Supreme Court New South Wales

• Medium Neutral Citation: George Christopher Harris v Sophia Rothery (as co-executor of the Estate of the Late Christopher George Harris) [2013] NSWSC 1275
• Hearing dates: 23 August 2013
• Decision date: 05 September 2013
• Jurisdiction: Equity Division
• Before: Kunc J

Decision

Plaintiff never appointor or protector

• Catchwords: TRUSTS AND TRUSTEES - Principles of construction of trust deed and notices under deed - Whether father's appointment of adult son as appointor and protector effective; TRUSTS AND TRUSTEES - Office of appointor and protector - Whether power to appoint successor fiduciary or personal; EQUITY - General principles - Undue influence - Whether applicable to appointment to an office under a trust deed
• Legislation Cited: Corporations Law; Corporations (New South Wales) Act 1990 (NSW); Evidence Act 1995 (NSW)
• Cases Cited: Belfield v Belfield [2012] NSWCA 416; (2012) 16 BPR 31,177; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253; Equuscorp Pty Ltd v HGT Investments Pty Ltd [2004] HCA 55; (2005) 218 CLR 471; Ex parte Gilchrist; re Armstrong (1886) 17 QBD 521; Harvey v Phillips (1956) 95 CLR 235; Hudson v Gray (1927) 39 CLR 473; Kearns v Hill (1990) 21 NSWLR 107; Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; MLW Technology Pty Ltd v May [2005] VSCA 29; Nic Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd [2001] NSWSC 343; (2001) 38 ACSR 57; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451; Richards v Cornford [2010] NSWCA 99; (2010) 76 NSWLR 572; Rowley v Rowley (1853-1854) Kay's Reports 242; In re Skeat's Settlement; Skeats v Evans (1889) 42 ChD 522; Symons v Williams (1875) 1 VLR(E) 199; Tjiong v Tjiong [2010] NSWSC 578; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165; Yerkey v Jones (1939) 63 CLR 649
• Texts Cited: D.W.M. Waters "The Protector: New Wine in Old Bottles?" in A.J. Oakley (General Editor), Trends in Contemporary Trust Law, OUP, 1996; Meagher Gummow & Lehane's Equity Doctrines & Remedies, 4th ed, Butterworths Lexis Nexis, 2002; Hanbury & Martin, Modern Equity, 18th ed, Sweet & Maxwell, 2009; G Thomas and A Hudson, The Law of Trusts, 2nd ed, OUP, 2010; Underhill and Hayton, Law Relating to Trusts and Trustees, 18th ed, Lexis Nexis, 2010
• Category: Principal judgment
• Parties: George Christopher Harris (Plaintiff); Sophia Rothery (as co-executor of the Estate of the late Christopher George Harris (First Defendant); Athanasia Soula Harris (as co-executor of the Estate of the late Christopher George Harris (Second Defendant); Vicki Gesouras (as co-executor of the Estate of the late Christopher George Harris (Third Defendant); Nicholas Christopher Harris (as co-executor of the Estate of the late Christopher George Harris (Fourth Defendant); Christopher Harris Pty Limited (Fifth Defendant)
• Representation: Counsel: B.A.J. Coles QC and N.C.T. Bilinsky (Plaintiff); R.G. McHugh SC and V.E. Whittaker (Defendants); Solicitors: Teece Hodgson & Ward (Plaintiff)
• File Number(s): 2011/302482
• Publication restriction: No

Judgment

Summary

1 The plaintiff (to whom I shall refer without disrespect as George) is a specialist banking and finance partner in an international law firm. His late father, Christopher George Harris ("Mr Harris"), established two discretionary family trusts. These proceedings concern the control of those trusts.

2 The first to fourth defendants are other family members who are co-executors of Mr Harris' estate. Mr Harris purported to appoint the fifth defendant (Christopher Harris Pty Ltd) as trustee of those trusts. George says Mr Harris was not entitled to do so. George submits that a company controlled by him, GC Harris Nominees Pty Ltd ("Nominees"), is the trustee of those trusts and seeks declarations to that effect and consequential relief.

3 George's case fails. He was never in a position to appoint Nominees as trustee of those trusts.

4 Because the facts apply to both trusts, I consider these first. The terms of each of the trusts are different, so I will then consider the application of the relevant facts and principles of construction to each of the trusts in turn. As will become apparent, that consideration is sufficient to dispose of George's claim. However, out of deference to the parties' thorough submissions, I will also deal with the defendants' allegation of undue influence by George against Mr Harris.

The facts

5 I find the facts to be as follows. Most of the facts were common ground. However, the findings which I make in paragraphs [13], [14] and [19] below were the subject of controversy. My reasons for making those findings are set out in paragraphs [32] to [47] below.

6 George was admitted as a solicitor in 1979. In 1985 he became a partner in Baker & McKenzie, where he has remained up until today, practising in the Banking & Finance practice group.

7 By deed made on 26 September 1981 the Christopher Harris Family Trust (the "First Trust") was settled with GP Harris Nominees Pty Ltd as the trustee. The original directors of GP Harris Nominees Pty Ltd were Mr Harris and his two brothers.

8 It is unclear, but probable, that the First Trust was drawn by Baker & McKenzie.

9 Mr Harris was the "appointor" under the First Trust. As such he had a number of powers, including to change the trustee of the First Trust.

10 By deed made on 24 November 1987 the Christopher George Family Trust (the "Second Trust") was settled, again with GP Harris Nominees Pty Ltd as trustee.

11 The deed establishing the Second Trust was drawn by Baker & McKenzie.

12 Mr Harris was the "protector" under the Second Trust. As such he had a number of powers, including to change the trustee of the Second Trust.

13 In the week or so before 8 December 1992 George met with his father. George presented the latter with a notice under each of the First and Second Trusts (the "Notices"). The first notice (set out in paragraph [57] below) (the "First Trust Notice") purported to appoint George as appointor under the First Trust. The second notice (set out in paragraph [117] below) (the "Second Trust Notice") purported to appoint George the protector under the Second Trust.

14 At the meeting, George said words to the effect:

Dad, if ever there were a dispute between you and Con and Emmanuel [Mr Harris' brothers] and you were not available or were no longer around, GP Harris Nominees [Pty Ltd] would be controlled by Con and Emmanuel and they would remain in control of the trustee. This can be overcome by appointing a successor to the office of protector.

15 Mr Harris signed the Notices without reading them or having them read to him. At the time he was preoccupied with his impending heart surgery. Mr Harris trusted and was reliant on George, at whose request he signed the Notices. Mr Harris asked for copies of the documents.

16 George took the signed, but undated, Notices with him. The original Notices have been lost and all that survives are copies.

17 On 9 December 1992 Mr Harris was admitted to St Vincent's Hospital for heart bypass surgery.

18 George did not discuss the Notices with any other family member until after Mr Harris' death. Nor did he serve them on GP Harris Nominees Pty Ltd.

19 In the months after his surgery, Mr Harris again asked George for copies of the Notices. One such occasion was on Saturday, 8 May 1993. However, George never provided Mr Harris with a copy of the Notices.

20 On 21 May 1993 Mr Harris wrote a letter which was found after his death with his will (the "Open Letter"). The Open Letter was signed by Mr Harris in the presence of a witness:

TO WHOM IT MAY CONCERN

21 May, 1993

Several days before 8 December 1992, the day before I was to enter St Vincent's Hospital for bypass surgery, my son George Christopher Harris unexpectedly called at my office at 10A Queen Street Woollahra.

He asked me to go with him to the yard at the rear of my office, whereupon he said that he had a document for me to sign. The purpose of the document was to remove my brothers Emmanuel and Con Harris as trustees of my estate and place my son George as trustee of my estate. The document was not read to me or by me before I signed it, nor have I read its contents since I signed it. It is unlike me to not read a document before signing it. However, the fact that my son, whom I trusted, asked me to sign it at a time when I was preoccupied with my impending surgery explains this uncharacteristic action. I did, however, at the time ask for a copy of the document to be given to me. I have not yet received a copy.

As I have been recovering over the last few months, I have on a number of occasions asked George for the original document. To date, he has not given me the original nor any copies of the document.

I am in the process of renewing my will and appointing new trustees to replace my son, George Christopher Harris. Let it be known to all that I do not accept the document drawn up by George in December 1992, which names George as trustee of my estate.

Signed by Christopher George Harris

In the presence of - signed by S. Merriman, 1/139 Bronte Road, Waverley 2024

21 Christopher Harris Pty Ltd was incorporated on 29 November 1993 with George as its sole director.

22 By deed made on 3 December 1993 (drawn by Gray & Perkins, solicitors), George purportedly as protector under the Second Trust, removed GP Harris Nominees Pty Ltd as trustee of the Second Trust and appointed Christopher Harris Pty Ltd as the new trustee.

