In The Matter of The Nicholas Trust and In The Matter of The Trustee Ordinance 1957 S.C. No. 1586 of 1983 Trustee Ordinance 1957 [1986] ACTSC 116 (19 December 1986)

  
  
  
  COURT
IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CWDS
  Trustee Ordinance 1957 - Trustee Act 1925 N.S.W. in its application to
A.C.T. - S.63 - Application for judicial advice or opinion - Whether power of
appointment of contingent interest validly exercised - Whether exercise
of
power created such an interest "under the trusts (of the Trust Deed)" or under
the Power of appointment - Whether power general
or special
  Hickling v. Fair (1899) AC 15
  Hanbury v. Bateman (1920) 1 Ch 313
  Grey v. Federal Commissioner of Taxation [1939] HCA 14;  (1939) 62 CLR 49
  Attorney General v. Chapman (1891) 2 QB 526
  Attorney General v. Mitchell (1881) 6 QBD 548
  Middleton v. Crofts
(1736) 2 Atk 650: 26 ER 788
  Muir or Williams v. Muir (1943) AC 468
  Pedley-Smith v. Pedley-Smith [1953] HCA 27;  (1953) 88 CLR 177
  In re De La Bere's Marriage Settlement Trusts; De La Bere v. Public Trustee
(1941) Ch 443
  Perpetual Trustee
Co. Ltd. v. Commissioner of Stamp Duties (N.S.W.) (1976) 1
NSWLR 127
  Sweetapple v. Horlock (1879) 11 ChD 745
  Jackson v. Commissioner
of Stamps [1907] HCA 28;  (1903) AC 350
  Davidson v. Armytage [1906] HCA 63;  (1906) 4 CLR 205
  Farwell on Powers, 2nd Edn p 144
  Sugden on Powers, 8th Edn 1861, p 470

HRNG
CANBERRA
#DATE 19:12:1986

ORDER
  THE COURT ADVISES THAT in its opinion the questions asked in the summons
herein should be answered as follows:-

    (a) Yes.

   (b) No.
    (c) No.

  THE COURT ORDERS THAT:
The applicant trustee's costs of and incidental to the said summons be taxed
on
a trustee basis and paid out of the assets of the trust fund referred to in
the summons.
  The costs of Margaret Helen Nicholas and
Alison Dorothy Nicholas of and
incidental to the said summons be taxed on a common fund basis and be paid out
of the said assets.

JUDGE1
  On 23 February 1959 a Deed of Settlement was entered into between Brian
Edward Nicholas as settlor and David Keith Nicholas
and Margaret Helen
Nicholas as trustees. A sum settled and any other sums or investments
transferred to the trustees to be held pursuant
to the deed were named the
"Trust Fund".
2.  Clause 1 of the deed provided that the Trust Fund was to be held

    "UPON TRUST for
such of the children of David
    Keith Nicholas and Margaret Helen Nicholas as
    within twenty-one years of the death of (a
 
  large class) attain the age of thirty years
    and if more than one in equal shares as
    tenants in common PROVIDED THAT if
any child
    of David Keith Nicholas and Margaret Helen
    Nicholas shall die before attaining a vested
    interest in the Trust
Fund leaving issue then
    the issue of such child shall take per
    stirpes the share which the said deceased
    child would
have taken had he survived to
    acquire a vested interest PROVIDED THAT prior
    to any child acquiring a vested interest in

   the Trust Fund the Trustees may in their
    absolute discretion by Deed appoint any share
    to which any child is contingently
entitled
    to other objects of the trust . . ."

and also provided in its last sentence that -

    "The Trustees shall hold any
part of the
    Trust Fund in which the issue of David Keith
    Nicholas and Margaret Helen Nicholas do not
    acquire a vested
interest upon such trusts as
    David Keith Nicholas and failing him Margaret
    Helen Nicholas shall by deed or will
    appoint."

3.  Relevant parts of Clause 4 of the deed were as follows:-

    "The Trustees may from time to time exercise
    any one or more
of the following powers and
    authorities, that is to say:-

    (a) during the minority of any child or
        children who may
be contingently entitled
        to apply the whole or any part or parts
        of the capital or income of the Trust
        Fund
and if necessary to the entire
        exclusion of any other or others
        contingently entitled as the Trustees may
      
 in their absolute discretion think fit
        for or towards his or her or their
        maintenance education and benefit or

       advancement in life . . .

