Orlanski v Spiegel
[2015] VSC 662
•25 November 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROBATE LIST
S CI 2015 00730
IN THE MATTER of the Will and Estate of JACOB MOSZKOWICZ, deceased
AND IN THE MATTER of the MOSZKOWICZ FAMILY TRUST NO 2 and the MOSZKOWICZ FAMILY TRUST NO 3
AND IN THE MATTER of an application pursuant to Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2005 for the determination of questions arising in the administration of the said estate and the said trusts
BETWEEN:
| HENRY JOSEPH ORLANSKI (who sues as the Executor of the Will and Estate of JACOB MOSZKOWICZ, deceased) and others (according to the attached schedule) | Plaintiffs |
| v | |
| DINA SPIEGEL and others (according to the attached schedule) | Defendants |
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JUDGE: | Ginnane J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 June 2015 |
DATE OF JUDGMENT: | 25 November 2015 |
CASE MAY BE CITED AS: | Orlanski v Spiegel |
MEDIUM NEUTRAL CITATION: | [2015] VSC 662 |
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TRUSTS – Discretionary Trusts – Construction of Trust Deeds – Lost trust deeds – Deeds of Confirmation – Effect of Deeds – Whether vesting and transfer of real estate valid – Third party joint guardians – Whether consent of each third party guardian required – Whether guardian in office.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr V Ruta | Jack Bock Lawyers |
| For the first and second Defendants | Mr R Boaden | Strongman & Crouch |
| For the third defendant | Mr L Glick QC | SBA Law |
| For the fourth defendant | In person | |
| For the fifth defendant | Mr J P Moore QC with Mr A J Verspaandonk | HWL Ebsworth Lawyers |
SCHEDULE OF PARTIES
| S CI 2015 00730 | |
| BETWEEN: | |
| HENRY JOSEPH ORLANSKI (who sues as the Executor of the Will and Estate of JACOB MOSZKOWICZ, deceased) | Firstnamed Plaintiff |
| - and - | |
| JAKEN NOMINEES PTY LTD (ACN 005 107 059) (as Trustee of the Moszkowicz Family Trust No 2) | Secondnamed Plaintiff |
| - and - | |
| GETEMA PTY LTD (ACN 005 117 591) (as Trustee of the Moszkowicz Family Trust No 3) | Thirdnamed Plaintiff |
| - and - | |
| DINA SPIEGEL | Firstnamed Defendant |
| - and - | |
| REBECCA MOSZKOWICZ | Secondnamed Defendant |
| - and - | |
| RAPHAEL MOSZKOWICZ | Thirdnamed Defendant |
| - and - | |
| JULIA MOSZKOWICZ | Fourthnamed Defendant |
| - and - | |
| ESTHER FELDMAN | Fifthnamed Defendant |
HIS HONOUR:
The questions for decision in this proceeding arise in part from the loss and later finding of two family trust deeds arranged by the late Jacob Moszkowicz. The proceeding is brought by his executor and seeks the Court’s answers to questions concerning the trusts and their operation.[1] One of the issues arising concerns the legal effect of Deeds of Confirmation that were executed while the trust deeds were lost. Another, is whether a requirement in one of trust deeds that decisions be made with the written consent of the trust Guardians required the consent of all of the Guardians. One of the Guardians is Mr Moszkowicz’s sister, Ms Gina Eschell, who has lived overseas for many years and is said not to have been involved in decisions about the trusts.
[1]See Amended Originating Motion dated 7 May 2015 brought under Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2005.
The practical issue behind these questions is whether real estate valued at over $10 million, which had been held on trust by two Moszkowicz family trusts, was vested in Mr Moszkowicz by decisions of the trustees and now forms part of his estate.
The proceeding also seeks answers to other questions concerning the two trusts. The parties are now agreed on the answers to most of the questions. I have considered the answers proposed by the parties and, where they were in agreement, have generally accepted their answers. I set out at the end of this judgment each of the questions that the first plaintiff, executor, asked and my answers to those questions that I consider can be answered, at least at this point.
Background to the proceeding
Mr Henry Joseph Orlanski brings this proceeding as the executor of the will and estate of Jacob Moszkowicz, who died on 10 May 2010.
Mr Orlanski is a director of Jaken Nominees Pty Ltd (‘Jaken’) and Getema Pty Ltd (‘Getema’). Mr Moszkowicz was a director of and shareholder in Jaken and Getema. Jaken was trustee of the Moszkowicz Family Trust No 2 (‘the No 2 Trust’) and Getema, the trustee of the Moszkowicz Family Trust No 3 (‘the No 3 Trust’). They are both family discretionary trusts.
Mr Orlanski made a number of affidavits and I take the facts from them. A number of other affidavits were also filed. No deponent was asked to attend for cross-examination.
Mr Orlanski was a long-time friend and confidant of Mr Moszkowicz and was his accountant. Mr Moszkowicz kept the Trust Deeds for the two trusts at his home and in effect made all the trustee decisions in respect of the trusts. Mr Orlanski agreed with his decisions.
On many occasions, Mr Moszkowicz told Mr Orlanski that he would update the trust deeds as circumstances required.
In 2009, the year before he died, Mr Moszkowicz wished to update the trust deeds but told Mr Orlanski that he could not locate the originals. Mr Moszkowicz retained a corporate services firm to ‘upgrade’ the deeds and overcome the difficulty of the missing originals. He executed confirmatory deeds which I will consider shortly. Solicitors prepared the confirmatory deeds on his instructions. Mr Orlanski signed them at Mr Moszkowicz’s request.
