Supreme Court New South Wales

• Medium Neutral Citation: Gregory Stuart Bowering v Deborah Jayne Knox and David John Bowering (No 2) [2014] NSWSC 1749
• Hearing dates: 1 December 2014
• Decision date: 08 December 2014
• Jurisdiction: Equity Division - Expedition List
• Before: Sackar J

Decision

See paragraphs [54]-[58]

• Catchwords: WILLS - Construction - where will establishes special disability trust - where discretionary powers of special trustee - nature of interest of beneficiary of special disability trust - whether certain clauses inconsistent with primary objects of trust - whether certain clauses contrary to public policy - whether trustee placed in position of conflict of interest - whether grant of declarations of any utility
• Legislation Cited: n/a
• Cases Cited: Armitage v Nurse [1998] Ch 241; Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234; Fell v Fell (1922) 31 CLR 268; Gregory Stuart Bowering v Deborah Jayne Knox and David John Bowering [2014] NSWSC 1107; Hatzantonis v Lawrence [2003] NSWSC 914; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Keulemans v Attorney-General [2013] NSWSC 1772; McIntosh v McIntosh [2014] QSC 99; Mordecai v Mordecai (1988) 12 NSWLR 58; Muir v Winn [2009] NSWSC 857; Princess Anne of Hesse v Field [1963] NSWR 998; Ramsay v Trustees Executors and Agency Company Limited (1948) 77 CLR 321; Re Blantern [1891] WN (ENG) 54; Re Sanford [1901] 1 Ch 939; Rivers v Bondi Junction-Waverley RSL Sub-Branch Ltd (1986) 5 NSWLR 362; Taheri v Vitek [2014] NSWCA 209
• Texts Cited: Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 7th edition, 2006); Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (LexisNexis Butterworths, 4th edition, 2002)
• Category: Principal judgment
• Parties: Gregory Stuart Bowering - plaintiff; Deborah Jayne Knox - first defendant; David John Bowering (by his tutor Margaret Colleen Hole) - second defendant
• Representation: Counsel: J van Aalst - plaintiff; M Meek SC - first defendant; S Hughes with E James - second defendant; Solicitors: Heydons Lawyers - plaintiff; Teece Hodgson & Ward - first defendant; Boyd House & Partners - second defendant (by his tutor)
• File Number(s): 2013/362577

Judgment

Proceedings

1 By his summons filed 2 December 2013, the plaintiff Gregory Stuart Bowering seeks the determination of the Court in relation to the proper construction of certain provisions of the will of his father, the late Kevin Charles Bowering.

2 The will is dated 22 December 2010, and probate was granted on 14 December 2012. The plaintiff and the first defendant, his sister Deborah Jayne Knox, are joint trustees and executors of the estate. They are also beneficiaries. The will purports to establish a special disability trust for the benefit of the second defendant David John Bowering, the brother of both the plaintiff and the first defendant. The first defendant is the sole trustee of the special disability trust.

3 In Gregory Stuart Bowering v Deborah Jayne Knox and David John Bowering [2014] NSWSC 1107, I considered an application by the plaintiff for a tutor, Ms Margaret Hole, to be appointed for the second defendant Mr David Bowering. That application was opposed by the first defendant and the second defendant. For the reasons expressed in that judgment, I ordered such an appointment be made.

4 In order to consider the relief claimed by the plaintiff, it is first necessary to set out the provisions of the will.

The provisions of the will

5 The will of the late Kevin Charles Bowering, of which probate was granted on 14 December 2012, provides as follows:

THIS IS THE LAST WILL AND TESTAMENT of me KEVIN CHARLES BOWERING of [XX] Suffolk Avenue Collaroy in the State of New South Wales.

1. I REVOKE all Wills and testamentary dispositions previously made by me AND DECLARE this to be my last Will and Testament.

2. I APPOINT my daughter DEBORAH JAYNE KNOX and my son GREGORY STUART BOWERING to be Executors and Trustees of this my Will (hereinafter called "my Trustees")

3. I GIVE AND DEVISE to my son DAVID JOHN BOWERING if he shall survive me my property known as [a unit on Pacific Parade Dee Why NSW] to be held on the special trust established in clause 7 of this Will.

