Dryandra Investments Pty Ltd (ACN 627 096 146) as trustee of the Dryandra Trust v Hardie by her guardian ad litem Ian Torrington Blatchford - [2024] WASC 248

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   DRYANDRA INVESTMENTS PTY LTD (ACN 627 096 146) as trustee of the DRYANDRA TRUST -v- HARDIE by her guardian ad litem IAN TORRINGTON BLATCHFORD [2024] WASC 248
CORAM:   MASTER RUSSELL
HEARD:   19 MARCH 2024 & 8 JULY 2024
DELIVERED          :   9 JULY 2024
FILE NO/S:   TRU 11 of 2023
BETWEEN:   DRYANDRA INVESTMENTS PTY LTD (ACN 627 096 146) as trustee of the DRYANDRA TRUST
Plaintiff
AND
ISOBEL MAY HARDIE by her guardian ad litem IAN TORRINGTON BLATCHFORD
Defendant

FILE NO/S: CIV 1921 of 2023
BETWEEN: TIMOTHY JOHN RYAN as enduring attorney for ISOBEL MAY HARDIE
Plaintiff
AND
ISOBEL MAY HARDIE by her guardian ad litem IAN TORRINGTON BLATCHFORD
Defendant

Catchwords:

Trusts – Appointment of replacement guardian and appointor – Where guardian and appointor has lost capacity - Application to vary trust under s 90 of the Trustees Act 1962 (WA) – Court's power to vary trust under s 90 of the Trustees Act 1962 (WA) - Court's power to appoint replacement guardian under inherent supervisory jurisdiction – Turns on own facts

Wills – Statutory will – Testator incapable of altering will – Application under s 40 Wills Act 1970 (WA) to alter will

Legislation:

Trustees Act 1962 (WA), s 7(1), s 90, s 90(1)(a)

Wills Act 1970 (WA), s 40(1)

Result:

Application granted in part
Order to be made replacing guardian and appointor of trust

Category: B

Representation:

TRU 11 of 2023

Counsel:

Plaintiff	:	Mr R J Nash
Defendant	:	Mr I T Blatchford

Solicitors:

Plaintiff	:	Jackson McDonald
Defendant	:	Blatchfords

CIV 1921 of 2023

Counsel:

Plaintiff	:	Mr R J Nash
Defendant	:	Mr I T Blatchford

Solicitors:

Plaintiff	:	Jackson McDonald
Defendant	:	Blatchfords

Cases referred to in decision:

Blenkinsop v Herbert [2017] WASCA 87; (2017) 51 WAR 264
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Cardacci v Cardacci [2023] WASCA 158
Commissioners of Inland Revenue v Raphael [1935] AC 96
Coote v Clarke [2007] WASC 97
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Faye & Ors v Faye & Ors [1973] WAR 68
Glenister v Glenister [2001] WASC 133
JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112
Mercanti v Mercanti [2016] WASCA 206
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Muhling v Perpetual Trustees WA Ltd as Executor and Trustee of the Estate of Herbert Ross Andrew (Dec) [2001] WASC 225
Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93
Smith v Lucas (1881) 18 Ch D 531
The Public Trustee as Executor of the Will of Karoline Lilly Fiedler v Fiedler [2007] WASC 296

MASTER RUSSELL:

Introduction

These reasons relate to applications concerning Isobel May Hardie made in two separate proceedings. The two applications were heard together on 19 March 2024. Further written submissions were filed on 22 April 2024 in relation to each proceeding, and I heard from the parties at a further hearing on 8 July 2024.
With no disrespect, I will refer to Isobel Hardie and members of her family, who I identify and refer to later in these reasons, by their first names.
Isobel was born on 25 June 1942, and is 82 years of age. She suffers from dementia caused by Alzheimer's disease. She is the defendant in both proceedings by her guardian ad litem, Ian Torrington Blatchford, an independent legal practitioner.
Isobel became the appointor and guardian of The Dryandra Trust (Trust) upon the death of her late husband, Barry Roger Hardie (Barry), on 6 May 2022.
In TRU 11 of 2023, the plaintiff, Dryandra Investments Pty Ltd as trustee of the Trust, by amended originating summons filed on 19 March 2024, seeks orders pursuant to s 90 of the Trustees Act 1962 (WA) (Trustees Act) that the Court approve and assent to variations to the trust deed of the Trust to ameliorate the adverse consequences of Isobel's loss of mental capacity. Alternatively, the plaintiff seeks orders under the Court's inherent jurisdiction, for the replacement of Isobel as appointor and guardian of the Trust, as set out in orders 2 and 3 of the amended originating summons. I refer to that action as the Trust Action.
In CIV 1921 of 2023, the plaintiff, Timothy John Ryan as enduring attorney for Isobel, seeks an order (together with ancillary orders) pursuant to s 40(1) of the Wills Act 1970 (WA) (Wills Act), that the Court authorise the making of a first codicil (Proposed Codicil) to Isobel's last will made on 13 November 2006 (Will), in the form set out in Attachment TJR-15 to the plaintiff's affidavit sworn on 17 August 2023. I refer to that action as the Statutory Will Action.
Whilst there are two separate actions and applications, they both seek to address issues arising in relation to the operation of the Trust during Isobel's life and after her death, which arise because of Isobel's lack of mental capacity.
Isobel does not have, and has not had since her appointment, capacity to act as appointor or guardian of the Trust. As such, since Barry died in May 2022, there has been no guardian capable of consenting to the reserved and restricted powers, which among other things, curtails the Trustee's discretion in making distributions of trust income. Nor does Isobel have capacity to appoint a replacement guardian.
There is no provision in the Trust Deed for the appointment of a replacement guardian upon Isobel's death or in circumstances where she does not have capacity. Since becoming guardian, Isobel has not had capacity, by will or otherwise, to appoint anyone to act as guardian upon her death. As things currently stand, the Trust will be left without a guardian upon Isobel's death.
The Proposed Codicil sought to be authorised by the Court in the Statutory Will Action, is intended to address the issue of the Trust being left without a guardian upon Isobel's death, by appointing:
(a)her enduring attorney and personal representative appointed by her Will, Timothy John Ryan, to succeed her as guardian of the Trust; and
(b)if he does not survive her or is unable or unwilling to act, then such of Robyn, David and Mark, who survive her and are able and willing to act.
The variations to the Trust Deed in the Trust Action are sought to allow Mr Ryan, as Isobel's enduring attorney, to exercise the powers of appointor and guardian in place of Isobel, for such period as her loss of capacity subsists. The medical evidence indicates that it is unlikely there will be any positive change in that regard.
The applications are supported by Isobel's guardian ad litem and by her children, who as far as the plaintiff in each case is aware, are the only persons entitled to receive distributions from the Trust, or who would be entitled to receive any part of Isobel's estate under a previous will or on intestacy.