Mr Moszkowicz was married to Ziona Moszkowicz, but they divorced. She died in 1988. They had three children: Dina Spiegel, Rebecca Moszkowicz and Raphael Moszkowicz. Raphael Moszkowicz is disabled and needs constant care.
Mr Moszkowicz formed a relationship with Esther Feldman, which lasted for 23 years and they had a daughter, Julia Moszkowicz.
Mr Moszkowicz made his last will on 7 May 2010 and died three days later. He appointed Mr Orlanski as his executor and trustee and the sole appointor of the No 2 and No 3 Trusts. He devised his real estate amongst his children and left a yacht to Esther Feldman. He left his residuary estate on trust to pay the net income to Esther Feldman for life and thereafter to Julia Moszkowicz.
On 28 July 2011, Mr Orlanski obtained a grant of probate of Mr Moszkowicz’s will. The gross value of the estate was $10,528,502.81, of which $10,015,000.00 was the value of real estate.
Jaken and Getema had purported to vest in Mr Moszkowicz real estate that had been the trust property of the Trusts.
Since Mr Moszkowicz’s death, three proceedings have been brought against his estate under Part IV of the Administration and Probate Act 1958. They have been commenced first by Raphael Moszkowicz, secondly by Diana Spiegel and Rebecca Moszkowicz and thirdly by Esther Feldman and Julia Moszkowicz.
I will next say something of the two Moszkowicz Family Trusts that give rise to the questions before the Court.[2]
[2]The Moskowicz Family Trust No 1 was not the subject of any questions raised in the proceeding.
The Moskowicz Family Trust No 2
First is the No 2 Trust. As stated, Jaken is its trustee and Mr Moszkowicz and Mr Orlanski were directors of Jaken. Jaken was the registered proprietor of a property at Cheltenham, two units in St Kilda East, a property in Sunshine and held a half interest in a property in Greensborough.
The Trust Deed dated 1 July 1979 recited that the Settlor was desirous of making provision for the Specified Beneficiaries and the General Beneficiaries thereinafter described as and in the manner thereinafter set out.
The Specified Beneficiaries of the No 2 Trust were the children and grandchildren of Jacob Moszkowicz and Ziona Moszkowicz and also ‘Gina Ashel’, Mr Moszkowicz’s sister, and her husband Ori Ashel. Ms ‘Ashel’s’ surname is spelt in a number of ways in the papers that have been filed. The most common form used, and that which appears on relevant ASIC documentation, is ‘Gina Eschell’ and I will use that spelling.
Jacob and Ziona Moszkowicz were named as Guardians and Appointors of the No 2 Trust. Following Ziona’s death, Mr Moszkowicz became the sole Guardian and Appointor of the No 2 Trust.
Jacob Moszkowicz was a member of the class of General Beneficiaries.[3] The parties accepted that he had an expectancy, or spes, so that Jaken, the trustee, might make distributions to him from the No 2 Trust. They also accepted that he had an expectancy or spes in respect of distributions from No 3 Trust.
[3]I use the trust term ‘beneficiary’ although those entitled to receive a benefit under a discretionary trust are not strictly beneficiaries.
The Deed of Confirmation
As I stated, in 2009, Mr Moszkowicz was unable to find the original Trust Deeds of the two family trusts.
So, on 2 November 2009, Mr Jacob Moszkowicz, Mr Orlanski and Jaken executed a Deed of Confirmation in respect of the No 2 Trust. The Deed recited that:
WHEREAS on or about 11th June 1975, Luis Fleiszig as Settlor created the trust known as the MOSZKOWICZ FAMILY TRUST NO. 2 with the Appointor as appointer and the Beneficiaries as beneficiaries and the Trustee is the present trustee of the said Trust AND WHEREAS the original deed of trust has been lost or is not available and no verified copy exists and the said trust has been administered since the date of its formation by the Trustee or its predecessors as trustees and it is desirable that the terms of the trust are capable of being referred to and the parties hereto have agreed that the provisions set out in the annexure are similar to those in the original deed and are acceptable to each of the parties as provisions to govern the trust henceforth.
NOW THIS DEED WITNESSES
that the parties hereto agree and confirm that the provisions in the annexure hereto shall be taken to be the provisions of the deed governing the MOSZKOWICZ FAMILY TRUST NO. 2 from the date hereof.
There were significant differences between the original Trust Deed and the Deed of Confirmation. The No 2 Trust Deed provided that in default of appointment, the trust fund was held on trust for such of the brothers and sisters of each specified beneficiary as tenants in common as should be living at the vesting date and if there were none, to the next of kin of any of the Specified Beneficiaries living at the vesting day. Under the Deed of Confirmation, Mr Moszkowicz, himself, was the taker in default of appointment.
The Deed of Confirmation expanded the definition of the beneficiary class. The Specified Beneficiaries in the Deed of Confirmation are the children and grandchildren of Mr Moszkowicz and any entity of which he was a director or shareholder. There is a very wide class of ‘Related Beneficiaries’.
On 7 May 2010, Mr Moszkowicz made his last will and testament, to which I have previously referred.
On the same day, Jaken executed a document, entitled ‘Declaration by Trustee Vesting Assets of Trust Fund’, which vested in Mr Moszkowicz the properties that Jaken held as trustee. The declaration incorrectly included a unit in Malvern (and also stated an incorrect number for it). In fact, that unit was the property of the No 3 Trust.
