Pope v DRP Nominees Pty Ltd & Anor No. Scgrg-96-1003 Judgment No. S6933

POPE v DRP NOMINEES PTY LTD & ANOR
[1998] SASC 6933

OLSSON J. These proceedings have already had a lengthy, expensive and unhappy history. They are, essentially, the product of an internal family falling out, in the course of which emotion and intransigence appear to have held sway over commercial reality and common sense. In the event, the legal profession seems almost certain to supplant the beneficiaries in the trust which is the subject of these proceedings.
The present action is concerned with what is known as the Pope Family Trust. This was a discretionary trust established by a Deed executed by Oliver Edgar Pope (“the Settlor”) on 5 November 1974. I will simply refer to that document as “the Deed”.
Although there are significant conflicts as to certain facts arising on the affidavits filed in the proceedings, many of the core facts and circumstances are clearly beyond dispute. I will, initially, focus on these.
The Deed appointed DRP Nominees Pty Ltd as the trustee of the trust. I will refer to that company as “the Trustee”.
As at 20 October 1995 a search of Australian Securities Commission records revealed that the directors of the Trustee were said to be WB Finnie & Co Pty Ltd and Desmond Roy Pope, a son of the Settlor. I will refer to Desmond Roy Pope as “ Desmond Pope”.
WB Finnie & Co Pty Ltd appears to be a company of which Desmond Pope is a director. How, conformably with the provisions of section 221(3) of the Corporations Law, it can currently be a director of the Trustee, presently eludes me. The shareholders of the Trustee are said to be Desmond Roy Pope, Valerie Doris Pope, Dale Tricia Pope, Danielle Edna Pope and Deanne Valerie Pope. Valerie, Dale and Danielle collectively hold the majority of shares, although Desmond Pope has the largest individual shareholding.
The Deed stipulates that the ultimate vesting date in respect of the trust’s assets is to be the 21st anniversary of the death of the last to die of a nominated list of potential beneficiaries. In the meantime the Trustee is invested with a wide discretion to allocate and pay the whole of the net annual income of the trust “to or for the benefit of such one or more of the nominated beneficiaries to the total or partial exclusion of any one or more of [them] in such shares and proportions and in such manner as the Trustee shall in its absolute discretion determine ... ”. A similar broad discretion is conferred on the Trustee to make distributions of corpus prior to the vesting date.
The nominated beneficiaries, for the purposes of the trust, were Valerie Doris Pope (the wife of Desmond Pope) and their children Desmond Oliver Pope (the plaintiff) and Deanna Valerie Pope, Dale Trisha Pope, Daniele Edna Pope and Darryn Scott Pope, any other grandchildren of the Settlor and the issue of any grandchild. There was another adopted grandchild, Debbie Kay Pope.
Clause 10 of the Deed is expressed as under:-
“10. In the event of the Trustee resigning from its appointment hereunder or being otherwise unwilling or unable to act or effectively to perform its functions hereunder then the power to appoint a new trustee being a company or a new trustee being a natural person or persons shall reside in the Settlor in the first instance and failing him in the said Desmond Roy Pope during his lifetime PROVIDED that in the event of new trustees being natural persons being so appointed then they shall not be less than two in number PROVIDED FURTHER that subject as aforesaid the provisions of Part V of the Trustee Act 1936 as from time to time amended shall apply to the appointment of new trustees hereunder.”
It is, at once, to be noted that the power of appointment vested in Desmond Pope only arises upon the occurrence of the specific contingencies referred to. Those contingencies do not include the removal of the Trustee by order of this court.
So far as I can determine, the Settlor died in about 1977.
All of the evidence in this matter is contained in a series of affidavits. I must do the best possible to extract the core history from what is now a mass of documentation.
The plaintiff deposes that he left school at the age of about 15 years and was employed to do general factory work for his father’s company OE & DR Pope Pty Ltd, which carried on business as a bag merchant. At about that time the rest of the family moved to work for the company in Melbourne, whilst the plaintiff remained in Adelaide. He had been close to the Settlor.
The plaintiff says that he worked for his father’s company for a number of years and was promised that he would ultimately inherit it, or portions of it. It would be his “superannuation”. He did not know of the existence of the trust until he was 16 or 17 years of age, since when he was told by Desmond Pope that the plaintiff would have to please him in order to get anything from it.
The relationship between the plaintiff and his father is said, by the plaintiff, to have been unhappy since the former was about 18 years of age, due to differences related to the plaintiff’s employment. He ultimately left OE & DR Pope Pty Ltd.
In 1995 his father appointed him to manage a horse stud at Oakbank, but he was later dismissed. He brought an unfair dismissal claim, which was eventually settled.
The plaintiff deposes that, in about February 1996, in the course of a telephone conversation, his father, inter alia, told him that there would be nothing in the trust for him.
The foregoing historical recital is, in various respects, seriously at odds with a lengthy affidavit sworn by Desmond Pope. I will not attempt a detailed summation of the latter, which runs to some 65 pages. I merely give the plaintiff’s version to set the scene of the dispute.
The plaintiff has not received any allocation pursuant to the Deed since 1983. A series of purported minutes of meetings of directors of the Trustee after 1983 disclose that all income has, consistently, been allocated to Deanne, Dale, Daniele and Darryn Pope in equal shares. The minutes in respect of the years 1984 to 1993 respectively purport to evidence meetings attended by Desmond Pope and his brother Garry Robin Pope (the latter said to be representing WB Finnie & Co Pty Ltd). An affidavit has been filed by the latter deposing that, not only did he not attend any such meetings, but also he only became aware of the fact that WB Finnie & Co Pty Ltd was a director of the Trustee about two years ago. He has deposed that he has never actively participated in its management. The Trustee has sought to join issue with these statements, at least to the extent that Garry Robin Pope has, for many years, been aware of the status of W B Finnie & Co Ltd as a director of “the Trustee” and has, on a number of occasions, signed relevant Directors’ reports related to the latter. Whilst this may well be the case it does not gainsay his denial of attending relevant meetings relating to the allocation of trust income.
Against the foregoing background these proceedings were initiated by summons issued on 14 May 1996.
That had been preceded by a letter, dated 22 August 1995, written by the plaintiff to the accountant for the trust, requesting information concerning it.
The plaintiff’s letter was followed by an exchange of correspondence between his solicitors and solicitors acting for the Trustee, at the conclusion of which the plaintiff and his solicitors were not satisfied that full disclosure had been made and adequate explanations given as to the administration of the trust. Nor were they satisfied that proper accounts had been kept. It is fair to say that the Trustee and Desmond Pope had been far from forthcoming on those matters.
The summons issued by the plaintiff, in its original form, merely sought the appointment of an inspector, pursuant to s84C of the Trustee Act 1936 (“the Act”) to investigate the administration of the trust.
Following some preliminary skirmishing, a Master determined, on 11 September 1996, to appoint an inspector. His comments recorded at that time read:-
“The lack of quite crucial documentation and I give the example of lease mortgage documents - and a number of those generally shown in the schedule, coupled with the fact of the existence of a very high unsecured loan and the whole history of this matter leads me, unhesitatingly to appoint an inspector.”