The evidence relied upon

Affidavits have been filed in support of the applications made in each of the Trust Action and the Statutory Will Action. There is a significant degree of overlap between them. The affidavits sworn by Timothy John Ryan in the Trust Action refer to and annex those sworn by him in the Statutory Will Action.

Statutory Will Action

In support of the orders sought in the Statutory Will Action, the plaintiff relies on:
(a)affidavits of Timothy John Ryan sworn on 17 August 2023, 31 October 2023 and 6 March 2024;
(b)affidavits of each of Isobel's children:
(i)Robyn Amber Schorer (Robyn) sworn on 8 September 2023;
(ii)David Graeme Hardie (David) sworn on 4 September 2023; and
(iii)Mark Roger Hardie (Mark) sworn on 1 September 2023;
(c)affidavit of Dr Jacquelyn Martin sworn on 31 August 2023 annexing her expert medical report dated 25 June 2023;
(d)affidavits of Isobel's guardian ad litem, Ian Torrington Blatchford sworn on 31 October 2023 and 30 November 2023;
(e)an outline of submissions filed on 19 January 2024; and
(f)an outline of supplementary submissions filed on 22 April 2024.

Trust Action

In support of the orders sought in the Trust Action, the plaintiff relies on:
(a)affidavits of Timothy John Ryan sworn on 17 August 2023, 31 October 2023 and 6 March 2024;
(b)affidavits of:
(i)Robyn sworn on 8 September 2023;
(ii)David sworn on 4 September 2023; and
(iii)Mark sworn on 1 September 2023;
(c)affidavit of Dr Jacquelyn Martin sworn on 20 December 2023 annexing her expert medical report dated 25 June 2023;
(d)affidavits of Isobel's guardian ad litem, Ian Torrington Blatchford sworn on 31 October 2023 and 30 November 2023;
(e)an outline of submissions and draft deed of variation filed on 9 February 2024; and
(f)an outline of supplementary submissions filed on 22 April 2024.
In both actions Mr Blatchford, as Isobel's guardian ad litem, has confirmed that he agrees with the submissions made on behalf of the plaintiff and to the orders sought.

Relevant factual background

The relevant background is common to both applications. The following facts are not disputed and are derived from the affidavits filed in each action, as summarised in the plaintiffs' written submissions.
As already noted, Isobel was born on 25 June 1942 and is 82 years of age.
Isobel and Barry married on 27 January 1962. Barry died on 6 May 2022.
Isobel and Barry had three children, who are all still living:
(a)Robyn, born on 10 June 1965;
(b)David, born on 20 March 1963; and
(c)Mark, born on 23 April 1969.
Neither Isobel nor Barry is known to have had any other children.
Isobel and Barry had the following grandchildren:
(a)Robyn's children:
(i)Samuel Rowan Schorer (born 22 January 1992);
(ii)Nicholas Paul Schorer (born 6 August 1993); and
(iii)Clayton Barry Schorer (born 19 February 1997);
(b)David's children:
(i)Luke Allan Hardie (born 9 November 1985); and
(ii)Brooke Alan Hardie (born 4 September 1989);
(c)Mark's children:
(i)Sarah Louise Hardie (born 25 June 1998); and
(ii)Emily Clare Hardie (born 7 October 1999).
David also has a stepdaughter, Annabelle Lila Moore (born 6 February 1992), whom Isobel treats and was treated the same as her other grandchildren.
Isobel is the beneficial owner of farming lands know as Freshfields, comprising 4,657 acres in the Shire of Williams (Farm Lands), on which a cropping and sheep farming business is carried on (Farm Business).
David lives on the Farm Lands and assists an independent farm manager in the management of the Farm Business, which is operated by a partnership, the Dryandra Grazing Co, of which 50% is owned by Isobel and 50% by the Trust.
The Trust was established following a meeting between the plaintiff in the Statutory Will Action, Timothy (Tim) Ryan, Barry and Isobel in early June 2018. Mr Ryan is a Chartered Accountant and acted as Barry's and Isobel's accountant and adviser from 1991. He is Isobel's enduring attorney under an enduring power of attorney made on 13 November 2006. On the same date, Isobel also appointed Mr Ryan as executor and trustee of her Will.
Mr Ryan deposes that, at the meeting in June 2018, he, Barry and Isobel discussed the benefits of introducing a discretionary family trust as a partner into the Farm Business. It was discussed that, amongst other things, the Trust:
(a)would act as a vehicle by which Barry and Isobel's children could seamlessly step in to continue to run and operate the Farm Business when Barry and Isobel died or became too old to farm; and
(b)was to provide a flexible structure that would allow any or all of the children to take part in the Farming Business with flexibility for income distributions to be made depending, inter alia, on the extent of the children's respective involvement in the Farming Business.
The Trust was established by deed made on 26 June 2018 (Trust Deed) between Con Peter Kramer as settlor and Dryandra Investments Pty Ltd as trustee (Trustee).
In the affidavits sworn by Dr Jacquelyn Martin in both actions (Martin Affidavits) and in her expert medical report of 25 June 2023 annexed to the Martin Affidavits, Dr Martin states that Isobel does not have and has lacked testamentary capacity since at least May 2021. Dr Martin's opinion is based on a detailed occupational therapy assessment of Isobel on 6 May 2021, which assessed Isobel to have significant cognitive losses in most domains tested. Dr Martin assessed Isobel on 2 August 2021 and found that she suffers from severe dementia of the Alzheimer's type and does not have the mental capacity:
(a)to understand the powers she holds as guardian and appointor of any trust;
(b)to understand the nature and extent of her property interests; or
(c)to comprehend and appreciate the claims on her bounty that she ought give effect to, nor to engage in the process of weighing those claims.
On 24 October 2023, Forrester J declared pursuant to O 70 r 1(c) of the Rules of the Supreme Court 1971 (WA) (RSC) that, by reason of mental infirmity, Isobel was incapable of managing her affairs in respect of these proceedings. An order was made on 7 November 2023 appointing Mr Blatchford as Isobel's guardian ad litem pursuant to RSC O 70 r 5.

