Power v Ekstein

[2000] NSWSC 905

CITATION:	Power v Ekstein [2000] NSWSC 905
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2395 of 1998
HEARING DATE(S):	29 August 2000
JUDGMENT DATE:	14 September 2000
PARTIES :	Kaaren Jarmila Power (Plaintiff) Paul George Ekstein (First Defendant) Paul Ward-Harvey as executor of the Estate of the late Otto Ekstein (Second Defendant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	Mr J C Campbell QC with him Mr D A Smallbone (Plaintiff) Mr P Hallen SC with him Mr S Burchett (First Defendant) Mr D Fagan SC (Second Defendant)
SOLICITORS:	Holman Webb (Plaintiff) Horowitz & Bilinsky (First Defendant) Paul Ward-Harvey & Co (Second Defendant)
CATCHWORDS:	TRUSTS - whether distribution of trust assets by will - testator trustee of discretionary trust where powers of trustee could be exercised by will - whether testator by will effectively exercised powers that he had as trustee of a discretionary trust - whether will exercised powers of trustee to determine distribution date determine entitlements of beneficiaries and amendments to list of beneficiaries - whether power to appropriate assets to beneficiaries exercised by will - TRUSTS - whether new trustee is bound to give effect to wishes of original trustee as set out in his will - clause inserted into trust deed by amendment required the trustee to give effect to the wishes of the original trustee as far as possible as evidenced by will - whether fetter on discretion - POWERS - powers of appointment - special power exercisable by will - whether power exercised - WILLS - special power of appointment - whether exercised by will
LEGISLATION CITED:	Trustee Act 1925 s85 Wills Probate & Administration Act 1898 s46B(1) Thomas: Powers 1998 7/42 - 7/47
CASES CITED:	Busk v Aldam [1874] LR 19 Eq 16 Kearns v Hill (1990) 21 NSWLR 107 In re Weston's Settlement [1906] 2 Ch 620 In re Knight deceased [1957] 1 Ch 441
DECISION:	Paragraphs 1, 2, 3 and 4 on pages 19 and 20

1

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 14 SEPTEMBER 2000

2395/98 KAAREN JARMILA POWER v PAUL GEORGE EKSTEIN & PAUL WARD-HARVEY AS EXECUTOR OF THE ESTATE OF THE LATE OTTO EKSTEIN

JUDGMENT

General Outline

1    The questions for decision in this action are whether a testator by will effectively exercised certain powers that he had as trustee of a discretionary trust, thereby effectively bringing about a distribution of trust assets by will; or whether, if he failed to do so, the present trustee is bound to give effect to the wishes of the testator as set out in the will.

Facts

2    The Otto Ekstein Family Trust (the Trust) was established by deed dated 1 April 1975, between Sydney George Frish as settlor and Otto Ekstein as trustee. It is in conventional terms with provisions as to distribution date, beneficiaries, powers of accumulation and distribution of income, distribution of capital, appropriation and the like. Otto Ekstein was married three times. Paul Ekstein and Helen Ekstein are children of the first marriage, Misha Ekstein is a son of the second marriage to Edita Ekstein, who is the mother of the plaintiff, Kaaren, Otto thus being the step-father of Kaaren, but treating her as a daughter. The third marriage was to Sonja Ekstein. Paul, Helen, Misha, Kaaren and Sonja are named as beneficiaries under the deed.

3    Relevant provisions of the original deed are as follows:

…
2. (a) The expression "the Distribution Date" shall mean the earliest of the dates respectively specified in sub-paragraphs (i), (ii) and (iii) of this paragraph:-
(i) the thirty-first day of January in the year Two thousand and twenty (2020);
(ii) the date of the twentieth anniversary of the death of the last survivor of the children now living of Her Majesty Queen Elizabeth II;
(iii) such other date as the Trustee may (by Deed or by oral resolution) determine.
3. In this Deed the expression "beneficiaries" shall mean and include those persons whose names are set out in the Schedule hereto.

