Colquhoun v Dronpane Pty Limited & Ors

Supreme Court of NSW|2011-11-04|Before: White J

Judgment 1HIS HONOUR : This is a suit for rectification of a trust deed dated 19 February 1971 and a deed described as a deed of resignation dated 12 December 1997. The trust deed conferred no discretionary power on the trustees to distribute income or to appoint capital prior to the vesting day. Rectification of the trust deed is sought to include those powers. Rectification of the deed of resignation of 12 December 1997 is sought to provide that the plaintiff be removed as trustee from that date. The plaintiff then seeks a declaration that a deed of variation of trust also dated 12 December 1997 was valid and effective. It was executed by only one trustee. Unless the deed of resignation or an earlier deed of retirement of trustee are rectified, the plaintiff remained a trustee, but did not join in signing the deed of variation of trust in that capacity. 2I have concluded that the trust deed should be rectified to include the trustees' powers to appoint income and capital that were mistakenly omitted. I have concluded that neither the deed of resignation nor the earlier deed of retirement can be rectified to provide for the plaintiff's having retired or having been removed as trustee. I refuse the declaration as to the validity or efficacy of the deed of variation. 3The individual beneficiaries and the Chief Commissioner of State Revenue were joined as defendants. They all filed submitting appearances.

Amending Deed of 31 May 1973 24No rectification is sought in respect of the failure to include all of the intended beneficiaries. This was addressed by an amendment to the trust deed made on 31 May 1973. The plaintiff seeks a declaration that the amending deed is valid and effective. There is no reason to doubt its validity. The amending deed was signed by both trustees as well as the settlor. The settlor's execution of the document was unnecessary because the trustees had the power to vary the trusts. It is desirable to make the declaration sought because there are issues concerning the efficacy of other trust documents.

Deed of Retirement of 1 February 1980 25The next relevant document is called a Deed of Retirement and was made on 1 February 1980. The plaintiff deposed that he intended by that deed that Corsair would retire as a trustee of the trust and that he also would retire. 26Clause 13 of the 1971 trust deed provided: " 13. THE power of appointing a new Trustee in place of a Trustee or in addition to an existing Trustee and also the power to remove any Trustee shall be vested in:- (a) the said Paul Julian Colquhoun by Deed or by Will. ... " 27This clause gave the plaintiff the power to retire by removing himself as one of the trustees. The power could only be exercised by deed or by will. There was no other provision in the trust deed dealing with the retirement of trustees. 28Under s 8 of the Trustee Act 1925 a trustee may retire from a trust by a registered deed. By subs 8(2) a trustee may not so retire unless the trustee's co-trustees, and any person empowered to appoint trustees, consent by registered deed to the retirement, and provided that after the retirement there are at least two continuing trustees, or the NSW Trustee, (formerly the Public Trustee) or a trustee company, to perform the trust. Section 8 could not be availed of in the present case unless there were at least two continuing trustees. Nor was it sought to be used. No deed of retirement was executed or registered. 29The plaintiff could not retire from the trusts merely by forming the intention to retire or ceasing to act as trustee. He could have applied to the court for permission to retire. That was not done. 30The deed of 1 February 1980 was made between the plaintiff (called " the Appointor "), Corsair (called " the Retiring Trustee ") and Dronpane Pty Limited (" Dronpane ") (called " the New Trustee "). It recited that the Retiring Trustee desired to be discharged from the trusts. It also recited that " the Appointor is desirous of appointing the New Trustee as Trustee of the said Deed of Settlement in the place of the Retiring Trustee to act jointly with the Appointor ". 31The relative operative provisions were: " 1. The Appointor in exercise of the power for that purpose given to him by the said Deed and every other power him enabling DOTH HEREBY APPOINT the New Trustee as a Trustee of the said Deed of Settlement to act with the Appointor in the execution of the trusts thereof in the place of the Retiring Trustee. 2. The Appointor hereby declares that the estate and interest of the Appointor and of the Retiring Trustee in the said fund created by the said Deed shall vest in the New Trustee jointly with the Appointor upon the trusts and subject to the powers and provisions contained in the said Deed. 3. That in pursuance of the premises and by virtue of the said Deed the Retiring Trustee (testified by its execution hereof) DOTH HEREBY RETIRE from the trusts of the said Deed. " 32Although the plaintiff believed that he retired as trustee by his execution of this deed, it is plain he did not. Only Corsair purportedly retired as trustee. Clause 1 was an effective exercise of the plaintiff's power under clause 13 of the trust deed to remove Corsair as trustee. Dronpane was appointed as " a " trustee (not the sole trustee). Dronpane was appointed to act with the plaintiff in the execution of the trusts. Under the trust deed the Appointor had no power to execute the trusts. That power was vested in the trustees of whom the Appointor was one. Clause 1 therefore provided for the plaintiff to continue to execute the trusts, but now with Dronpane as his co-trustee in place of Corsair. Likewise clause 2 vested the estate and interest held by " the Appointor and ... the Retiring Trustee " in Dronpane jointly with the Appointor. The plaintiff held his estate and interest in the trust assets as trustee. Clause 2 provided for the trust assets to be vested in Dronpane jointly with him. Under the trust deed the role of the Appointor did not extend to holding any of the assets of the trust. 33In other words, the deed of 1 February 1980 expressly provided for the plaintiff to continue in office as trustee. It was not a deed whereby the plaintiff exercised the power under clause 13 to remove himself as trustee. 34Counsel for the plaintiff did not dispute that this was the effect of the deed of 1 February 1980. Nor by his amended statement of claim did the plaintiff seek rectification of the deed of 1 February 1980, although that relief was sought in final submissions as a fallback position if the remaining claim for rectification failed. I deal with that submission below after considering the application to rectify the Deed of Resignation of 12 December 1997.