The Trust Action

The relevant terms of the Trust Deed

Capitalised terms in this section of the reasons are defined terms, and have the meaning provided, in the Trust Deed.
The Specified Beneficiaries of the Trust are described in the Schedule to the Trust Deed as Barry, Isobel and their children. The present Specified Beneficiaries are Isobel, Robyn, David, and Mark.

Guardian

Clause 1.1 of the Trust Deed defines 'Guardian' to mean, relevantly, the person or persons (if any) successively named in the Schedule. The Guardian of the Trust is described in the Schedule to the Trust Deed as follows:
The said BARRY ROGER HARDIE (the 'first named person') or such other person or persons as the first named person may by will or instrument in writing (whether revocable or irrevocable and whether taking effect in the future or at present and whether subject to a contingency or not) appoint and failing any such appointment then upon the death or during any period of incapacity of the first named person the said ISOBEL MAY HARDIE (the 'second named person') (provided the second named person shall then be living) or such other person or persons as the second named person may by will or instrument in writing (whether revocable or irrevocable and whether taking effect in the future or at present and whether subject to a contingency or not) appoint.

Appointor

Clause 1.1 of the Trust Deed defines 'Appointor' to mean, relevantly, the person or persons successively named in the Schedule. The Appointor of the Trust is described in the Schedule to the Trust Deed as follows:
The said BARRY ROGER HARDIE (the 'first named person') or such other person or persons as the first named person may by will or instrument in writing (whether revocable or irrevocable and whether taking effect in the future or at present and whether subject to a contingency or not) appoint and failing any such appointment then upon the death or during any period of incapacity of the first named person the said ISOBEL MAY HARDIE (the 'second named person') (provided the second named person shall then be living) or such other person or persons as the second named person may by will or instrument in writing (whether revocable or irrevocable and whether taking effect in the future or at present and whether subject to a contingency or not) appoint.
Under the Schedule, Barry is the first named Guardian and first named Appointor and, in default of an alternative appointment by Barry, upon Barry's death or during any period of his incapacity, Isobel became the second named Guardian and Appointor, provided she was then living.
When Barry died on 6 May 2022, Isobel became the Guardian and Appointor of the Trust as Barry did not appoint a successor by his last will, nor did he appoint a successor by instrument in writing during his lifetime.