It is small wonder that he arrived at that conclusion, because such material as had been produced was highly suggestive of possible breaches of trust on the part of the Trustee.

The Trustee promptly initiated an appeal to the Full Court against that order.
When the appeal came on for hearing before the Full Court on 6 March 1997 it was, at the last moment, abandoned by the Trustee. In the circumstances the Full Court ordered the Trustee personally to bear the costs of the appeal on a solicitor and client basis. It was understandably critical of the stance which had been adopted by the Trustee in light of the existence of circumstances in which the order made was plainly warranted.
On 16 July 1997 the Master appointed Mr Russell Heywood-Smith to carry out the inspection.
On 8 December 1997 the Trustee issued an application seeking an order with directions as to the scope of the inspector’s powers. In essence the Trustee sought to confine the scope of the inspector’s activities in a manner which was contrary to advice which had been given to the latter by his own solicitors. After a good deal of further skirmishing, this application was essentially withdrawn on 13 January 1998.
The inspector tendered an interim report on 22 February 1998. The highlights of that report may be summarised thus:-

.insufficient books and records of the trust were available to enable a formal audit to be conducted;
.the Trustee has not maintained all records required by s84B and reg6 of the Act. No financial accounts are available in respect of the period from 1974 to 30 June 1979 and for the years ended 30 June 1981 and 30 June 1983;
.the original supporting documents for any payments or receipts made or received on behalf of the trust are records of OE & DR Pope Pty Ltd. They have not been retained past seven years since their creation;
.no separate bank accounts have been maintained either for the trust or DRP Nominees Pty Ltd. All transactions are intermingled with the bank account of OE & DR Pope Pty Ltd;
.since 1980, the only financial distributions made appear to have been in favour of the plaintiff’s three sisters and his brother;
.the 1980 statements indicate that funds had, inter alia, earlier been allocated to the plaintiff but, during the year ended 30 June 1991, his accumulated entitlements were extinguished from the financial statements by an unsubstantiated transaction. Journal records assert that Desmond Pope paid expenses on behalf of the plaintiff and this was used to expunge the entitlement. There is no evidence to support the entries;
.the trust purchased a property at 80 King William Street Kent Town in June 1978 at a cost of $177,147.75, subject to a mortgage to the vendor in the sum of $160,000. This was paid out by OE & DR Pope Pty Ltd during the year ended 30 June 1988. The property is the current major asset of the trust. The trust has recognised a liability to OE & DR Pope Pty Ltd, but it is not known what was owing to the vendor when he was paid out. There is no evidence that the trust interest in the property is covered under any insurance policy;
.so far as the inspector can ascertain, the Kent Town property was occupied by OE & DR Pope Pty Ltd, or a company associated with it, from June 1978 until November 1987. It paid no rent during the first twelve months, but it did meet the holding costs. It has been impossible to ascertain whether a commercial rent was subsequently paid by the occupant. From 1 November 1987 to 1 November 1995 the property was leased by Theodore Bruce Group Pty Ltd at what appears to have been a commercial rental.
Financial statements record no rental credits until the year ended 30 June 1980 and, even then, it is not clear whether these related to this property, or a property at Payneham, then owned by the trust.
The trust records simply do not indicate how rental was applied, nor does it appear what was the precise difference between rental received and outgoings under the vendor mortgage;
.when the vendor mortgage on the Kent Town property was discharged it was replaced by a debenture to the ANZ Bank to secure open ended advances made by it to OE & DR Pope Pty Ltd. On the face of the transaction this related to the normal business operations of that company and had nothing to do with the trust;
.on 7 April 1992 the lastmentioned debenture was discharged. A fresh mortgage, limited to $350000 was registered in favour of the ANZ Bank, but not shown in the trust statements until the following financial year. Those statements indicate that $350000 was actually borrowed from the bank and then on-lent, on an unsecured basis, by the trust to OE & DR Pope Pty Ltd, for its business purposes. There is no documentation to evidence the basis of the transaction, although it is said that such company has been servicing the loan. The bank records indicate that the loan was for the purposes of the “Des Pope Family Trust”. The inspector points out that the Trustee is also trustee of the Des Pope Family Settlement and that there may have been an intermingling of loan moneys with a quite different trust;
.investigations to date indicate the possible need to look into shares which were held by the Trustee in DRP Holdings Pty Ltd up until 1993;
.the trust owned a property at Devitt Avenue Payneham, which was sold during the year ended 30 June 1995. The proceeds were distributed to the three sisters of the plaintiff, all of whom were directors of WB Finnie & Co Pty Ltd, one of the “Directors” of the Trustee. [As has been seen, they also hold the majority shares in the Trustee.]

The inspector reported that there are a number of aspects which plainly require deeper investigation, but that this would involve significant cost. However, he was able to report that:-
the trust has been operated without appropriate accounting records;

the affairs of the trust have been intermingled with the affairs of entities associated with the Trustee;

the trust has entered into transactions not for its benefit, but for the benefit of associated entities, especially OE & DR Pope Pty Ltd; and

a pattern of distributions excluding certain beneficiaries is discernible.

By order dated 6 March 1998 I granted leave to the plaintiff to amend the summons in these proceedings so as to seek relief both under s36 of the Act and also the inherent jurisdiction of the Court. Further leave to amend was granted on 16 June 1998, following an abortive attempt at mediation.
In its present form the summons, relevantly, claims the following relief:-
“4..... That the report of Mr Russell Heywood-Smith as Inspector of the Pope Family Trust dated 22 February 1998 be received by the Court as a final report of the inspector into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936.
5...... That the defendant DRP Nominees Pty Ltd, be removed as trustee of the Pope Family Trust forthwith.
6...... That Scott Kershaw, Official Liquidator, or such other person as the Court deems fit be appointed trustee of the Pope Family Trust in place of DRP Nominees Pty Ltd and be invested with all of the powers conferred on the trustee of the Pope Family Trust according to the provisions of the Indenture dated 5 November 1974 and such further or other powers as the Court deems fit.
7...... In the alternative to paragraph 6 herein, that Scott Kershaw, Official Liquidator, or such other person as the Court deems fit, be appointed Receiver and Manager of the Pope Family Trust.
8...... That the Pope Family Trust be wound up.
9...... In the alternative to paragraphs 4, 5, 6, 7 and 8 herein;
9.1An order that the report of Mr Russell Heywood-Smith as Inspector of the Pope Family Trust dated 22 February 1998 be received by the Court as an interim report of the inspector into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936.
9.2That the Inspector of the Pope Family Trust be directed to investigate the matters in respect of which he has expressed the view in his report of 23 February 1998 warrant further investigation.
9.3That the Inspector have available to him all of the powers vested in an inspector pursuant to Section 84D of the Trustee Act, 1936.
9.4That pending the completion by the Inspector of his investigations into the Pope Family Trust and the delivery of a final report by the Inspector pursuant to Section 84E of the Trustee Act, 1936 the defendant be removed as trustee of the Pope Family Trust.
9.5That pending the delivery by the Inspector of a final report into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936, Mr Scott Kershaw, Official Liquidator, or such other person as the Court deems fit, be appointed trustee or interim trustee of the Pope Family Trust.
9.6That pending the delivery by the Inspector of a final report into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936, the trustee of the Pope Family Trust be restrained from dealing in any way with the assets of the Pope Family trust until further order or in the absence of prior written approval from every one of the beneficiaries of the said trust.
10.... That the plaintiff has his costs of and incidental to this action from the defendant on an indemnity basis or, alternatively, to be taxed on a solicitor and client basis if not agreed.
11.... A declaration that the defendant be restrained from indemnifying itself out of assets of the Pope Family Trust in respect of any liability for costs of and incidental to this action.
12.... That the fees of the Inspector in conducting his investigation into the Pope Family Trust be met by the defendant and that the defendant be restrained from indemnifying itself out of trust assets in respect of such liability.
13.... Further to paragraphs 10, 11 and 12 herein, that in the event that the defendant is unable to meet a liability for:
13.1the plaintiff’s costs of and incidental to this action; and/or
13.2the Inspector’s fees,
......... it be ordered that the directors of the defendant pay such costs and fees.
14.... In the alternative to paragraph 13 herein, that in the event that the defendant is unable to meet a liability for:
14.1the plaintiff’s costs of and incidental to this action; and/or
14.2the Inspector’s fees,
......... it be ordered that such costs and fees be met from the Pope Family Trust estate prior to the trustee of the said trust exercising his discretion to distribute any income or capital thereof to the beneficiaries entitled to receive the same.
15.... Such further or other order as the Court deems fit.”
That was followed by the filing of detailed points of claim by the plaintiff at my direction. These not only plead the substance of what I have summarised above, but also raise other concerns, including the Trustee’s conduct within the present proceedings.
When the amended summons came before me, primarily as to the application to remove the Trustee and appoint replacement trustees, it was intimated from the bar table that the Trustee was, in the circumstances, desirous of retiring from the trust and that Desmond Pope wished to appoint two new personal trustees in its place, pursuant to cl10 of the Deed. Objection was expressed by the plaintiff concerning the replacement trustees proposed in the amended summons.
An affidavit sworn in the action by the solicitor for the plaintiff exhibits a copy of a letter written by Desmond Pope which indicated his desire to appoint Robert Rowett, a business executive, and Stephen Harvey, a chartered accountant, as joint new trustees under the Deed.