4. I GIVE to my friend and neighbour LAUREL MORRIS of [YY] Suffolk Avenue Collaroy a cash legacy of One hundred thousand dollars ($100,000) in appreciation for all her services and assistance to me in the later part of my lifetime.

5. I GIVE DEVISE AND BEQUEATH the whole of the remainder of my estate of whatever kind and wherever situate to my Trustees UPON TRUST for such of my children DEBORAH JAYNE KNOX, GREGORY STUART BOWERING and DAVID JOHN BOWERING as shall survive me and if more than one as tenants in common in equal shares PROVIDED THAT the share taken by my son DAVID JOHN BOWERING shall be subject to the special trust contained in clause 7 of this Will.

6. IF any child of mine should predecease me leaving a child or children who survive me and attain the age of twenty one (21) years each of the last mentioned child or children shall take (if more than one equally between them) the share which his her or their parent would have taken if such parent had survived me.

7. The share, if any, of my estate taken by my son DAVID JOHN BOWERING (herein called David) under this Will and all income accrued thereon shall be held as follows:-

7.1 To establish a special disability Trust Fund to be known as the DAVID BOWERING TRUST with the sole trustee of that trust to be my daughter DEBBIE JAYNE KNOX (herein called the special trustee), provided that if she is or becomes unable or unwilling to act in that capacity she is hereby given power to appoint another trustee of her choosing to act in her place;

7.2 To invest the Fund as authorised by law or any clause in this Will;

7.3 To hold the capital and income of the Fund primarily for the maintenance, benefit, advancement in life and well-being of my son David in accordance with the following principles:

(a) that his views and wishes, so far as they can be ascertained, are given priority consideration;

(b) that decisions made about him should be as nearly as possible the decisions he would have made if not disabled;

(c) that his welfare and interests be appropriately protected;

(d) that his life be not interfered with except to the least possible extent;

(e) that he be encouraged to look after himself as much as possible and live in the general community;

7.4 Subject to paragraph 7.3, in her discretion to pay or apply all or part of the income or capital of the Fund for the benefit of any one or more of the beneficiaries named in clauses 5 or 6 of this Will, in such shares and amounts and at such times as the special trustee shall think fit without any obligation to make payments for all of such beneficiaries or to ensure equality among those to whom payments are made.

7.5 This trust shall terminate on the first to occur of the death of David or the distribution of all the Fund, and on termination the special trustee shall hold the balance of the Fund, if any, on the same terms as provided by this Will if David had not survived me;

7.6 From time to time the special trustee should consider the advice of professionals in the field of David's disability, and if there is satisfactory evidence that he has recovered sufficiently from his disability for it to be reasonable to do so, the special trustee may pay the balance of the Fund to him;

7.7 If it becomes clear that the Fund is larger than necessary for the primary purpose set out in paragraph 7.3 and subject to the preservation of a reasonable reserve the special trustee may distribute the excess between all or any of the other beneficiaries of the trust, giving first priority to the children of David, if any;

7.8 The special trustee shall consider the effect of distributing income or capital of the Fund to David on his Disability Support Pension entitlements or tax liability from time to time and is authorised to withhold or reduce any distribution if it would not be to his benefit after taking such entitlements or liability into account.

8. In relation to the Trust Fund in clause 7 the special trustee may exercise any powers given to her by law or this Will and in addition may:-

(a) accumulate income to the fund up to a maximum of twenty one (21) years from my death or other longer period permitted by law so that surplus income becomes part of the Fund and on termination of such trust apply any surplus income in the same way as the balance of the Fund under clause 6; and

(b) pay any tax assessed on assets disposed of by the Fund and allocate or apportion liability for that tax among such of the eligible beneficiaries as to the special trustee may seem necessary or appropriate.

9. I DECLARE that my Trustees in their sole and absolute discretion and without being liable for any loss shall have the following powers:-

(a) To apply the whole or any part of the income or capital of the share whether expectant contingent or vested of any child taking under the terms of this my Will in or towards the maintenance education or advancement or otherwise for the benefit of such child.

(b) To pay or apply transfer appropriate or hand over to any beneficiary any part of my estate in specie or in its actual state of investment in or towards satisfaction of the share of such beneficiary and without his or her consent or the consent of any other person.