23 By deed made on 6 June 1995 George purportedly as appointor under the First Trust, removed GP Harris Nominees Pty Ltd as trustee of the First Trust and appointed Christopher Harris Pty Ltd as the new trustee. By reason of the identical document footer and the substantially identical terms, it is clear that this deed was also prepared by Gray & Perkins based upon their earlier 1993 deed in relation to the Second Trust. Not all necessary changes were made between the two deeds. In particular, the 1995 deed defines George as "the Protector", which is not a position known to the First Trust. However, there is no doubt that by this later deed George was purporting to exercise his powers as appointor under the First Trust.

24 On 19 December 2000 Mr Harris made his will, which included:

11. I HEREBY APPOINT my Trustees Protector in terms of Clause 11 of the Deed of Settlement dated 24 November 1987.

25 On 21 December 2001 GP Harris Nominees Pty Ltd (the original trustee of the First and Second Trusts) changed its corporate name to Kythera Investments Pty Ltd ("Kythera").

26 Mr Harris died on 17 May 2010.

27 On 23 July 2010 George for the first time provided one of the defendant executors with copies of the undated Notices.

28 By notice dated 19 August 2010 George, purportedly as appointor of the First Trust, gave notice to Kythera removing it as trustee of the First Trust.

29 By notice dated 26 August 2010 George, purportedly as protector of the Second Trust, gave notice to Kythera removing it as trustee of the Second Trust.

30 By deed made on 26 August 2010 George, purportedly as protector under the Second Trust, appointed Nominees as trustee of the Second Trust.

31 By deed made on 31 August 2010, George, purportedly as appointor under the First Trust, appointed Nominees as trustee of the First Trust.

When were the Notices signed?

32 The timing and circumstances of the execution of the Notices were a matter of contest between the parties. The findings which I have set out in paragraphs [13], [14] and [19] above are the product of my resolution of that contest.

33 There was no dispute that Mr Harris executed the Notices. In a matter marked by a dearth of contemporaneous written records concerning the critical events, three other matters are clear:

(1) Mr Harris went into hospital on 9 December 1992 for heart bypass surgery.

(2) George has a diary entry for 8 May 1993 which reads "CGH Trust appt".

(3) The fact and contents of the Open Letter dated 21 May 1993 (set out in paragraph [20] above).

34 A fourth matter which, albeit not contemporaneous written evidence, to which I attribute decisive weight is the evidence of the third defendant (corroborated in a more general way by evidence of the fourth defendant) that Mr Harris in mid-1993 and later said that he had repeatedly asked George to give back the documents which he (Mr Harris) had signed before his heart bypass operation, that George had never returned them and that he (Mr Harris) had "written a letter to reverse the documents [he] signed for George before [his] heart op".

35 Neither the third nor the fourth defendant was cross-examined. The evidence is consistent with statements in the Open Letter and is inherently credible. While the absence of cross-examination does not mean I am bound to accept the evidence, that absence means that I may be more assured than might otherwise be the case in accepting that evidence. The consistency of the third and fourth defendants' evidence with the Open Letter, the fact that the evidence is inherently credible and the absence of cross-examination all persuade me on the balance of probabilities that I should, and I do, find that Mr Harris made statements of the kind I have recorded.

36 Bearing in mind the four matters to which I have referred in the preceding paragraphs, it is then necessary to consider the parties' respective contentions.

37 George's evidence on this point was set out in his affidavit:

Undated Notices appointing successors to the Offices of Protector

25. Annexed and marked "F" is a true copy of an undated notice signed by the deceased in my presence regarding the First Trust.

26. Annexed and marked "G" is a true copy of an undated Notice signed by the deceased in my presence regarding the Second Trust.

27. In relation to when the Notices were prepared and signed, I have reviewed my diary for 1993. Annexed and marked "H" is a true copy of an extract of my diary for the period 3 May 1993 to 9 May 1993. One of the diary entries for 8 May 1993 reads "CGH trust appt". My diary entry reflects my usual practice of diarising events.

28. Having refreshed my memory by reference to my diary I am able to say that the deceased signed the Notices on 8 May 1993, which was a Saturday.

29. I had a telephone conversation with the deceased before I prepared the Notices.

Me: "Dad, if ever there were a dispute between you and Con and Emmanuel and you were not available or were no longer around, GP Harris Nominees [Pty Ltd] would be controlled by Con and Emmanuel and they would remain in control of the trustee. This can be overcome by appointing a successor to the office of protector.

The deceased: "All right, let's do that."

30. I spoke to the deceased again a few days later. I said: "I have the Notices in relation to both trusts appointing me as the new protector. Do you want to come around on Saturday?" He said "Yes, sure."

31. The deceased came to my home on 8 May 1993. I let him in and we went to a quiet part of the house. I explained the effect of the Notices to him but I do not have a specific recollection of the conversation that took place. The deceased then signed the two Notices and handed them to me.

32. I kept a bundle of files relating to the deceased's companies in a filing cabinet at home. I kept other files on a shelf and in filing cabinets at work. It was my practice to place documents relevant to the deceased's businesses with the files I maintained and I believe I placed the original Notices with these files on that occasion but I have no specific recollection of doing this.

33. I do not recall discussing the Notices with the deceased again.

34. I have searched my personal records and the records maintained by Baker & McKenzie and I cannot find the original Notices.

38 It was urged by Mr B.A.J. Coles QC, who appeared with Mr N.C.T. Bilinsky of Counsel on behalf of George, that I should accept on the basis of George's diary entry for 8 May 1993 that the Notices were executed on that day. George's case was that the Open Letter should be disregarded because in its terms it related to a completely different period (five months earlier) and to a completely different document.

39 The case put by Mr R.G. McHugh SC, who appeared with Ms V.E. Whittaker of Counsel for the defendants, was that the Open Letter was a powerful piece of contemporaneous written evidence which should be accepted and that in all the circumstances, the document referred to in it as having been signed shortly before Mr Harris' heart bypass surgery had to be the Notices. Insofar as the entry in George's diary was concerned, the defendants submitted that it was more likely a record of an occasion when George and Mr Harris had met and Mr Harris had requested George to return the Notices.

40 I prefer the defendants' submissions for the following reasons.

41 George conceded both in his affidavit evidence and in the witness box that he had no actual recollection of when the Notices were executed or what was said at the time. He frankly acknowledged that he had reconstructed the date for their execution by reference to his diary entry and that any further elaborations of his evidence that he gave in the course of his crossexamination were themselves reconstructions. I formed the impression, despite Mr McHugh SC's resolute challenges to the contrary in the course of George's cross-examination, that George was doing the best he could to assist the Court in explaining the circumstances in which the Notices had come into existence. I do not doubt that he had persuaded himself of the truth of his reconstructed account, but in the absence of specific recollection, contemporaneous written evidence, inherent probability or an admission against his interest I do not give his evidence any decisive weight.

42 I do accept George's evidence that he explained to Mr Harris the circumstances giving rise to the need for the Notices (i.e. the possibility of Mr Harris being dead or otherwise unavailable) given that it is inherently probable and that it is corroborated by the explanation for the Notices provided in the Open Letter. I also accept his concessions in crossexamination that he knew Mr Harris wanted the Notices back because he was asking for them and that Mr Harris would try to revoke them if he (George) sought to rely on them in Mr Harris' lifetime.

43 In the ordinary course of events it is more likely that concerns about Mr Harris' possible death or incapacity would have reached their zenith in the days immediately before Mr Harris' surgery. This makes it much more likely that the Notices were executed then.

44 No one, including George, was able to point to what other document or documents the Open Letter might be referring if not the Notices. The imprecise description of the Notices in the Open Letter both as one document and as to their effect does not dissuade me from the view I have taken. While obviously intelligent, Mr Harris was a layman and in broad terms the nature and effect of the Notices is captured by his description in the Open Letter.

45 It is inherently unlikely Mr Harris would be writing about George in the way he does in the Open Letter only two weeks after, on George's case, Mr Harris had reposed sufficient confidence in George to make the appointments in the Notices.

46 These last three considerations satisfy me on the balance of probabilities that the Notices are the document referred to in the Open Letter and that they were executed in the week or so before Mr Harris was admitted to hospital for his heart bypass operation.

47 The text of the Open Letter, the evidence of the defendants and George's concessions in cross-examination (to which I have referred in paragraph [42] above) support the conclusion, which I find to be the case, that the meeting recorded in George's diary for 8 May 1993 was an occasion on which Mr Harris asked for the Notices to be returned to him. If, as I further find in accordance with the Open Letter, George refused to return the Notices on that occasion, it is entirely consistent and understandable for Mr Harris to be writing two weeks later in the way that he did in the Open Letter.

Legal principles - interpretation of the Notices

48 The defendants raised several arguments that the Notices were ineffective. Those arguments require both the Notices and the First and Second Trusts to be construed.