…

5. The Trustee shall hold the Trust Fund upon the Trusts hereinafter set out.

…

7. The first annual accounting period for the purpose of this Deed shall be the period commencing the date of the execution of this Deed and ending on the following thirtieth day of June and each succeeding annual accounting period shall be the year ending the thirtieth day of June following that on which the immediately preceding annual accounting period ended.
8. (a) The Trustee shall be entitled in respect of each annual accounting period to accumulate so much of the income of the Trust Fund as shall arise in that annual accounting period as the Trustee shall in his sole discretion decide PROVIDED ALWAYS that no income from the Trust Fund and no part of such income shall be accumulated for a period longer than 21 years from the death of the Settlor.
(b) All income of the Trust Fund in each annual accounting period other than income accumulated pursuant to the provisions of sub-clause (a) of this Clause shall be paid by the Trustee to the beneficiaries or to such one or more of them as the Trustee in his absolute discretion from time to time decides in such proportions whether varying or uniform as the Trustee in his absolute discretion from time to time decides and in making any such payment of income the Trustee shall be entitled at his absolute discretion to exclude any one or more but not all the beneficiaries.
9. On the distribution date the Trustee shall pay and transfer the whole of the Trust Fund to the beneficiaries or to such one or more of them as the Trustee in his absolute discretion decides and in such proportions whether varying or uniform as the Trustee in his absolute discretion decides and in making such payment and transfer the Trustee shall be entitled at his absolute discretion to exclude any one or more but not all the beneficiaries.

…

11. The Trustee may appropriate any portion of the Trust Fund or any investment representing the same to or towards the share of any person or persons entitled under the Trusts herein contained whether the interest or interests of such person or persons is or are vested or contingent or vested but liable to be divested and may charge any share or shares with such sum or sums of money by way of equality as the Trustee may think fit and for such purposes may fix the value of any real or personal property forming part of the Trust Fund as the Trustee may think fit and every such appropriation charge and valuation shall be binding on all persons who may at any time be entitled hereunder to any interest in the Trust Fund.

…

20. The power of appointing a new Trustee in the place of a Trustee or in addition to any existing Trustee and also the power to remove all or any Trustee shall be vested in the said OTTO EKSTEIN and in the event of his death shall be vested in his executor or administrators and such powers have to be exercised in writing.

21. At any time prior to the distribution date the Trustee may from time to time in his absolute discretion notwithstanding anything to the contrary hereinbefore contained expressed or implied by deed or by oral resolution of the Trustee for the time being hereof or by such other method as the Trustee shall in his absolute discretion determine vary the Trusts or any provision whatsoever hereof in any manner whatsoever PROVIDED however that this Clause shall at all times be subject to the provisions of Clause 22 and Clause 23 as are hereinafter set out. The powers created by this Clause shall not be construed as Trusts or powers in the nature of Trusts or subject to Trust or fiduciary obligations but may be exercised by the Trustee as he in his absolute discretion sees fit subject to the proviso previously set out in this Clause and also subject to the further restriction that such power shall be exercisable only within the periods and in such manner permissible from time to time under the laws in relation to perpetuities and accumulation of income with the proviso that a beneficiary or beneficiaries so appointed could be only one of the persons described in the Schedule hereinbefore referred to in Clause 3 hereof.

…
THE SHEDULE HEREINBEFORE REFERRED TO (CLAUSE 3)
The beneficiary/ies is/are:-
(a) PAUL EKSTEIN born on the 9th day of July 1950 the son of OTTO EKSTEIN ; (b) HELEN EKSTEIN born on the 27th day of February, 1947 the son daughter of OTTO EKSTEIN ; (c) MISHA DAVID EKSTEIN born on the 7th day of November, 1957 the son of OTTO EKSTEIN ; (d) KAREN JARMILA JONES born on the 27th day of November, 1947 the step-daughter of OTTO EKSTEIN and (e) SONJA WELLS born on the 23rd day of November, 1921 of 4 Waterview Street, Seaforth North, N.S.W.
(b) Such other person or persons not being the Settlor SYDNEY GEORGE FRISH as the Trustee may from time to time appoint in writing and in making any such appointment the Trustee is entitled to eliminate fully or partially the beneficiary/ies first mentioned hereunder or any of them or any beneficiary or beneficiaries subsequently appointed as hereinbefore provided from obtaining benefits under this Deed PROVIDED however that any such appointee or appointees not being identical with the appointor must be a relative or relatives of the beneficiary/ies first mentioned herein living at the distribution date who then have or has attained or who live to attain the age of twenty-one years and for this purpose a relative is defined as being any one of the following:-
(i) the spouse of the beneficiary/ies first mentioned herein;
(ii) the lineal descendants of the beneficiary/ies first mentioned herein and their spouses;
(iii) the parents, grandparents and their lineal descendants and their spouses of the beneficiary/ies first mentioned herein.
The order in which the names in this Schedule appear shall be of no relevance in the interpretation or construction of this Deed.

