Jenkins v Ellett

[2] Ivor George Ventris Jenkins died on 29 January 2002. He was also known as George Jenkins and was a primary beneficiary named in the trust deed as well as one of two trustees and the "Principal". Other primary beneficiaries were his children and grandchildren. The other trustee was Luciano Menniti. The trust deed created a discretionary trust.

[3] George Jenkins had a son and a daughter. His son, George Jenkins junior, predeceased him. The daughter, Joyce Elizabeth Ellett, is the respondent. George Jenkins junior had three children, two of whom are the applicants, Georgina Venesa Jenkins and Peter George Jenkins. The third child is aware of the proceedings and does not wish to be made a party.

[4] The settlor of the trust deed was Robert Craig Goodman.

[5] The Principal had the power to remove any trustee and to appoint any person to be a trustee under cl. 12.1 of the deed. Relying on that power, on 2 February 1999, George Jenkins removed Luciano Menniti as a trustee and appointed Joyce Ellett as his co-trustee. On the same date, relying on a power in the trustees to vary the "Trusts declared", contained in cl. 11 of the deed, he and Joyce Ellett as trustees purported to remove himself, George Jenkins, as the Principal and to appoint Joyce Ellett to be the Principal.

[6] Part 9 of the schedule to the deed, on the other hand, provided relevantly that, on the death of George Jenkins, his executor became the Principal. Probate was granted to his granddaughter, Georgina Venesa Jenkins on 3 November 2003. She, acting as Principal, appointed herself and her brother, Peter George Jenkins, as new trustees with Joyce Ellett as a continuing trustee by deed poll dated 10 December 2003. Accordingly there is an issue whether the respondent is the sole trustee or whether she and the two applicants are the trustees.

[7] The decision depends on the proper construction of the power to vary the trusts declared contained in cl. 11. That clause provides:

"The Trustee may by Deed revoke add to release or vary all or any of the Trusts declared or any Trusts declared by any variation, alteration or addition made from time to time and may by the same or any other Deed declare any new or other trusts or powers concerning the Trust Fund but so that the Trustee shall not have any power to revoke add to or vary any of the Trusts so that the Settlor may acquire a beneficial interest in the Trust Fund or any part of it nor to effect [sic] the beneficial entitlement of any Beneficiary to any amount applied for him prior to the date of revocation or alteration and any other person or persons upon whom any power or powers so conferred on him or them. Upon this exercise of any release and revocation pursuant to this clause the power so released and revoked shall be absolutely and irrevocably determined."

[8] The applicants contend that this power of variation applies only to the trusts declared in cll. 2 to 10 of the deed. Clause 2 is the declaration of trust. It provides that the trustee holds the trust fund "upon the trusts subject to the powers and provisions contained in this Trust". Clause 3 deals with the trustee's obligations in respect of the income of the trust fund. Clause 4 provides when the trust terminates and what then happens to the capital of the fund. Clauses 5 and 6 give powers to the trustees to distribute the trust fund while cl. 7 sets out many specific powers available to the trustee. Clause 8 makes provision for the trustee's expenses and remuneration. Clause 9 makes it clear that the trustee has an uncontrolled discretion in the exercise of powers under the deed while cl. 10 deals with questions of the trustee's liability.

[9] By contrast, submitted Mr Clarke SC for the applicant, the remaining clauses of the deed dealt with matters not likely to be the subject of a power to vary, namely, the removal and appointment of trustees, the governing law of the Trust, its name and the absence of any obligation in the beneficiaries to indemnify the trustee. His submission in respect of cl. 12 was that its substance pointed to it being an entrenched provision, a well known device to ensure there was a check on the trustee, allowing the Principal to remove a trustee promptly should the need arise. He submitted that it would be very odd and self-defeating to allow the trustee to defeat such a device by amending the deed to remove the Principal.

[10] In arguing that cl. 11 gave a power to amend the deed to change the Principal, Mr Bradley for the respondent submitted that the trust was defined in cl. 1 as "the trust constituted by and comprised in" the deed and its schedule, that the provisos in cl. 11 did not apply in these circumstances and that cl. 11 in providing a power to the trustee to "declare any new or other trusts or powers concerning the Trust Fund" and by its rather elliptical reference in the last sentence of the clause, "Upon this exercise of any release and revocation pursuant to this clause the power so released and revoked shall be absolutely and irrevocably determined", entitled George Ventris to disclaim or release the power of appointment conferred on him by the settlor.

[11] In that context he relied on s. 205(1) and s. 205(2) of the Property Law Act 1974 which provide:

"205 Disclaimer etc. of powers

(1) A person to whom any power, whether or not coupled with an interest, is given, may by deed disclaim, release or contract not to exercise the power, and after such disclaimer release or contract shall not be capable of exercising or joining in the exercise of the power.

(2) On such disclaimer, release, or contract, the power may be exercised by the other person or persons or the survivor or survivors of the other persons to whom the power is given unless the contrary is expressed in the instrument creating the power."

[12] He submitted that George Ventris was entitled to disclaim or release the power of appointment conferred on him by the settlor pursuant to s. 205(1). He went on to submit that, after doing so, George Ventris was no longer capable of exercising the power but that the power could be exercised by Joyce Ellett, pursuant to s. 205(2), as the "other person" to whom the power was given by the variation deed

[13] He also submitted that any possible conflict between the power of the trustee under cl. 11 and the power of the Principal under cl. 12 was averted by ensuring that the Principal remained a trustee and that the conferring of a power of appointment of new or replacement trustees on existing trustees was consistent with s. 12(1) of the Trusts Act 1973 which gives the existing or remaining trustee the power to appoint new or replacement trustees where the power of appointment under the trust instrument cannot or will not be exercised.