49 The principles governing the interpretation of contractual notices were summarised by Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 767-768:

The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual sense. ... the inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases. Given that the reasonable recipient must be credited with knowledge of the critical date and the terms of clause 7(13) the question is simply how the reasonable recipient would have understood such a notice.

50 Although his Lordship's analysis was concerned with a notice determining a lease, the principle has been accepted in Australia as applying in other circumstances, contractual and non-contractual: e.g. Richards v Cornford [2010] NSWCA 99; (2010) 76 NSWLR 572 at 584; MLW Technology Pty Ltd v May [2005] VSCA 29 at [78]-[79].

51 Applying these authorities, the objective inquiry which I must conduct to construe the Notices is to ask what a reasonable person in the position of the trustee, in the circumstances then applying known to the parties, would have understood the Notices to mean. However, a reasonable recipient of the Notices in the position of the trustee, would, as his Lordship pointed out, have had in the forefront of its mind the terms of the relevant trust deed. Each Notice must, therefore, be construed in the context of the proper construction of the trust deed under which it was purportedly given.

Legal principles - interpretation of the trusts

52 "The rules for the construction of contracts apply also to trusts": Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at [102], [105]-[107] per Heydon and Crennan JJ, see also at [53] per Gummow and Hayne JJ. Thus Hamilton J in Nic Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd [2001] NSWSC 343; (2001) 38 ACSR 57 at [18] identified the task as being:

... In construing a trust deed one must turn to the deed itself, examining carefully the words construed and giving them their natural and ordinary meaning in the context of the whole deed.

53 As with any contract, the terms of the trusts are to be construed by reference to what a reasonable person would have understood them to mean rather than the subjective intentions of the parties. This ordinarily requires consideration not only of the text, but also the surrounding circumstances known to the parties, and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Equuscorp Pty Ltd v HGT Investments Pty Ltd [2004] HCA 55; (2005) 218 CLR 471 at [33]-[36]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [35]-[48].

54 In the course of argument, my attention was drawn on behalf of George to the judgment of RP Meagher JA (Mahoney & Clarke JJA agreeing) in Kearns v Hill (1990) 21 NSWLR 107 at 109, where his Honour said:

... the deed of trust is an example of many such documents which have been commonly used for many years which are designed to deal with the disposal of family assets in such a way that the trustees are furnished with the most ample powers of management and disposition of the settled fund coupled with maximum flexibility in the use of those powers, so as to accommodate the settled fund to emerging and ever-changing economic and revenue considerations.

55 I do not understand his Honour's statement as establishing or identifying a freestanding principle of interpretation relevant only to trust deeds. That his Honour was not departing from orthodoxy is apparent a few lines later, where he said:

The fact that a document happens to contain infelicities and mistakes is not a sufficient reason for a court called upon to interpret one or other of its provisions to do so in a narrow or unreal way nor to depart from its cardinal duty to construe each provision according to its natural meaning, and in such a way to give it its most ample operation.

56 The need for ampleness of powers and flexibility are matters which, where appropriate, the Court can take into account where they form part of the background circumstances known to the parties or are otherwise part of the purpose and object of the transaction.

The First Trust

57 The First Trust Notice was:

NOTICE

TO: G.P. HARRIS NOMINEES PTY LIMITED as Trustee of The Christopher Harris Family Trust constituted by Deed dated 16 September 1981.

Pursuant to Sub-Clause 13.1 of such Deed, Christopher George Harris hereby nominates George Christopher Harris as the successor to the office of Appointor and George Christopher Harris consents to holding such office.

The Trustee ratifies this nomination notwithstanding that it is made more than 14 days after the date of the said Deed.

DATED:

Signed

Christopher George Harris

Signed

Christopher George Harris for and on behalf of G.P. Harris Nominees Pty Ltd

Signed

George Christopher Harris

58 The matters raised by the defendants in relation to the First Trust Notice invite these questions:

(1) Is the First Trust Notice ineffective because:

(a) it misstates the date of the relevant trust deed;

(b) it is undated;

(c) it is a copy;

(d) the appointment was not made within the 14 days specified and could not be ratified; or

(e) it was never delivered to be recorded in the minute books and kept with the records of the First Trust?

(2) If the First Trust Notice is otherwise effective:

(a) when did the appointment as appointor under the First Trust Notice take effect? and

(b) was the appointment revoked by the Open Letter?

59 Before I answer these questions by the application of the principles of interpretation which I have identified in paragraphs [48] to [56] above, I shall set out the relevant provisions of the First Trust.

60 The critical provision is clause 13:

SUCCESSOR TO OFFICE OF APPOINTOR

13.1 (a) THE Appointor named in Clause 1 hereof shall within 14 days of the date hereof nominate in writing to the Trustee the person or persons to act as the successor to the office of Appointor.

(b) The Trustee shall upon receipt of such nominations enter such names of the successor in the Minute Books of the Trust and such entry shall be conclusive evidence in any court of law of the validity of the nomination of such successor to the office of Appointor.

(c) If the Appointor vacates the office of Appointor or dies while holding the office of Appointor and the person first named by him as the successor is living at the time then such person shall succeed to the office of the Appointor. In the event that the first named successor to the office of Appointor is not living at that time then the next named and living successor to the office of Appointor shall succeed the Appointor.

(d) The successor to the office of Appointor shall within 14 days of taking office by an instrument in writing in like manner nominate the person or persons to act as the successor to the office of Appointor.

(e) The Appointor for the time being may by an instrument in writing addressed to the Trustee revoke the nomination of any person to the office of the Appointor and nominate such other person or persons in substitution therefor as the Appointor shall in his absolute discretion think fit. Upon receipt of such notice the Trustee shall make any necessary entries to that effect in the Minute Book of the Trust and otherwise the provisions of paragraph (b) of this Sub-Clause shall apply in respect of such entries.

61 Next, I note that the appointor is not in fact a party to the deed which establishes the First Trust. The parties are Norman Markus Wilson as the settlor and GP Harris Nominees Pty Ltd as the trustee. The appointor first appears in Recital E that "The first Appointor bound by the provisions of this Deed shall be CHRISTOPHER GEORGE HARRIS".

62 The relevant interpretation and definition provisions are:

1.1 IN this Deed unless the context otherwise requires the following expressions shall have the following meanings: -

...

(i) "Appointor" means the person referred to in recital E during his lifetime or otherwise the Appointor for the time being being appointed pursuant to Sub-Clause 13.1. ...

(u) ... Headings are inserted for ease of reference and do not form part of this Deed and shall not affect the construction hereof.

63 Two other matters are important. The first is that the appointor has a number of important functions under the First Trust. One of these relates to the trustee:

THE TRUSTEE

10.1 THE Appointor may at any time by writing remove from office any Trustee other than a Trustee appointed by the Court.

10.2 ANY Trustee (not being the sole Trustee) may resign his office by notice in writing given to the other Trustees and such resignation shall take effect upon such notice being given.

A sole Trustee may resign his office by not less than one month's notice in writing given to the Appointor.

64 A number of other significant matters under the First Trust can or must involve the consent or other participation of the appointor: see clauses 3.6, 3.7, 9.1(y), (aa), (ac) and (ad), 9.4, 10.4, 11.1, 12.1, 14.1, 15.2 and 15.3.

65 The second observation is that, notwithstanding the apparently important role assigned to the appointor, the First Trust expressly contemplates that there may not be one. The relevant clauses use language such as "if for the time being there is an Appointor" or "the consent in writing of the Appointor (if any)". It is sufficient to quote two examples:

3.7 THE Trustee may at any time and from time to time before the Vesting Day lend any sum or sums out of the Trust Fund and any other moneys held in trust hereunder to any other Beneficiary either with or without security and upon such terms and conditions as to repayment and with or without interest as the Trustee in its absolute discretion may determine PROVIDED that -

(a) If for the time being there is an Appointor then no such loan shall be made without the consent in writing of the Appointor, and

(b) If for the time being there is no Appointor then no such loan shall be made except on such terms and conditions as to repayment and at such rate of interest as the Trustee reasonably considers to be appropriate in the interests of the Trust Fund.

...

14.1 THE Trustee may from time to time determine that the Vesting Day will be a date earlier than the date which but for such determination would be the Vesting Day PROVIDED that if for the time being there is an Appointor no such determination shall be effective without the consent in writing of the Appointor.

66 The other clauses which use such language are clauses 3.6, 4.1(aa), (ac) and (ad), 11.1, 12.1 and 15.2.

A wrong date

67 The First Trust was settled by deed dated 26 September 1981. The First Trust Notice (see paragraph [57] above) is addressed:

To: G.P. Harris Nominees Pty Ltd as Trustee of the The Christopher Harris Family Trust constituted by Deed dated 16 September 1981.

