;
3.having discharged the duty to consider whether to consent, each of the six guardians is, on a proper construction, as is now not challenged by the appellant, free to make a decision in accordance with their own self‑interest;
4.an element of the scheme of the trust deeds is that the otherwise broad discretion of the Trustee is constrained in specific spheres by the need to obtain the consent of the Guardian who is or are free to make a decision whether to consent in accordance with their own interests; and
5.the trust deeds make provision for the position in default of any (effective) exercise of the Trustee's power of distribution of income and capital; the failure of the guardians to give unanimous consent does not render the execution of the trusts unworkable, as was the case when the directors of the trustee company could not agree.
For these reasons, in our opinion, the judge's conclusion that to order the removal of the guardians would be an impermissible variation of the trust would be unaffected by a recognition of a fiduciary obligation on the part of the Guardian to consider whether to exercise the power of consent, and in exercising it to have regard to the interests of the other objects of the trust, or a subset of them.

Conclusion

For these reasons, the appeal must be dismissed.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BLENKINSOP -v- HERBERT [2017] WASCA 87 (S)

CORAM: MURPHY JA
MITCHELL JA
BEECH JA

HEARD: 5 MAY 2017 AND ON THE PAPERS

DELIVERED : 8 JUNE 2017

FILE NO/S: CACV 59 of 2016

BETWEEN: JUDITH ANNE BLENKINSOP
Appellant
AND
JEFFREY LAURENCE HERBERT
First Respondent
SCOTT FREDERICK BLENKINSOP
Second Respondent
ROSS ALEXANDER BLENKINSOP
Third Respondent
TRACEY ANN JAKOVICH
Fourth Respondent
KIM ROSINA HOLLAND
Fifth Respondent
CHRISTINE MARION THURTELL
Sixth Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :ALLANSON J
File No  :CIV 2074 of 2013

Catchwords:

Costs - Trusts - Appeal against dismissal of beneficiary's application to remove guardian - Appeal dismissed - Appropriate costs orders

Legislation:

Supreme Court Rules 1971 (WA), O 66 r 4

Result:

Costs orders made in favour of second respondent

Category: B

Representation:

Counsel:

Appellant:     Mr C R Bailey
First Respondent           :     Mr S J Dundas
Second Respondent      :     Mr W C J Zappia
Third Respondent          :     In person
Fourth Respondent        :     No appearance
Fifth Respondent           :     No appearance
Sixth Respondent          :     No appearance

Solicitors:

Appellant:     Williams & Hughes
First Respondent           :     H W L Ebsworth
Second Respondent      :     Scott Blenkinsop Legal
Third Respondent          :     In person
Fourth Respondent        :     No appearance
Fifth Respondent           :     No appearance
Sixth Respondent          :     No appearance

Case(s) referred to in judgment(s):

Atlas Corp Pty Ltd v Kalyk [2001] NSWCA 10
Bashour v Australian and New Zealand Banking Group Ltd [2017] FCA 163
Bechara v Bates [2016] NSWCA 294
Blenkinsop v Herbert [2017] WASCA 87
Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403
Curry v Glen (1936) 54 CLR 445
Dobree v Hoffmann (1996) 18 WAR 36
Gale v Gale (1914) 18 CLR 560
Guss v Veenhuizen (No 2) [1976] HCA 57; (1976) 136 CLR 47
Hogan v Hogan [1983] 2 NSWLR 561
Khera v Jones [2006] NSWCA 85
London Scottish Benefit Society v Chorley, Crawford & Chester (1884) 13 QBD 872
Loomis v ML Lawyer [2016] FamCAFC 168
Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S)
Soia v Bennett [2014] WASCA 27; (2014) 46 WAR 301
Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191
Wang v Farkas [2014] NSWCA 29; (2014) 85 NSWLR 390
Watson v Ralph (1982) 148 CLR 646
Wilkie v Brown [2016] NSWCA 128
REASONS OF THE COURT:

Introduction

On 5 May 2017 we dismissed Judith's appeal against the primary judge's rejection of her application to remove the guardians of the two Blenkinsop family trusts.[159]
[159] Blenkinsop v Herbert [2017] WASCA 87. We will use the terminology and abbreviations used in the primary reasons.
In accordance with this court's usual practice, we invited submissions on the question of costs with a view to resolving costs questions at the time of judgment delivery. However, it was necessary to provide the first respondent, the trustee of the trusts who had not played an active role in the appeal, with the opportunity to respond to submissions that were made. Consequently, directions were made for the filing of further submissions, and for the resolution on the papers of the question of costs.
For the reasons that follow, we would make the costs orders sought by Scott, who was successful on the appeal.