Deed of Resignation dated 12 December 1997 35Two further deeds were made on 12 December 1997. Although there is no direct evidence as to the order in which they were executed, it can be inferred that the shorter deed was signed first. The plaintiff seeks rectification of the shorter deed described as a Deed of Resignation. It names Dronpane as the " New Trustee " and the plaintiff as the " Retired Trustee ". It provided: " A. By Deed dated the 19 th day of February 1971 between KATHLEEN HOLME RAMSDEN as Settlor and PAUL JULIAN COLQUHOUN and CORSAIR PTY LTD as the then Trustees ('the Trust Deed') the Paul Colquhoun Family Trust was established ('the Trust Fund'). B. By Deed dated 1 st day of February 1980, Corsair Pty Ltd retired as a Trustee of the Trust Fund and was replaced by the new Trustee with the intention that the New Trustee as and from that date act as sole Trustee of the Trust Fund ('the Appointing Deed'). C. On or before the date of the Appointing Deed, Paul Julian Colquhoun retired as a trustee of the Trust Fund with the intention that as and from the date of his retirement he be released and indemnified by and from any further responsibility as trustee. D. The New Trustee is at the time of making this Deed the trustee of the Trust Fund. E. The Retired Trustee by his execution of this Deed confirms his retirement as a trustee of the Trust Fund and the appointment of the New Trustee as sole Trustee of the Trust Fund. NOW THIS DEED WITNESSES:

RETIREMENT The Retired Trustee hereby confirms that as and from the date of the appointment of the New Trustee, the Retired Trustee retired as a Co-Trustee of the Trust Fund and the Trust Fund and the income therefrom held by him as Co-Trustee was vested in the New Trustee.
INDEMNITY The New Trustee hereby confirms that as and from the date of its appointment, the New Trustee agreed to the extent of the assets of the said Trust Fund in its hands from time to time to indemnify the Retired Trustee against all liabilities of the Retired Trustee incurred in his capacity as Co-Trustee of the said Trust Fund and in respect of which the Retired Trustee is entitled by law to be indemnified. ... " 36The problem with this deed is that recitals C and D were incorrect. The plaintiff had not retired as trustee, even though he believed he had done so. He had no power to confirm that he had retired as from 1 February 1980. The plaintiff could only have retired by exercising the power in clause 13 of the trust deed to remove himself as trustee. He could only do that by deed. He did not do that by the deed of 1 February 1980. The plaintiff does not say that he executed any other deed to bring about his retirement. He says that he intended to retire by executing the Deed of Retirement of 1 February 1980. Therefore recital C is wrong. Recital D is wrong because Dronpane was not " the " trustee of the Trust Fund. It was a co-trustee with the plaintiff. Recital E and clause 1 are ineffective. The plaintiff's purported confirmation of his retirement cannot change the fact that he had not retired (unless the 1 February 1980 deed were to be rectified to provide for the plaintiff's removing himself as a trustee). 37The Deed of Resignation of 12 December 1997 did not purport to exercise the power in clause 13 of the Trust Deed for the plaintiff to remove himself as trustee as from that date. Clause 1 expressly provided that the plaintiff confirmed that he had retired as from 1 February 1980, not that he removed himself as trustee as from 12 December 1997.