The recitals to that Declaration were:
WHEREAS
A. The Trustee under a Deed of Settlement dated 11 June 1975 made between Luis Peter Fleizig as Settlor and the Trustee which Deed of Settlement established the Moszkowicz Family Trust No. 2 (“the Deed”) and the Trust Fund of such Trust (“the Trust Fund”).B. The Deed provides inter alia as follows:
“THE Trustees may in their absolute discretion notwithstanding anything to the contrary herein contained or provided -
(3) at any time or times and from time to time pay or apply to or for the benefit of any beneficiary the whole or any part of the capital or income to which he is absolutely or contingently entitled or in which he has an expectancy…”
C. The Trustee has resolved pursuant to the Deed to transfer the property owned by the Moszkowicz Family Trust No. 2 at 51 Taunton Drive, Cheltenham in the State of Victoria 3192 [and the undermentioned properties*] free of all taxes and duties including Capital Gains Tax to JACOB MOSZKOWICZ.
[*Apartments 3 and 4, 271 Balaclava Road East St Kilda
2/26 McArthur Street Malvern
359 Ballarat Road Sunshine]D. The Trustee has resolved pursuant to the Deed to transfer the one half interest in the property owned by the Moszkowicz Family Trust No. 2 at 80 Main Street, Greensborough in the State of Victoria 3088 free of all taxes and duties including Capital Gains Tax to JACOB MOSZKOWICZ.[4]
[4]Text in square brackets handwritten.
In respect of the date 11 June 1975 contained in Recital A, Mr Orlanski stated that that he is only aware of a Deed of Settlement for the Moszkowicz Family Trust dated 1 July 1979 and believes that the reference to 11 June 1975 should have been to that date. The other parties agreed with that contention. The parties did not suggest that that error affected the validity of the Vesting Declaration.
On 10 May 2010, the very day of Mr Moszkowicz’s death and three days after the Vesting Declaration was executed, he and Mr Orlanski, as directors of Jaken, executed a transfer to Mr Moszkowicz of the properties that Jaken held on trust.
The transfer has been stamped by the State Revenue Office but has not been lodged at the Land Titles Office for registration.
In August 2014, the original Deed of Settlement for the No 2 Trust was found.[5]
[5]Transcript of Proceedings, Orlanski v Spiegel (Supreme Court of Victoria, S CI 2015 00730, Ginnane J, 16 June 2015), 4 (‘T’).
The No 3 Family Trust
The No 3 Trust was created in 1981. The original trustee was DM Mendes Nominees Pty Ltd. In 1983, by a Deed of Change of Name of Trust, Deed of Change of Trustee and Deed of Change of Guardian and Appointor, Getema became the new trustee and the name of the trust was changed to the Getema No 1 Trust. For accounting and administration purposes, the Getema No 1 Trust was known as the ‘Moszkowicz Family Trust No 3’ and I have referred to it as the No 3 Trust.
Under the 1983 Deed, Jacob Moszkowicz, Ziona Moszkowicz and Gina Eschell were appointed the joint Appointors and Guardians of the No 3 Trust. Clause 4 stated:
The said JACOB MOSZKOWICZ and ZIONA MOSZKOWICZ and GINA ESCHELL are hereby appointed joint Appointors and Guardians of the Trust.
Ms Gina Eschell has lived in Israel since 1969. The 1983 Deed was signed by her attorney, her brother Mr Moszkowicz.
The Specified Beneficiaries of the No 3 Trust were the Yooralla Society of Victoria and the University of Melbourne. The additional members of the class of general beneficiaries included: The Jewish Welfare Society of Victoria, the Jewish Orphan and Children’s Aid Society and the Royal Victorian Institute for the Blind. Also included were any person who had made a contribution of not less than five dollars to any of the above organizations and the children, spouses, brothers and sisters and parents, uncles and aunts, cousins, grandchildren, grandparents and nephews and nieces of such contributors.
Mr Orlanski swore that since 10 December 1981, Mr Moszkowicz had made numerous donations to the Jewish Welfare Society of Victoria, or Jewish Care as it is now named. He made at least two payments each month. Mr Moszkowicz and Ms Feldman were very generous to a number of charities including those mentioned in the No 3 Trust Deed.
The parties ultimately agreed or did not dispute that both the fourth and fifth defendants were beneficiaries of the No 3 Trust.[6]
[6]T 15, 92, 94.
Getema was registered as the proprietor of two properties in Mentone and a unit or town house in Malvern.
The No 3 Trust Deed dated 10 December 1981 for the No 3 Trust stated that the term ‘Guardian’:
means successively the person or persons named in, or determined according to the terms of, the Schedule and holding office as Guardian.
The Schedule named ‘D.M. MENDES NOMINEES PROPRIETARY LIMITED’ as ‘Guardian & Appointor’ but, as previously stated, the 1983 Deed appointed Mr Moszkowicz, Ziona Moszkowicz and Gina Eschell as joint Appointors and Guardians of the No 3 Trust.
Clause 11 of the No 3 Trust Deed stated:
SUBJECT always to any express provision to the contrary herein contained every discretion vested in the Trustees shall be absolute and uncontrolled and every power vested in them shall be exercisable in their absolute and uncontrolled discretion without any obligation to consider competing claims of beneficiaries.
PROVIDED that notwithstanding anything contained in this Deed: -
(1) the Trustees may before exercising any discretion or power vested in them or making any determination hereunder consult the wishes of the Guardian (if any);
(2) where a Guardian is named in the Schedule and is in office the Trustees shall not exercise the powers contained in clauses 4, 5, 7, 8 (23), 8(27) and 19 hereof without the consent in writing of the Guardian; but if there is no Guardian in office the Trustees may exercise the said powers in their own discretion and without any consent;
(3) the Guardian may at any time by instrument in writing declare that thenceforth the Trustees shall not be obliged to obtain his consent or that of any future Guardian as a condition precedent to the exercise of any power or powers.