68 A notice of this kind will be ineffective if the recipient could be left in any genuine doubt about which trust is being referred to. Recital A of the First Trust provides that "The Settlor is desirous of creating a trust to be known as THE CHRISTOPHER HARRIS FAMILY TRUST, ...". That is the name used in the First Trust Notice. It cannot be seriously said that the recipient of the First Trust Notice would be in any doubt about which trust is being referred to. The reference to "16 September" is obviously a typographical error and of no legal significance. It must be construed as intended to refer to "26 September": Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 756.

69 The defendants' first objection to the effectiveness of the First Trust Notice fails.

The First Trust Notice is undated

70 Clause 13 of the First Trust does not specify any particular form of nomination other than it be "in writing to the Trustee". There is no requirement for it to be dated.

71 The defendants' second objection to the effectiveness of the First Trust Notice fails.

The First Trust Notice is a copy

72 There is no dispute that there was once an original of the First Trust Notice. A copy has been admitted into evidence to prove the form and contents of the original. I understand the defendants' objection to be that if all that can be found is a copy, that copy would be ineffective because it is a copy.

73 Again, clause 13 of the First Trust does not specify that the nomination which is received by the trustee must be an original document. There is no basis to imply such a requirement. There is no reason why, in the absence of the original, if otherwise effective, a copy would not be sufficient.

74 The defendants' third objection to the effectiveness of the First Trust Notice fails.

The First Trust Notice was too late and could not be "ratified"

75 On any view the First Trust Notice came into existence more than 14 days after the date of the First Trust (26 September 1981). The defendants submit that on its proper construction clause 13.1(a) (see paragraph [60] above) confers an entitlement or power of nomination that could only be exercised within 14 days after the date of the First Trust.

76 The defendants' construction is correct.

77 First, it reflects the ordinary and natural meaning of the words used. The First Trust is silent as to what happens if the nomination is not made in the time specified. The absence of express provision for that possibility both:

(1) points against implication of a power to nominate after 14 days or reading down the 14 days as being inessential to a valid nomination; and

(2) supports construing the entitlement to nominate in accordance with its terms as having to be exercised within 14 days.

78 Second, "shall" in the expression "shall within 14 days of the date hereof" is mandatory. That is its ordinary meaning and there is nothing in the context that would support it being construed as conferring a discretion. On the contrary, the careful use of "may", which is obviously discretionary, in clause 13.1(e) fortifies the conclusion that the author of the First Trust advisedly used "shall" and "may" in the traditional way of being mandatory and discretionary respectively.

79 Third, even if "shall" as a matter of construction conferred a discretion, that would beg the question of whether the power or entitlement lapsed within 14 days.

80 Fourth, the First Trust contains numerous indications (see paragraphs [65] and [66] above) that the parties to the First Trust contemplated the possibility that there would be a time when there was no appointor. The presence of an appointor is not necessary for the effective execution of the First Trust and this militate against a construction that would permit a valid nomination after the 14 day period. If the First Trust contemplated or for its effective operation required that there should always be an appointor, that would be a powerful indicator in favour of a construction contrary to the one I have reached.

81 Fifth, and perhaps another way of putting the previous point, the definition of appointor as being Mr Harris for his lifetime (see paragraph [62] above) suggests the intention of the parties to the First Trust as recognising his ongoing important role as paterfamilias (see paragraph [165] below), but giving him the option at the outset of the life of the First Trust to nominate his successor if he wished.

82 In drafting the First Trust Notice George was clearly aware of the 14 day issue because he included in it:

The Trustee ratifies this nomination notwithstanding that it is made more than 14 days after the date of the said Deed.

83 This purported ratification is why provision was made in the First Trust Notice for Mr Harris to sign (which in fact he did) "for and on behalf of GP Harris Nominees Pty Limited".

84 The defendants submit that there is no basis for such a purported ratification to be effective.

85 The defendants are correct.

86 First, if the power or entitlement to nominate a successor was confined to the first 14 days as I have found, then the First Trust Notice is a nullity. There is nothing capable of "ratification".

87 Second, GP Harris Nominees Pty Limited as the trustee of the First Trust only had those powers conferred upon it expressly or impliedly by the First Trust or under any applicable trustee legislation. None of these provide a source of power for the purported ratification.

88 Third, even if there was a power in GP Harris Nominees Pty Limited to "ratify" the First Trust Notice, there is no evidence that Mr Harris was authorised to exercise such a power of "ratification" on its behalf.

89 Fourth, "ratification" is an inapt concept. Normally it would apply to a party, such as a principal, adopting a transaction to which it was not originally bound, for example entered into by an agent. In this case nothing had been done on behalf of the trustee for it to ratify, as that term might ordinarily be understood.

90 What I find was intended in this case by use of the language of ratification was an indication by the trustee that it would accept as valid and binding upon it a notification which was not or may not have been so. Even understood in that way, the purported "ratification" fails for want of power in the trustee.

91 The defendants' objection to the validity of the First Trust Notice therefore succeeds.

The First Trust Notice was never delivered

92 The defendants contend that the First Trust Notice is also ineffective because it was never delivered to GP Harris Nominees Pty Limited as trustee of the First Trust, such that the nomination of George as successor was never entered into the minute books of the First Trust in accordance with clause 13.1(b) (see paragraph [60] above). George submitted that there is no requirement or no pre-condition to the validity of the First Trust Notice that it be delivered to anybody.

93 In and of itself clause 13.1(b) is ministerial and evidentiary, rather than prescribing an element necessary for a valid nomination under clause 13.1(a). However, the importance of clause 13.1(b) for this part of the argument are its opening words "The Trustee shall upon receipt of such nominations". It assumes that the nomination in writing is received by the trustee.

94 On the proper construction of clause 13.1, receipt of the written nomination is essential for a valid nomination not by reason of clause 13.1(b), but rather as a consequence of the words "nominate in writing to the Trustee" (emphases added). On the ordinary meaning of the words, something cannot be nominated to someone without it being received by that person.

95 The First Trust does not contain any express provisions as to how notices are to be served. In 1992 and 1993 service of documents on a company in New South Wales was governed by s 220 of the Corporations Law by reason of s 7 of the Corporations (New South Wales) Act 1990 (NSW). That provided for service on a company by leaving the document at, or sending it by post to, the registered office of the company or by delivering a copy of the document personally to each of two directors of the company.

96 As a matter of fact on no view could what occurred when Mr Harris signed the First Trust Notice be described as service upon him in his capacity as a director of GP Harris Nominees Pty Ltd. George took the First Trust Notice with him after Mr Harris had signed it and never provided his father with a copy. Nor is there any suggestion that the First Trust Notice was ever served on GP Harris Nominees Pty Limited. In those circumstances, there was no nomination "in writing to the Trustee" within the meaning of clause 13.1(a).

97 The contrary construction to the one which I have reached would be impractical and unbusinesslike. Given the role and powers of the appointor, while there was one, under the First Trust (see paragraphs [63] and [64] above), the scheme of clause 13.1 (especially clause 13.1(b)) necessitates that the trustee of the First Trust should know the identity of the appointor from time to time. It is clear that there can be no valid nomination to the trustee under clause 13.1(a) if the writing evidencing that nomination has not been received by the trustee.

98 The defendants' arguments as to the ineffectiveness of the First Trust Notice also succeed on this ground.

When did the First Trust Notice operate?

99 If, contrary to the conclusions I have reached above, the First Trust Notice was valid and effective, George submitted that it created him as appointor with immediate effect. It was said that by appointing George as his successor, Mr Harris was necessarily vacating the position of appointor. The defendants submitted that in and of itself the First Trust Notice was in its terms insufficient to notify or effect a vacation of the position of appointor by Mr Harris in favour of George.

100 These contentions require the First Trust Notice to be construed. As I have set out in paragraphs [48] to [51] above, the question is what a reasonable person in the position of the recipient, GP Harris Pty Limited, would have understood by it. That understanding is to be objectively determined by reference, inter alia, to the terms of the First Trust which may be taken to have been known to both the notice giver and the recipient. In other words, the construction of the First Trust Notice must be informed by the construction of the provisions of the First Trust to which it relates.

101 The Defendants' submission is correct.

102 First, the notice precisely reflects the terms of clause 13.1(a). A stream cannot rise higher than its source, so its construction depends upon the true construction of clause 13.1(a).

103 Second, as a matter of ordinary English, when someone nominates a successor (someone to succeed or follow after them in a position or office) they are not thereby understood, without more, as resigning or vacating their present office or position.

104 Third, clause 13.1(c) clearly assumes (although does not require) a temporal difference between nominating a successor and the nominee succeeding to the office (emphasis added):

If the Appointor vacates the office of Appointor or dies while holding the office of Appointor and the person first named by him as the successor is living at the time then such person shall succeed to the office of the Appointor ...