Deed of Variation dated 12 December 1997 38On the same day the plaintiff and Dronpane executed a Deed of Variation of the trust deed of 19 February 1971. It appears from recital D to this document that the Deed of Variation was executed after the Deed of Resignation. The Deed of Variation recited clause 19 of the Trust Deed. Recital G stated that the parties desired to amend the terms of the Trust Deed. Recital H stated that: " The Appointor by his execution of this Deed consents to the amendments contained in this Deed and acknowledges that the requisite notice pursuant to Clause 19 of the Trust Deed has been provided. " 39Recitals C and D stated that Dronpane became the sole trustee of the trust on 1 February 1980 and that the plaintiff had retired as trustee on or before the date of the deed of 1 February 1980. The deed purportedly made various amendments to the Trust Deed of 19 February 1971 by adding additional clauses relating to the determination of the net income of the trust for trust law purposes, by adopting a tax law concept of income, by expanding the clauses relating to the investment and other powers of the trustees, by deleting clause 13 of the trust deed relating to the power to appoint and remove trustees, and by substituting a new clause which added Alison Colquhoun as a Co-Appointor with the plaintiff. The variations to the trust deed were purportedly made by Dronpane as sole trustee of the trust in the exercise of powers under clause 19 of the trust deed with the consent of the plaintiff given as Appointor. The plaintiff as Appointor consented to the amendments. He did not, as trustee, make the amendments acting jointly with Dronpane. 40The plaintiff seeks a declaration that the Deed of Variation of 12 December 1997 is valid and effective according to its terms. I deal with that claim below after dealing with the claims for rectification.

Rectification of Deed of Resignation of 12 December 1997 41The plaintiff sought rectification of the deed of 12 December 1997 so that it would read as follows: " THIS DEED is made the 12 day of DECEMBER 1997 BY : DRONPANE PTY LTD A.C.N. 001 745 115 of [xxx] [yyyyyyy] Street, Lavington in the State of New South Wales ('the New Trustee') AND : PAUL JULIAN COLQUHOUN OF [xxx] [yyyyyy] Street, Albury in the State of New South Wales (' the Appointor '); WHEREAS: A. By Deed dated the 19 th day of February 1971 between KATHLEEN HOLME RAMSDEN as Settlor and PAUL JULIAN COLQUHOUN and CORSAIR PTY LTD as the then Trustees ('the Trust Deed') the Paul Colquhoun Family Trust was established ('the Trust Fund'). B. By Deed dated 1 st day of February 1980, Corsair Pty Ltd retired as a Trustee of the Trust Fund and was replaced by the new Trustee with the intention that the New Trustee as and from that date act as co-trustee of the Trust Fund ('the Appointing Deed'). C. Paul Julian Colquhoun is desirous of removing himself as a co-trustee of the Trust pursuant to clause 13 of the Trust Deed ; D. The New Trustee is at the time of making this Deed a co- trustee of the Trust Fund. E. The Retired Trustee [sic] by his execution of this Deed confirms his retirement as a trustee of the Trust Fund and the appointment of the New Trustee as sole Trustee of the Trust Fund. NOW THIS DEED WITNESSES:

RETIREMENT The Appointor hereby removes himself as a co-trustee of the Trust with effect from this date and confirms that Dronpane Pty Limited holds office henceforth as the sole trustee of the Trust ;
INDEMNITY The New Trustee hereby confirms that as and from the date of its appointment, the New Trustee agreed to the extent of the assets of the said Trust Fund in its hands from time to time to indemnify the Appointor against all liabilities of the Appointor incurred in his capacity as Co-Trustee of the said Trust Fund and in respect of which the Appointor is entitled by law to be indemnified. " (Underlining added to show amendments.) 42If the deed were rectified in the way sought, it would be effective to remove the plaintiff as trustee as from 12 December 1997. It would then follow that the Deed of Variation, which was entered into later, would be effective, because following rectification of the Deed of Resignation there would have been only one trustee when the Deed of Variation was entered into. Because a decree for rectification is a rectification only of the instrument, it takes effect from the date that the instrument that is so rectified takes effect. 43But there is a difficulty in the plaintiff's position. Equity rectifies instruments, not agreements. If the Deed of Resignation of 12 December 1997 is rectified in the way sought, the plaintiff will be taken to have ceased to be trustee as from the date that deed was entered into. But that was not the plaintiff's intention. His belief, albeit a mistaken belief, was that he had retired as a trustee on 1 February 1980. He did not intend that the instrument of 12 December 1997 would effect his removal as a trustee as from 12 December 1997. He intended to confirm what he mistakenly believed was the fact. His lawyers must have had doubt about that fact, and rightly so. They sought to address the problem by a retrospective cure. No retrospective cure was possible, unless the deed of 1 February 1980 could be rectified. It was not possible for the plaintiff to retire retrospectively. 44Counsel for the plaintiff did not dispute this. Counsel submitted that when the deed of 12 December 1997 was entered into, the plaintiff believed that he was no longer a trustee and intended that that position continue, that is, he intended not to be a trustee in the future. Counsel submitted that the deed of 12 December 1997 should be rectified to give effect to that intention so far as that was possible, that is, by removing the plaintiff as trustee as from that date. 45Counsel submitted that the plaintiff's was the governing mind of the Deed of Resignation of 12 December 1997. He and his wife were the only directors of Dronpane. The plaintiff's wife did not give evidence about her intention when she signed the Deed of Resignation of 12 December 1997 as one of the directors of Dronpane, except to confirm her understanding of the purported effect of that deed. However, I accept that it is the plaintiff's intention that is relevant to the rectification of the deed of 12 December 1997. 46The plaintiff's evidence in relation to the deed of 12 December 1997 was to the effect that he verified as true the allegations in the amended statement of claim. The statement of claim set out the reasons that the Deed of Resignation of 12 December 1997 was ineffective unless it were rectified. The plaintiff deposed that the amended statement of claim adequately explained why this deed failed to fulfil his instructions. However, he did not say what instructions he gave for the deed of 12 December 1997. He deposed that it was his intention to retire as a trustee on 1 February 1980. The plaintiff's evidence is that the amended statement of claim explains why the deed of 12 December 1997 was ineffective to bring about the result that the plaintiff was taken to have retired as a trustee as from 1 February 1980. The plaintiff also deposed that in his belief para 15 of the amended statement of claim accurately sets out " what the terms of the deed [of 12 December 1997] should state in order to fully implement my instructions to Peter for its preparation ". Paragraph 15 alleges that the 12 December 1997 deed should be rectified in the manner set out in para [41] above to achieve " the mutual intent of all parties to it, who were present on 12 December 1997 when it was made, that with effect from that date, Paul Colquhoun ceased to hold office as a trustee of the Trust ". 47Peter Colquhoun was not the draftsman of the deed of 12 December 1997. That deed was prepared by a firm of solicitors, Mitchell, McKenzie & Co, of Echuca in Victoria. The firm no longer exists and its file is not available. I understand the plaintiff to say that para 15 of the amended statement of claim sets out what the terms of the deed should have stated in order to implement as from 12 December 1997 the instructions the plaintiff says he gave to Peter Colquhoun in 1980. 48But the plaintiff's intention was not that he cease to hold office as trustee as from 12 December 1997. His belief was that he had ceased to hold that office from 1 February 1980. The rectification sought of the Deed of Resignation of 12 December 1997 would not give effect to that intention and could not do so. 49In MacKenzie v Coulson (1869) LR 8 Eq 368 Sir William James VC said (at 375): " Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. " 50The plaintiff seeks to rectify the Deed of Resignation of 12 December 1997 to bring about what could have been done at that time to fulfil the plaintiff's intention that he not personally be a trustee and that the only trustee be his company, Dronpane. It can be inferred that his then lawyers were concerned that the plaintiff's belief that he had retired in 1980 was wrong because the deed prepared by his brother did not bring that about. His lawyers could have brought about his removal from the office of trustee by preparation of a deed in the exercise of his power as Appointor under clause 13 of the trust deed. They could have sought rectification of the deed of 1 February 1980 if there was clear and convincing proof that the 1980 deed did not give effect to the plaintiff's intentions. Both courses could have been taken. Neither was taken. The plaintiff now seeks a decree of rectification of the 12 December 1997 deed to do what should have been done at that time. 51This goes well beyond the jurisdiction to rectify instruments. Counsel for the plaintiff relied on the decision of the Court of Appeal in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd and of Hodgson J in Bush v National Australia Bank Limited at 406. In Commissioner of Stamp Duties (NSW) v Carlenka Mahoney A-P said (at 331): " In Australia, the courts have, I think, reiterated the necessity to establish the intention of the parties as to what the written document should effect and the failure of it to effect that intention. " Sheller JA said (at 336) that: " ... the availability of relief depends upon disconformity between the form or effect of the document executed and the intention of the parties or party who executed it. " McLelland A-JA said (at 345): " In general, the remedy of rectification of an instrument is available where it is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention (if more than one party, a common intention) as to the effect which the instrument would have which was inconsistent with the effect which the instrument as executed did have in some clearly identified way. In this context 'effect' means the legal and factual operation of the instrument according to its true construction, but does not include legal or factual consequences of the operation of the instrument of a more remote, or collateral, kind (for example, its liability to stamp duty). " 52There was no disconformity between the purported effect of the document and the intention of the plaintiff. The document purported to confirm the earlier retirement of the plaintiff as trustee and that was the plaintiff's intention. But the document was ineffective to achieve that outcome. Commissioner of Stamp Duties (NSW) v Carlenka Pty Limited does not support the submission that because the purported effect of the document was not capable of being achieved, the document should be rectified to achieve what the plaintiff could then have done. 53In that case the parties intended that a trust deed be amended to empower the trustee to distribute income to a particular company. The amendment made meant that the company became entitled to participate in both income and capital. This resulted in the amending deed operating as a resettlement of the trust property liable to ad valorem stamp duty. The amending deed was capable of rectification because it went beyond the parties' intention, namely, to allow the trustee to distribute only income to the additional beneficiary. 54In Bush v National Australia Bank Limited rectification was sought of letters of credit issued by the ANZ Bank to the National Australia Bank in respect of any debt that the National Australia Bank might certify was owed to it by nominated obligors. The mistake of the National Australia Bank was that the obligors nominated were not its debtors. The ANZ Bank assumed that the persons nominated were the National Australia Bank's customers, or that the National Australia Bank was linking them with its borrower by taking appropriate securities from them. It intended that the letter of credit would be security for a debt owed to the National Australia Bank. There was a common mistake that the letters of credit provided security for debts owed to the National Australia Bank. This was the relevant mistake as to the legal effect of the documents that founded the decree for rectification. The document could be rectified by naming the correct obligor. 55Hodgson J rejected the submission that rectification was only available where there was a common mistake as to the words to be included in the document and was not available where the mistaken common intention was as to the legal effect of the document (at 406). But as his Honour observed (at 407) that was not a case where the court was asked to draft an agreement for the parties to give effect to some intention of the parties which they had totally failed to accomplish with the words they had chosen. The present case is of the latter kind. 56In Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447 the purchaser sought to rectify a contract for the sale of a specified area of land where both parties were under the mistaken belief that the area sold contained a bore and cultivated land. The area agreed to be sold was known as subdivision 1. The purchaser sought rectification by including part of subdivision 2 as part of the area of the land to be sold as the bore and cultivated land was on part of that subdivision. The claim failed. Neither party had intended to include any part of subdivision 2 in the agreement for sale, although they both intended that the bore and the area of cultivated land would be included in the sale. Their mistake was in thinking that those areas were contained within subdivision 1. Brennan J said (at 457): " Rectification of the contract to include a parcel of land lying outside and to the south of subdivision 1 could not be decreed merely on proof that the parties mistakenly believed that the bore and the cultivation lay within the boundaries of subdivision 1. Rectification could be decreed only upon proof that the parties intended that a further parcel of land, precisely identified, was to be included in the sale. In the absence of evidence of such an intention, the claim for rectification was bound to fail. There was no evidence tending to show that Mr Pukallus and Mr Cameron had agreed on a southern boundary corresponding with that fixed by the order of the learned trial judge. The mistake shared by Mr Pukallus and Mr Cameron was not a mistake as to the embodying of their intention in the written contract. The only mistake was a mistake as to what features were within the boundaries of the land sold. " 57The reasoning in Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 was essentially similar. There, the parties were mistaken as to the quality of the subject matter of the sale, but they had the common intention that the subject matter of the sale should be as it was described in the contract. 58In The Club Cape Schanck Resort Co Limited v Cape Country Club Pty Ltd [2001] VSCA 2; (2001) 3 VR 526 the parties agreed to settle a dispute about sewerage charges by including a term that failing agreement, the determination of the charges would be referred to the Victorian Administrative Appeals Tribunal. That Tribunal lacked jurisdiction. The Victorian Court of Appeal held that the agreement could not be rectified by substituting a designated arbitrator for the Tribunal. The parties had a common intention that a dispute would be determined by the Tribunal, not by some other arbitrator. Tadgell JA said (at [14]): " [14] ... So, since the equitable doctrine of rectification exists for the purpose, in effect, of ordering actually or notionally the textual amendment of a document, it will not be available to achieve the amendment of a particular document just because the document is shown not to conform with a common intention of the parties to it. It must be shown further that words or expressions or other text inserted into or deleted from the document would give effect to the common intention. There were and are no words or expressions or other text that, if inserted into or deleted from cl 2, would give effect to the parties' common intention as the learned judge found and expressed it to be. It cannot be right to say that, in those circumstances, the doctrine of rectification will provide, by way of the insertion of some words, for the achievement of what the court, or one of the parties, considers to be the next best thing. So much I take to be axiomatic: it has never been the office of a decree of rectification to offer, as a kind of simulacrum, the nearest alternative to the thing to which the parties actually agreed. In Re Streamline Fashions Pty Ltd Hudson J made the same point, saying ' ... the Factoring Company had no such intention in fact and ... it would not be open to the Court to rectify or treat as rectified a debenture which would operate to bind it to the acceptance of a security different in terms from that to which it agreed and intended to agree' . That was exactly parallel to the reasoning in Rose v Pim and it has equal application here. " 59Chernov JA said (at [44]): " [44] ... The mistake which the parties made was to assume that the tribunal had jurisdiction or power to do what the terms of settlement contemplated. They proceeded to make the agreement on that wrong assumption, but there was no mistake as to the embodying of their common intention in the terms of settlement. They agreed that, failing agreement between them, either could request the tribunal to determine the level of the ongoing charges and that, subject to the appeal process, such a determination would be binding. What they so agreed upon was faithfully reproduced in the written agreement signed by them. Unlike the situation in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd , the document here, on its true construction, did not wrongly state the parties' intention. Thus, there is no basis on which the court could properly rectify the terms of settlement. The situation is not dissimilar to that which prevailed in Pukallus where the parties signed a contract of sale of land which was identified by reference to title particulars, believing that the area contained a bore and some cultivated land. In fact, both lay outside the subject land. It was held that the contract could not be rectified so as to include the bore and the cultivated land because that mistake was not a mistake in the embodiment of the parties' intention in the written agreement, but was a mistake as to what features were within the boundaries of the land sold. The parties in Pukallus , like the parties in the present case, proceeded to reach an agreement on a wrong assumption but made no mistake in embodying their agreement in the document which they executed with the intention that it be binding on them. " 60Similarly, in this case rectification cannot be ordered to give the plaintiff " the next best thing " to that he intended to achieve in 1997. I refuse the claim for rectification of the deed of resignation of 12 December 1997.