In his letter Desmond Pope said:-
“Mr. Harvey is a friend of all the Pope family. He has known the family for 25 years. Stephen has a long-standing friendship with all the Pope children, which has always been amicable. Olly Pope and Stephen Harvey played on the same football team and developed a friendship. Stephen Harvey knows the family and is on good terms with each member of the family. As an adult partner his expertise will serve the trust well. The Pope family regularly attended functions Mr. Harvey and his wife attended at his father in laws house. It has been a very long-standing family relationship.”
I here pause to record that Valerie Doris Pope, the estranged wife of Desmond Pope has sworn an affidavit in which she supports the removal of the Trustee and expresses the view that all of the children ought to be treated equally.
She makes the point that Darryn Scott Pope, now aged 26 years, was seriously injured in a motor vehicle accident in 1994 and has been mentally incapacitated. A letter written by State Trustees, Victoria, the administrator of Darryn’s estate, supported the appointment of a new trustee who is “at arm’s length” from all parties having an interest in the trust.
In an affidavit sworn by him, Mr Selley, the solicitor for the plaintiff, deposes that Debbie Kay Pope has expressed support for the appointment of an independent new trustee of the trust.
The plaintiff objects to the persons proposed to be appointed by Desmond Pope. Suasive evidence has been placed on file to indicate that both proposed appointees (who are Melbourne based) are, or have been, business associates of Desmond Pope. They have, it is said, shared financial interests with him.
Consents to act, signed by two independent, Adelaide based, accountants Mark Hall and Peter Lanthois, have been filed by the plaintiff as possible alternate nominees.
On 28 July 1998, Desmond Pope¸ wrote to the court indicating an intention not to be represented and to abide by the decision of the court. When the application for removal and replacement of the Trustee was called on for hearing, on 27 August 1998, he appeared by Mr Whitington QC of senior counsel. He sought and obtained leave to intervene. During the course of submissions on that date Mrs Shaw QC, of senior counsel for the plaintiff, applied for and obtained an order joining him as a defendant. This became necessary in view of certain contentions advanced in relation to the issue of appointing new trustees of the trust.
On the lastmentioned date Mrs Shaw QC presented full argument in support of the plaintiff’s application for the two orders then sought. At that point there was no evidentiary material on file at the instance of Desmond Pope. The hearing was then stood over until 2 September.
On the morning of the lastmentioned date an affidavit sworn by Desmond Pope was placed on file. As earlier stated, this ran to some 65 pages and exhibited a substantial volume of documentary material. It is not practical, within the scope of these reasons, to attempt a fully detailed analysis of the content of that affidavit. However, its key features may be summarised thus:-

.the deponent gave a very lengthy version of his dealings with the plaintiff over the years. In the course of the affidavit he sought to portray the latter as an unstable person addicted to alcohol, who, although given every opportunity for employment and advancement in the family business, had proved himself utterly unreliable and had exhibited conduct detrimental to that business;
.whilst he did not deny the matters adversely reported on by the inspector, he sought to characterise them as being only of the nature of technical breaches. He went to some lengths, for the first time, to explain the relevant transactions. He deposed that his various actions had always been, bona fide, for the benefit of the trust and that there were good and sound reasons why the plaintiff had been excluded from benefit;
.inter alia, he tendered the various minutes to which reference has earlier been made as valid minutes of meetings actually held; and
.proffered various financial statements and calculations concerning the administration of the trust.