The active parties' positions as to costs

The appellant Judith resists the application of the usual rule that costs follow the event. She seeks an order that her costs, and Scott's costs, be assessed on a solicitor/client basis and paid out of the property of the trusts.
Scott seeks costs orders to the following effect:
(1)Judith pay his costs of the appeal on a party/party basis, including his reasonable costs of acting as his own solicitor engaged at the rate applicable to the relevant costs determination.
(2)To the extent that he is unable to recover his costs from the appellant, pursuant to O 66 r 4 his costs be paid out of the property of the trusts, to be taxed on a solicitor/client basis and to include his costs of engaging counsel and the reasonable costs of his acting as his own solicitor engaged at the rate applicable to the relevant costs determination.
Although initially Ross sought a costs order in his favour, he subsequently indicated that he did not seek any costs.[160]
[160] Email 26 May 2017.
The trustee did not actively oppose the orders for costs from the trust sought by Judith or Scott, beyond saying that each of them would need to demonstrate their entitlement to such an order.

Judith's submissions

As the parties accepted, the relevant principles were outlined by this court in Scaffidi v Montevento Holdings Pty Ltd.[161] Of particular relevance to the present appeal is the following:[162]
[161] Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S) [31] ‑ [39].
[162] Scaffidi v Montevento Holdings Pty Ltd [39].
In relation to appeals by a beneficiary, the general rule is that a beneficiary who unsuccessfully appeals a decision concerning the proper construction of a trust instrument is liable to pay costs, unless there are circumstances which warrant a relaxation of the general rule: Gale v Gale [1914] HCA 53; (1914) 18 CLR 560, 574 (Rich J); Trustees, Executors and Agency Company Ltd v Ramsay [1920] HCA 2; (1920) 27 CLR 279, 285; Fowler v Nield (1961) 61 SR (NSW) 152, 161 (Walsh J). If the circumstances warrant a relaxation of the general rule, the court may order, for example, that the costs of the other parties be paid out of the trust with the appellant to bear its own costs (see Currie v Glen [1936] HCA 1; (1936) 54 CLR 445, 451, 461), or that the costs of all parties be paid out of the trust (see Gale v Gale (574) (Griffith CJ); Watson v Ralph [1982] HCA 35; (1982) 148 CLR 646, 654, 657) …
The appellant Judith accepts that her appeal falls within this general rule and that it is for her to demonstrate circumstances which warrant a relaxation of the general rule. She points to the following circumstances:
(1)The appeal raised important and difficult issues both for these trusts, and for other trusts more generally, given the lack of authority on the nature and powers of guardians and protectors of trusts.[163]
[163] Appeal ts 121.
(2)While this court arrived at the same conclusion as the primary judge, its reasoning was materially different in that this court undertook the construction exercise by reference to the 1996 and 1993 Trust Deeds, whereas the primary judge focused on the position after the execution in 2011 of the deeds of variation.[164]
[164] Appeal ts 121 ‑ 122, relying on Gale v Gale (1914) 18 CLR 560 and Curry v Glen (1936) 54 CLR 445.
(3)The appeal clarified certain unclear aspects of the primary judge's reasons.[165]
[165] Appeal ts 122, relying on Dal Pont G, Law of Costs (3^rd ed, 2013) [20.18].
(4)The appellant was encouraged to appeal by the fact that at trial all parties had agreed that the office of guardian was fiduciary, so that the arguments as to whether the powers of the guardian were fiduciary or personal were never fully ventilated before the appeal.[166]
[166] Appeal ts 123 ‑ 124 referring to Watson v Ralph (1982) 148 CLR 646.
(5)The primary application concerned the proper administration of the trust and the proper construction of the trust instrument and consequently was an application that could reasonably have been brought by the trustee himself.[167] By clarifying the proper construction and due administration of the trust, the appeal has benefited the beneficiaries, guardians and the trustee.[168]
[167] Appeal ts 124.
[168] See also appellant's response submissions 19 May 2017 [1].
(6)In this case, unlike in most of the High Court cases referred to in Scaffidi, the construction advanced by the appellant did not directly produce a material benefit to her.[169]
[169] Appeal ts 125.
(7)As the primary judge found, the appellant was dependent on the trusts for her subsistence. Consequently, if the appellant is required to pay the respondent's costs it may require her to make a call on the trustee for assistance in paying that liability.[170]
[170] Appeal ts 125.
Further, the appellant submits that Scott should not have costs orders that include his reasonable costs of acting as his own solicitor, in the absence of evidence from him that the time he spent on these proceedings diverted him from doing work which would otherwise have generated an income for him.[171]
[171] Appeal ts 125 ‑ 126, relying on Atlas Corp Pty Ltd v Kalyk [2001] NSWCA 10.