Rectification of Deed of Retirement of 1 February 1980 61The consequence is that unless the deed of 1 February 1980 can be rectified, the plaintiff continued in office as trustee and has remained in office to date. Although in his pleading the plaintiff did not seek rectification of the 1980 deed, in final submissions counsel for the plaintiff did seek rectification of that deed if it were found that the 1997 Deed of Resignation could not be rectified. This was very much a fallback position. I think counsel recognised the difficulties of rectifying the 1980 deed. 62As I have said, the plaintiff deposed that by the 1 February 1980 deed he intended to retire as a co-trustee of the trust at the same time as Corsair retired as a trustee. There was corroboration of that intention by the fact that subsequent minutes record only Dronpane as a trustee and the minutes are signed by the plaintiff not in his capacity as a trustee but as a director of Dronpane. Subsequent financial statements for the trust name only Dronpane as a trustee. 63But there are two difficulties. The first is that I do not consider this to be sufficiently clear and convincing proof that as at 1 February 1980 the plaintiff intended to exercise the power in the trust deed to remove both Corsair and himself as trustees, and to appoint Dronpane as the only trustee. If those were his instructions to his brother it is almost inconceivable that the deed of 1 February 1980 would have taken the form it did. No explanation is available as to how such a mistake could have been made. 64The second difficulty is the plaintiff's delay in seeking rectification of the 1980 deed. It can be inferred that in December 1997 the plaintiff's then lawyers appreciated that there was a problem in that the 1980 deed had not brought about the plaintiff's retirement. They sought to deal with that issue at that time by preparing a deed that purportedly confirmed an earlier retirement that had not in fact taken place. They did not then seek an order for rectification of the 1980 deed. In the meantime available evidence has been lost. Most notably the plaintiff's brother, Peter Colquhoun, who drew the deed of 1 February 1980, died on 2 February 2000. The delay in seeking rectification of the 1 February 1980 deed after the difficulty was appreciated is a bar to the remedy.