The powers that were listed in clause 11(2) as requiring the Guardians’ consent in writing were as follows. Clause 4 dealt with the payment of net income to beneficiaries. Clause 5 dealt with those who take in default of appointment. Clause 7 dealt with how sums held on trust could be dealt with, including the vesting of property. Clause 8(23) dealt with the appointment of new trustees, and clause 8(27) gave power to direct that the trust fund be held on new trusts.
Clause 19 gave the trustee wide powers to revoke, add to, or vary, all or any of the trusts.
Mr Orlanski stated that he and others thought that the No 3 Trust Deed was missing and that no verifiable copy existed. So, to rectify that situation, on 2 November 2009, he, Mr Moszkowicz and Getema executed a Deed of Confirmation for the No 3 Trust. It was in the same terms as the Deed of Confirmation for the No 2 Trust.
Although it was executed by Mr Moszkowicz and Mr Orlanksi who described themselves as appointors, Mr Moszkowicz, his wife and sister were in fact the named Appointors. The Deed also incorrectly recited that the No 3 Trust had been settled by Luis Fleiszig on 11 June 1975, when in fact it had been settled on 10 December 1981. The Deed of Confirmation specified Mr Moszkowicz as the sole corpus beneficiary and made him the sole taker in default. The other takers in default were removed. The definition of ‘discretionary class’ was expanded. The Deed of Confirmation also sought to alter the vesting date of the trust.
On 7 May 2010, Getema executed a Declaration by Trustee Vesting Assets of Trust Fund in Mr Moszkowicz in respect of the two Mentone properties. The Declaration did not refer to the Malvern unit.
The Declaration of Vesting contained the following recitals:
WHEREAS
A. The Trustee under the Deed of Settlement dated 11 June 1975 made between Luis Peter Fleiszig as Settlor and the Trustee which Deed of Settlement established the Moszkowicz Family Trust No. 3 (“the Deed”) and the Trust Fund of such Trust (“the Trust Fund”).B. The Deed gives the Trustee the power any time or times and from time to time to pay or transfer any investments or money appropriated to a share to which any person is or becomes absolutely entitled to such person absolutely if he is of full age.
C. The Trustee has resolved to transfer the property owned by the Moszkowicz Family Trust No. 3 at 5 Shearson Crescent, Mentone in the State of Victoria 3194 [and the undermentioned property*] free of all taxes and duties including Capital Gains Tax to JACOB MOSZKOWICZ.
[*19-25 Grange Road Mentone]NOW BY THIS INSTRUMENT:
1. On the date hereof the property at 5 Shearson Crescent, Mentone [and the undermentioned property] shall be vested and transferred by the Trustee to
JACOB MOSZKOWICZ.
[*19-25 Grange Road Mentone][7]
[7]Text in square brackets handwritten.
Again, Mr Orlanski believed that the reference in Recital A to a Deed of Settlement for the No 3 Trust dated 11 June 1975 was in error and intended to refer to the 1 July 1979 Deed establishing the No 3 Trust.
On 10 May 2010, Getema, by its directors Mr Moszkowicz and Mr Orlanski, executed a transfer of the Mentone and Malvern properties to Mr Moszkowicz. The stamp duty on the transfer has been paid, but it has not been lodged with the Land Titles Office.
Mr Orlanski stated that he discovered the originals of the Trust Deeds of the No 3 Trust in August 2014. He said that confusion surrounded which Trust Deed governed the No 3 Trust. If the 1981 and 1983 Deeds were the valid Trust Deeds, the question arose whether the real property held on trust under the No 3 Trust had been validly vested in and transferred to Mr Moszkowicz.
Mr Orlanski commenced this proceeding in order to obtain the Court’s determination of questions that arose from the above circumstances. He stated that he received different demands and instructions from the defendants as to the action he should take in respect of the transfers of land that had been executed.
The parties cannot agree on two important issues. The first, is whether the Deeds of Confirmation did replace the original Trust Deeds or did not have that legal effect and ceased to have any effect once the original Trust Deeds were found. The second issue is whether the written consent of all Guardians in office was required by the terms of the No 3 Trust to give effect to the Deed of Confirmation, the Vesting Declaration and subsequent transfer of property.
The first issue: were the Deeds of Confirmation valid?
All the parties, other than the fourth and fifth defendants, submitted that the Deeds of Confirmation were invalid, because the original Trust Deeds had been found. They argued that the Deeds of Confirmation were never intended to vary or amend the original Trust Deeds. By the Deeds of Confirmation, the trustees were seeking to confirm documents that were lost. The Deeds were legally ineffective attempts to confirm the contents of the missing Trust Deeds and not attempts to vary them.
The fifth defendant, Ms Feldman,[8] submitted that considered objectively, the Deeds of Confirmation were intended both to confirm and vary the original Trust Deeds. That was evident because the terms of the Deeds of Confirmation were different from the terms of the Trust Deeds. The Deeds of Confirmation were intended to be ‘similar’ to the original deeds, not the same. She made a number of submissions about the circumstances of the creation of the Deeds of Confirmation to support her contention. They were first that the No 2 and No 3 Trusts were established pursuant to the wishes of Mr Moszkowicz. He made all the trustee decisions and considered himself entitled to amend the Trust Deeds. In 2009, he wished to update them. He kept them at his home. By 2 November 2009, when he executed the Deeds of Confirmation, his personal circumstances had changed significantly from 1983, as he had divorced his wife and she had died. He had formed a relationship with Esther Feldman and they had a child, Julia Moszkowicz, from that relationship. The Deeds of Confirmation contained different definitions of beneficiaries reflecting Mr Moszkowicz’s changed family circumstances. They were expressed to operate from the date of their execution. While the title ‘Deed of Confirmation’ may have been chosen to avoid possible stamp duty liabilities caused by any resettlement,[9] those Deeds also significantly varied the original Trust Deeds.