Apart from the responsive affidavit of Garry Robin Pope as to the minutes exhibited to Desmond Pope’s affidavit, Mrs Shaw QC also filed an affidavit of the solicitor for the plaintiff which exhibited additional financial statements related to the trust and asserted that the relevant material relied on by Desmond Pope contained fundamental errors in relation to the so called “back to back” loan account.
Further affidavits were filed on behalf of the Trustees which, inter alia, sought to challenge the accuracy of the affidavit of Garry Robin Pope as to his knowledge of relevant events. They also established that he agreed that Danielle Edna Pope would represent W B Finnie & Co Pty Ltd at all meetings of the board of the Trustee as from 5 March 1998; and that her representation at a meeting of the Trustee on 26 February 1998 was, retrospectively, confirmed.
In response to the submissions made by Mrs Shaw QC, Mr Whitington QC, in effect, submitted:-
that, in the circumstances, there was no jurisdiction to make either of the orders sought; and

that, even if there was, such was the state of the conflict of evidence that no orders could properly be made at this time - the dispute would have to go forward to trial on oral evidence.

I first turn to the asserted lack of “jurisdiction”. In this regard Mr Whitington QC took, as his commencement point, a consideration of the provisions of the Trustee Act 1936 (“the Act”) and, in particular, s36 of that statute.
The material portion of s36 of the Act is expressed in these familiar terms:-
“36. (1) The Supreme Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there be no trustee. In particular, and without prejudice to the generality of the foregoing provision, the court may make an order for the appointment of a new trustee in substitution for a trustee who is convicted of an indictable offence, or has been adjudicated bankrupt or made an assignment or composition or arrangement with his creditors under any Act in force in that behalf, and may remove such last-mentioned trustee.”

This, of course, derives from Imperial legislation, substantially to the same effect, dating back to the early to mid 1800s.