    (b) at any time or times to advance or raise
        or apply or pay or by deed appoint to
any
        person or persons who may have a
        contingent interest under the Trusts
        hereof whether a minor or not the
whole
        or any part or parts of the capital or
        income of the Trust Fund and if necessary
        to the entire exclusion
of any other or
        others contingently entitled as the
        Trustees may in their absolute discretion
        think fit and
to advance or raise or
        apply or pay or by Deed appoint the same
        for the maintenance education advancement
      
 in life or benefit of such person or
        persons with the like power of payment
        mentioned in sub-clause (a) of this
        clause.

    . . .

    (h) to take and act upon the opinion of
        Counsel of five years standing practising
      
 in any country where the Trust Fund or
        any part thereof may for the time being
        be invested in relation to the
 
      interpretation of these presents or any
        other document or statute or as to the
        administration of the Trusts
hereof
        without being liable to any of the
        persons beneficially interested in
        respect of any act done by the
Trustees
        in accordance with such opinion BUT
        nothing in this provision shall prohibit
        or impede the Trustees
from applying to
        any Court if they shall think fit or
        prohibit any of the beneficiaries from so
        doing;"

4.  Clause 10 of the Deed empowered the settlor during his lifetime and after
his death the Trustees to appoint a new Trustee or
new Trustees in or out of
the Australian Capital Territory.
5.  In 1963 the Trustees retired. By Deed of Appointment dated 23 December
1963 the Settlor exercised his power to appoint Damaral (Canberra) Pty.
Limited, the applicant herein, trustee. The affidavit in
support of the
summons describes the retirement and new appointment as having taken place on
23 September 1963 but in this I think
the deponent was mistaken.
6.  The major assets of the Trust Fund consist of a house in Wollstonecraft,
New South Wales, presently
registered in the Trustee's name and an investment
of $82,000 with C.B.F.C. Limited.
7.  Early in 1978 the Trustee sought the opinion
of Counsel of the requisite
five years standing practising in New South Wales. He was asked to advise on
two questions. They were:-

    1.  Is David Keith Nicholas legally entitled to make
        Margaret Helen Nicholas contingently entitled
        under the
Trust by executing a Deed appointing her
        the person who will receive the whole of the Trust
        Fund in the event of
the issue of David Keith
        Nicholas and Margaret Helen Nicholas failing to
        acquire a vested interest?

    2.  If by
execution of such a Deed Margaret Helen
        Nicholas "may have a contingent interest under the
        Trust (of the Deed of
Settlement)", is the Trustee
        legally entitled, pursuant to the powers and
        authorities vested in it under the Deed,
"to
        advance or raise or apply or pay or by deed
        appoint . . . the whole or any part or parts of
        capital or
income of the Trust Fund" for
        "maintenance education advancement in life or
        benefit" of Margaret Helen Nicholas?

8.  By his opinion dated 19 April 1978 Counsel answered each question in the
affirmative.
9.  Thereupon on 21 April 1978 David Keith
Nicholas as appointor in exercise
of the Power of Appointment given him by the last sentence of clause 1 of the
Deed of Settlement
irrevocably appointed the applicant to "hold the whole of
the Trust Fund in which the issue of (him the appointor) and Margaret Helen
Nicholas did not acquire a vested interest upon trust for Margaret Helen
Nicholas for her own use and benefit absolutely". Immediately
he gave notice
of his purported exercise of the power to the Trustee.
10.  On the same day the Directors of the Trustee in exercise
of their powers
under clause 4(b) of the Deed of Settlement resolved that the whole of the
Trust Fund should vest in Margaret Helen
Nicholas and resolved further to
execute a form of appointment to effect such vesting. The appointment, dated
the same day and bearing
the common seal of the Trustee, recited that the
Trustee as appointor in exercise of the Power of Appointment by Deed given to
it
by the Deed of Settlement irrevocably appointed the whole of the Trust Fund
to be vested, in accordance with the Directors' resolution,
in Margaret Helen
Nicholas for her own use and benefit absolutely to the entire exclusion of all
other persons.
11.  As at 21 April
1978 there were then living only two children of David
Keith Nicholas and Margaret Helen Nicholas, namely, David Robert Nicholas
born
6 May 1948 and Alison Dorothy Nicholas born 14 April 1958. Neither of them has
or had as at 21 April 1978 any children.
12.
 In 1978 Margaret Helen Nicholas brought proceedings in this Court seeking
declaration against the Trustee that the appointments
dated 21 April 1978 were
invalid. In 1981 Alison Dorothy Nicholas brought proceedings in the Equity
Division of the Supreme Court
of New South Wales seeking similar declarations.
After the filing of the originating process in each case, neither took any
further
step in the proceedings. Correspondence between solicitors established
that neither was willing to proceed further with the actions
she had commenced
nor was she willing to abandon any challenge to the appointments dated 21
April 1978 and any vesting of the property
of the Trust Fund in Margaret Helen
Nicholas pursuant to the second of those appointments.
13.  Letters from David Robert Nicholas
indicate that he too is unwilling to
take any action to challenge the validity of the transactions dated 21 April
1978 or to agree
that the property of the Trust Fund should vest in Margaret
Helen Nicholas and that the Trustee should be released from all liability
in
respect of the transfer to effect that vesting.
14.  By summons dated 21 September 1983 the Trustee sought the advice of the
Court
under the Trustee Ordinance 1957 (the Ordinance) on the following
questions:-