[8]And the fourth defendant, who adopted the fifth defendant’s submissions.
[9]See generally, John Glover, ‘“Resettlements”: Revenue Consequences of Varying Discretionary Trusts (2005) 79 Australian Law Journal 620.
Conclusion on the first issue
The intention of the Deeds of Confirmation is to be determined objectively.[10] Adopting that approach, I consider that the Deeds of Confirmation were intended to state the terms of the No 2 and No 3 Trusts as varied or amended from 9 November 2009, which was the date of their execution.
[10]Byrnes v Kendle (2011) 243 CLR 253, 262–3 (French CJ), 273–4 (Gummow and Hayne JJ), 283–291 (Heydon and Crennan JJ).
I note, but leave to consider when dealing with the second issue, the question of whether in the case of the No 3 Trust, the requirement that the Guardians’ written consent be obtained was satisfied in respect of the relevant documents, the Deed of Confirmation, the Vesting Declaration and the transfer. I also leave for later consideration, determination of the legal consequences if that requirement was not met.
The Recitals of the Deeds of Confirmation demonstrate two matters. First, that the parties to the Deeds agreed that the terms contained in the annexure to the Deeds were similar to the terms in the original deeds. Secondly, that those terms were acceptable to the parties as the provisions to govern the Trust thenceforth. The Deed witnessed:
that the parties hereto agree and confirm that the provisions in the annexure hereto shall be taken to be the provisions of the deed governing the MOSZKOWICZ FAMILY TRUST NO. 2 from the date hereof.[11]
[11]The Deed of Confirmation of the Moskowicz Family Trust No 3 was in similar terms.
I consider that the Deeds of Confirmation both confirmed and varied the terms of the original Trust Deeds. They were not intended to cease having legal effect if or when the lost Trust Deeds were found. Nor were they an ineffective attempt to confirm the contents of the existing Trust Deeds. So much is clear from the changes made to the definitions of beneficiaries, which reflected Mr Moszkowicz’s altered personal circumstances. Mr Moszkowicz had significant reasons for wishing to vary or amend the original trusts.
Deeds of Confirmation, or Affirmation as they are sometimes called, often confirm a grant, but can also alter the grant.[12]
[12]Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2012] WASC 443 [130]–[131] (Edelman J).
The Vesting Declaration of 7 May 2010 in respect of the No 2 Trust did not rely on the vesting power contained in the Deed of Variation, but appears to have relied on the vesting power contained in the original Trust Deed. The identification of the source of the vesting power relied on in the Vesting Declaration in the No 3 Trust is less clear. It may be that the vesting clause in the No 1 Trust Deed was used as a template or precedent, or the parties may have assumed that there was a vesting power. The evidence does not permit a conclusion on those matters. In any event, I do not consider that that uncertainty has any present legal significance.
The Deeds of Confirmation do not state the power under which they were made. That is understandable as the original Deeds of Trust were lost. But the power to ‘revoke, add to or vary’ was sufficient to permit the execution of the Deeds of Confirmation. The parties may well have assumed that there was such a power. It was unnecessary that the power that was relied on be expressly referred to. The power to alter provisions of a family discretionary trust permits the addition of new beneficiaries.[13]
The second issue: in the case of the No 3 Trust was the consent of the guardians given to the trustee’s exercise of power?
[13]Kearns v Hill (1990) 21 NSWLR 107.
The second issue upon which the parties disagreed was in respect of the No 3 Trust. The issue was whether the fact that Ms Gina Eschell, who was stated to be a Guardian, did not execute the Deed of Confirmation, the Declaration of Vesting or the transfer of the three properties to Mr Moszkowicz meant that those exercises of trustee’s powers were not legally valid.
This issue did not affect the No 2 Trust, as at relevant times Mr Moskowicz was the only Guardian.
I will deal first with the question of whether all Guardians appointed under the No 3 Trust by the 1983 Deed, still living and in office, were required to give their individual written consent to the trustee’s decisions to sign the Deed of Confirmation, the Vesting Declaration and the transfer of land.
Hardingham and Baxt describe the role of appointors and guardians under a discretionary trust as follows:
It will be of crucial interest to settlor, trustees and objects alike to appreciate the circumstances in which the court will interfere with the activities of discretionary trustees. If the settlor is to engage in a form of estate planning that leaves a trustee or some other person with wide discretions to benefit designated objects of the settlor’s bounty, then the question naturally arises how far those discretions can be controlled. Of course, the settlor can build into the trust machinery particular controls and restraints such as, for example, powers of veto or revocation or powers of re-appointment. He may provide for an appointor or guardian. The former is usually given power to remove and replace trustees. The latter is given similar power coupled with more direct control (usually by way of power of veto) over the trustees’ decision-making.[14]
[14]I J Hardingham and R Baxt, Discretionary Trusts, (Butterworths, 2nd ed, 1984) 93 [501].
Guardians are called protectors in some jurisdictions. They are often given powers to monitor, oversee and even control the trustees in the administration of the trust.[15]
[15]David Hayton et al (eds), Underhill and Hayton – Law Relating to Trusts and Trustees, (Lexis Nexis Butterworths, 17th ed, 2006) 41–46 (‘Underhill & Hayton’); Geraint Thomas and Alastair Hudson, The Law of Trusts, (Oxford University Press, 2nd ed, 2010) 672.