4    There have been two relevant amendments to the trust deed. The first was made by deed poll of 21 February 1977 in the following terms:

KNOW ALL MEN BY THESE PRESENTS that OTTO EKSTEIN of 148 Milson Road, Cremorne in the State of New South Wales, Company Director, the Trustee of the Trust Fund created under Deed dated 1 April 1975 and made between the Trustee and SYDNEY GEORGE FRISH , desires to vary the said Deed in pursuance of Clause 21 thereof
NOW THESE PRESENTS WITNESS that for effecting the said desire and in exercise of the power for this purpose given by the said Deed, he the said OTTO EKSTEIN doth hereby vary the said Deed to the effect that the exercise of power by the Trustee may also be effected by Will or other testamentary disposition.
DATED at Sydney this twenty-first day of February, 1977.
SIGNED, SEALED AND DELIVERED )
by the said OTTO EKSTEIN in the presence of: ) [signed]
[witnessed]

5    The second relevant amendment was made by document dated 13 January 1986 the relevant provisions of which are as follows:

…

(3) The Trustee has determined to vary the Trust Deed and the provisions thereof as hereinafter provided.
(4) The Trustee pursuant to Clause 21 of the Trust Deed and all other powers thereunto enabling hereby varies the Trust Deed and the provisions of the Trust Deed as follows:
(a) By deleting Clause 20 of the Trust Deed and substituting the following:
"20 The power of appointing a new Trustee in the place of a Trustee or in addition to any existing Trustee shall be vested in the said OTTO EKSTEIN and in the event of his death shall be vested in PAUL GEORGE EKSTEIN PROVIDED THAT in the event that the said PAUL GEORGE EKSTEIN is unable to act as Trustee shall be vested in JOHN BEDE HARRINGTON and he is unable to act as Trustee shall be vested in MICHAEL LAWRENCE KANDY ."
(b) By adding Clause 25 to the Trust Deed:
"25. Notwithstanding anything to the contrary in this Deed expressed upon the death of the said OTTO EKSTEIN the Trustee shall as far as possible give effect to the wishes of the said OTTO EKSTEIN in regards to the affairs and management of the O. Ekstein Family Trust as evidenced by his last Will and Testament."
…

6    Otto Ekstein died on 13 May 1992. Pursuant to the power given under the substituted clause 20 of the trust deed Mr Paul Ekstein, by document called "declaration of appointment" appointed himself as trustee of the trust on 27 May 1992.

7    Otto Ekstein left a will dated 13 September 1990 and codicil thereto dated 17 April 1991, probate of which documents was granted to Paul Ward-Harvey, the second defendant and substitute executor named in the will on 28 October 1993. The will provided certain bequests of personal items and gave a legacy of $100,000 to Helen Ekstein and after such provisions came, inter alia, the following clauses 9, 10 and 13:

9. I DIRECT that the following provisions shall apply in relation to the property known as 148 Milson Road Cremorne (hereinafter referred to as "the Cremorne property") owned by the O. EKSTEIN FAMILY TRUST (hereinafter referred to as "The Trust")
(a) My said wife SONJA EKSTEIN shall have the right during her lifetime
(i) to reside in Flat 2 free of rent and use all the contents therein
(ii) to receive all rental income for Flat 1 subject to payment of Municipal Rates and Water Rates together with the costs of maintaining the property (except replacements of a capital nature or repairs of a structural nature which shall be paid for by the Trust)
(b) My said daughter HELEN EKSTEIN shall have the right during her lifetime to reside in Flat 3 rent free
(c) Upon the death of my said wife the rental income from Flat 1 shall be paid to the Trust AND my said daughter KAAREN JARMILLA EKSTEIN shall have the right during her lifetime to reside in Flat 2 free of rent or to receive the rental income therefrom on condition that she contribute two-fifths of the outgoings
(d) Upon the death of my said daughter KAAREN JARMILA EKSTEIN the Cremorne property shall subject to any life interests created pursuant to clauses 9(a) and 9(b) be vested in my said son PAUL GEORGE EKSTEIN UPON TRUST for such of his children and children of my said daughter KAAREN JARMILLA EKSTEIN as survive my said daughter KAAREN JARMILA EKSTEIN and reach the age of twenty-eight (28) years and if more than one in equal shares as tenants in common
10.
(a) I GIVE DEVISE AND BEQUEATH the rest and residue all the real and personal estate of whatsoever nature and kind regardless of the legal entity in which it is vested including property owned by the Trust and wheresoever situate to which I shall be entitled to or over or in relation to which I shall any power of disposition at the time of my death to divide into two shares as follows
(i) as to one undivided one half share to my said daughter KAAREN JARMILA EKSTEIN PROVIDED THAT should she predecease me to such of her children as survive her and if more than one in equal shares as tenants in common PROVIDED FURTHER THAT if she predeceases me without leaving children as aforesaid then to the Trust
(ii) as to the other one half share
(I) as to two-thirds of the income thereof to my said son PAUL GEORGE EKSTEIN UPON TRUST for my said daughter HELEN EKSTEIN
(II) as to one half of the capital thereof to my said son PAUL GEORGE EKSTEIN UPON TRUST for such of his children as survive my said daughter HELEN EKSTEIN and reach the age of twenty-eight (28) years and if more than one in equal shares as tenants in common and
(III) as to the remainder thereof to my said son PAUL GEORGE EKSTEIN
(b) AND I DIRECT my said son PAUL GEORGE EKSTEIN that should my said daughter HELEN EKSTEIN make any reasonable request to him that in view of the circumstances part of the capital bequeathed in sub-clause a(ii)(II) hereof should be paid to her my said son PAUL GEORGE EKSTEIN may in his reasonable discretion account with or without giving reasons therefor to my said daughter HELEN EKSTEIN for part of the said capital and my said son shall incur no liability whatsoever by complying with such request and it shall be in the reasonable discretion of my said son PAUL GEORGE EKSTEIN
(I) as to what constitutes a reasonable request
(II) as to what amount of capital should be handed over
(III) as to the application of such capital
PROVIDED THAT IN THE EVENT of any conflict between my said son PAUL GEORGE EKSTEIN and my said daughter HELEN EKSTEIN as to the matters referred to herein I DIRECT THAT the opinion of the said MICHAEL LAWRENCE KANDY or if he is unable or unwilling so to act then of the said PAUL WARD-HARVEY shall be sought and his unfettered decision shall be final and binding upon both my said son PAUL GEORGE EKSTEIN and said daughter HELEN EKSTEIN who shall act in accordance therewith
(c) I DIRECT my Trustee that in determining the values of my residuary estate the following principles be adopted
(i) formal valuations be applied for by my Trustee
(ii) the undivided one-half share bequeathed to my said daughter KAAREN JARMILA EKSTEIN shall as far as possible exclude the assets of the Trust and shall include the property known as 8 John Street Avalon and a balancing amount either be paid to her or be paid by her in order to ensure that my wishes are fulfilled


…

13. I DIRECT my Trustees:-

(a) to seek and obtain all necessary information concerning my financial affairs from Messrs Selinger & Company Chartered Accountants or any such other accountants as may be employed by me at the date of my death from Westpac Bank King and Castlereagh Streets Branch and from SYDNEY GEORGE FRISH of 90A Arabella Street Longueville in the said State and

(b) to have regard to a Partnership Agreement between the said SYDNEY GEORGE FRISH and myself dated 23rd August 1984 and in the event of any conflict between the provisions of this my Will and the said Partnership Agreement in relation to property in which the said SYDNEY GEORGE FRISH and I both have an interest either directly or indirectly then the provisions of the said Partnership Agreement are to prevail