105 That is not to say that the appointor could not a appoint a successor and vacate the office at the same time. Rather, it supports a construction that they are two juridical acts, each of which would require specific expression, i.e. "I hereby nominate X to act as the successor to the office of Appointor and I hereby vacate that office". Putting it another way, a reasonable recipient of the First Trust Notice would not understand it as being a vacation of office in the absence of something as significant as that being clearly expressed.

106 Fourth, George's construction of the First Trust Notice (and implicitly of clause 13) is odd in circumstances where Mr Harris was intended to be appointor for life (see paragraph [62] above) but had a power or entitlement (as I have found) to appoint a successor in the first 14 days of the First Trust's life. On George's construction Mr Harris, had he exercised the power or entitlement, would have vacated what was intended to be a lifelong office in the first fortnight.

107 Fifth, George's construction leads to the absurdity that clause 13.1(e) could never operate. That clause depends upon the possibility (but not necessity) of there being a temporal gap between nomination of a successor and the successor taking office. This is because it allows the appointor for the time being to revoke a nomination. If nomination in accordance with the terms of clause 13.1(a) worked an immediate succession, there would never be any scope for revocation of a nomination.

108 George's contention that his appointment as appointor (if otherwise effective) took immediate effect fails.

Was the First Trust Notice revoked by the Open Letter?

109 It is clear that the power of revocation of a nomination under clause 13.1(e) of the First Trust resides in the "Appointor for the time being". Therefore this question only becomes relevant if my conclusions in paragraphs [75] to [98] above are incorrect (so that the First Trust Notice is valid and effective) but I am correct in concluding that the First Trust Notice did not effect an immediate appointment of George as appointor. On this basis, Mr Harris was the "Appointor for the time being" as at the date of the Open Letter, 21 May 1993.

110 The defendants submit that the Open Letter was a revocation of George's nomination by the First Trust Notice in accordance with clause 13.1(e) (see paragraph [60] above). Even though I accept that by addressing the Open Letter "To whom it may concern" satisfies the requirement of "an instrument in writing addressed to the Trustee" for the purposes of clause 13.1(e), the defendants' submission fails for two reasons.

111 First, the language of revocation in the Open Letter is its final paragraph.

I am in the process of renewing my will and appointing new trustees to replace my son, George Christopher Harris. Let it be known to all that I do not accept the document drawn up by George in December 1992, which names George as trustee of my estate.

112 Even allowing for the fact that the Open Letter was written by a layman, as a matter of construction "not accepting" a document does not mean "I revoke" a document. On the contrary, to revoke a document implicitly requires acceptance that it is effective until it is revoked. Furthermore, the last sentence must be understood in the context of the preceding sentence. This supports the interpretation that the Open Letter was not intended to effect the replacement of George. This was to be done by the "process of renewing ... and appointing" then in train.

113 Second, and even if the first reason I have just given is incorrect, on a proper construction of clause 13.1(e) to be effective a revocation of a nomination must be received by the trustee. Although the language is necessarily different (one can nominate someone to someone else, one does not revoke someone to someone else) by parity with the reasoning I applied to the construction of clause 13.1(a) in relation to an effective nomination (see paragraphs [92] to [98] above), a revocation to be effective must also be received by the trustee (see especially my reason in paragraph [97] above). In the absence of clear words to the contrary, it would not be rational to construe clause 13 in a way which meant that to be effective a nomination had to be received by the trustee but a revocation of that nomination did not.

114 Just as there is no evidence the First Trust Notice was ever received by GP Harris Pty Limited (see paragraph [96] above), there is no evidence that the Open Letter was ever served on or received by GP Harris Pty Limited. On the contrary, Mr Harris kept it with his personal papers, including his will.

115 The defendants' submission that the First Trust Notice (if otherwise effective) was revoked by the Open Letter fails.

Nominees is not the trustee of the First Trust

116 The result of my analysis is that George never became the appointor of the First Trust. Mr Harris was the appointor of the First Trust as at 6 June 1995. He was therefore entitled, as he did on that day, under clause 10.1 of the First Trust to remove GP Harris Nominees Pty Ltd as trustee. George's attempt in August 2010 to remove what was by then known as Kythera as trustee of the First Trust and to appoint Nominees to that position was a nullity.

The Second Trust

117 The Second Trust Notice was:

NOTICE

TO: G.P. HARRIS NOMINEES PTY LIMITED as Trustee of The Christopher GEORGE Harris Family Trust constituted by Deed dated 24 November 1987.

Pursuant to Clause 11.1 of such Deed, Christopher George Harris hereby nominates George Christopher Harris as successor to the office of Protector and George Christopher Harris hereby consents to holding such office.

DATED:

Signed

Christopher George Harris

Signed

George Christopher Harris

118 The matters raised by the defendants in relation to the Second Trust Notice invite these questions:

(1) Is the Second Trust Notice ineffective because:

(a) it is undated;

(b) it is a copy; or

(c) it was never delivered to the Trustee so that the change could be endorsed or permanently annexed to the Second Trust?

(2) If the Second Trust Notice is otherwise effective:

(a) when did the appointor as protector under the Second Trust Notice take effect? and

(b) was the appointment revoked by the Open Letter?

119 Before I answer these questions by the application of the principles of interpretation which I have identified in paragraphs [48] to [56] above, I shall set out the relevant provisions of the Second Trust.

120 The critical provision is clause 11:

11. PROTECTOR

11.1 Subject to Clause 11.4, the power of appointing a new Protector shall be vested in the Protector for the time being hereof who shall be entitled to appoint in writing by will or otherwise any person or corporation to be Protector in his place.

11.2 A person holding the office of Protector shall be entitled to retire upon giving written notice to the Trustee, and forthwith upon receipt of such notice such person shall cease to hold office PROVIDED HOWEVER that such notice shall be accompanied by written consent by another person to hold the office of Protector upon and as from the retirement, AND that other person shall be the Protector as from receipt of such notice.

11.3 Upon receipt of any notice of change in the person for the time being holding the office of the Protector as aforesaid the Trustee shall endorse or permanently annex to this Deed a memorandum to that effect and any person who is for the time being a Trustee himself shall be entitled to rely on such memorandum (or the latest of such memoranda if more than one) as sufficient evidence that the person named therein is for the time being the Protector or has ceased to be the Protector, as the case may be.

11.4 If the Protector, being an individual, dies without having nominated a successor or is declared bankrupt or of unsound mind, or being a corporation, enters into liquidation or receivership, then the personal representative, trustee, liquidator or receiver, as the case may be, shall perform the functions of the Protector until such time as a new Protector is appointed. In such a case, the Settlor shall appoint a new Protector as soon as possible after such death, declaration, liquidation or receivership (as the case may be).

11.5 (a) The Trustee shall, before exercising any power, discretion or authority conferred on it by Clause 3.1(a) or (b) or Clauses 4.1, 5.1, 7.1, 8 or 9 give seven (7) [sic] days notice in writing to the Protector of its intention to exercise such power, discretion or authority and the manner and the extent to which it proposes to exercise or not to exercise such power, discretion or authority (which notice shall not be deemed to be given until received by the Protector), and the Trustee is hereby prohibited from exercising any such power, discretion or authority until it has received written consent from the Protector to such exercise PROVIDED THAT on the receipt of any such notice the Protector may be notice in writing to the Trustee waive the said prohibition and on receipt of such notice of waiver the Trustee shall be at liberty to exercise such power, discretion or authority forthwith notwithstanding that the said period of seven (7) days has not expired.

(b) The Protector may at any time exercise any power, discretion or authority referred to in (a) above in place of, and as if it were, the Trustee.

121 Next, I note that the protector is not in fact a party to the deed which establishes the Second Trust. The parties are Constantine George Harris as the settlor and GP Harris Nominees Pty Limited as the trustee. The protector does not appear until the definition provisions of the deed.

122 The relevant interpretation and definition provisions are:

1. CONSTRUCTION AND INTERPRETATION

1.1 Construction

In this Deed the following expressions shall, unless the context requires otherwise, have the following meanings:

...

(d) "Protector" means Christopher George Harris of 10A Queen Street, Woollahra, New South Wales;

...

(f) "the Trustee" means the Original Trustee or, where the Original Trustee is replaced pursuant to Clause 10, the Trustee for the time being of this Settlement;

...

1.2 Interpretation

...

(e) The headings in this Deed are for convenience only and shall not affect its interpretation;

...

(h) References to the Settlor and the Protector shall, where relevant, be deemed to be references to or to include, as appropriate, their respective successors or permitted assigns; and

(i) A requirement in this Deed for any matter or thing to be in writing shall be satisfied if it is transmitted by telex, telegram, cable or facsimile machine.