    "(a) whether, on the true construction of a
 
       Deed of Trust dated 23 February 1959
         whereunder the plaintiff is the trustee
         of a certain trust fund and
in the events
         which have happened, David Keith Nicholas
         by Deed of Appointment dated 21 April
         1978 validly
appointed that the plaintiff
         as trustee hold the whole of the said
         Trust Fund for Margaret Helen Nicholas
    
    absolutely;

     (b) whether, by reason of the said Deed of
         Appointment dated 21 April 1978 the said
         Margaret
Helen Nicholas became a person
         who had a contingent interest under the
         trusts of the said Trust Deed, for the

        purposes of Clause 4(b) of the said Deed;

     (c) whether on the true construction of the
         Trust Deed and in the
events which have
         happened, the plaintiff as trustee by
         Deed of Appointment dated 21 April 1978
         validly
appointed that subject to any
         liabilities to creditors the whole of the
         trust fund be vested in the said Margaret
         Helen Nicholas for her own use and
         benefit absolutely."

15.  Directions were given that notice of the proceedings
should be given to
Margaret Helen Nicholas, David Robert Nicholas and Alison Dorothy Nicholas. In
each case directions were given
as to the method of service of the notice. It
was to be served on David Robert Nicholas by being sent "by overseas express
airmail
letter" addressed to him at his address in Los Angeles, California. A
direction was also given that any person served with a notice
who desired to
appear in the proceedings should make application to the Court for further
directions in the proceedings. Appearances
were filed on behalf of Margaret
Helen Nicholas and Alison Dorothy Nicholas. No appearance has been filed on
behalf of David Robert
Nicholas. The notice, of which a copy was sent to each
of the three named persons, referred to the commencement by summons of
proceedings
in this Court seeking judicial advice under the Ordinance as to
the manner in which the Trustee should administer the Trust Fund
established
by the Deed of 25 February 1959. The questions on which advice is sought in
the summons were set out in full. Notice
was also given

    (a) that an order would be sought that the costs
        of the proceedings should be paid out of the
      
 assets of the Trust Fund;

    (b) of the Trustee's intention to distribute the
        whole of the Trust Fund to Margaret Helen
        Nicholas, subject to any liabilities to
        creditors of the Trust, should the Court
        answer affirmatively the
third question
        posed;

    (c) that as a possible beneficiary of the Trust
        Fund David Robert Nicholas might be entitled
        to appear in the proceedings by legal
        representatives and to present submissions on
        the questions in issue;

    (d) that the Court had given directions that
        notice of the proceedings be given him; and

    (e) that if he did not
appear in the proceedings
        in accordance with the terms of the notice he
        would be bound by the opinion, advice,
 
      directions or order of the Court given in the
        proceedings in the same manner as if he had
        been a party to the
proceedings.