(c) to distribute the assets and income from the Trust and from the various private companies and other entities controlled by me or controlled by me jointly with the said SYDNEY GEORGE FRISH to my said son PAUL GEORGE EKSTEIN and my daughters HELEN EKSTEIN and KAAREN JARMILA EKSTEIN in accordance with the provisions of Clause 11[an error for 10] hereof and in doing so to take into account the loan accounts shareholders' advances members' advances and other entitlements as shown in the books of those entities upon my death but to disregard their unequal formal shareholdings in the said private companies

(d) to determine the value of my shareholdings in Boucher & Muir Pty. Limited and other trading enterprises in accordance with the provisions of the said Partnership Agreement

(e) to disregard the formal ownership of assets including those of the Trust but to treat them all as part of my Estate

8    The codicil gave Paul Ekstein and Robert Whaites 110 "A" Class shares and 100 "A" Class shares respectively in Boucher & Muir Pty Limited.

9    The assets of the deceased were considerable. In the inventory attached to the probate they were estimated to have a value of over $2,800,000 including property 8 John Street, Avalon with an estimated value of $300,000.

10 The third wife, Sonja, brought a claim under the Family Provision Act, which was settled by an order providing that in lieu of the provision given to her under the will she received the sum of $60,000 plus what was described as "$800 per week by way of regular payments of capital for her life".

11 There has been considerable delay in the administration of the estate, part of which is explained by the Family Provision Act proceedings and part by the claims made in this action. The executor has taken the view that the provisions of the will, so far as they attempt to dispose of or bring about the disposition of trust assets are ineffective. The trustee, Mr Paul Ekstein, the first defendant, has also taken that view. The present value of the estate is estimated to be in the order of $3,200,000, excluding the value of shares in certain companies which could be of considerable value. The estimated figure cannot be accurate, because the Avalon property is still shown to have an estimated value of $300,000, being the same figure as that estimated eight years ago.

Pleadings

12    The pleaded claim is quite detailed but can be summarised as follows:

A. That the variation deed of 21 February 1977 provided for exercise of trust powers by will; that the vesting date could be established by will pursuant to clause 2(a)(iii); and that the powers under clause 9 and 11 of the trust deed could be exercised by will;

B. That by his will Otto Ekstein determined the distribution date for the trust as the date of his death; and determined the persons entitled to the trust fund at the distribution date in accordance with clause 9;

C. Alternatively to B, by clauses 9 and 10 of his will, Otto Ekstein exercised the power of appropriation under clause 11 of the trust deed.

D. In the alternative to B and C above, that the will evidences the wishes of the Otto Ekstein in respect of the affairs and management of the trust and thereby binds the trustee, pursuant to clause 25 (as inserted by the deed of 13 January 1986) of the deed to exercise the powers under the trust so as to give effect to those wishes.

13    There are numerous other claims that go to the administration of the estate which were not addressed in argument and which may need to be considered if any of the principal contentions of the plaintiff succeeds.

14 The first defendant trustee says that the amendment of 21 February 1977 is void for uncertainty and denies the main claims of the plaintiff and says that if the provisions under clause 9 of the deed were exercised by will then the exercise was a fraud on the power. There is in addition a pleaded defence of laches which was not argued and a claim for relief under s85 of the Trustee Act 1925 which can be left aside at the moment. The second defendant denies the plaintiff's main claims and any obligation to distribute benefits other than so far as is possible, to distribute estate assets in accordance with the will.

15    By cross-claim the executor seeks declarations that on the proper construction of the will of the deceased clauses 9, 13(c) and 13(e) are of no effect, that clause 10(a) takes effect as if the words "regardless of the legal entity in which it is vested including property owned by the trust" and the words in 10(c)(ii) "shall as far as possible exclude the assets of the trust and" were omitted from the will and that in clause 10(a) and 10(c)(ii) the word "undivided" were omitted.

16    It is necessary when considering the pleadings to understand that in the amended statement of claim filed in court the paragraph numbering has been amended in ink but the defences refer to the paragraph numbers as typed, not as hand written.