123 It is apparent from clause 11.5 (see paragraph [120] above) that the protector has considerable power. The clauses listed in clause 11.5(a), the exercise of which by the trustee are subject to the consent of the protector, go to fundamental matters such as payments out of income and capital and the early determination of the Second Trust.

124 The protector can also remove and appoint the trustee:

10. RETIREMENT AND APPOINTMENT OF TRUSTEES

10.1 (a) Retirement

The Trustee may at any time and without the consent of any co-Trustee or of any other person or corporation retire as Trustee of this Settlement PROVIDED THAT if there is more than one Trustee they need not retire together and PROVIDED FURTHER that the Trustee shall not so retire without having first notified the Protector in writing giving sufficient notice to enable the Protector to exercise the power of appointment conferred by sub-paragraph (b) of this Clause where necessary so that this Settlement has at all times at least one Trustee.

(b) Appointment and Removal

The Protector shall be entitled by instrument in writing at any time and from time to time:-

(a) to remove any Trustee hereof;

(b) to appoint any additional Trustee or Trustees;

(c) to appoint any new Trustee or Trustees in the place of any Trustee who is removed, retires, or ceases to be a Trustee by operation of law.

125 Finally, clause 16.8 specifies how notices are to be served. The address for service of notices to the settlor, trustee and protector was Mr Harris' address in all cases.

The Second Trust Notice is undated

126 Clause 11 of the Second Trust does not specify any particular form of appointment other than it be "in writing by will or otherwise" (clause 11.1) or by "written notice to the Trustee" (clause 11.2). There is no requirement for it to be dated.

127 The defendants' first objection to the effectiveness of the Second Trust Notice fails.

The Second Trust Notice is a copy

128 There is no dispute that there was once an original of the Second Trust Notice. A copy has been admitted into evidence to prove the form and contents of the original. I understand the defendants' objection to be that if all that can be found is a copy, that copy would be ineffective because it is a copy.

129 Again, clause 11 of the Second Trust does not specify that the Notice received by the trustee must be an original document. There is no basis to imply such a requirement. There is no reason why, in the absence of the original, if otherwise effective, a copy would not be sufficient.

130 Two further matters support this conclusion. First, insofar as clause 11.1 refers to the appointment being done "by will", it is well established that a copy of a will will be admitted to probate if the original cannot be found. Second, clause 1.2(i) (see paragraph [122] above) expressly contemplates notices being given by, for example, facsimile machine, which necessarily involves reliance upon a copy.

131 The defendants' second objection to the effectiveness of the Second Trust Notice fails.

The Second Trust Notice was never delivered

132 The defendants contend that the Second Trust Notice is also ineffective because it was never delivered to GP Harris Nominees Pty Limited as trustee of the Second Trust, such that the nomination of George as protector was never able to be endorsed or permanently annexed to the Second Trust in accordance with clause 11.3 (see paragraph [120] above).

133 The answer to the defendants' submission depends upon whether the Second Trust Notice is a notice under clause 11.1 or 11.2. This is because as a matter of the natural and ordinary meaning of the words used, notice to the trustee of the exercise of the power of appointment under clause 11.1 is not required for such an appointment to take effect, whereas it is in terms necessary in the case of a notice under clause 11.2.

134 The Second Trust Notice bears features referable to the language of both clause 11.1 and 11.2

135 The Second Trust Notice is expressed to be "pursuant to clause 11.1" of the Second Trust. It speaks of nominating George, although clause 11.1 uses the word "appointing" rather than "nominate". Clause 11.2 nowhere uses the language of appointment or nomination. However, clause 11.1 is expressed to be subject to clause 11.4, where the words "nominated a successor" are to be found.

136 Insofar as clause 11.2 is concerned, the Second Trust Notice is expressed to be a written notice to the trustee (clause 11.1 in its terms not requiring such a notice). Furthermore, the Second Trust Notice contains George's written consent to be protector, which is expressly required under clause 11.2.

137 Clauses 11.1 to 11.4 (inclusive) disclose a clear scheme. Clauses 11.1 and 11.4 (the former being expressly subject to the latter) deal with the protector's power to appoint someone to be protector "in his place" upon the protector dying or becoming legally incapacitated in the ways specified in clause 11.4. This is clear from the reference to a will in clause 11.1 and the list of other events in clause 11.4. None of these are necessarily voluntary acts. The reference to a will in clause 11.1 further negatives any suggestion of the need to give written notice to the trustee for an effective appointment, because it would be odd to provide the trustee with a will by way of written notice rather than the trustee being informed of the identity of the new protector by being provided with a copy of the will after the late protector's death).

138 On the other hand, clause 11.2 deals with the Protector retiring from that office during his lifetime. This is necessarily by his own voluntary act. Clause 11.2 expressly sets out when a retirement under clause 11.2 becomes effective (upon receipt of the written notice by the trustee). If clause 11.1 and a notice under it have the effect for which George contends, then clause 11.2 would have no work to do.

139 Clause 11.3 is a ministerial and evidentiary provision which in its terms applies to both preceding sub-clauses. This is because it refers to "receipt of any notice of change" (emphasis added), which is wider than just the written notice to the trustee referred to in clause 11.2. It includes, for example, a letter from a solicitor saying the protector has died and enclosing a copy of the will which appoints the new protector.

140 A reasonable recipient in the person of the trustee, necessarily conscious of the terms of the Second Trust properly construed, would understand the Second Trust Notice to be intended to be an "or otherwise" notice under clause 11.1 for at least three reasons.

141 First, it is expressed to be pursuant to clause 11.1. Second, it speaks of nominating George as successor to the office of protector, which is the language of clause 11.4, with which clause 11.1 must be read. Third, nowhere does the Second Trust Notice use the language of retirement. Given the importance of the act of retirement and the elaborateness of the provisions in clauses 11.2, a reasonable recipient of the notice in the position of the trustee would not understand it to effect a retirement in the absence of the use of that word or an obvious synonym.

142 As a notice under clause 11.1, the Second Trust Notice did not have to be delivered to the trustee of the Second Trust to be an effective appointment. The defendants' third objection to the validity of the Second Trust Notice therefore fails. However, that is not the end of the matter, because it begs the question which I next turn to consider.

143 Before considering that next question, it is also necessary to record that if, contrary to the view I have reached, the Second Trust Notice has the effect of being a notice of retirement under clause 11.2 of the Second Trust, then the position must be that it never took effect. This is because clause 11.2 makes it very clear that the outgoing protector does not cease to hold office and his successor does not take over until the written notice is received by the trustee. That never occurred in the present case. For the reasons set out in paragraph [96] above, it could not be said that the circumstances in which the Second Trust Notice came into existence could constitute receipt by the trustee.

144 Finally, it will be apparent from what follows that, irrespective of the correctness of my view on this issue, the same position will ultimately be reached because of what I consider to be the overriding effect of Mr Harris' will on the question of the identity of the protector.

When did the Second Trust Notice operate?

145 It is clear from the scheme in clause 11 which I have identified in paragraph [137] above, that in the absence of earlier legal incapacity, the appointment of a successor protector under clause 11.1 takes effect upon the death of the protector for the time being. This is apparent from clause 11.1 specifying the primary means of appointment as being "by will" and the reference in clause 11.4 to the possibility that the protector "dies without having nominated a successor". Therefore, while I have concluded that the Second Trust Notice is valid as a notice under clause 11.1, the appointment of George as protector would not take effect until Mr Harris' death. This is subject to Mr Harris revoking the appointment, which I find in paragraphs [154] to [156] below he in fact did.

146 If I am wrong and the Second Trust Notice is a notice under clause 11.2 of the Second Trust, then in accordance with the terms of clause 11.2 George's appointment would only have taken effect upon receipt of the Second Trust Notice by the trustee. On the express terms of clause 11.2, receipt by the trustee is a necessary step for an effective retirement.

147 The Second Trust Notice was never received by the trustee for the time being of the Second Trust. Until it was received by the trustee, Mr Harris continued as protector of the Second Trust. Furthermore, as I explain in paragraphs [154] to [156] below, any appointment of George that might otherwise have been effected by the Second Trust Notice was revoked by Mr Harris' will before any such appointment took effect.

Was the Second Trust Notice revoked by the Open Letter?

148 There is no express power under clause 11 of the Second Trust for an appointment of a new protector to be revoked. George submits that a power of revocation would not be implied. However, that submission was put in the context of his primary submission that the power of appointment under clause 11.1 took effect immediately. I have not accepted that primary submission.

149 Having regard to the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 286, I have no difficulty in implying such a power to the effect that the protector can always revoke his appointment of a new protector or his retirement before that appointment or retirement has taken effect. Once that appointment or retirement has taken effect, the former protector will either be dead or, if still alive, powerless.