The appropriate costs orders

We are not persuaded that the matters relied upon by Judith warrant a relaxation of the general rule.
Broadly speaking, we accept the first point made by the appellant. We accept that there are very few Australian or Commonwealth authorities on the scope and nature of the powers of guardians or protectors of trusts.
The appellant's second point does not, in our view, assist her. While this court undertook the construction exercise by reference to the original trust deeds, rather than after execution of the deeds of variation, that was by virtue of an assumption favourable to the appellant, not any finding of error on the part of the primary judge.
As to the fifth point, we accept that the appeal concerned the proper administration of the trust and the proper construction of the trust instrument and that, to some degree at least, the primary reasons on the appeal will provide some additional clarity for the parties affected by these trusts. Nevertheless, the significance of these matters must be viewed in the context that the primary judge resolved the application unfavourably to the appellant, the appellant chose to appeal, and was unsuccessful. Moreover, the primary judge dismissed the application on two grounds, only one of which raised the broad questions of the nature of the guardian's powers.
While there was, with respect, as we said in the primary reasons, a degree of lack of clarity in relation to an aspect the primary judge's reasons, we are not persuaded that it was of a nature and extent as to justify a departure from the general rule. This case does not have any relevant parallels to Curry v Glen.[172] In that case the judges of the High Court in their individual judgments differed in varying degrees with the reasons of the Full Court. Our conclusions on the nature of the guardian's powers are not markedly different from those of the primary judge. Further, and in any event, we upheld his Honour's second reason for refusing the application.
[172] Curry v Glen (451).
As to the fourth point relied on by the appellant, that there was a measure of agreement between the parties before the primary judge as to the fiduciary character of the powers of the guardian is not a matter of great significance. Apart from anything else, that related to only one of the two grounds of the judge's decision. It was unnecessary to determine ground 1 of the appeal, which complained of a breach of procedural fairness. The present appeal does not raise considerations similar to Watson v Ralph,[173] on which the appellant relies. In that case, the fact that the will had been badly drawn, and that the appellant's arguments were accepted by the trial judge (and then rejected by the Full Court) justified the exceptional course of ordering costs of the appellant to be paid out of the estate.[174]
[173] Watson v Ralph.
[174] Watson v Ralph (654).
While the appellant's sixth point may be accepted, it does not attract any significant weight in the circumstances of the present case, in which it can be inferred that the appellant was not acting altruistically but perceived a potential personal benefit from success in the appeal. Nor, in our view, does the appellant's seventh point attract any significant weight.
For these reasons we would make the usual order that the appellant pay the second respondent's costs of the appeal.
The second respondent Scott is a solicitor who acted for himself on the appeal. The parties accept that a solicitor who acts for themselves can recover their costs.[175] However, the appellant opposes an order to the effect that Scott's costs include his reasonable costs of acting as his own solicitor in the absence of evidence from him that the time he spent on these proceedings diverted him from doing work which would otherwise have generated an income for him.[176] In this respect, the appellant relies on the decision in the New South Wales Court of Appeal in Atlas Corp Pty Ltd v Kalyk.
[175] Soia v Bennett [2014] WASCA 27; (2014) 46 WAR 301, overruling Dobree v Hoffmann (1996) 18 WAR 36.
[176] Appeal ts 125 ‑ 126.
We do not think that Atlas Corp Pty Ltd v Kalyk supports the proposition that, in order for a solicitor to recover their costs of acting for themselves in an action, they must first demonstrate that they have lost the opportunity of using their time to do professional work for other clients for which they would have been remunerated.