The plaintiffs’ submissions
The plaintiffs submitted that if the consent of all the Guardians was required and was not obtained, it was up to the Guardians to obtain an injunction to prevent the vesting and transfer of the properties. As no such injunction had been obtained, the vesting and transfer of the No 3 Trust properties were legally effective.
Alternatively, because Ms Eschell had lived in Israel for many years, she could no longer be regarded as in office as an Appointor and Guardian of the No 3 Trust or should be taken to have resigned from those offices.
I should mention at this point that the solicitor for the first and second defendants, Mr Andrew Joseph, made an affidavit referring to conversations that he had with Ms Eschell. He stated that on 5 and 9 June 2015, he spoke on the telephone to Ms Eschell, who he said had resided in Israel since 1969. He explained to her that it was to be argued in the proceeding that she, as a ‘Guardian’ of the No 3 Trust, had not consented to transactions undertaken by the trustee in May 2010. On 5 June 2015, he emailed her the amended originating motion, the deeds of 1981 and 1983, the declaration by the trustee of 7 May 2010[16] and the transfer of land dated 10 May 2010. He then stated:
Mrs Eshel stated to me categorically in each of our discussions on 5 June 2015 and (after she had considered the above documents ) on 9 June 2015 that she had no knowledge or awareness of having ever been made an “appointor” or “guardian” of the No 3 Trust until a day or two before I spoke to her on 5 June 2015. She was adamant that neither her brother, the deceased Jacob Moszkowicz, or anyone else, had ever told her that she held either of these offices, and she was not informed about them until the first defendant’s husband, Nathan Spiegel, spoke to her on the telephone about 10 days ago.[17]
[16]The affidavit incorrectly gives the date of the declaration as 7 May 2012.
[17]Affidavit of Andrew Henry Joseph sworn 11 June 2015, [4].
There was initial objection to reliance on this affidavit but that objection was withdrawn.[18]
[18]T 6 and 59.
First and second defendants’ submissions
The first and second defendants submitted that the intention of the No 3 Trust Deed was to be assessed objectively from the words used, amplified by facts known to both parties. Counsel submitted that the three Guardians held office jointly and were close relatives. The Trust Deed required the prior written consent of the Guardian for the exercise of many of the trustee’s powers, in particular the power to distribute income. In construing the Trust Deed an intent to give business efficacy to the operation of the trust was to be assumed. It was improbable that the Trust Deed was intended to require that the three Guardians’ consents and signatures be obtained each time the trustee exercised any of the specified powers.
The appointment of persons as ‘joint’ Guardians did not require that when consent had to be given by the Guardians that they all had to give consent. Any one Guardian could give consent. A construction that all were required to give consent might bring down the trust as many decisions had been made which had not been consented to by Ms Eschell.
The first and second defendants also submitted that the transfer of the property held by the No 3 Trust was given effect to by the vesting declarations and it was not relevant if the declarations were invalid as the transfer took effect in accordance with the principle in Milroy v Lord.[19]
[19](1862) 4 De GF & J 264, 274.
The third defendant made similar submissions.
Submissions of the fourth and fifth defendants
The fourth defendant, Julia Moszkowicz, appeared in person and adopted the submissions of the fifth defendant.
The fifth defendant stated that distributions of trust income under the No 3 Trust had been made to both Esther Feldman and Julia Moszkowicz. Those distributions were evidenced by financial documents exhibited to an affidavit sworn by the fifth defendant’s solicitor.
The fifth defendant submitted that all of the Guardians who were in office had to consent to the trustee’s exercise of the specified powers. Ms Eschell has been a director of Getema since 1986, so she must have been intended to sign trust documents. She was also a shareholder of Getema.
The fifth defendant submitted that the Deed of Confirmation of the No 3 Trust was not valid, because Ms Eschell had not consented to it. Consequently, the Trust Deed dated 10 December 1981, as amended by the Deed dated 1 March 1983, continued in force. For similar reasons, the Deed of Vesting and the transfer of the properties had no legal effect. The vesting of the real estate was invalid, because Ms Eschell’s written consent as a Guardian had not been obtained.
Conclusion on second issue
The question of whether all the Guardians in office must consent to the trustee’s exercise of the specified powers requires the construction of the provisions of the Trust Deed and the Deed appointing the Guardians.
I consider that the wording of the Trust Deed and Deed appointing the Guardians require the written approval of all the Guardians in office for the valid exercise by the trustee of the specified powers. The Trust Deed required that all Guardians, who were in office, consent in writing to the exercise of specified powers including the varying and vesting powers. The trustee, through its directors, knew when Ms Eschell was appointed a Guardian, that she lived in Israel. Any inconvenience likely to be caused by that fact would have been known at that time and could have been alleviated by her appointing her brother as her attorney, as indeed Ms Eschell appears to have done.
I consider that the requirement for all Guardians to consent in writing flows from the ordinary meaning of the words used in the definition of ‘Guardian’ and the terms of clause 11 of the Trust Deed and of the terms on which the Guardians were appointed by the 1983 Deed. The Trust Deed defines the office of ‘Guardian’ in terms which may include more than one person. That definition then governs the meaning of the term ‘Guardian’ in clause 11. Then the 1983 Deed of Change of Name of Trust, Deed of Change of Trustee and Deed of Change of Guardian and Appointor appointed the three persons as joint Appointors and Guardians of the Trust. Those provisions contain no indication that one of the persons appointed could exercise the powers of Guardian without the consent of the others.