150 The implication is clear under both clauses 11.1 and 11.2. In relation to clause 11.1, given that the principal means of appointment is expressed to be by will, a testator can always change their will (subject to any contractual restraint not to do so, which is inapplicable in the present case). In the case of retirement under clause 11.2, the situation is no different to that which permits an unaccepted offer to make a contract or an unaccepted resignation from employment to be withdrawn before they are accepted. Thus, prior to receipt by the trustee of a notice of retirement (at which point retirement becomes effective), the protector is entitled to revoke the notice of retirement. The facts of this case do not raise the question of whether such notice of revocation would have to be received by the trustee before the trustee had received the notice of retirement.

151 In accordance with ordinary principles, the revocation could be express or implied. An example of the latter is the subsequent appointment of a protector inconsistent with an earlier appointment.

152 However, for the reasons set out in paragraphs [109] to [115] above, the Open Letter on its proper construction does not effect a revocation of the Second Trust Notice, irrespective of whether it is a notice under clause 11.1 or 11.2. Nor, to the extent notice of any revocation was required to be received by the trustee, did the trustee ever receive such notice.

153 Nevertheless, the matter does not end there.

154 Insofar as the Second Trust Notice is (as I have decided) a notice under clause 11.1, then Mr Harris' appointment of his testamentary trustees as protector in clause 11 of his will on 19 December 2000 impliedly revoked the appointment under the Second Trust Notice.

155 Insofar as the Second Trust Notice was a notice under clause 11.2, the purported appointment of George had not taken effect, for want of delivery to the trustee, on 19 December 2000 when Mr Harris made his will. As at that date he remained protector and was entitled to revoke George's purported appointment in his will, which he impliedly did by appointing his testamentary trustees as protector.

156 The defendants' submission that the Second Trust Notice (if otherwise effective) was revoked succeeds, but not by reference to the Open Letter. The revocation was achieved by clause 11 of Mr Harris' December 2000 will, which took effect on his death on 17 May 2010.

Nominees is not the trustee of the Second Trust

157 The result of my analysis is that George never became the protector of the Second Trust. Mr Harris was the protector of the Second Trust as at 6 June 1995. He was therefore entitled, as he did on that day, under clause 10.1(b) of the Second Trust to remove GP Harris Nominees Pty Limited as trustee. George's attempt in August 2010 to remove what was by then known as Kythera as trustee of the Second Trust and to appoint Nominees to that position was a nullity.

Undue influence - legal principles

158 In addition to the various arguments of construction with which I have dealt above, the defendants submitted that Mr Harris' execution of the Notices was procured by undue influence. With one fundamental exception, there was no dispute between the parties as to the legal principles to be applied:

(1) The exercise of the power of nomination by the Notices is susceptible to the application of the doctrine of undue influence.

(2) The mere reposing of trust or confidence in another does not mean that every benefit conferred on that other is subject to being set aside. The influence exercised by reason of that trust or confidence must be "undue" in the sense that the impugned act was the product of the improper use of that influence so that it was not, in the fullest sense of the words, the actor's free, voluntary act.

(3) A relationship of influence may be presumed (for example, between solicitor and client) or proved.

(4) The relationship of adult child and elderly parent does not create a presumption of undue influence: McIvor v Westpac Banking Corporation [2012] QSC 404 at [14].

(5) To rebut the presumption of undue influence "it is not sufficient to show that the weaker party understood what he was doing or the significance thereof. What has to be shown is that the formation of his intention was free from the influence of the other party, and that he was at the time of the gift 'emancipated' from that influence. The circumstances of the case thus will require close examination; the stronger party may rebut the presumption in any manner open to him on such circumstances. But in many cases the courts have placed particular reliance upon the presence or absence of improvidence and independent advice": Meagher Gummow & Lehane's Equity Doctrines & Remedies, 4th ed, Butterworths Lexis Nexis, 2002 at [15-125] ("MGL"); and

(6) In the absence of a presumed or proven relationship of influence, it nevertheless remains open to a party to prove that a particular benefit was in fact procured by the undue influence of another.

159 With the exception of the proposition set out in sub-paragraph [158(1)] above, the preceding summary is derived from the compendious treatment of undue influence in Chapter 15 of MGL. The subject of the proposition in sub-paragraph [158(1)] above was disputed between the parties and I now set out my reasons for that proposition.

160 George submitted that "the presumption of undue influence does not arise merely from a relationship between the parties in which one has the opportunity of obtaining an ascendency over the other, but from what amounts to an extravagant disposition of property which cannot be explained", citing the High Court in Yerkey v Jones (1939) 63 CLR 649 at 675. For undue influence to be established, there had to be an unfair exploitation of influence in order to obtain a substantial proprietary benefit. The appointment of George to the office of appointor/protector did not amount to a conveyance of a proprietary interest, noting the fundamental distinction between a power and property: Ex parte Gilchrist; re Armstrong (1886) 17 QBD 521; Hudson v Gray (1927) 39 CLR 473 at 515. The appointment was not a transaction, the object of which was to convey property or confer any benefit on the plaintiff. Therefore, the doctrine of undue influence did not apply.

161 The defendants submitted that the application of the doctrine was not confined to a transaction which involved any immediate disposition of "property" in a narrow sense. They drew attention to statements in leading texts that were not confined to dispositions of property. For example, in the 18th edition of Hanbury & Martin, Modern Equity, Sweet & Maxwell, 2009, it is stated in relation to undue influence that "Under the head of constructive fraud, equity recognises a wide variety of situations in which intervention is justified by reason of a defendant's influence or dominance over the claimant in procuring his execution of a document (such as a settlement) or his entering into an obligation" (at [26-007]; emphasis added).

162 The defendants submitted that while, for obvious reasons, the vast majority of cases and related commentary concerned gifts and dispositions of property, there is no reason in principle for the equitable doctrine to be limited to benefits of that kind. They drew attention to other cases where undue influence has been called in aid which did not involve a gift or transfer of property. Examples included cases seeking to set aside consent orders such as Harvey v Phillips (1956) 95 CLR 235 at 243-244 and the decision of Palmer J in Tjiong v Tjiong [2010] NSWSC 578 where two beneficiaries were entitled to a declaration that their consent to the establishment of a family trust had been obtained by undue influence.

163 I accept the defendants' submissions. The use in both the cases and texts of language such as "transaction" and "benefit", while entirely understandable, is apt to mislead if read as prescribing the limits of the application of the doctrine. The key features which invoke the equitable jurisdiction are a particular kind of relationship of dependence or reliance by A on B and the unconscientious use of that relationship by B which has brought about a change in A's legal rights and entitlements. Insofar as that change involves a disadvantage to A or a benefit to B (or any other person), equity will look to substance rather than form and will treat those concepts in their widest possible senses.

164 Rowley v Rowley (1853-1854) Kay's Reports 242 provides an instructive analogy. In the course of dealing with what was described as "the corrupt motive of the donee of the power", Vice-Chancellor Sir W Page Wood observed (at 262) that "it would be impossible to contend, if a direct bribe were given to the appointor, ... that the appointment could be upheld in favour of the party to whom the fund subject to appointment was given". Bribery is a very obvious example of fraud. Similarly, "undue influence is only one of the instances of fraud; and undue influence itself is manifested in a variety of ways ... but still it is in all cases bottomed in fraud": Symons v Williams (1875) 1 VLR(E) 199 at 216 per Barry J cited in MGL at [15-005].

165 If, as Rowley v Rowley makes clear, the exercise of a power of appointment (as traditionally understood) could be vitiated by fraud, there is no reason in principle why the doctrine of undue influence would not extend to the exercise of a slightly different power, in this case to appoint someone to the office of appointor or protector of a trust. Having said that, I should note that the nature and scope of the powers of an appointor or protector remain the subject of some debate. The presence of such an office in discretionary trusts was remarked upon by the Court of Appeal in Belfield v Belfield [2012] NSWCA 416; (2012) 16 BPR 31,177:

[72] While it was far from universal, it was by no means uncommon for [discretionary] trusts to be associated with a device whereby the instigator achieved at least some practical control or influence over the decisions the trustee made ...

[73] One device that has come to be used sometimes is to create a discretionary family trust that has an office, separate to that of the trustee, which is commonly called by a name such as "protector" or "guardian": P W Young, "Non-Fiduciary Trust Administrators" (2010) 84 ALJ 668; Heydon and Leeming, Jacobs on Trusts, 2006, at [320]; H A J Ford and W A Lee, Law of Trusts, Thomson Reuters, Sydney, paras [12.250], [5.12170] and [8180]. Such devices were well known before 1982 to Australian lawyers who practiced in trusts and estate planning: for example, S E K Hulme QC, "Difficulties in the Use of Trusts in Estate Planning" (1976) 5 Aust Tax Rev 134, p 143. Commonly, a trustee who is proposing to exercise a discretionary power is required to give the "protector" or "guardian" a particular period of notice before that power is actually exercised. If the "protector" or "guardian" disapproves of that decision, the "protector" or "guardian" has the power to remove the trustee and replace it with another whose opinions are more in accord with those of the "protector" or "guardian". Alternatively, the "protector" or "guardian" could be given a power of veto of decisions of the trustee. As well, other powers could be conferred on a "protector" or "guardian". When there is any such arrangement, it will require a close analysis of the terms of the particular trust documentation ...