I took Mr Whitington’s primary thesis to be, as he put it, “the statute is no more than a reflection of the inherent jurisdiction” of the Court. This was, he said, a proposition accepted “on all hands” by the text books. I took this submission to mean that the inherent jurisdiction of the Court had virtually been subsumed by s36 and was, for all practical purposes, no more than co-extensive with it. On that basis the published authorities concerning statutory provisions of the nature of s36 were, Mr Whitington QC contended, therefore equally applicable to the inherent jurisdiction.
So it was that Mr Whitington QC relied upon a line of authorities, commencing with what fell from the Vice-Chancellor in In the Matter of Hodson’s Settlement (1851) 9 Hare, 118; 68 ER 439, as establishing the proposition that there is no jurisdiction to remove and replace a trustee where the relevant trust instrument confers a power of appointment from the Settlor, which the donee of the power is capable of and willing to exercise.
In Hodson Sir G J Turner, V-C had before him a petition pursuant to the section of the Trustee Act 1850 (Imp) substantially equivalent to s36 of the Act. It sought the removal and replacement of a surviving trustee of a settlement, in circumstances in which a person in whom the power of appointment was vested had originally declined to exercise it unless he received a corrupt consideration for so doing. When the matter came before the court the appointor had altered his stance and intimated that he was willing and desirous of exercising the power of appointment unconditionally.
The Vice-Chancellor said that, even if he should remove the surviving trustee, he could not “appoint another in his place, unless the provisions of the statute enable me to take away [from the appointor] the power of appointment given him by the settlement”. He went on to hold that “it is not competent to the Court, under the provisions of this statute, to take away the legal power vested in [the appointor], however corruptly he may have intended to exercise it”.
There can be no doubt that the relevant provisions of the Act were intended to be enabling and facilitative, so that the Court would be empowered to resolve practical difficulties arising in the administration of trusts without having to make an order for the general administration of a trust. As is said by the learned authors of Ford and Lee, “Principles of the Law of Trusts”, Second Edition (1990) at par826, the statutory jurisdiction exists only where it is inexpedient, difficult or impracticable for a new trustee to be appointed without the assistance of the court. That pre-requisite simply cannot be satisfied in a case in which it appears that there is a person able and willing to exercise a power of appointment vested in such person.
That reasoning appears to me to be unexceptional.
However, it seems to me that, with respect, Mr Whitington QC is not correct when he suggests either that the inherent jurisdiction of the Court is co‑extensive with that conferred by the Act, or that the text writers universally support such a proposition. The situation is quite the contrary, even given that there is some obvious area of potential overlap between the powers conferred by the Act and those exercisable within the inherent jurisdiction of the court.
One merely has to consider the inherent power of the court to make an order for general administration of a trust (with the concomitant power to exercise the type of supervision over appointors adverted to in In re GaddEastwood v Clark (1883) 23 Ch D 134) to appreciate the point. Moreover, as was recognised by Astbury J in In re Cotter [1915] 1 Ch 307 at 314, there are circumstances in which a court may be disposed, in exercise of its inherent jurisdiction, actually to interfere in the exercise of a power vested in an appointor. Furthermore, there are other circumstances where, for reasons of practical expediency, the court will exercise its inherent power to appoint a trustee, notwithstanding the clear existence of a power of appointment under the Act. (In the Will of Tunstall [1921] VLR 559, re Cooper [1856] 4 WR 729.)
In their text Ford and Lee expressly recognise the existence of power, within the inherent jurisdiction and dehors the Act, to appoint new trustees of a trust. Whilst it may well be that the court will be reluctant to exercise such a power, as a matter of policy, other than in circumstances akin to those contemplated by s36, that is neither to deny the power nor the fact that, there are circumstances - outside the contemplation of the section - which may warrant its exercise.
As the learned authors point out, the inherent power stems from the general jurisdiction of the court to supervise trusts and trustees. This arises even short of the making of a formal order for general administration of a trust. I do not take such a proposition to be denied by other text writers such as Meagher and Gummow “Jacobs’ Law of Trusts in Australia”, 6th Edn (1997).
I therefore reject the primary contention advanced by Mr Whitington QC. Both the jurisdiction and the power relied on by Mrs Shaw QC plainly exist.
In the course of their opinion in Letterstedt v Broers and Anor (1884) IX App Cas 371 at 386-7, the Privy Council pointed out that the inherent jurisdiction of the court to remove trustees is ancillary to its duty to ensure that trusts are properly executed. They made the point that it must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate. As their Lordships expressed the concept:-
“... if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign, and does so. If, without any reasonable ground, he refused to do so, it seems to their Lordships that the Court might think it proper to remove him;”
A somewhat similar dictum is to be found in Miller v Cameron and Ors (1936) 54 CLR 572 at 580-1. Dixon J there said:-
“The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary.”
There are no fixed rules as to the circumstances which will justify removal. Each case must be reviewed on its own merits.