Validity of Deed of Variation of Trust dated 12 December 1997 65The final question concerns the validity of the Deed of Variation of Trust dated 12 December 1997. 66Clause 19 of the trust deed of 19 February 1971 conferred power on " the Trustees " to vary the trusts. There was no provision entitling the power to be exercised by only one of the trustees. The power had to be exercised by the trustees jointly. 67The plaintiff did not purport to exercise the power to vary the trusts acting jointly with Dronpane as co-trustees. He consented to the variation as Appointor. He was also a director of Dronpane and there can be no doubt that he intended that the variations take effect. But his consent to the variation in his capacity as Appointor and his intention that the variations take effect do not amount to his having joined with Dronpane in the exercise of his and Dronpane's powers under clause 16 of the trust deed. 68It was not submitted that if Dronpane was only one of two trustees that the Deed of Variation was nonetheless effective because the plaintiff as Appointor consented to the amendments. Nor was it submitted that the trust deed permitted one of two trustees to exercise the powers conferred by clause 19 on the trustees jointly. It was not submitted that equity could aid the defective execution of the power. There would be serious difficulties in such a submission where the Deed of Variation manifests a positive intention that the plaintiff not exercise the power of amendment given by the trust deed to the trustees (George Farwell , A Concise Treatise on Powers , 2 nd ed (1893) Stevens and Sons at 191). 69For these reasons I refuse the declaration sought that the Deed of Variation of 12 December 1997 was valid and effective according to its terms.