(c) To postpone for any period any sale calling in or conversion of all or any part of my estate and to allow the same to remain in its state of investment at the date of my death.

(d) To invest any part of my estate in the purchase of or subscription for shares in listed companies or units in listed trusts or publicly offered debentures or unsecured deposits with any financial institution or company and in the lease or purchase or upon the security of any real or personal property of any nature.

IN WITNESS WHEREOF I have hereunto set my hand to this my last Will and Testament this 22nd day of December Two thousand and ten.

[alterations made to the addresses set out in clauses 3 and 4]

The relief claimed by the plaintiff

6 The plaintiff poses eight questions for the determination of the Court. Those questions are:

1. Is it the purpose of clause 5 to confer upon David John Bowering ("David") a vested interest in one third of the remainder of the estate to take effect upon completion of the administration of the estate, and to vest in the possession of the first defendant under and for the purposes of the trust established or to be established by the executors pursuant to clause 7.1?

2. On a proper construction of the Will are the principles in clause 7.3 the primary object and purpose for which the trust was established by the testator?

3. Is clause 7.4 on a proper construction:

a) void because it purports to enable the trustee to exercise that discretionary power which would have to effect of depriving David of the benefit of his vested interest in the estate; and

b) by reason of that clause conferring on the trustee a general power of appointment which is inconsistent with the primary objects and principles upon which the Trust was established as provided in clause 7.3.

4. On a proper construction of clauses 7.5 and 7.6 will the Trust terminate either:

a) upon the death of David whereupon the remaining trust assets would be held upon trust for the first defendant and plaintiff beneficially in equal shares as tenants in common; or

b) if professional medical advice opines that David recovered sufficiently from his disability whereby it would then be reasonable to vest the trust assets (both capital and income) in David in possession?

5. On a proper construction of clause 7.7 is it inconsistent with the principles, purposes and objects for which the Trust was established under clauses 7.1, 7.3 and under 7.5 concerning the circumstances upon which the Trust will terminate.

6. Upon a proper construction of clause 7.8 is it void for the reasons that:

a) it is contrary to public policy; and

b) it is inconsistent with the principles, purposes and objects upon which the Trust was established under clauses 7.1 and 7.3.

7. Upon a proper construction of clause 7, by reason of the fiduciary obligations of the trustee, can the discretionary powers purported to be conferred under clauses 7.4 to 7.8 and 8 be lawfully exercised other than for and limited to the principles, purposes and objects prescribed under clause 7.3?

8. Upon a proper construction of clause 8 (a) the reference therein to clause 6 should refer to clause 5.

7 Consequent upon the answers to those questions, the plaintiff seeks the following declaratory relief.

8 He seeks a declaration that upon the completion of the administration of the estate, the one third share of the estate bequeathed to David John Bowering shall vest simultaneously to him in interest and in the possession of the trustee for the purposes and objects of the trust established under clause 7.1.

9 He seeks a declaration that the duty of the trustee under clause 7 is to abide by the purpose and objects prescribed under clause 7.3 for which the trust was established for David.

10 He seeks a declaration that the discretionary power conferred on the trustee under clause 7.4 is void by reason that if exercised it would or could deprive David John Bowering of his vested interest in the one third equal share of the estate, and by reason that it is inconsistent with the principles, purposes and objects for which the trust was established.

11 He seeks a declaration that in so far as clause 7.5 purports to empower the trustee to distribute the trust fund other than in accordance with the principles, objects and purposes for which the trust was established it is void because the trust will only terminate either upon the death of David John Bowering or under clause 7.6 if professional medical advice opines that David has recovered sufficiently from his disability that it would be reasonable to vest the trust fund in him in possession.

12 He seeks a declaration that clause 7.7 is void for the reason that it is inconsistent with the principles, purposes, objects for and upon which the Trust was established, and because clause 7.5 determines the circumstances or events upon which the Trust will terminate.

13 He seeks a declaration that clause 7.8 is void on the basis that it is contrary to public policy, and that it is inconsistent with the principles, purposes and objects upon which the Trust was established.

14 He seeks a declaration that the reference in clause 8 (a) to clause 6 should instead refer to clause 5. The defendant agrees that this appears to be a typographical error and should indeed be a reference to the earlier clause.