Clause 11(3) of the 1981 Trust Deed described the consent of the Guardians as being a precondition to the exercise of the specified powers.
I consider that the written consent of each of the Guardians who were in office was required to create the Deed of Confirmation and to make the vesting declarations and transfer of land held by the No 3 Trust.
If Ms Eschell was in office as a Guardian, I do not consider that the principle of equity in Milroy v Lord[20] had the effect for which the parties, other than the fourth and fifth defendant, contended. That principle gives effect to the assignment of property without consideration where the settlor has done everything which, according to the nature of the property comprised in the settlement, was required in order to transfer the property and render the settlement binding on him or her. Getema did not do everything necessary to vest the trust property in Mr Moszkowicz, as it did not obtain the written consent of the Guardians. The vesting of property in him was invalid. There was no valid disposition. Lewin on Trusts contains the following relevant statement concerning the requirement that the consent of third parties be obtained for the exercise of trust powers:
Settlements and wills have likewise often required the consent of third parties to the exercise of various powers by the trustees, the requirement thus conferring a power of veto. The consent of third parties is often required, for instance, to the sale of trust assets or the exercise of powers of advancement or of investment powers; in the absence of a consent required by the terms of the power, a purported exercise is simply invalid.[21]
A requirement of consent is a power of veto and so, in common with all powers other than beneficial powers, it is subject to the limitation that it can be used only for the purpose for which it was conferred.[22]
[20]Milroy v Lord (1862) 4 De GF & J 264, 274; Corin v Patton (1989) 169 CLR 540; Marchesi v Apostoulou (2006) 235 ALR 136.
[21]Lynton Tucker et al (eds), Lewin on Trusts (Sweet & Maxwell, 19th ed, 2015) 1263 (citations omitted) (‘Lewin’), Cf Underhill & Hayton, above n 15, 41–7.
[22]Lewin, above n 21, 1270.
To similar effect is the following statement in Thomas on Powers:
Where the giving of consent is regarded as a condition precedent, then clearly unless and until the consent is given, any exercise of the power is to all intents and purposes void.[23]
[23]Geraint Thomas, Thomas on Powers (Oxford University Press, 2nd ed, 2012) 348 (citations omitted).
Was Ms Eschell in office as a guardian at relevant times?
However, my decision on the second issue raises another issue: was Ms Eschell in office as a Guardian of the No 3 Trust at relevant times?
The following facts are known. The Deed that appointed Ms Eschell and Jacob and Ziona Moszkowicz as ‘joint Appointors and Guardians of the Trust’ was signed for her by her brother, Jacob Moszkowicz, as her attorney under power. She had lived in Israel for many years before she was named as a Guardian. She was a director and shareholder of Getema. I have set out previously the statements contained in Mr Joseph’s affidavit as to his conversations with Ms Eschell.
Lewin on Trusts states under the heading ‘Acceptance and Disclaimer of Trusts’:
Right to disclaim
No one can be compelled to accept a trust. Thus the intended trustee can disclaim the office as a whole at any time before acceptance, but not afterwards.[24]
[24]Lewin, above n 21, 560.
And Lewin on Trusts further states, that disclaimer can occur by deed, by writing under hand, by a defence, at the bar of the court or by an oral refusal to act. A disclaimer can also be implied from conduct inconsistent with acceptance.[25] I apply those principles to the office of Guardian under a trust.
[25]Ibid 560–1.
The parties other than the fourth and fifth defendant contend that Ms Eschell never took office as a Guardian. They rely on the absence of evidence that she played any role as Guardian in connection with No 3 Trust.
I am not prepared to find at present that Ms Eschell was not in office as a Guardian in 2009 and 2010. I take into account that she was living in Israel when she was appointed a Guardian. It appears that she appointed her brother as her attorney. It was not suggested that the death of Ziona Moszkowicz had the effect that all of the Guardians of the No 3 Trust lost office.
However, the contents of Mr Joseph’s affidavit throw doubt on Ms Eschell’s position as a Guardian and contain hearsay evidence suggesting that she may never have taken office as a Guardian. But, that evidence is brief and may not provide a basis for concluding that she did not take office as a Guardian or had ceased to be a Guardian. The parties made limited submissions on those issues. In those circumstances, it would be wrong for the Court to answer the questions relating to the No 3 Trust, that turn on whether Ms Eschell was, at relevant times in office as a Guardian, without giving the parties an opportunity to consider my reasons for judgment and decide whether they wish to provide further evidence, including from Ms Eschell, on whether she became and remained a Guardian of the No 3 Trust and make submissions about any such evidence.
Accordingly, I will defer answering questions 8 and 11 to 13.
Conclusion
I provide the following answers to the questions raised by the amended originating motion.
Question 1
Is the Trust Deed that established the Moszkowicz Family Trust No 2, of which the Second Plaintiff is trustee, the one dated:
(a) 1 July 1979; or
(b) 11 June 1975; or
(c) some other and, if so, what date?
Answer: The Trust Deed dated 1 July 1979.[26]
[26]Affidavit of Henry Orlanski sworn 19 March 2015, [9].
Question 2
From 2 November 2009, was the Trust Instrument that governed the Moszkowicz Family Trust No 2 the:
(a) Trust Deed dated 1 July 1979; or
(b) Trust Deed dated 11 June 1975; or
(c)Annexure to the Deed of Confirmation dated 2 November 2009 in respect of the Moszkowicz Family Trust No 2; or
(d) some other Trust Instrument and, if so, what other Trust Instrument?
Answer: The Deed of Confirmation dated 2 November 2009 in respect of the Moszkowicz Family Trust No 2 (see Reasons [56]-[62]).