Costs 70The costs of the proceedings should be paid out of the trust fund on the indemnity basis. All defendants have entered a submitting appearance. The application was properly brought. The costs should be paid out of the trust estate. The plaintiff and Dronpane are entitled to their costs on the indemnity basis.

Orders 71For these reasons I make the following orders:

The deed of settlement dated 19 February 1971 made between Kathleen Holme Ramsden (as settlor), Paul Julian Colquhoun (as joint trustee) and Corsair Pty Limited (as joint trustee) creating the Paul Colquhoun Family Trust (the Trust Deed) be and is hereby rectified in the following terms, namely: (a) a new clause is hereby inserted immediately following clause 1 and before clause 2 of the Trust Deed in the following terms, namely: "1A THE Trustees shall have a power to pay, apply or set aside the net income of the Trust for the current year of income, at any time prior to midnight on 27 th day of June in each year of income, to or for the benefit of any one or more of the Beneficiaries and in such shares or proportions as the Trustees may in their absolute discretion determine at the time of that appointment." (b) a new clause is inserted immediately following clause 4 and preceding clause 5 of the Trust Deed in the following terms, namely: "4A THE Trustees shall have the power to determine at any time prior to the Vesting Day to hold the capital of the Trust Fund or such part or proportion of it as they may determine in their absolute discretion for any one or more of the Beneficiaries and to pay, apply or set it aside for them in such shares or proportions as the Trustees may determine in their absolute discretion." (c) Each of the references in clauses 3 and 4 of the Trust Deed to "Clause 2" is to read "Clause 1A".
Order that the plaintiff and first defendant bring the original of the Trust Deed into the registry to have order 1 endorsed on it.
Declare that the following deeds are valid and effective according to their terms, namely: (a) the Deed of Variation of Trust dated 31 May 1973 between Kathleen Holme Ramsden (as settlor), and Paul Julian Colquhoun and Corsair Pty Limited (as co-trustees); and (b) the Deed of Retirement dated 1 February 1980 between Paul Julian Colquhoun, Corsair Pty Limited and Dronpane Pty Limited.
The costs of the proceedings be paid out of the property of the Paul Colquhoun Family Trust on the indemnity basis.
The claims for relief in the amended statement of claim be otherwise dismissed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 December 2011

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