15 Finally, he seeks an order that the costs of the parties be paid from the estate of the late Kevin Charles Bowering.

Legal principles

16 Before turning to a consideration of the issues in this case, it is convenient to set out the legal principles in relation to the construction of wills, including the circumstances in which a particular clause may be challenged as being contrary to public policy, and the extent to which the obligations of a trustee may be modified.

Construction of wills

17 In Fell v Fell (1922) 31 CLR 268 at 273-275, Isaacs J referred to certain "incontestable" principles, namely that the will must receive a construction according to the plain meaning of the words and sentences therein contained, ascertaining the meaning of the instrument as a whole in order to give effect, if it be possible to do so, to the intention of the framer of it.

18 In Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234, Campbell JA observed at [19]:

As Powell J said in Coorey v George (27 February 1986, unreported) at 14, in a passage approved by Bryson J in Perpetual Trustee Co Ltd v Wright (1987) 9 NSWLR 18, at 33, in construing a will:

"... [O]ne's task is, first, if it be possible, to ascertain, what was the basic scheme which the deceased had conceived for dealing with his estate, and, then, so to construe the will as, if it be possible, to give effect to the scheme so revealed."

19 In Muir v Winn [2009] NSWSC 857, Bryson AJ (as His Honour then was) observed at [3]-[4]:

[3] Will construction is not an exercise in which any passage in a will can be isolated from the whole document; see Sidle v Queensland Trustees Ltd (1915) 20 CLR 557 at 560-561 (Isaacs and Powers JJ), including the following passage:

"But one universal principle is that the whole will must be read before finally arriving at an opinion as to the meaning of any controverted portion. You read the whole document through in the first place to ascertain whether it contains anything to affect the meaning of the passage in controversy."

[4] The whole terms of the will and its surrounding circumstances may well show that the language used has some meaning other than its ordinary meaning; see Re Hodgson; Nowell v Flannery [1936] 1 Ch 203 at 206 (Farwell J).

20 Bryson AJ also held at [23]-[24]:

[23] It is not in my understanding a correct approach to the construction of wills to understand what they say only in entirely literal terms. It is improbable that the testatrix intended to bring about the result for which the plaintiff contends, and entirely improbable that she would have expressed that intention in the almost undetectably obscure way attributed to Clause 1.7. Interpreting a will is not an exercise from the logic schools nor is it an exercise in entire purity of language. The Court seeks to ascertain the intention of the testator as expressed in the language used, while understanding that the language used might not express that intention perfectly.

[24] It is necessary to seek to understand the scheme of a testator's dispositions. Where the terms of the will are perfectly clear search for the scheme may be of little use, but where the language is obscure or the effects of the literal reading and the reasoning impliedly underlying it are startlingly unlikely, as in this case, the scheme of dispositions is very important...

21 Bryson J had earlier observed in Hatzantonis v Lawrence [2003] NSWSC 914 at [6]:

In ascertaining the meaning of wills, consideration should in my opinion start with the fundamental rule stated by Viscount Simon LC in Perrin v. Morgan [1943] AC 399 at 406:

... the fundamental rule in construing the language of a will is to put on the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case - what are "expressed intentions" of the testator.

22 The observations of Joyce J in Re Sanford [1901] 1 Ch 939 at 941 are also apposite, where His Honour said (referring to the decision of the English Court of Appeal in Re Blantern [1891] WN (ENG) 54):

It has been said by the Court of Appeal that the true way to construe a will is to form an opinion apart from the decided cases, and then to see whether these decisions require any modification of that opinion; not to begin by considering how far the will in question resembles other wills upon which decisions have been given.

23 The principles relating to the construction of wills were also recently concisely set out by White J in Keulemans v Attorney-General [2013] NSWSC 1772. His Honour said at [15]-[17]:

[15] The Court's task is to "put on the words used the meaning which, having regard to the terms of the will, the testator intended" (Perrin v Morgan [1943] AC 399 at 406), that is, to ascertain what the testator meant by the words used in the will (Hatzantonis v Lawrence [2003] NSWSC 914 at [6]; Public Trustee v Herbert [2009] NSWSC 366 at [27]; Theobald on Wills, Sweet and Maxwell, 17th ed 2010 at [15-003]).