The validity of first amending deed

17    This question was not the subject of a great deal of argument by the defendants. In general there is no reason why a power cannot be exercised by will if the trust instrument so provides. A fund can be settled upon A upon trust for B for life and after the death of B as to both capital and income for persons appointed by A by deed or will with provision in default of appointment. The words of the amending deed are perfectly clear; thus their intention is clear. In some cases the original deed provides for exercise of power by "deed or oral resolution" (see clause 2(a)(iii) and 21). The amending deed provides another means of exercise. It is not uncertain. However, that would not mean that powers envisaged to be exercised at a particular time could be validly exercised by will operating before that time as that may be inconsistent with the deed. As I will indicate I consider that the reasonable interpretation of clause 9 requires the power to determine capital entitlement to be exercised at the distribution date; it would therefore not be a power capable of being exercised by will coming into force prior to distribution date. The deed clearly envisages that beneficiaries entitled to consideration in the exercise by the trustees of their discretion are persons living at the date of exercise of discretion. But insofar as a power can properly be exercised by will in a manner not inconsistent with the proper construction of the deed, the first amending deed is not uncertain and I consider it effective. It was held in Kearns v Hill (1990) 21 NSWLR 107 that powers of amendment should be given effect in accordance with their terms and not be held circumscribed by some principle of primary purpose. In the same way amending deeds should be given effect so far as it is possible to do so.

Has there been an exercise of power by will?

18    Whether a power exercisable by will has in fact been exercised is a question to be determined in each case, having regard to the terms of the power and the terms of the will: see for example In re Knight deceased [1957] 1 Ch 441. Generally a reference in a will to the specific power or to the property subject to the power is sufficient to indicate an intention to exercise a special power of appointment: In re Weston's Settlement [1906] 2 Ch 620. The deceased's will does refer to trust property in clause 9, 10(a), 10(c), 13(c) and 13(e) and purports to distribute it by will. Insofar as the deceased held a power of appointment or appropriation by will I consider he intended to exercise it. Whether his intentions were successful is another matter.

19    It must be borne in mind that property passing under a general power of appointment exercised by will vests in the legal personal representative of the deceased: s46B(1) of the Wills Probate & Administration Act 1898; that however is not the position with property passing under special powers. This poses a problem with clause 10(c) of the will directing the trustee of the will to distribute the deceased's estate and the trust assets in a particular way without the executor having the trust assets within his control. It also poses a problem under clause 13(c) - which where it refers to clause 11, clearly intended clause 10 - because although it is a term or direction "to my trustees" it is clearly a direction to Mr Ward-Harvey and in any event the deceased is not his own trustee and neither is the trustee of the trust his trustee. On its face, the will attempted to dispose of trust assets as if they were assets of the deceased available for distribution under his will as his assets. In so attempting it fails, but that does not determine the matter.

Has there been a determination of distribution date and a determination of beneficiaries to take on that date?

20    Mr J C Campbell, QC, senior counsel for the plaintiff, argued that the will, by clauses 9 and 10 made such determinations as required by clauses 2(a)(iii) and 9 of the trust deed. This requires a decision that the testator, by his will, determined his date of death to be the distribution date and by clauses 9 and 10 of his will distributed to beneficiaries entitled to the trust fund.

21    There are considerable difficulties with this argument. Clause 9 of the trust deed envisages the determination of the trust by distribution to beneficiaries. Clause 9 of the will does not envisage distribution, but rather purports to create life interests in parts of the property 148 Milson Road, Cremorne, presumes the continued existence of the trust to manage the property, carry out structural repairs and to collect rent, and then purports to distribute the remainder interest in the property by giving it to Mr Paul Ekstein on trust for his children and the children of the plaintiff who survive the plaintiff and attain twenty-eight years. Those grandchildren of the testator are not beneficiaries under the trust deed so that the plaintiff would need to argue that the will also operated as a valid appointment of additional beneficiaries under clause (b)(ii) of the Schedule, although that clause would not allow the vesting to be contingent on attaining twenty-eight years. Therefore that would need to have been altered as well.

22    Mr Campbell appreciated these problems and put forward an alternative distribution date, determined by the will as being the date of death of the plaintiff. That was not pleaded and in any event is an argument, I think, without substance. The words of clause 9 of the will could not support such a finding and neither could the words of clause 9 of the trust deed.