16.  The directions plainly provided for a convenient method of bringing all
concerned parties before the Court if
they were willing to appear. Two have
done so and I am not further concerned with the procedure adopted in relation
to the notice
given them. The third, David Robert Nicholas, has not appeared.
17.  During the course of the hearing an affidavit was tendered to
prove that
a copy of the notice provided for by the order for directions was posted to
David Nicholas by International Priority Paid
mail, said to be the fastest
international postal service available ensuring that the notice would be
delivered by courier to the
addressee on the west coast of the United States
within 48 hours of posting in Sydney. I accepted that evidence. The same
affidavit
indicated that there is a type of mail called "Overseas Express Air
Mail". Having noted the difference between the two types of mail,
I came to
the conclusion that what was done was a sufficient compliance with the
direction unless the words "overseas express airmail"
were to be given a fixed
and rigid meaning as a term of art. I do not think they should.
18.  In all the circumstances I am satisfied
that the procedure laid down by
s.63 of the Trustee Act 1925 of the State of New South Wales in its
application to the Territory by virtue of the Ordinance has been followed
sufficiently and
I therefore proceed to consider the questions asked.
19.  In the absence of any words controlling or limiting its meaning, I take
the word "issue" where used in the Deed to mean the whole of the issue of any
child of David Keith Nicholas and Margaret Helen Nicholas
whether in existence
or not at the time such child should attain a vested interest in the Trust
Fund. Hickling v. Fair (1899) AC
15 at p 21 per Lord Watson. The use of the
words "children" and "child" in clause 1 of the Deed, in my opinion, makes
this plain.
Counsel for Alison Nicholas did not seek to put a contrary view.
(It should be noted that Margaret Helen Nicholas elected to make
no
submissions as to the substantive questions.)
20.  Nor is it disputed that the first question should be answered in the
affirmative.

    "A power presently given to a designated
    person, to be exercised upon a contingency,
    can be well exercised before the
contingency
    happens."

Farwell on Powers, 2nd Edn. p 144, approved in Hanbury v. Bateman (1920) 1 Ch
313 at p 317. See also Grey
v. Federal Commissioner of Taxation [1939] HCA 14;  (1939) 62 CLR
49 at p 59 per Rich J. The power of appointment was, therefore, validly
exercised.
21.  The critical question, (b),
is whether by virtue of the Deed of
Appointment in her favour dated 21 April 1978 Margaret Helen Nicholas became a
person who had
a contingent interest under the trusts of the Trust Deed for
the purposes of clause 4(b) of the Deed.
22.  Counsel for the applicant
trustee submitted that the only persons who
could be in the category of contingent beneficiaries "under the trusts (of the
Trust
Deed) were the issue of the children of David Keith Nicholas and
Margaret Helen Nicholas and any appointees under the power of appointment
contained in the last sentence of clause 1". He referred to Attorney General
v. Chapman (1891) 2 QB 526. In that case, as appears
from the headnote, by a
settlement made in consideration of marriage, H. transferred personal property
to trustees upon trust to
pay the income to herself for life; and, if certain
events should happen, after her death upon trust for such person or persons as
she, notwithstanding coverture, might appoint. The events happened, and she
died in 1888, having, during her coverture, by deed exercised
the power of
appointment in favour of a niece. It was held that the property so appointed
to the niece must be taken to be property
"passing under" (the phrase used in
the relevant legislation) the marriage settlement. At p 532, Wills J, giving
the judgment of
the Court (Denman and Wills JJ), said:-

    "The expression 'passed under' is not a
    phrase of art in the same strict sense in
    which 'devise', grant', 'estate in fee',
    'remainder', and a host of others having
    exact and uniform technical significations
    would be properly so termed. It is a phrase
    of a comprehensive nature, and we think it
    may fairly be used in respect
not only of
    dispositions which are effected by the words
    of the instrument creating them but of those
    which are effected
by the subsequent
    execution of a power created by the
    instrument in question. A deed of
    appointment would do nothing
of itself, and
    only owes its vitality to the instrument
    creating it. It is surely, under such
    circumstances, no stretch
of language to say
    that property, the right to direct the
    application of which is created by deed A,
    but the specific
direction of which is
    effected by deed B, passes under (not by)
    deed A."