In Atlas Corp Pty Ltd v Kalyk, the New South Wales Court of Appeal was invited to apply the general principle established in Cachia v Hanes,[177] that a litigant appearing in person is not entitled to recover professional remuneration from the unsuccessful party, and not to apply the established exception (the Chorley[178] exception) in the case of solicitors who act for themselves in litigation. Handley JA, with whom Meagher and Sheller JJA agreed, referred to the decision of the High Court in Guss v Veenhuizen (No 2) as authority for the Chorley exception.[179] Handley JA also referred to what was said by the plurality in Cachia v Hanes. In that case, the plurality referred to the exception in relation to solicitors who act for themselves as 'somewhat anomalous' and as having a justification that was 'somewhat dubious'; but as serving to emphasise the general rule.[180] Handley JA found that what was said by the plurality in Cachia v Hanes was obiter dicta. His Honour then continued, observing:
[177] Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403.
[178] London Scottish Benefit Society v Chorley, Crawford & Chester (1884) 13 QBD 872.
[179] Guss v Veenhuizen (No 2) [1976] HCA 57; (1976) 136 CLR 47, 51.
[180] Cachia v Hanes (411 ‑ 412).
[T]hat although solicitors representing themselves in litigation have no need of any indemnity against professional costs paid or payable to another practitioner, there is still scope for the indemnity principle. Such solicitors will have spent time and trouble representing themselves and, to that extent, they will have lost the opportunity of using that time doing professional work for other clients and being remunerated accordingly. The indemnity in the case of solicitor litigants is, therefore, against the opportunity cost rather than the direct cost of their professional time spent on their own case.[181]
[181] Atlas Corp Pty Ltd v Kalyk [9].
In our opinion, those observations were a response to the criticisms made in Cachia v Hanes[182] and were directed to offering a rationale for the Chorley exception to the general rule.[183] The observations were not directed to evidentiary requirements for recovery of costs by a solicitor who acts for himself or herself. Nor have those observations been interpreted that way in subsequent cases.[184]
[182] Cachia v Hanes (411 ‑ 413).
[183] See Bechara v Bates [2016] NSWCA 294 [64].
[184] See for example Khera v Jones [2006] NSWCA 85; Wang v Farkas [2014] NSWCA 29; (2014) 85 NSWLR 390; Wilkie v Brown [2016] NSWCA 128; Bechara v Bates; Loomis v ML Lawyer [2016] FamCAFC 168 [65]; compare Bashour v Australian and New Zealand Banking Group Ltd [2017] FCA 163 [73].
In our view, neither authority nor the expressed rationale for the Chorley exception supports the appellant's contention that a solicitor is required to establish that he or she has other billable work which was forgone in order to recover costs within the Chorley exception.
Finally, we would also make an order for Scott to recover from the property of the trusts such of his costs as he does not recover on a party/party basis from Judith. That order would reflect that in circumstances where (quite properly) the trustee did not take an active part in the appeal, Scott's successful opposition to the appeal was reasonable, and assisted in the due administration of the trust and proper construction of the trust instruments. Such an order is not unconventional.[185]
[185] See, for example, Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191 [84]; Hogan v Hogan [1983] 2 NSWLR 561, 562.
The first respondent submits that Scott has not demonstrated that he is entitled to costs above scale limits and so should not be awarded costs out of the trust.[186] For the reasons we have just stated, Scott should be fully indemnified, not only on a party/party basis.
[186] First respondent's supplementary cost submissions 30 May 2017 [9].

Costs orders

For these reasons, we make the following orders:
(1)The appellant pay the second respondent's costs of the appeal on a party/party basis, including any reserved costs, and the second respondent's reasonable costs of acting as his own solicitor engaged at the rate applicable to a senior practitioner under the Legal Profession (Supreme Court) (Contentious Business) Determination 2016 (Determination).
(2)Pursuant to O 66 r 4(1) of the Rules of the Supreme Court, to the extent the second respondent is unable to recover his costs of the appeal from the appellant pursuant to order 1 above then, pursuant to O 66 r 4(1) of the Rules of the Supreme Court, those costs be paid out of the property of the Blenkinsop Family Trust and the Blenkinsop Family Trust No 2 on the basis that any adjustment necessary shall, if possible, be made as between the two trusts to ensure that the second respondent's costs are borne equally from the assets of each trust.
(3)Pursuant to O 66 r 13(c) of the Rules of the Supreme Court, the second respondent's costs pursuant to order 2 above are to be taxed on a solicitor/client basis with such costs to include:
(a)costs of counsel incurred by the second respondent; and
(b)the reasonable costs of the second respondent acting as his own solicitor engaged at the rate applicable to a senior practitioner under the Determination.