23    Clause 10 of the will presents the same sort of difficulties. On its plain words, it treats the trust assets as distributable by will. It assumes the executor will be in control of them. Although as events have turned out the possibility has not arisen, clause 10(a)(i) envisages the continued existence of the trust, clause 10(a)(ii) would or could effect a distribution of trust assets to persons not trust beneficiaries, and clauses 10(c) and 10(e) envisage division of trust assets by the trustee of the will, not by the trustee of the settlement.

24    The fact that an appointment is to an extent valid and to an extent beyond power, does not make the whole appointment ineffective. So far as it is good, the appointment operates as a valid appointment. Neither does an appointment to trustees of a will in trust for proper objects make the appointment invalid although generally it would be for the settlement trustees to effect the transfer to the objects of the power, particularly if the interests appointed were not vested: Busk v Aldam [1874] LR 19 Eq 16. But much depends on the wording in question: see Thomas: Powers 1998 7/42 - 7/47. Nevertheless it is necessary to bear these difficulties in mind when deciding whether or not a power has been exercised. One must decide here whether the will operated (1) as a determination that the distribution date was the date of death of the testator, (2) as a determination of beneficiaries entitled at that date of distribution, (3) if the provision for grandchildren is to be upheld then that the will operated to alter the beneficiaries under the trust.

25    I determine that no such conclusion can be drawn. I do not think it could be assumed that the intention of the deceased was to do all these things by will or that the will had such an effect. Clause 9 of the will is inconsistent with it. There is no doubt that the deceased did wish to dispose of the trust assets by will, but without far more precise language I consider it not possible to find that he exercised the powers necessary to bring this about. The whole language of the will is against such a finding and the language of clause 9 of the trust deed envisages payment of money or transfer of assets, not the creation of interests for life and in remainder.

Did the testator by will exercise the power under clause 11 of the trust deed to appropriate property to beneficiaries.

26    Mr Campbell argued, I consider correctly, that the shares of the beneficiaries in income under clause 8(b) of the trust deed were shares vested but subject to divestment upon the trustee exercising discretion to pay income to one or more to the exclusion of others. The shares of beneficiaries in capital pass in the same way on the distribution date. Thus clause 11 applies to those interests. It would be taking the relatively simple language of clause 11 to the extreme to hold that clause 9 of the will made an appropriation pursuant to trust clause 11 powers. Contrary to the argument of counsel for the plaintiff, I do not consider that the trustee can, in advance, determine to appropriate more than income for the current year. But that is only one problem. For the reasons previously given I do not think that there was an appropriation, even in part by clause 9 of the will. So far as clause 10 of the will is concerned, in the same way difficulties exist. The provisions of clause 10 and clause 13(e) would require a mixing of trust and estate assets, rather than an appropriation. Even if one could regard clause 10 of the will as an appropriation of the trust fund by will to the beneficiaries under clause 10, clause 10(c)(ii) would provide a direction as to exercise of discretion rather than an actual appropriation. I consider this argument of the plaintiff fails.

Effect of clause 25 of the trust deed

27    This clause was inserted by amendment made on 13 January 1986. Insofar as he attempted by will to direct disposition of trust assets as part of his own assets that attempt by the testator failed. Nevertheless the wishes of the deceased as to the disposition of trusts assets are, I consider, evidenced by clauses 9 and 10 of his will and perhaps also by clause 13(c), although it is likely that some of the clause 13(c) directions will be impossible to implement as the assets would not fall under the control of the trustee of the will or of the trustee of the settlement. The question is whether the first defendant, as trustee of the trust, is obliged to exercise discretions as to determination of distribution date, distribution to beneficiaries, appropriation to beneficiaries and additions to the list of trust beneficiaries so as to carry out the intentions envisaged in the will. The first defendant trustee argued through his counsel that this would fetter the discretions vested in the trustee and thus the court should not declare the trustee bound to exercise powers so as to give effect to the testamentary wishes. I do not consider that correct. The trustee is bound to carry out the trust. The terms of the deed include clause 25 which must not be considered as some provision of little importance. If the trust deed gives true discretionary powers to the trustee during the lifetime of the original trustee, then circumscribes those powers so that the trust turns more towards being a strict settlement then that is because the trust deed so provides.