23.  Counsel referred also to Attorney General
v. Mitchell (1881) 6 QBD 548.
In that case s.2 of the Succession Duty Act 1853 fell to be considered.
Relevantly it provided that
every disposition of property by reason whereof
any person had or should become beneficially entitled to any property upon the
death
of any person dying after the commencement of the Act should be deemed
to have conferred or to confer on the person entitled a "succession"
and the
term "successor" should denote the person so entitled and the term
"predecessor" should denote the settlor etc. or other
person from whom the
interest of the successor had been or should be derived.
24.  As appears from the headnote, a testator bequeathed
personalty in trust
for his daughter for life and afterwards for such persons as she should by
deed appoint. After the Act came into
operation, the testator having died
before it did, the daughter, by deed, appointed the trust fund to her sister's
daughters. It
was held that the daughters derived their interest from their
grandfather, the testator, as predecessor and not from their aunt the
appointor.
25.  Reference was made during the course of the judgments to earlier
authorities which express the view that an appointment
under a power is
incorporated into the instrument creating the power. At p 555 per Lindley J
(as he then was).
26.  Counsel also
referred to the following passage from Sugden on Powers, 8th
Edn. 1861, at p 470:-

    "The estates created by the execution of
a
    power take effect precisely in the same
    manner (with the exception which will shortly
    be noticed) as if created by
the deed which
    raised the power. Thus, suppose a general
    power of appointment to be given to a man by
    deed, and he by
virtue of his power limit the
    estate to A for life, with remainder to his
    children in strict settlement, these
    limitations
will take effect as estates
    limited by the original deed, and in exactly
    the same way as they would have done had they
 
  been limited in that deed by the grantor of
    the power, in lieu of the power of
    appointment by force of which they were
    created."

27.  The authority relied on in support of the proposition just quoted was
Middleton v. Crofts (1736) 2 Atk 650: 26
ER 788, a decision of the whole Court
of King's Bench, presided over by Lord Hardwicke, then Chief Justice of that
court, who delivered
its judgment. At p 661: 794, he said:-

    ". . . for nothing is more certain in law than
    this, than (sic) when any act is done
under a
    power, that act is deemed to be done by the
    grantor of the power, and to have its
    validity from him, and not
from the person
    that executes it."

28.  But in Muir or Williams v. Muir (1943) AC 468, Lord Romer, with whom Lord
Wright and
Lord Clauson agreed, and from whose views I do not understand Lord
Thankerton and Lord Macmillan to have dissented, said at p 483:-

    " . . . if a person be given a general power of
    appointment over certain property he is
    virtually the owner of that
property. If and
    when he exercises the power the interests of
    his appointees come to them by virtue of and
    are created
by the deed of appointment. In
    the case of a special power it is very
    different. If, for example, property be
    settled
on trust for A for life and after his
    death on trust for such of A's children or
    remoter issue and in such proportions as
B
    shall by deed appoint, B has no interest in
    the property whatsoever. He has merely been
    given the power of saying on
behalf of the
    settlor which of the issue of A shall take
    the property under the settlement and in what
    proportions. It
is as though the settlor had
    left a blank in the settlement which B fills
    up for him if and when the power of
    appointment
is exercised. The appointees'
    interests come to them under the settlement
    alone and by virtue of that document."

29.  In
Pedley-Smith v. Pedley-Smith [1953] HCA 27;  (1953) 88 CLR 177 at p 190, the High
Court referred with approval to the passage from the speech of Lord Romer just
quoted. At
p 191 the Court referred with approval also to a passage from the
judgment of Simonds J (as he then was) in In re De La Bere's Marriage
Settlement Trusts; De La Bere v. Public Trustee ((1941) Ch 443) where his
Lordship said at p 448:-

    "In fact, those cases (In
re Dickinson's
    Settlements; Bickersteth v. Dickinson (1939)
    Ch 27 and In re Rush; Warre v. Rush (1922) 1
    Ch 302) are
examples of a principle which
    seems to be perfectly clear, namely, that,
    where there is an instrument creating a power
 
  and a later instrument exercising that power,
    the interest created by the exercise of the
    power arises under the later
instrument, for,
    in fact, there never was such an interest
    until the power was exercised so as to create
    it."

The High
Court went on to say immediately, at p 191:-

    "But while the interest arises under the
    later instrument in this sense it
so arises
    because of the operative effect of the
    disposition contained in the instrument
    creating the power. It would
not be in
    accordance with principle to deny that the
    interest was acquired under that instrument."