Question 3
On the true construction of the Trust Instrument governing the Moszkowicz Family Trust No 2 as at 7 May 2010, was the Second Plaintiff entitled to vest the real estate of the Trust in the Deceased absolutely because:
(a) the Deceased was contingently entitled thereto; or
(b) the Deceased had an expectancy or spes in such real estate; or
(c) for some other and, if so, what reason?
Answer: Yes, because (b), the Deceased had an expectancy in such real estate (see Reasons [21]).
Question 4
If yes to any part of Question 3, was the Declaration by Trustee Vesting Assets of Trust Fund made 7 May 2010 and executed by the Second Plaintiff (‘the Jaken Declaration’) valid and effectual to vest the real estate assets therein specified (with the exception of 2/26 McArthur Street, Malvern in the State of Victoria) in the Deceased notwithstanding (in the event that the Trust Deed dated 11 June 1975 is not the founding Trust Deed of the Moszkowicz Family Trust No 2 trust), the Jaken Declaration may have referred to the wrong Deed of Settlement in Recital A thereto?
Answer: Yes, the Declaration by Trustee Vesting Assets of Trust Fund – Moskowicz Family Trust No 2 made 7 May 2010 was valid. The error in Recital A of the date of the Deed of Settlement did not affect its validity: (see Reasons [29]).
Question 5
If yes to Question 4, may the First Plaintiff as the legal personal representative of the deceased lawfully lodge with the Land Titles Office an Instrument of Transfer executed on or about 10 May 2010 whereby the Second Plaintiff purported to transfer the real estate therein specified to the Deceased?
Answer: Yes.
Question 6
If yes to any part of Question 3 but no to question 5, may the First Plaintiff, in his capacity as executor of the Will and the estate of the Deceased, request the trustee to execute a transfer in registrable form of the real estate assets specified in the Jaken Declaration, but excepting in respect of 2/26 McArthur Street, Malvern, Victoria?
Answer: Not applicable.
Question 7
Is the Trust Deed that established the Moszkowicz Family Trust No 3, of which the Third Plaintiff is trustee, the one dated:
(a) 1 July 1979; or
(b)11 June 1975 as confirmed in a Deed of Confirmation executed by the Deceased, the Plaintiff and the Third Plaintiff on 2 November 2009 in respect of the Moszkowicz Family Trust No 3;
(c)10 December 1981 wherein Luis Peter Fleiszig was settlor and DM Mendes Pty Ltd was trustee which established the Elstern No 9 Trust, as amended by a Deed of Change of Name, Deed of Change of Trustee and Deed of Change of Guardian and Appointor dated 1 March 1983 whereby:
(i) The said Trust changed its name to Getema No 1 Trust;
(ii)DM Mendes Pty Ltd resigned as trustee and the Third Plaintiff was appointment as trustee; and
(iii)the Deceased, Ziona Moszkowicz and Gina Eschell were appointed as joint Guardians and Appointors; or
(d) Some other and if so what Trust Instrument?
Answer: (c), the Trust Deed dated 10 December 1981 as amended by the Deed of Change of Name of Trust, Deed of Change of Trustee and Deed of Change of Guardian and Appointor dated 1 March 1983 (see Reasons [33]–[34]).
Question 8
From 2 November 2009, was the Trust Instrument that governed the Moszkowicz Family Trust No 3 the:
(a) Trust Deed dated 1 July 1979; or
(b) Trust Deed dated 11 June 1975; or
(c) Trust Deed dated 10 December 1981; or
(d)Annexure to the Deed of Confirmation dated 2 November 2009 in respect of the Moszkowicz Family Trust No 3; or
(e) some other Trust Instrument and, if so, what other Trust Instrument?
Answer: The Court defers answering this question.
Question 9
If the answer to question 7 or 8 is ‘the Trust Deed dated 10 December 1981 referred to in paragraph 14 of the affidavit of Henry Joseph Orlanski sworn 19 March 2015 (or an answer to a similar effect):
(a) is the fourth-named defendant (Julia Moszkowicz) a beneficiary of the trust?
(b) is the fifth-named defendant (Esther Feldman) a beneficiary of the trust?
Answer: Yes, to both (a) and (b) (see Reasons [38]).
Question 10
If yes to all or any part of Question 8, was the Third Plaintiff entitled to vest the real estate of the Trust in the Deceased absolutely because:
(a) the Deceased was contingently entitled thereto; or
(b) the Deceased has an expectancy or spes in such real estate; or
(c) for some other and, if so, what reason?
Answer: Yes, but only with the written consent of the Guardians in office: Reasons [21].
Question 11
If yes to any part of Question 10, was the Declaration by Trustee Vesting Assets of Trust Fund made 7 May 2010 and executed by the Third Plaintiff (‘the Getema Declaration’) valid and effectual to vest the real estate assets therein specified in the deceased notwithstanding that the Getema Declaration may have referred to the wrong Deed of Settlement in Recital A thereto?
Answer: The Court defers answering this question.
Question 12
If yes to Question 11, may the First Plaintiff as the legal personal representative of the Deceased lawfully lodge with the Land Titles Office an Instrument of Transfer executed on or about 10 May 2010 whereby the Third Plaintiff purported to transfer the real estate therein specified to the Deceased?
Answer: The Court defers answering this question.
Question 13
If yes to any part of Question 10 but no to question 12, may the First Plaintiff, in his capacity as executor of the Will and the estate of the Deceased, request the trustee to execute a transfer in registrable form of the real estate assets specified in the Getema Declaration?
Answer: The Court defers answering this question.
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