Effect of Isobel's loss of capacity on her appointment as Guardian and Appointor

I requested further submissions as to whether and, if so how, Isobel's lack of capacity affected her appointment as Guardian and Appointor of the Trust. It was submitted on behalf of the plaintiff that there is no legal principle nor statutory provision that imposes a requirement of mental capacity for a person to assume, or be appointed to, an office which confers on that person a power or powers. I have been unable to identify any authority to the contrary.
The plaintiff submitted that, leaving aside the proper construction of the trust instrument under which a person is appointed to the office of guardian or appointor, a lack of mental capacity does not of itself affect the validity of the appointment.[1] Rather, the consequence of a lack of capacity is that it prevents the valid exercise by the donee of the power or powers conferred. In support, the plaintiff relies on the commentary in chapter 14 of Jacobs' Law of Trusts in Australia,[2] by way of analogy, which states in relation to the appointment of trustees:
The appointment, when made, may appear undesirable by reason of old age, infirmity, or absence of capacity for reasoned judgment, and these factors may afford grounds for removal and the appointment of someone better qualified to act in that person's place, but the appointment itself will be valid.
[1] Referring to Geraint Thomas, Thomas on Powers (Oxford University Press, 2^nd ed, 2012), 7.12.
[2] JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (Lexis Nexis Butterworths, 8^th ed, 2016) (Jacobs) [14-01].
The plaintiff also points to the situation where a child or person who lacks mental capacity is appointed as a trustee, in which case the appointment is valid, but the person appointed is not capable of exercising any discretionary power. In that instance, the person under a disability may be replaced as trustee under s 7(1) of the Trustees Act.[3]
[3] See Jacobs [14-02] and the authorities referred to.
I have been unable to identify, and counsel for the plaintiff has not identified, any authority addressing a situation similar to that in this case concerning the lack of capacity of a guardian or appointor, as opposed to a trustee. However, I accept the plaintiff's submissions to the effect that, subject to the terms of the relevant trust instrument, incapacity of itself does not operate to render the appointment invalid. Rather, the person appointed is, by reason of their incapacity, incapable of giving effective consent or of exercising such powers as conferred on them by their appointment.
It is, of course, necessary to construe each trust instrument according to its terms. The principles that apply to the interpretation of a trust deed are the same as those that apply to the interpretation of contracts.[4] As for a contract,[5] a trust deed is to be construed objectively based on the understanding of a reasonable person in the position of the parties to it by reference to the contract as a whole, its text, context and purpose or objects.
[4] Mercanti v Mercanti [2016] WASCA 206 [68] - [80] (Buss P) and the authorities referred to. See also Blenkinsop v Herbert [2017] WASCA 87; (2017) 51 WAR 264 (Blenkinsop) [106]; Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93 [12] - [15].
[5] See Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [53]; JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112 [67] - [72] and the authorities referred to.
As stated by Buss P in Mercanti v Mercanti,[6] the words of a provision in a trust deed are to be given their ordinary and natural meaning, read in the context of the trust deed as a whole, unless the words have a special or technical meaning. As Buss P also stated in Mercanti v Mercanti:[7]
The search for 'intention' in relation to trusts, as with contracts, is for the intention as revealed in the words used by the parties. The expressed intention of the parties is to be found in the answer to the question, 'What is the meaning of what the parties have said?', not to the question, 'What did the parties mean to say?
[6] Mercanti v Mercanti [80] (Buss P). See also Mercanti v Mercanti [353] (Newnes and Murphy JJA).
[7] Mercanti v Mercanti [73] (Buss P), citing Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [53] (Gummow & Hayne JJ), [102] ‑ [107] (Heydon & Crennan JJ); Smith v Lucas (1881) 18 Ch D 531, 542 (Sir George Jessel MR); Commissioners of Inland Revenue v Raphael [1935] AC 96, 142 ‑ 143 (Lord Wright).

There is no requirement in the Trust Deed requiring Isobel to have mental capacity as a condition of her appointment, or for her to accept the appointment, as Guardian or Appointor. On a plain reading of the relevant provisions of the Trust Deed, as outlined, Isobel's appointment took effect upon Barry's death, if she was living at that time.
Other than in relation to Barry's appointment as the first named Guardian and Appointor, there is no provision in the Trust Deed that deals with the circumstance where a person named as Guardian or Appointor loses capacity.
Having regard to the terms of the Trust Deed, applying the principles governing the interpretation of trust instruments, as outlined, I accept the plaintiff's submissions to the effect that, at the time of Barry's death, Isobel:
(a)fulfilled the condition of appointment as Guardian and Appointor in that she was living at that time;
(b)did not, however, have the mental capacity to exercise the powers of Guardian and Appointor, or to appoint another or others by will or instrument in writing to act as Guardian or Appointor.
As such, whilst Isobel remains alive, and where no provision has been made for anyone to succeed her in those positions, there is no person appointed who has capacity to act as Guardian or Appointor, and there will be no Guardian upon Isobel's death.
By clause 14 of the Trust Deed, the Appointor has the power to remove any Trustee of the Trust and appoint additional or new Trustees. If the last surviving Appointor has not appointed any other person to act as Appointor on their death, that person's legal personal representative shall be entitled to exercise that power. However, there is no provision that deals with the circumstance where the Appointor is living but has lost capacity to act, as is the case here.

Guardian's consent required in relation to exercise of certain powers of the Trustee