[14] The essential issue seems to me to be whether the power given to the trustee to vary the trusts declared can extend to the removal of the Principal especially where it is the Principal who alone, in the trust deed as originally drafted, has the power to appoint and remove the trustee. It is necessary, in attempting to answer the question, to construe the power in cl. 11 by reference to the words in their surrounding context.

[15] The scope of powers of amendment of a trust deed is discussed in an illuminating fashion in Thomas on Powers (1st ed., 1998) at pp. 585-586, paras 14-31 to 14-32 in these terms:

"In all cases, the scope of the relevant power is determined by the construction of the words in which it is couched, in accordance with the surrounding context and also of such extrinsic evidence (if any) as may be properly admissible. A power of amendment or variation in a trust instrument ought not to be construed in a narrow or unreal way. It will have been created in order to provide flexibility, whether in relation to specific matters or more generally. Such a power ought, therefore, to be construed liberally so as to permit any amendment which is not prohibited by an express direction to the contrary or by some necessary implication, provided always that any such amendment does not derogate from the fundamental purposes for which the power was created. Thus, a power of amendment will undoubtedly be capable of making amendments which are essentially ancillary to, and for the better execution of, such fundamental purposes, e.g. so as to substitute an easier form of communication or service for the one originally stipulated, or so as to make other powers exercisable in writing rather than by deed, or, indeed, introduce other amendments which are not simply administrative or managerial in nature. It does not follow, of course, that the power of amendment itself can be amended in this way. Indeed, it is probably the case that there is an implied (albeit rebuttable) presumption, in the absence of an express direction to that effect, that a power of amendment (like any other kind of power) cannot be used to extend its own scope or amend its own terms. Moreover, a power of amendment is not likely to be held to extend to varying the trust in a way which would destroy its 'substratum'. The underlying purpose for the furtherance of which the power was initially created or conferred will obviously be paramount."

[16] Clause 2, in declaring that the trustee holds the trust fund "upon the trusts subject to the powers and provisions contained in this Trust", highlights the link to cl. 11's power to amend the "Trusts declared". The language of cl. 2 also makes the declaration of trust subject to the power, for example, vesting in the Principal to appoint new trustees in cl. 12. The power to amend in cl. 11 is not to amend "the trust constituted by and comprised in this Deed and the Schedule" but the "Trusts declared", namely those declared in cl. 2. The difference between the singular and plural forms of the word "trust" is significant. It would have been easy for the drafter of the deed to provide the trustee with a broad power of amendment of "this Trust", which is defined in cl. 1 to mean "the trust constituted by and comprised in this Deed and the Schedule" or of the deed and the schedule as a complete document if that were intended.

[17] The limitation of the trustee's power of amendment to the trusts declared, where those trusts were subject to the powers and provisions contained in "this Trust", has led me to the view that cl. 11 should be construed so that its powers of amendment do not extend to a provision such as the definition of the Principal in the schedule to the deed.

[18] The power to appoint a new trustee available to the Principal under cl. 12 does not seem to me to be one that requires easy amendment to add to any desirable flexibility in managing the fund; cf. Meagher JA in Kearns v Hill (1990) 21 NSWLR 107, 109. Clause 12's purpose of allowing the removal of a trustee is also inconsistent with the possibility that the trustee could negate the operation of the power by amending the schedule to the deed to change the identity of the Principal. Nor is it the case that the structure of the deed requires some continuing identity between the Principal and the trustee or trustees named under it so that there is a built-in safeguard against the Principal's position being subverted.

[19] The Principal's ability to remove and replace a trustee seems to me to be one of the fundamental features of the structure of this deed, one setting up a family discretionary trust. The maintenance of that power is obviously designed to ensure that the control of the trust will remain with the significant intended beneficiary, here George Jenkins, and after him his spouse or his executor, as follows from the definition of "The Principal" in the schedule. To allow the power in cl. 12 to be subverted by the trustee it was designed to supervise purporting to use cl. 11's powers to amend the deed rather than the trusts declared by the deed is not, in my view, permissible. It is akin to destroying the substratum of the deed.

[20] The argument based on s. 205 of the Property Law Act is not persuasive. The deed purporting to remove George Ventris and to appoint Joyce Ellett as Principal relied on cl. 11, not s. 205. In my view, for the reasons I have expressed, it was not an effective use of cl. 11. For s. 205 to come into play one presupposes that the attempt to use cl. 11 must have failed. That language of the deed removing George Ventris does not obviously invoke s. 205. Even if its words could be construed as a disclaimer for the purposes of the section it is a disclaimer which clearly contemplates George Ventris's replacement by another person in circumstances where, in my view, his replacement was not authorised. It is difficult, as Mr Clarke submitted, to construe the deed as a valid disclaimer in those circumstances. In my view that conclusion is correct.

[21] Mr Clarke also reserved the issue whether the power in s. 205 applied only to powers of appointment under s. 204 and whether a power of revocation was a power of appointment, relying on Thomas on Powers at 13-01 but those are not issues that I need to decide for present purposes.

[22] Accordingly I shall make orders similar to those sought in paras 2 to 8 of the application and invite submissions as to the any further directions that should be made in respect of the balance of the relief sought in the application.