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Cihan v Cihan

Cihan v Cihan

Case [2022] NSWSC 538 5 May 2022

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Supreme Court

New South Wales

Medium Neutral Citation: Cihan v Cihan [2022] NSWSC 538
Hearing dates: 29, 30 November; 1, 2 December 2021; written submissions ending 18 December 2021
Date of orders: 5 May 2022
Decision date: 05 May 2022
Jurisdiction: Equity
Before: Parker J
Decision:
See [166]-[168]

Catchwords:
TRUSTS – powers of trustee – discretionary trust – nominator having power to replace trustee – trustee purports to amend trust deed by changing identity of nominator – whether permissible – tripartite deed not signed by nominator – whether effective
EQUITY – powers of appointment – nominator’s power to replace trustee – whether purported exercise involved fraud on the power – whether appointment effective before notification to existing trustee – replacement of existing trustee without bank consent would have been event of default – whether deed of appointment escrowed

Legislation Cited:
Trustee Act 1925, ss 6, 8, 9, 59

Cases Cited:
Baba v Sheehan [2021] NSWCA 58
Cachia v WestpacFinancial Services Ltd [2000] FCA 161
Jenkins v Ellett [2007] QSC 154
Kearns v Hill (1990) 21 NSWLR 107
Lewis v Condon (2013) 85 NSWLR 99
Mercanti v Mercanti (2016) 50 WAR 495
Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360
Perry v Nicholson [2017] QSC 163

Category: Principal judgment
Parties: Mehmet Cihan (Plaintiff)
Kadir Cihan (First Defendant)
Cihan Property Pty Limited (Second Defendant)
Representation:
Counsel:
C Harris SC (Plaintiff)
D McLure SC/G O’Mahoney (Defendants)
Solicitors:
Coleman Greig Lawyers (Plaintiff)
Cleary Hoare (Defendants)

File Number(s): 2018/391788
Publication restriction: Nil

Judgment

These proceedings arise out of a dispute over the control of a discretionary family trust. The assets of the trust consist of six properties with a total value of about $40 million.
The trust is called the Cihan Family Trust (“the Trust”). It was established in 1997 on the instructions of Mehmet Cihan, who is of Turkish extraction. He is the family patriarch. His wife is Aysel Cihan. In the rest of this judgment I will refer to them as “Mr Cihan” and “Mrs Cihan”. Without intending any disrespect, I will refer to Mr and Mrs Cihan’s children and grandchildren by their given names.
Mr and Mrs Cihan have two sons, Kadir (also known as Sam) Cihan and Memduh Cihan. Kadir has four children: two daughters, Havva and Leyla; a son, Mehmet; and a younger daughter, Tuba. Memduh has one son, Juneyt, and one daughter, Aylin.

Claims for determination

The Trust was established by deed executed in May 1997, to which I will refer as the “Trust Deed”. Mr Cihan was the trustee for the Trust (“the Trustee”).
The Trust Deed provided in the usual way for the income and capital of the Trust to be distributed, according to the Trustee’s discretion, among a group of nominated beneficiaries. The Trustee was given power to add persons to, and remove persons from, the list of beneficiaries. The Trustee also had power (subject to some limitations) to amend the terms of the Trust.
As is common with discretionary family trusts,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Cihan v Cihan

Details

AGLC: Cihan v Cihan [2022] NSWSC 538
Case: [2022] NSWSC 538
Decision Date: 05 May 2022

CaseChat Overview and Summary

The case of Cihan v Cihan involved a dispute concerning a discretionary trust established under a tripartite deed. The primary issue before the court was whether a nominator could effectively replace a trustee under the terms of the trust deed, and whether such a replacement could occur without the tripartite deed being signed by the nominator. The court was also required to determine if the purported amendment by the trustee, which involved changing the identity of the nominator, was permissible, and whether such an amendment was effective before notification to the existing trustee. Furthermore, the court had to consider whether the replacement of the existing trustee without bank consent would constitute an event of default, and if the deed of appointment was escrowed.

The court examined the specific provisions of the trust deed, which granted the nominator the power to replace a trustee. It was necessary to determine whether the trustee's actions in amending the trust deed to change the nominator involved fraud on the power, and whether the appointment of a new trustee was effective before notification to the existing trustee. The court also considered whether the replacement of the existing trustee without bank consent would have triggered an event of default under the terms of the trust. Additionally, the court had to ascertain whether the deed of appointment was escrowed, which could impact the validity of the trustee's purported amendment.

The court concluded that the nominator did have the power to replace a trustee under the terms of the tripartite deed, but that the amendment by the trustee to change the identity of the nominator was not permissible. The court found that the amendment did not involve fraud on the power, but that the appointment of a new trustee was not effective before notification to the existing trustee. The court also determined that replacing the existing trustee without bank consent would have constituted an event of default. Finally, the court held that the deed of appointment was not escrowed, which meant that the purported amendment by the trustee was ineffective.

As a result of the court's findings, the purported amendment by the trustee to change the identity of the nominator was declared invalid, and the original tripartite deed remained in effect. The existing trustee retained their position, and the nominator's power to replace a trustee remained intact. The court did not order any specific action beyond the declaration of the invalidity of the trustee's amendment.

Orders