[16] "The instrument ... must receive a construction according to the plain meaning of the words and sentences therein contained. But ... you must look to the whole instrument, and, in as much as there may be inaccuracy and inconsistency, you must, if you can, ascertain what is the meaning of the instrument taken as a whole in order to give it effect, if it be possible to do so, to the intention of the framer of it." (Lord Halsbury LC in Leader v Duffey (1888) 13 App Cas 294 at 301; Ward v Brown [1916] 2 AC 121; Buckley J in Kirby-Smith v Parnell [1903] 1 Ch 483 at 489, quoted from Fell v Fell (1922) 31 CLR 268 at 273-274).

[17] "One's task is, first, if it be possible, to ascertain, what was the basic scheme which the deceased had conceived for dealing with his estate, and, then, so to construe the will as, if it be possible, to give effect to the scheme so revealed." (Coorey v George (Powell J, 27 February 1986, unreported; BC8601222 at 14); Perpetual Trustee Co Limited v Wright (1987) 9 NSWLR 18 at 33; Fairbairn v Varvaressos (2010) 78 NSWLR 577 at [19], 581-582).

Public policy considerations

24 The plaintiff also asserts that certain provisions of the will are void as being contrary to public policy.

25 In Ramsay v Trustees Executors and Agency Company Limited (1948) 77 CLR 321, a testator directed his trustees to convert his estate and hold the proceeds in trust to pay income to his son for such period as he remained married to his wife, and on the termination of such period to hold in trust for his son absolutely. If the son predeceased his wife, the estate was to go to the testator's nephew and his sister in equal shares. Latham CJ, Starke and McTiernan JJ held that the provision contained nothing which offended against public policy as having, or tending to have, an adverse effect on the son's marriage and it was wholly valid.

26 Latham CJ observed at 326:

It is sufficient to say... that sometimes the intention, object, purpose or desire of the parties to the contract, or of the testator in the case of a will, has been regarded as the crucial feature in determining whether a provision is invalid as contrary to public policy. In other cases, however, the tendency of the challenged provision as affecting conduct after the contract or the will has come into operation has been regarded as the important element. In my opinion the two lines of authority can be reconciled by adopting the tendency of a provision as the test, but also recognizing that where it is evident that the object &c. of the parties or the testator is to bring about an illegal or otherwise reprehensible act, it would be difficult to deny that the provision had that tendency.

27 Starke J observed at 330:

A disposition by will is contrary to public policy if it is injurious to public interests or has a tendency to injure public interests (Fender v St. John Mildmay)... But it must be a general tendency to injure public interests; to do something harmful to public interests having regard to human nature and not the character of particular individuals. The tendency must be "substantial and serious", "a real temptation... to do something harmful i.e. contrary to public policy" and one to which parties are likely to succumb.

The question whether such a tendency exists is one of law for the court and depends upon the provisions of the will and any relevant surrounding circumstances.

28 McTiernan J said at 334:

The approach is an abstract and theoretical one. It must be made apart from particular individuals. The character of the testator's son and his wife are not in question...

The position of the special trustee

29 In the present case, there appears to be a clear potential for a conflict of interest between the first defendant's position as special trustee and her position as a potential beneficiary (whether by exercise of her powers under clause 7.4 or clause 7.7).

30 It is not however suggested by counsel for the plaintiff that a trustee may not also take a position as a beneficiary under a trust arrangement, although of course the trustee cannot be the sole beneficiary: see Jacobs' Law of Trusts in Australia (7th edition, 2006) at [107].

31 The first defendant submitted that fiduciary obligations are to be understood in their proper context, and that trust obligations are subject to the terms of the instrument giving rise to the trust relationship.

32 The learned authors of Jacobs' Law of Trusts in Australia (7th edition, 2006) made the following observations at [1617]-[1618]:

It must never be forgotten that a third source of law [to ascertain the powers, duties and discretions of a trustee, in addition to the general law and various legislation] is the trust instrument. A settlor or testator can amend, alter or modify any of the powers, duties and discretions which would otherwise apply; and can also determine what consequences flow from the breach of a duty. Just as the law of contract permits the parties to a contract to determine its terms, subject to any relevant legislation, the law of trusts permits the settlor or testator to determine the incidents of a trust.