By the terms of the Trust Deed, the Guardian's consent is required before the Trustee can exercise certain powers relating to the Trust.
When there is a Guardian, cl 9(c) of the Trust Deed provides that, subject to cl 9(e) which does not apply in the present circumstances, the Trustee of the Trust shall not exercise the reserved powers or the restricted powers except with the consent of the Guardian. The effect of this is that, while Isobel is the Guardian but has no capacity to give her consent, none of those powers can be exercised by the Trustee.
Where there is a Guardian named in the Schedule and there ceases to be a Guardian, cl 9(d) provides that the Trustee of the Trust shall not:
(a)exercise the reserved powers (clause 9(d)(i)); or
(b)exercise the restricted powers in such a manner that would impair or diminish the expectations of any Specified Beneficiary or of any other person or persons the Trust Fund is to devolve on the Vesting Day, as provided in cl 4 (clause 9(d)(ii)).
It is submitted, and I accept, that:
(a)clause 9(c) applies to the current situation where Isobel is the Guardian but does not have capacity to give her consent; and
(b)clause 9(d) would apply as things presently stand on Isobel's death, as Isobel is named in the Schedule as Guardian but on her death there will cease to be a Guardian (unless one is appointed).
The reserved powers are set out in cl 9(g)(i)(A)-(G) and the restricted powers are set out in cl 9(g)(ii)(A)-(B) of the Trust Deed. The Guardian's powers under the Trust Deed are effectively powers of veto. The Guardian has the power to decide whether to consent to an exercise of the reserved or restricted powers by the Trustee.
A summary of the reserved and restricted powers is set out in Annexure TJR‑14 to Mr Ryan's affidavit sworn on 17 August 2023 in the Statutory Will Action. It is not necessary for me to set them out in full. The relevant powers and the effect of there being no Guardian capable of consenting are described by Mr Ryan in his affidavit and conveniently summarised in the plaintiff's submissions, as follows.
Trustee unable to exercise Income Distribution Power
The reserved powers include, amongst others, the power under cl 3.1(a) of the Trust Deed to pay, apply or set aside net income to a General Beneficiary on the first occasion on which that power is exercised in relation to that General Beneficiary. To date, the only beneficiary to whom trust distributions have and can validly be made is Isobel.
Without the Guardian's consent, the Trustee's power to distribute income is significantly curtailed. The Trustee is prohibited from exercising the power to make discretionary distributions of income and is confined to:
(a)accumulating the income,[8] or distributing it to Isobel (both of which, it is submitted, would result in the income being taxed at the highest marginal tax rate); or
(b)by default,[9] holding the net income on trust for such of the Specified Beneficiaries then living (Isobel, Robyn, David and Mark) as tenants in common in equal shares (the Default Income Provisions).
[8] Pursuant to cl 3.1(b) of the Trust Deed.
[9] Pursuant to cl 3.4 and cl 4.2 of the Trust Deed.
The General Beneficiaries include other members of Barry's and Isobel's family, including (amongst others) their grandchildren. It is submitted that neither option allows for the flexibility intended when the Trust was settled. That is because the Default Income Provisions do not take into account circumstances in which:
(a)a child of Barry and Isobel dies leaving a child or children. In that case, the income would be held in trust for the surviving children of Barry and Isobel, and the issue of the deceased child would have no entitlement as long as one of Barry's and Isobel's children remains living; or
(b)one of Barry's and Isobel's children were to become bankrupt, or for some other reason it was not in a child's interests to receive a trust distribution.
Nor do the Default Income Provisions allow for differential distributions of Trust income to be made, having regard to the involvement of the children in the Farm Business, as intended.

Vesting day and related provisions

The Trust was established in 2018. The Vesting Day is 80 years from 26 June 2018, the date of execution of the Trust Deed.
If there is no successor Guardian upon Isobel's death, there will be no Guardian to consent to the Trustee exercising the restricted and reserved powers. This includes the restricted power under cl 6.1(a) of the Trust Deed, which requires the Guardian's consent to the Trustee making any capital distributions prior to the Vesting Day in June 2098, other than equally between the Specified Beneficiaries (Barry's and Isobel's children who are then living). Nor would the Trustee be able to bring forward the Vesting Day from 2098.
The Trustee will also be unable to exercise the reserved power under cl 4.1 of the Trust Deed to select and nominate which beneficiaries the Trust Fund will vest in on the Vesting Day and in what proportions. By default, the Trust Fund would vest in such of Barry's and Isobel's children who were living at the Vesting Day, equally if more than one (Default Vesting Provisions).
The Default Vesting Provisions give rise to similar issues to the Default Income Provisions. This includes, by way of example, that if only one of Barry's and Isobel's children was alive at the Vesting Day, that child would take the whole of the Trust Fund to the exclusion of any children or remoter issue of Barry's and Isobel's deceased children.

Trustee's records and accounts

Clause 13 of the Trust Deed confers powers on the Guardian to require the Trustee to provide information as to the names and addresses of the persons who have custody of the Trust assets, by way of substantiation of the Trust's accounting records. If there is no Guardian, that power can be exercised by the Specified Beneficiaries. However, those protective powers are unable to be exercised in the present circumstances, where there is a Guardian but the Guardian does not have the capacity to exercise them.

Power to vary

By cl 19, the Trustee has power to revoke, add to, vary, alter or amend the Trust, and any or all of the powers, terms and conditions, or provisions declared or included in the Trust Deed, including the Schedule. However, that is also a reserved power which may only be exercised by the Trustee with the Guardian's consent.
As Isobel does not have mental capacity, she is unable to consent to a variation of the Trust Deed. The Trust Deed makes no provision for the circumstance where the Guardian does not have or loses mental capacity.

The variations sought in the application

With the support of Robyn, David, Mark and Isobel, by her guardian ad litem, the plaintiff as Trustee of the Trust seeks the court's approval and assent on behalf of Isobel as Guardian under s 90 of the Trustees Act to two variations to the Trust Deed. The variations sought are as set out in paragraph 1 of the amended originating summons and in the draft Deed of Variation filed on 9 February 2024, as follows:
(a)The definition of 'Guardian' in the Schedule to the Trust Deed be varied by adding the following words:
and in the default of appointment, the second named person's legal personal representative.
(b)That the following clause be inserted after clause 14.1 of the Trust Deed:
14.1AIn the event that either the Appointor or Guardian by reason of mental disability, however occasioned, is declared by the Supreme Court of Western Australia or the State Administrative Tribunal of Western Australia to no longer have capacity to manage his or her own affairs, then any attorney of the Appointor or Guardian under a subsisting and valid enduring power of attorney may exercise the powers of Appointor and Guardian under this Deed in the place of the Appointor and Guardian for such period as the loss of capacity subsists.
The first variation is sought to address the position after Isobel's death by appointing her personal representative, Mr Ryan, as Guardian in default of Isobel having appointed another person or persons by will or instrument in writing. The Proposed Codicil, the subject of the Statutory Will Action, is also directed at addressing this issue.
The second variation is sought to address the circumstance where the person appointed as Appointor or Guardian is alive but has lost mental capacity and cannot exercise the powers of the office. It is submitted that a variation in those terms allows for the enduring attorney of the person appointed to exercise the powers of Appointor or Guardian for such period as the loss of capacity subsists.