Their Honours then went
on to discuss the application of the principle. It is
plain from that discussion, in my opinion, that they were referring to the
grant in an instrument of a special power of appointment when by virtue of the
fact that two instruments form part of the same assurance
the interest arising
under the later instrument can be said to have been acquired under the earlier
instrument. It seems to me that
the construction of the two instruments
together is necessary to ascertain the extent of the interest created by the
special power
of appointment.
30.  It follows that the apparent width of Lord Hardwicke's dictum in
Middleton v. Crofts (supra) is to be read down
when powers of appointment are
in question in the light of Muir or Williams v. Muir (supra) and Pedley-Smith
v. Pedley-Smith (supra).
Those cases establish -

    "that an exercise of a special power is read
    back for the purposes of determining the
    source
and the validity of the gift to the
    appointee: as was said in the High Court, it
    is the instrument creating the power which
    has the operative effect: Cf. Pedley-Smith
    v. Pedley-Smith (supra)."

Perpetual Trustee Co. Ltd. v. Commissioner of Stamp
Duties (N.S.W.) (1976) 1
NSWLR 127 at p 131.
31.  Counsel for the applicant trustee referred also to Sweetapple v. Horlock
(1879)
11 ChD 745. In that case, under a marriage settlement, real estate
stood limited to H., the husband, for life, with remainder to
the use of such
of the children or issue of the marriage as he should by deed or will appoint
and in default of appointment, to the
use of the children of the marriage
equally as tenants in common in fee. There were two children of whom one, the
daughter, by a
marriage settlement covenanted with the trustees for the
conveyance and settlement of all property which she was then 'seised of,
or
interested in, or entitled to' upon the trusts therein mentioned. She survived
her husband and thereupon her father appointed
the real estate comprised in
the original settlement, subject to his life estate, to the daughter and her
brother equally in fee,
the daughter thus taking the same share as she would
have taken in default of appointment. It was held that inasmuch as the
reversionary
moiety appointed to the daughter constituted a new interest
acquired by her subsequently to the date of her settlement, such moiety
was
not bound by the convenant in her marriage settlement.
32.  Counsel also referred to Jackson v. Commissioner of Stamps [1907] HCA 28;  (1903) AC 350,
a decision of the Privy Council on appeal from the Supreme Court of New
Zealand. At p 354 their Lordships said:-

    "It has been determined in this country that
    a person entitled under a will in default of
    appointment, who takes by
appointment
    precisely the same interest which he would
    have taken if no appointment had been made,
    takes a new interest,
and takes under the
    appointment and not under the will.
    (Sweetapple v. Horlock (1879) 11 ChD 745.)"

33.  Counsel sought
to distinguish the two cases just referred to but, in my
opinion, unsuccessfully. Additionally, it is to be noted that Sweetapple
v.
Horlock (supra) was referred to by the High Court in Davidson v. Armytage [1906] HCA 63; 
(1906) 4 CLR 205 at p 211 where Griffiths CJ, giving the judgment of the
court, said:-

    "That is, of course, not an exhaustive
    definition, but that condition is fulfilled
    in the present case, because, although in
    default of these deeds of appointment
the
    same persons would have taken a share of the
    property as tenants in common in fee, it is
    settled by Sweetapple v.
Horlock (supra), the
    authority of which has not been disputed,
    that the interests taken under the deeds are
    new interests."

34.  In my opinion, the somewhat confusing conflict of authority is to be
resolved in favour of the proposition that the interest
which Margaret Helen
Nicholas took under the power of appointment exercised by David Keith Nicholas
was not a contingent interest
under the trust instrument but a contingent
interest under the power of appointment.
35.  The same result is achieved, I think, by
consideration of the nature of
the power. In my opinion it is a general power of appointment which may be
exercised without limit
in respect of the interest over which it purports of
operate.
36.  On the authorities it seems to me therefore that any interest
created by
the exercise of the power of appointment in favour of Margaret Helen Nicholas
depends for its effect, not on the Trust
Deed, but upon the exercise of the
power. Hence it does not create, within the meaning of the Trust Deed, a
contingent interest "under
the trusts (t)hereof".
37.  In my opinion, therefore, the questions asked should be answered -

    (a) Yes.
    (b) No.
    (c)
No.