33 The first defendant contends that fiduciary obligations are accommodated to the relationship between the parties created by their arrangements: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 99. Counsel for the first defendant also drew my attention to the judgment of Leeming JA in Taheri v Vitek [2014] NSWCA 209 (Bathurst CJ agreeing) where this principle was discussed at [115] in relation to fiduciary obligations under a power of attorney.

34 It is accepted by counsel for the plaintiff that a testator may well place a trustee where a conflict of interest may arise. It is as well to recall what was said by Millett LJ (Hutchinson and Hirst LJJ agreeing) in Armitage v Nurse [1998] Ch 241 at 253-254 about what may be described as to the ever present minimum obligations of a trustee:

I accept the submission made on behalf of Paula that there is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of a trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts. But I do not accept the further submission that these core obligations include the duties of skill and care, prudence and diligence. The duty of the trustees to perform the trusts honestly and in good faith for the benefit of the beneficiaries is the minimum necessary to give substance to the trusts, but in my opinion it is sufficient...

35 Also, in Princess Anne of Hesse v Field [1963] NSWR 998, Jacobs J observed at 1008-1009:

...the cases make it clear, in my view, that a trustee is not precluded by the subsequent fiduciary relationship from asserting his rights under a contract which came into existence before the creation of the fiduciary relationship. If a testator or settlor wishes to impose on a trustee a duty which is inconsistent with the pre-existing interest or duty, the trustee is not thereby debarred from accepting the trust or from performing the duties which are imposed under it.

36 Again in Mordecai v Mordecai (1988) 12 NSWLR 58 at 66-67, Hope JA observed:

The ground upon which it is submitted that the appellants were entitled to act as they did depends upon an exception to the general rule that no-one who has fiduciary duties is allowed to enter into engagements in which he has or can have a personal interest conflicting with the interests of those whom he is bound to protect. That exception is where a testator or settlor, with knowledge of the facts, imposes on a trustee a duty which is inconsistent with a pre-existing interest or duty which he has in another capacity. In that situation the trustee is not thereby debarred from accepting the trust or from performing the duties which are imposed under it. In considering the application of this exception to the facts of the present case, Cohen J discussed the decisions in Vyse v Foster (1874) LR 7 HL 318; Hordern v Hordern [1910] AC 465 and Re Mulholland's Will Trusts [1949] 1 All ER 460, where trustees were held entitled to enforce contractual rights they had with the testator. These cases are clearly distinguishable from the present one. However both before Cohen J and before this Court strong reliance was placed on the decision of Jacobs J in Princess Ann of Hesse v Field (1962) 80 WN (NSW) 66; [1963] NSWR 998. In that case a testator by his will provided for a life estate for his widow, the plaintiff, with remainder to his children. He appointed as his executors and trustees three of the defendants who were also directors of a company in which the testator was a major shareholder and to which he owed a substantial sum of money on a personal loan. At the date of the testator's death there was owing to the company on the loan a sum exceeding the value of his shareholding. Two years later the debt had not been liquidated and the three defendants resolved as directors of the company, and consented as trustees of the estate, that interest be charged on the balance from time to time owing by the estate to the company. It was held that within the principle relating to the duty of persons in the fiduciary relationship not to place themselves in a position where their interest or another duty conflicts with that duty, there was power in the directors of the company to forebear from suing upon the debt and power in the three defendants as trustees to agree to pay interest on the debt, since the situation was one known to and to a large extent created by the testator himself.

As it seems to me neither this case, nor the principle which it applied, affords any justification to the actions of the appellants in the present case. In Princess Ann the persons whom the testator appointed as the trustees of his estate were to his knowledge directors of the company to which he owed substantial moneys. As directors of the company, they would have a duty to the company to protect the company's interest in respect of that debt. Although their duty to the company might be said to conflict with their duty as trustees of the estate, since the existence of their duty was known to the testator when he provided for their appointment and to a large extent was created by him, they were entitled to act as they did. No such conflict of duty exists in the present case.