Alternatively, the plaintiff seeks relief in the exercise of the court's inherent jurisdiction, to appoint Mr Ryan as Guardian and Appointor of the Trust on the basis that it is necessary to secure due execution of the Trust as intended when the Trust was settled. The alternative orders sought are those set out in the amended originating summons, as follows:
2.Alternatively to the orders sought in paragraph 1, the defendant be replaced by Timothy John Ryan as Guardian and Appointor of The Dryandra Trust.
3.Alternatively to the orders sought in paragraphs 1 and 2 above, upon the defendant's death, the defendant's legal personal representative be appointed as the successor Guardian of The Dryandra Trust.
The first alternative seeks to address the current situation by replacing Isobel as Guardian and Appointor of the Trust with Mr Ryan, her enduring attorney, if the court is not satisfied it is appropriate to make the orders sought under s 90 of the Trustees Act.
The second alternative is only sought if the court does not make the order sought under s 90 and does not make the order sought in the Statutory Will Action.

The court's power to vary under s 90 of the TrusteesAct

Section 90 of the Trustees Act provides, relevantly:
90.Varying or revoking certain trusts, Court's powers as to
(1)Without limiting any other powers of the Court, it is hereby declared that, where any property is held on trusts arising under any will, settlement or other disposition …, the Court may, if it thinks fit, by order approve on behalf of –
(a)any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who, by reason of infancy or other incapacity, is incapable of assenting[,]
…
Any arrangement (by whomever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts.
(2) … the Court shall not approve an arrangement on behalf of any person if the arrangement is to his detriment; and, in determining whether any such arrangement is to the detriment of a person, the Court may have regard to all the benefits that may accrue to him directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which he belongs.
…
(4)Any rearrangement approved by the Court under subsection (1) is binding on all persons on whose behalf it was so approved, and thereafter the trusts as so rearranged shall take effect accordingly.
…
The function of the court in an application under s 90 of the Trustees Act is to act as a substitute for the person who is incapable by reason of lack of mental capacity to signify their consent.[10]
[10] Faye & Ors v Faye & Ors [1973] WAR 68, 71-72 (Lavan J).
The plaintiff seeks the court's approval of the proposed variations to the Trust Deed on behalf of Isobel as Guardian. It is submitted that Isobel is a person having a direct or indirect interest under the trusts and is incapable of assenting to the 'arrangement' by reason of incapacity.
Though Isobel, by her guardian ad litem, and each of Robyn, David and Mark, support the application, the court must still be satisfied it has power to grant the relief sought under s 90 and, if so satisfied, that it is appropriate to exercise the power.
The plaintiff submitted by reference to The Public Trustee as Executor of the Will of Karoline Lilly Fiedler v Fiedler,[11] that before the court can make an order under s 90, it must be satisfied that:
(a)property is held on trust under a settlement or other disposition;
(b)the arrangement seeks to vary or revoke all or any of the trust; and
(c)the arrangement must not be to the detriment of the person on whose behalf the approval is being sought.
[11] The Public Trustee as Executor of the Will of Karoline Lilly Fiedler v Fiedler [2007] WASC 296 (The Public Trustee v Fiedler) [21] (Jenkins J).
It seems to me, having regard to s 90(1)(a), that in addition to the matters stated, the court must also be satisfied, relevantly, that the person on whose behalf the approval is being sought has a direct or indirect interest 'under the trusts', who by reason of incapacity is incapable of assenting.
It was submitted that the court's power under s 90(1)(a) to approve the proposed variations is enlivened in the circumstances of this case, where:
(a)property is held on trust under a settlement, the Trust Deed;
(b)Isobel has an interest in the Trust as Appointor, Guardian and as a Specified Beneficiary;
(c)by reason of her mental incapacity, Isobel is incapable of assenting to the proposed variations to the Trust Deed; and
(d)the proposed variations are not detrimental to Isobel, having regard to her and Barry's intentions when the Trust was created.
I accept that (a) and (c) above are satisfied, and that Isobel has an interest under the Trust as a beneficiary. However, the court is not being asked to assent to the variation sought on behalf of Isobel as a beneficiary. Isobel's consent is required in her capacity as Guardian because the Trustee's power to vary the Trust Deed under cl 19 is a reserved power.