A primary consideration to be borne in mind is that, as was emphasized by Finn J in Australian Securities Commission v AS Nominees Ltd and Ors (1995) 133 ALR 1, a trust manager clearly stands in a fiduciary relationship with the beneficiaries, who are entitled to expect the exclusion of its own or any third party’s interests in its dealings for or on behalf of the trust. This is always so, but that concept is doubly important in the case of a discretionary family trust. Such is the delicate nature of the decisions to be made that patent independence and even handed dealing on the part of the trustee is a paramount requirement.
What is revealed by the inspector’s report in the instant case is the very antithesis of what ought to have been the situation. Proper, separate accounts have not been kept, moneys have been intermingled with trading accounts of an entirely unrelated entity, trust assets have been employed for the benefit of a corporate entity controlled by Desmond Pope, there is reason to suppose that some dealings with trust property may have not been on a proper commercial, arm’s length basis, and certain beneficiaries have consistently been benefited to the exclusion of others. Moreover, there is disturbing evidence to the effect that purported meetings of the board of the Trustee were not in fact held, as represented by Desmond Pope.
The indisputable evidence indicates that the Trustee has apparently been controlled by Desmond Pope and a purported corporate “co-director”, which is, seemingly, itself controlled, or capable of control, by the very persons who have consistently received benefits. Even given the affidavits of David Gaetjens sworn on 4 September 1998 and 21 October 1998 respectively, the evidence of Garry Robin Pope is a cause for serious disquiet as to the mode by which purported trustee’s decisions have been made. The entities for the benefit of whom inappropriate transactions have occurred are, so far as can be determined, also controlled by Desmond Pope. These dealings have, on the face of them, been the product of classic conflict of interest situations.
Mrs Shaw QC contends that the “flavour” which emerges from the material before me is not unlike that described by Macrossan J in Re Whitehouse (1982) Qd R 196. He said, of the father/trustee in that case:-
“CMW, as father, clearly found difficulty in making the necessary transition from one role as parent who possessed financial control and whose word was not to be questioned, to another as trustee owing duties and with limited scope for acting autocratically. His position in the controlling structure of the companies no doubt made it difficult for him to observe the impartial and moderate spirit required of a trustee. Although he was not called to give evidence during the hearing, the material filed on his behalf did nothing to allay a suspicion that he was incorrigible in his expectation that his personal decisions could be imposed when he wished.”
She argues that, on the face of the situation, what has occurred has patently been orchestrated by Desmond Pope who, on the evidence, has, to employ the language of Macrosson J, seemingly failed to show the degree of detachment and that impartiality between trustee and beneficiaries which the law demands. He seems simply to have intermingled trust matters with his own business interests at will and to have caused the Trustee to reflect his own personal pleasure or displeasure in relation to potential beneficiaries.
Mr Whitington QC strongly pressed upon me that, if I came to the conclusion that the court possessed power to make the orders sought then, having regard to the conflict of fact which existed on the face of the affidavits, it would be quite inappropriate to make any order, absent findings of fact arrived at after a full trial on oral evidence. I took counsel for the Trustee to seek to adopt a somewhat parallel stance.
There are, as it seems to me, a number of obvious ripostes to that contention.
First, it is not to be forgotten that, despite many requests and opportunities for him to explain the transactions identified by the inspector, Desmond Pope and, for that matter, the Trustee have been singularly unforthcoming until, literally, the eleventh hour.
Second, whilst there is, undoubtedly, a significant area of factual conflict arising on the affidavits, nevertheless, when that area is viewed in perspective, it immediately becomes apparent that it really focuses on matters which are essentially peripheral to the core issues to be addressed for present purposes. The question of the past behaviour of the plaintiff or whether he merited exercises of discretion in his favour are not of central importance for present purposes, nor is the issue of whether Desmond Pope’s actions have been either autocratic or prompted by good or bad motives. The critical question is whether, on facts beyond real dispute, such has been the mode of conduct of the trust that the administration has been unsatisfactory to the degree that, on any view, the Trustee ought to be removed and replaced.
Finally, the prospect of a full trial on disputed, but peripheral facts, is not to be contemplated. Already, vast and disproportionate costs have been generated by this unfortunate family dispute. To accede to Mr Whitington’s blandishments and those of counsel for the Trustee would, inevitably, be to ensure that what equity remains in the trust would almost certainly be dissipated in legal costs. That is a luxury which ought to be contemplated only if no other course remains open.
At the end of the day it seems to me that any attempt to settle the disputed peripheral facts would be quite unproductive in the resolution of the core issues in this matter. The key facts and circumstances relative to the critical issues are beyond realistic dispute.
True it is that Desmond Pope seeks to assert that his actions have been designed to benefit the trust and have actually advantaged it.. However, that issue will give rise to a major enquiry in its own right.
What we now see is a situation in which, undoubtedly -