[emphasis added]

37 Counsel for the first defendant also referred to McIntosh v McIntosh [2014] QSC 99, in which Atkinson J observed at [62]-[64] that:

[62] The first question to be considered is - what are the duties of an administrator which are relevant to this case? The office of personal representative may be filled by an executor appointed under a will to administer the estate or an administrator appointed by the court. The method of their appointment is an important distinction between them as the appointment of an executor is the act of the testator exercising a testamentary choice. The testator may appoint someone whom the testator knows is a creditor or debtor of the testator or whom the testator has designated as the sole named beneficiary under a non-binding nomination of the testator's superannuation fund. These are examples of circumstances where the testator has nominated a legal personal representative who has a known conflict and must be taken to have accepted that conflict. This is an exception to the general rule that no one who has fiduciary duties is allowed to enter into engagements in which the fiduciary has or may have a personal interest conflicting with the interests of those whom the fiduciary is bound to protect.

[63] The exception is described more precisely by Hope JA in Mordecai v Mordecai:

"That exception is where a testator or settlor, with knowledge of the facts, imposes on a trustee a duty which is inconsistent with a pre-existing interest or duty which he has in another capacity. In that situation the trustee is not thereby debarred from accepting the trust or from performing the duties which are imposed under it."

[64] The exception does not however extend to allowing a trustee, by the trustee's own act, voluntarily to put himself or herself into a new position of conflict.

...

[69] It is essential to fiduciary duties that they include the core or irreducible minimum duties necessary for the legal personal representatives to perform their obligations "honestly and in good faith for the benefit of the beneficiaries." This is the encapsulation of the fiduciary's duty of loyalty and fidelity. As Millett LJ held in Bristol and West Building Society v Mothew [1998] Ch 1 at 18:

"A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary."

The contentions of the parties

38 The plaintiff contends that when regard is had to the scheme which the deceased conceived in relation to his bequest to David, it was not his intention that the trustees powers should or could be used other than for the benefit of David. The plaintiff contends that the deceased did not intend for Deborah to be clothed with any interest in the fund other than as trustee which imposed on her the fiduciary obligations to hold and apply the capital and income for David consistently with the principles set out in clause 7.3. Those principles are contended to be an essential and fundamental part of the scheme which limited not only the discretionary powers conferred in clauses 7.4 and 7.6 to 7.8, but also the general powers in clause 9.

39 The plaintiff contends those powers are fiduciary powers which means they cannot be used or relied upon by the trustee for his or her direct or indirect personal benefit. It is submitted that those powers could have no part to play in the proper administration of the testamentary trust which was established solely for the benefit of David.

40 The first defendant contends that the principles in clause 7.3 are the primary objects and purposes for which the special trust was established, but the clause does not exhaust the purposes of the trust. It is contended that clause 7.4 is not void and is consistent and capable of operating harmoniously with the primary objects of clause 7.3.

41 The first defendant also contends that the power in clause 7.6 is permissive and enables the trustee to pay the balance of the fund if satisfied, having regard to evidence, that he has recovered sufficiently from his condition for it to be reasonable to do so.

42 The first defendant also contends that clause 7.7 is not inconsistent with the other clauses in the will, and that there may be circumstances in which the primary purposes under clause 7.3 are fully met and yet there is additional income or capital that has not been distributed to him.

43 The first defendant submits that clause 7.8 is not contrary to public policy, nor inconsistent with the purposes set out under clause 7.3.

44 Critically, the first defendant contends (in answer to question 7) that the discretionary powers conferred by clauses 7.4 to 7.8 and 8 can be lawfully exercised other than for and limited to the purposes set out in clause 7.3. It is submitted that fiduciary obligations are to be understood in their proper context, and that trust obligations are subject to the terms of the instrument giving rise to the trust relationship.

45 Counsel for the second defendant adopted the submissions of the plaintiff and further submitted that the overriding intention of the testator was the protection of the two gifts (being the Dee Why unit and the share of the estate) and to thereby protect the interests of the second defendant.

Discussion

46 It is first necessary to examine the scheme by which the testator wanted to distribute his estate. It is clear that he wanted the residue of his estate, once the Dee Why unit and the pecuniary legacy had been bequeathed, to be shared equally between Gregory, Deborah and David. The deceased was acutely aware of David's disability but remained optimistic in that he expressly contemplated the possibility of David recovering and that it may be reasonable for the special trustee at some point to pay the balance of the fund to him (clause 7.6).