I have been unable to identify, and counsel has not identified any authority to support the proposition that the court has power under s 90(1)(a) of the Trustees Act (or s 90 generally) to approve a variation to a trust where the consent of a guardian is required to vary the trust or trust instrument and it is the guardian who is incapable of assenting.
When considering the text of the section in context and having regard to the purpose of the legislation, I am not persuaded that s 90 extends to a power to approve a variation that requires the consent of a guardian who lacks capacity to provide such consent.
Section 90(1)(a) specifically refers to any person having a direct or indirect interest 'under the trust'.
Section 90(2) provides that the court shall not approve an arrangement on behalf of any person if the arrangement 'is to his detriment' and, in determining whether any such arrangement is to the detriment of a person, the court may have regard to 'all the benefits that may accrue to him directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which he belongs.'
The language of the section as a whole is, in my view, clearly directed to a person whose interests under the trust will or may be affected by the arrangement, relevantly, the variation sought to be approved. Whilst a guardian may also be a beneficiary in a trust, they do not have an interest in the trust property acting in their capacity as guardian. In their capacity as guardian, their role is limited to exercising the powers of that office.
It is difficult to conceive of a situation in which a variation to a trust would be to the detriment of a guardian. The 'detriment' is, in my view, clearly directed to those with an interest in the trust property to whom the 'benefits' may accrue.
For these reasons, it is unsurprising that no authorities have been identified supporting an exercise of the court's power under this, or similar provisions in other jurisdictions, where the court has approved a variation of a trust on behalf of a guardian incapable of assenting.
Ordinarily, applications under s 90 of the Trustees Act are made to approve an arrangement on behalf of a beneficiary of a trust, or a person who may become a beneficiary, or has or may in the future have some interest in the property held on trust or the relevant disposition. The person incapable of assenting is typically an infant or a person who, by reason of some other incapacity, is incapable of assenting to the variation, or is yet to be born or is unknown.[12]
[12] See for example, Coote v Clarke [2007] WASC 97; Muhling v Perpetual Trustees WA Ltd as Executor and Trustee of the Estate of Herbert Ross Andrew (Dec) [2001] WASC 225 (Muhling v Perpetrual Trustees); Glenister v Glenister [2001] WASC 133.
In The Public Trustee v Fiedler,[13] an application under s 90(1)(c) of the Trustees Act concerning approval of an arrangement on behalf of any unborn children, Jenkins J considered the proper construction of s 90 by reference to Hasluck J's decision in Muhling v Perpetual Trustees,[14] as follows:
32In the course of his reasons for decision, Hasluck J considered the nature of the power given in s 90 and the manner in which it should be exercised. His Honour said:
It is clear that the power to approve conferred by s 90(1) is discretionary. In essence, the power of the Court is to give its consent or approval on behalf of those beneficiaries or potential beneficiaries, infants, unborn and ascertained persons who, by reason of those and other disabilities, are incapable of consenting. The process is one in which the Court, in effect, joins with beneficiaries who are sui juris and entitled to the trust property so that they may exercise their proprietary rights to modify the intention of a testator: Palmer v McAllister (1991) 4 WAR 206.
A function of the Court on an application of this nature is to act as a substitute for the persons who are incapable, either because they lack capacity or because they are not born, to signify their consent. The proposal for variation is to be considered as a whole and, although the application may be designed to interfere with or modify the intention of the settlor, if there is no detriment likely to accrue to any person contingently interested and all interests will best be served by carrying into effect the proposed modification, then the application will be approved: Faye & Ors v Faye & Ors [1973] WAR 66.
Where, whilst the scheme proposed would be generally beneficial, there is a risk of detriment to the person or class of persons in respect of whom the Court's approval is sought, the Court may have regard to the degree of risk and, if it is a risk that an adult would be prepared to take to achieve the benefits to be derived from the scheme of rearrangement, then the Court may take that risk on behalf of the person or persons for whom its approval is sought: Re Cohen's Will Trusts [1959] 3 A[ll] ER 523 [25] - [27].
[13] The Public Trustee v Fiedler [32].
[14] Muhling v Perpetual Trustees [25] - [27].