. there has been a total failure, at all times, to maintain proper trust records as required by the Act and regulations; trust funds have been consistently intermingled with those of a corporate trading entity controlled by Desmond Pope; and there is every reason to believe that the purported trustee’s minutes as to allocations are spurious and that the meetings which they purport to evidence did not take place;

.large money loans have been raised on the security of the major trust asset and have been on-lent, on an unsecured basis, to the corporate entity controlled by Desmond Pope;
.the structure of the trust management arrangements are such that they inherently give rise to conflict of interest situations;
.it is plain, even on his own affidavit, that the trust has been administered not on an independent, objective basis - but to reflect the personal views and wishes of Desmond Pope - regardless of whether he has acted in good faith or not;
.a significant number of the persons who are potential beneficiaries have, with good reason, lost faith in the Trustee;
.Desmond Pope seeks to appoint as new trustees persons who are plainly business associates of his and who could not, by any stretch of the imagination, be categorised or perceived as independent; and
.questions will need to be considered as to whether any breaches of trust sounding in damages have occurred and what action may need to be taken in relation to them.

In the lastmentioned regard I note that, on the final day of the hearing, State Trustees appeared by Mr Frost, of counsel, in the interest of the administered estate of Darryn Scott Pope. If I may say so, his was the only voice of reason, reality and objectivity in response to the application before me. He submitted that the attitude of his client was that it was there should be an appointment of a new trustee who is plainly independent and at arm’s length from all interested parties. He opined that, if this was not achieved, the likelihood was an unending vista of continuing litigation concerning the trust. I unreservedly agree with that assessment.
Mr Roder, of counsel for the three daughters of Desmond Pope directly associated with him as shareholders of the Trustee supported the contentions of Mr Whitington QC as to the law and also the proposal that Desmond Pope ought to be permitted to appoint his proposed nominees as new trustees. He scathingly sought to attack the persons proposed by the plaintiff as insolvency practitioners who would, almost certainly, bleed the trust dry with their fees. He joined Mr Whitington QC in asserting that there was no satisfactory, admissible evidence establishing an undesirable relationship of Desmond Pope’s nominees with him in any event. The short answer to such a suggestion is that the ASC documentation exhibited speaks for itself. Moreover, it is noteworthy that Desmond Pope’s voluminous affidavit goes to great lengths to traverse almost every other issue, but is strangely reticent about his business and social relationships with his proposed appointees - despite what is asserted by the plaintiff in that regard.
Mr Ross-Smith, of counsel for the Trustee protested that his client had indicated a desire to resign. He argued that, in such circumstances, it was quite inappropriate to remove the Trustee- Desmond Pope should simply be permitted to exercise a power of appointment of new trustees as proposed. I took him to espouse the proposition that, if the plaintiff desired to proceed, a formal defence should be filed and a full trial on oral evidence ought to take place.
As I have sought to demonstrate, such a trial would do nothing to gainsay the features which I have above listed, or to do other than deflect attention to what are essentially collateral matters.
The administration of the trust has been about as inappropriate and unsatisfactory as one can imagine, short of actual dishonesty. Even on Desmond Pope’s own affidavit this remains painfully apparent. No good purpose would be served by any trial on oral evidence as to the issues now under consideration and the costs of the exercise could eliminate the trust equity. The inevitable result would necessarily remain the same. The trust has simply not been executed in a proper manner. What is now proposed is, quite reasonably, unacceptable to a not insignificant number of eligible beneficiaries.
In my opinion the inspector’s report, read in the context of the wider documentary material on file, establishes a compelling case for an order for removal of the Trustee. There must be an order accordingly.
The question then arises as to whether this court ought to exercise its inherent power to appoint replacement trustees.
I have already discussed the contention of Mr Whitington QC, supported by Mr Roder, of counsel for the three daughters of Desmond Pope who are directors of the purported “co-director” of the Trustee, that the relevant power of appointment is, in terms of the Deed, vested in Mr Pope; and that this court either has no power to, or should not, make the appointment sought.
With respect, I do not consider that any of these propositions is correct. In terms of cl10 of the Deed the power vested in Desmond Pope arises only in certain, specific circumstances, namely:-