166 There is a live academic and judicial debate about the extent to which the powers of an appointor/protector are fiduciary. Since the appointor/protector does not hold the trust property, he or she is not a trustee. Nevertheless, the generally accepted view appears to be that the powers of an appointor/protector will generally be fiduciary, but need not necessarily be so. For example, a protector with the power to remove or appoint trustees will be a fiduciary, just like any other person with such a power: In re Skeat's Settlement; Skeats v Evans (1889) 42 ChD 522. Other powers may be personal, depending on the proper construction of the trust instrument. The state of the debate may be ascertained by reference to G Thomas and A Hudson, The Law of Trusts, 2nd ed, OUP, 2010 at 23.34-23.36; Underhill and Hayton, Law Relating to Trusts and Trustees, 18th ed, Lexis Nexis, 2010 at 1.76-1.92; and, D.W.M. Waters "The Protector: New Wine in Old Bottles?" in A.J. Oakley (General Editor), Trends in Contemporary Trust Law, OUP, 1996 at pp 63-122 especially at p 81.

167 The significance of the distinction is that while all power holders must act within the scope of their powers, only those whose powers are for the benefit of others (such as fiduciaries) are subject to the "fraud on a power" rule. That rule requires the power holder to act in good faith and for a proper purpose. Insofar as a power is fiduciary, then it is a straightforward conclusion that, if the power has been exercised subject to undue influence, equity will not regard it as having been exercised in good faith or for a proper purpose. If the appointor's/protector's power to appoint a nominate a new appointor or protector is a fiduciary one, then this line of reasoning supports the conclusion that the power purported to be exercised by the Notices is amenable to the doctrine of undue influence.

168 On the other hand, if, on the proper construction of the trust deed, the power to appoint a new appointor/protector is a purely personal (non-fiduciary) power, it might be argued that a different result would follow. This is because, as D.W.M. Waters points out at page 81 of his article just cited, "provided he acts within the scope (and intention) of his power, it seems to be generally accepted that, if the holder of a power does not hold that power as a fiduciary, the courts are not going to impose restraints or criteria as to behaviour upon him in the exercise or non-exercise of that power". To the extent it may be necessary, my view is that the power to appoint a new appointor/protector under the First and Second Trusts is a personal one. However, that does not put the exercise of the power beyond the reach of the doctrine of undue influence. Unless it is clear from the instrument conferring the power, where a personal power is conferred on someone it is axiomatic that for the exercise of that power to be within its scope and intention, it must be the free and voluntary act of the holder of the power.

169 For these reasons, whether or not the power to appoint a new appointor/protector is fiduciary or personal, the exercise of such a power is susceptible to the application of the doctrine of undue influence.

Undue influence - the parties' submissions

170 The defendants submitted that there was a presumption of undue influence in the present case either because of George's role as a solicitor towards his father in relation to the preparation and explanation of the Notices or by reason of the relationship between them involving ascendency or influence on the part of George, or dependence, reliance, trust or confidence on the part of Mr Harris. The defendants pointed to a number of aspects of George's evidence concerning what he did or did not advise his father about in relation to the Notices. They submitted that Mr Harris was wholly reliant upon George for advice and assistance in relation to the Notices in circumstances where it was clear that, to the extent benefit was required, the Notices did confer on George a considerable benefit because as appointor/protector he effectively controlled the trusts. Furthermore, on the basis that the Open Letter referred to the Notices, the contents of the Open Letter supported the conclusion that the presumption of undue influence had been engaged. Finally, the defendants submitted that George's evidence, particularly when measured against the contents of the Open Letter, did not rebut the presumption of undue influence.

171 It was submitted for George that the relationship of influence such as it was between Mr Harris and George did not ground a presumption of undue influence, because the influence was not "undue" in the requisite sense. Next, it was said that George had never exploited the opportunity created by his appointment nor obtained any substantial benefit thereby. Insofar as George's role as a solicitor was concerned, it was submitted that he did not act in that capacity towards his father, but was rather acting in his personal capacity as eldest son. That did not give rise to a presumption of influence. Finally, there was nothing in the Open Letter which suggested that Mr Harris was acting under the burden of any undue influence.

Undue influence - resolution

172 The facts give rise to the presumption of undue influence in relation to the execution of the Notices. George has been unable to rebut that presumption. If the Notices were otherwise effective, I would declare them to be void. Insofar as it was necessary, and subject to the intervention of third party rights that could militate against such an order, the defendants would also be entitled to declarations that any particular acts done by George in purported reliance upon the Notices are also void. My reasons for these conclusions are as follows.

173 I do not accept the defendants' submission that the relationship between George and Mr Harris was one of solicitor and client and therefore automatically gave rise to a presumption of undue influence. George may have been a highly qualified solicitor and that fact was one of the bases upon which (as I find) Mr Harris reposed trust and confidence in George. Nevertheless, the evidence does not permit me to characterise their relationship as one of solicitor and client. It is clear that what passed between them in relation to the Notices was in their respective capacity as father and son.

174 While the relationship between them does not support the automatic presumption of undue influence, the facts as I have found them do establish that the nature of their relationship insofar as the Notices are concerned was one that gives rise to the presumption. Mr Harris did repose trust and confidence in George. He did so because he was his son. He undoubtedly also did so because he knew that George was a highly experienced commercial solicitor. In the circumstances of the execution of the Notices, in particular that they were the only two people present, Mr Harris was entirely reliant upon George to explain to him the effect of the Notices. Because of his understandable anxiety about his forthcoming heart surgery, Mr Harris was also in a position of vulnerability at the time he executed the Notices.

175 This is a case where a relationship which give rises to the presumption of undue influence has been clearly demonstrated. It is unnecessary for me to make, and I do not make, a finding that George intended to or did in fact exercise undue influence against Mr Harris. In those circumstances my conclusion does not require me to take into account s 140 of the Evidence Act 1995 (NSW) (considering the gravity of the matters alleged in deciding whether the allegation has been proven). Even if that section were relevant, I would still be satisfied to the degree contemplated by that section of the existence of the relationship that gives rise to the presumption.

176 An important factor in rebutting the presumption is whether or not the person concerned had the benefit of independent advice. Although the defendants invited me to make findings in relation to what advice may or may not have been given by George to Mr Harris, for the reasons set out in paragraph [41] above I am unable to make any finding about what, if any, advice George gave to his father. Even if not independent, in some cases a full and dispassionate explanation by the beneficiary of the transaction to the donor or transferor may assist in rebutting the presumption. Advice to Mr Harris, independent or otherwise, about the effect of the Notices is completely absent from this case.

177 Contrary to George's submissions, the contents of the Open Letter only support the conclusion that the requisite relationship existed. Mr Harris says in terms (see paragraph [20] above) that he signed the Notices in a way completely uncharacteristic of him because he trusted George and was preoccupied with his impending surgery. I have accepted, as the defendants urged, that the Open Letter refers to the execution of the Notices and not something else. The Open Letter both supports the establishment of the presumption and stands in the way of George rebutting it.

178 Finally, I do not accept George's submission that any presumption of undue influence or a case of actual undue influence is rebutted by the fact that he has not gained materially from the exercise of the powers conferred upon him by the Notices. That is irrelevant. The question is ultimately the freedom of mind which Mr Harris had in executing the Notices (see sub-paragraph [158(5)] above). The circumstance that the beneficiary of an act which was the consequence of undue influence (presumed or actual) may not seek to enjoy the fruits of that act cannot rationally effect the determination of how that act was brought about.

Resolution

179 At the conclusion of the hearing the parties asked for time to read these reasons before final orders are made. This was to give them an opportunity to consider the applicability of my reasons to any other disputes that may be outstanding between them and also to make submissions concerning the appropriate form of any declaratory relief.

180 I publish these reasons accordingly.

181 I fix the proceedings for the making of final orders before me at 9.30am on Monday, 16 September 2013. If the parties are unable to agree on a set of orders giving effect to my reasons, I will resolve any disputes then.

Amendments

05 December 2013 - Amended paragraphs: Para 20, second line, "George" replaced by "Mr Harris"

05 December 2013 - Amended paragraphs: Para 21, "Mr Harris" replaced by "George"

05 December 2013 - Amended paragraphs: Para 22, line 2, "Mr Harris" replaced by "George"

Decision last updated: 05 December 2013