Her Honour also considered authorities from other jurisdictions, which though not directly applicable, were informative as the provisions under consideration were in similar terms. Those cases also concerned the approval of variations to trusts where a beneficiary or potential future beneficiary was unable to assent to the variation.[15]
[15] The Public Trustee v Fiedler [33] - [41].
Though Isobel is a beneficiary of the trust, the application is not made in lieu of Isobel's assent in her capacity as a beneficiary, but her assent as Guardian.
For the reasons stated, I am not satisfied the court has power under s 90(1)(a) of the Trustees Act (or s 90 generally) to approve the variations to the Trust Deed on behalf of Isobel in her capacity as Guardian of the Trust. As such, I decline to make the orders in paragraph 1 of the amended originating summons.
I turn then to consider the orders sought in the alternative, to replace Isobel as the Guardian and Appointor of the Trust under the court's inherent supervisory jurisdiction.

The court's inherent jurisdiction to appoint a replacement Guardian and Appointor

Separately to the powers under s 90 of the Trustees Act, the court has inherent supervisory jurisdiction to see that trusts are properly executed. Courts have long recognised and exercised their supervisory jurisdiction over the administration of trusts, the principal duty being to see that the trusts are properly executed.[16]
[16] See Blenkinsop [72]; Cardacci v Cardacci [2023] WASCA 158 [196].
The plaintiff submitted that the court has discretionary power, under its inherent supervisory jurisdiction, to appoint a replacement or substitute guardian (and appointor) to a trust in circumstances where the named guardian (or appointor) has lost mental capacity and is no longer able to perform the powers of the office as envisaged by the settlor.
In contrast to the express power conferred by s 90, under its inherent jurisdiction, the court cannot vary or alter the terms of the relevant trust. Accordingly, as outlined, in the alternative to the variations sought under s 90 of the Trustees Act, the plaintiff seeks an order that Isobel be replaced by Mr Ryan as Guardian and Appointor of the Trust.
Counsel for the plaintiff had not identified, and I have not been able to identify, any decisions of this court in which a guardian has been replaced under an exercise of the court's inherent jurisdiction, or otherwise.
In Blenkinsop, the Court of Appeal (and Allanson J at first instance) considered the court's jurisdiction to remove and replace a guardian of a trust under the court's inherent jurisdiction. Though the circumstances of that case differ to those in the present case, the decision is instructive.
Relevantly, in Blenkinsop, the court was dealing with a trust in which six persons had been appointed to act as joint guardians with the obligation to exercise the powers of guardian unanimously. In the circumstances that arose, namely the dysfunctional relationship between the guardians, the guardians' powers were not being effectively engaged. The court was not willing to replace the guardians because to do so would be to alter the intended operation of the trust, namely the requirement for the six guardians to act unanimously.
There was no suggestion in Blenkinsop that the guardians did not have the capacity to act unanimously if they each chose to do so. It was accepted for the purposes of that case, that the power to remove the guardians (or some of them) could only arise if their position could be characterised as fiduciary,[17] which required that it be shown (on a proper construction of the terms of the trust) that they had a duty to act in the interests of the beneficiaries of the trust rather than in their own interest.
[17] Blenkinsop [75].
The court held the powers of the guardians in that case were personal and not fiduciary as contended for by the appellant. Ultimately, the court dismissed the appeal, upholding the primary judge's decision and conclusion that to order removal of the guardians would be an impermissible variation of the trust, which would be unaffected by a recognition of a fiduciary obligation on the part of the guardian, as contended for.
The circumstances in the present case are of a different character to those in Blenkinsop. Here there is only one guardian, Isobel who, because of her mental incapacity, is not legally capable of performing her powers as Guardian. The effect of Isobel's loss of capacity, amongst other things, means that despite there being a Guardian of the Trust:
(a)the Trustee cannot consult the wishes of the Guardian as provided in cl 9(a) of the Trust Deed;
(b)no one is capable of exercising the Guardian's power of consent to the Trustee's exercise of any of the reserved or restricted powers; and
(c)there is no person who can exercise the protective power in cl 13 of the Trust Deed.
The following observations of the Court of Appeal in Blenkinsop are instructive:[18]
70Under 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. 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.
71 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.
72… The court's principal duty is to see that trusts are properly executed. … 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. …
75… 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.
(citations omitted)
[18] Blenkinsop [70] - [72], [75].
In my view, these observations and the authorities from which they are derived, support a conclusion that the court has power under its inherent supervisory jurisdiction to remove and, relevantly, replace a guardian of a trust, if the circumstances are such as to warrant the exercise of the power. There is no fixed rule. Each case must be considered on its own facts and circumstances, including the terms of the relevant trust instrument.
I also consider that the court has power under its supervisory jurisdiction to appoint a replacement appointor, in the circumstances of this case where Isobel does not have capacity to perform that role, and the Trust is unable to operate as intended.
For the reasons stated, I am satisfied the court has power in its inherent supervisory jurisdiction to replace Isobel as Guardian and Appointor, as such is necessary to secure the proper administration and due execution of the Trust.
Isobel's proposed replacement, Mr Ryan, is Isobel's enduring attorney and the person appointed by Isobel as executor and trustee under her Will. It is submitted, and I accept, that Mr Ryan is a person in whom Isobel has clearly reposed her trust. He has no personal interest in the Trust. His appointment is supported by Isobel's guardian ad litem and Isobel's children, the other Specified Beneficiaries.
In the circumstances, I am satisfied that Mr Ryan is, in all respects, a suitable replacement as Guardian and Appointor of the Trust, and it is an appropriate exercise of the court's discretion to make an order that he replace Isobel as Guardian and Appointor as such is reasonably necessary to secure, but not alter, the due execution of the Trust.
Upon making that order, the alternative relief sought in paragraph 3 of the amended originating summons falls away.

The application in the Statutory Will Action

By the Proposed Codicil in the Statutory Will Action, it was proposed to exercise Isobel's power conferred on her under the Trust Deed, to appoint by will a successor Guardian of the Trust on her death. It was proposed that the plaintiff in the Statutory Will Action, Timothy John Ryan, be appointed in the first instance, and if he does not survive Isobel, or is unable or not willing to act, then such of Isobel's children who survive her and are able and willing to be appointed.
It is unclear from the terms of the Proposed Codicil as drafted, whether it is proposed that one of Isobel's children be appointed or they be appointed jointly. However, that is not a matter that need be addressed.
Upon making an order in the Trust Action that Mr Ryan replace Isobel as Guardian and Appointor, the orders sought in the Statutory Will Action are no longer required to provide for a Guardian to be appointed after Isobel's death. Also, the terms of the Proposed Codicil will no longer apply because Isobel will have been replaced as Guardian.
As such, it is neither necessary or appropriate to grant the relief or make the orders sought in the Statutory Will Action. I heard from the parties in respect of this on 8 July 2024, and they each confirmed they agreed that is so.

Conclusion and orders

For these reasons, I will make an order substantially in the terms of paragraph 2 of the amended originating summons in the Trust Action that Isobel May Hardie be replaced by Timothy John Ryan as Guardian and Appointor of The Dryandra Trust.
The plaintiff also seeks an order that the plaintiff's and the defendant's costs of the proceedings, calculated on an indemnity basis, be paid out of the assets of the Trust. The defendant, by her guardian ad litem, agrees that is the appropriate order. I am satisfied that an order should be made in those terms.
I will hear from the parties as to the final form of orders in each of the Trust Action and the Statutory Will Action. Alternatively, if the form of orders are agreed, the parties are to file an agreed minute of proposed orders in each action by 16 July 2024.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AP
Associate to Master Russell
9 JULY 2024