Kennon & Ors v Spry & Ors; Spry v Kennon & Ors

The High Court of Australia considered appeals and cross-appeals in *Kennon & Ors v Spry & Ors; Spry v Kennon & Ors*. The dispute concerned the proper construction and effect of a discretionary trust deed, specifically whether a beneficiary's entitlement to trust income and capital was extinguished by his conduct, and whether the trustee had validly exercised its discretion to appoint trust property to a company. The primary issue was the enforceability of the trustee's purported exercise of discretion in light of the beneficiary's alleged misconduct.

The Court was required to determine whether the trustee's discretion to appoint trust property to the company was validly exercised, given the beneficiary's alleged misconduct. This involved considering whether the beneficiary's conduct constituted a breach of trust or other conduct that would disentitle him from benefiting from the trust, and whether the trustee's exercise of discretion was a sham or otherwise invalid. The Court also had to consider the proper interpretation of the trust deed in relation to the trustee's powers and the beneficiary's entitlements.

The High Court held that the trustee's purported exercise of discretion was invalid. The Court reasoned that the trustee's actions were not a genuine exercise of the discretion conferred by the trust deed, but rather an attempt to circumvent the beneficiary's rights and prevent him from receiving his entitlements. The Court applied principles of trust law concerning the proper exercise of trustee powers, the concept of a sham transaction, and the disentitlement of a beneficiary due to misconduct. The Court found that the trustee had acted in bad faith and that the purported appointment was a nullity.

Consequently, the High Court allowed the appeal in part and dismissed the cross-appeal, setting aside the orders of the Full Federal Court and remitting the matter to the Federal Court for further orders consistent with the High Court's judgment.