28    It was also argued that a discretion to give effect to the wishes of the deceased in regard to the "affairs and management" of the trust was an administrative provision rather than one operating so as to determine trust interests. However, I see no reason why the words should not carry their normal meaning. The affairs of the trust have I think, a wide embrace extending to exercise of power to determine interests.

29    I consider that clause 25 of the trust deed is a clear and valid direction binding upon the trustee. It follows from this that the third of the principal claims of the plaintiff succeeds, even though it was apparently thought to have less chance of success than the others.

30    Finally I add that there was no basis to conclude either exercise of power or obedience to the trust would be a fraud on the power.

General matters

31    It follows from what I have said up to the present time that the second defendant, being the executor of the will of the deceased, is bound to distribute the estate assets in accordance with the terms of the will. It might have been possible to give effect to clause 10(c) had I held that there had been an exercise of power of appointment under clause 9 of the trust or an appropriation under clause 11 of the trust deed. As I have not so held the executor will hold the whole of the estate upon the trusts set out in clause 10 of the will. No argument was directed towards the relief sought in the amended statement of claim in claim 10, which went to the interest in private companies and partnerships. There was no basis for that relief. In the same way in view of the decision I have come to the relief sought in paragraph 12A is not available, although there will be a need for co-operation between the defendants to bring about the proper distribution of the assets of the estate and trust.

Cross claim

32    The executor seeks certain declarations as to the proper construction of the will in the events which have occurred. I will deal with these claims in turn.

A. That clause 9 is of no effect. It would not normally be the practice to make such a declaration, but in any event the clause has an effect pursuant to clause 25 of the trust deed. It in no way bears upon the power or duties of the executor of the will. The declaration should not be made.

B. That clause 10 takes effect as if the words in sub-paragraph (a) "regardless of the legal entity in which it is vested, including property owned by the trust" were not included. For the same reasons a declaration should not be made, although the estate assets should be distributed without regard to those words.

C. That clause 10(a)(i) and 10(c)(ii) take effect as if the word "undivided" were omitted therefrom. The inclusion of the word shows how little the draftsman understood his task. The word if strictly construed would require the assets to be transferred to the beneficiaries as tenants in common. In the terms of the will that was not intended and is almost impossible. Thus the only way to administer the estate in accordance with the intentions of the testator is to do so disregarding that word. In those circumstances the declaration sought should be made.

D. In clause 10(c)(ii) as if the words "shall as far as possible exclude the assets of the trust and" were omitted. It follows from my earlier reasons that such a declaration should not be made.

E. Clause 13(c) and 13(e) are of no effect. Clause 13(e) cannot be given effect to. Clause 13(c) only refers to clause 11 which presumably is a mistake and means clause 10. In any event it appears to relate only to trust assets and assets of private companies and insofar as it so relates has no effect on the executor of the will. Insofar as it may relate to assets of the deceased it is likely to be ineffective, but I do not think it necessary to make any declaration about it unless some further argument is addressed to me on that aspect.

Proposed orders

1. Declare that the trustee for the time being of the Otto Ekstein Family Trust is bound by clause 25 of the trust deed to give effect so far as it possible to the wishes of Otto Ekstein deceased in regard to the affairs and management of the trust as evidenced by his last will and testament.

2. Amended statement of claim otherwise dismissed.

Cross claim

3. Declare that upon the proper construction of the will, dated 13 September 1990 and the codicil thereto dated 17 April 1991 of Otto Felix Ekstein deceased and the events which have happened clause 10(a)(i) and clause 10(c)(ii) take effect as if the word "undivided" were omitted therefrom.

Costs

4. So far as costs are concerned it seems that to a large extent these have been incurred as a result of the inept drafting of the will and to some extent the trust deed. On that basis it seems appropriate that the costs of the first defendant trustee of the trust should be paid out of the trust assets and the costs of the second defendant as executor of the will should be paid out of the estate assets. It is not quite clear how the costs of the plaintiff should be provided for, but on balance. I think a fair result is that they be paid out of the trust assets and out of the estate assets in equal shares.

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Last Modified: 09/25/2000