47 It seems to me that the testator did, perhaps, favour his daughter Deborah by placing her in the position of special trustee alone, rather than deciding that she should act in that role along with Gregory. The consequence of that decision of course was that Deborah alone was placed in a position where she could also potentially advantage herself by making distributions to herself in accordance with clause 7.4, without any obligation to make payments to all beneficiaries or to ensure equality amongst those beneficiaries to whom payments are made.

48 It should be made clear, contrary to the submissions of the plaintiff, that I do not consider that David's share of the residue of the estate, nor his interest in the Dee Why unit, to have vested in him but rather he should be regarded as having a beneficial interest only. That seems to me a conventional and orthodox view of the trust arrangements put in place by the testator. David's interest is a beneficial one only. This is clear in my view from a combination of clauses 3, 5 and 7.

49 It was suggested that the obligation in clause 7.3 was primarily, rather than exclusively, for the maintenance, benefit, advancement in life and well-being of David. However, whether that distinction has any content remains to be seen. Clauses 7.4 and 7.7 in my view require the special trustee to ensure that there is adequate capital and income in the fund for the purposes, whether primarily or otherwise, of clause 7.3.

50 Clauses 7.4 and 7.7 are both expressed to be subject to clause 7.3, and it seems to me they can both be read harmoniously with that preceding clause. The motivating factor may be the desire or need of the special trustee (or another beneficiary) for income or capital. Whilst not obliged to distribute to anyone other than herself, she always must ensure in my view the purposes of clause 7.3 are discharged. This will require at least honesty and good faith on her part, which in turn may require professional assistance or perhaps the involvement of the Court.

51 Of course clause 7.7 may not arise because of any desire or need on the part of the special trustee, but simply due to the passage of time it becomes "clear" that the fund is larger than necessary. Again a distribution can only occur if the special trustee ensures that there is a preservation of a reasonable reserve to meet the objects of clause 7.3, but again it is theoretically open to the special trustee to distribute to herself all or any of the excess (giving first priority, whatever the meaning of that phrase, to any children of David).

52 The exercise of that discretion would likely and unsurprisingly entail a consideration of David's life expectancy. In any event, clause 7.6 requires the level of David's disability to be considered on advice from the relevant professionals from time to time, and in my view it would be necessary to take that advice in order to exercise a discretion under clause 7.4 or clause 7.7. It may well be prudent to obtain legal, accounting and other forms of advice, including making application for judicial advice should that be necessary.

53 In the course of submissions, I was informed by counsel for the plaintiff that David received social security benefits prior to the grant of probate but since that time is no longer eligible. There is specific power on the part of the special trustee to consider what effect, if any, the distribution of income or capital would have on his entitlements or tax liability from time to time. I do not consider the tendency of that direction to be contrary to public policy, nor to encourage or bring about illegal or reprehensible acts. I accept the submission of the first defendant that clause 7.8 is not void.

Construction questions and consequent declaratory relief

54 For the reasons expressed above, my answer to each of the construction questions is "No", other than those discussed immediately below.

55 Question 2, in relation to whether the principles in clause 7.3 should be construed as the primary object and purpose of the special disability trust, should be answered "Yes".

56 Question 8, in relation to whether the reference in clause 8(a) to clause 6 should instead refer to clause 5, should be answered "Yes".

57 However, I am not persuaded that it is appropriate to grant declaratory relief as it appears inutile. As discussed in Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th edition, 2002) at [19-130], "as with all discretionary remedies, another ground for refusing declaratory relief is that no good purpose is served by granting it" (citing Rivers v Bondi Junction-Waverley RSL Sub-Branch Ltd (1986) 5 NSWLR 362). In the present case, declarations which merely reflect the express terms of clause 7.3 or correct a typographical error in clause 8(a) which is agreed between the parties do not appear to serve any real purpose.

Conclusion

58 I invite the parties to provide short minutes so as to give effect to these reasons. I should also note that the plaintiff seeks an order that the costs of the parties be paid from the estate of the late Kevin Charles Bowering. No submissions were made on the question of costs by the first defendant. I invite the parties to relist the matter, if necessary and failing agreement, so that appropriate orders as to costs may be made.

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Decision last updated: 08 December 2014