.on resignation of the Trustee;
.on the Trustee being otherwise unwilling or unable to act or effectively perform its functions.

The evidence presently extends no further than it being suggested that the Trustee is willing to resign and make way for a replacement trustee.
In the instant case the Trustee has, in any event, now actually been removed by my order - a contingency not anticipated by cl10. In my view that is not a situation which enlivens any power vested by the Deed in Desmond Pope.
Even if I am incorrect in that assessment, it is, as I have already demonstrated, implicit from the authorities that, notwithstanding the terms of the Deed, the court has at least an inherent power, if not a power conferred by s36 of the Act, to make an appropriate appointment.
To employ the words of Rolfe J in Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185, the beneficiaries are entitled to have a trustee who would not only be, but also appear to be, completely independent.
The proposal propounded on behalf of Desmond Pope, quite obviously, would do little to allay the reasonable concerns of the plaintiff and those supporting his stance. On the contrary, the obvious business and financial relationships existing, or which have existed, between his nominees and himself, is sufficient to generate in the mind of any reasonable person, given the dominant role of Mr Pope in the past, a perception that the future administration of the trust may still not be objective and even handed; and that alleged past breaches of trust may not be investigated and/or pursued with vigour.
The point was made in In re Tempest (1866) 1 Ch at pp485 at 488 that any appointment must be made, patently, to promote and not impede the proper execution of the trust In Storti and Anor v Andrews (Lander J, 2 July 1998, S6737, unreported) the view was expressed that the court has power to order the removal of a trustee and for the substitution of a new trustee, either under s36 of the Trustee Act or in the inherent jurisdiction of the court.
This is, in my view, plainly correct. Leaving aside the vexed question of the precise ambit of power conferred by s36 of the Act, the inherent jurisdiction of the court is extremely wide. The Courts of Chancery always asserted what was tantamount to a supervisory jurisdiction in relation to the proper administration of trusts. Just as it exercised the right to remove trustees in proper cases, it has, in practice, never hesitated to appoint a new trustee to ensure proper future administration.
No doubt it would hesitate to exercise the latter power in cases in which a clear power of new appointment was vested in an appointor under the relevant trust instrument and that appointor evinced a desire, bona fide, to make what appeared to be a proper appointment (cf the reasoning in Re Cooper [1856] 4 WR 729, In the Will of Tunstall [1921] VLR 559).
However, here the very reason for the order of removal has been the direct, or indirect, conduct of the potential appointor himself. Moreover, his proposal for appointment is one which, on the face of it, is inappropriate. I repeat, beneficiaries would have every reason to perceive that the persons proposed may not be able to discharge their duties in a totally objective and independent manner, by reason of their present or past business and financial associations with the appointor.
This is a situation in which the Court is plainly compelled to intervene to ensure the proper execution of the trusts established by the Deed. The time has arrived at which common fairness and justice demands that the administration of the trust be placed in the hands of persons independent of the influence of Desmond Pope and those of his daughters who are closely aligned with him. If necessary I would have been prepared to restrain him from acting as he proposes, having regard to the content of the inspector’s report and the circumstances generally.
In the circumstances, I have no hesitation in ordering that Mark Hall and Peter Lanthois be appointed new trustees of the trust constituted by the Deed. They are patently independent and well qualified. They have the added advantage of being based in Adelaide where the principal trust asset is located. They will, inter alia, have the difficult task of picking up where the inspector has left off.
I will hear counsel as to the question of costs.

[1998] SASC 6933

5 November 1998