Lewis v Nortex Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4206/03 - FRANK WHEELER (TRUSTEE) v ANNE MARGARET McGREGOR JUDGMENT 1 HIS HONOUR: At the conclusion of the evidence tendered by the plaintiff, counsel for the defendant made submissions in support of the position, which I was told of at the opening of the hearing, that the standing of the plaintiff, Mr Wheeler, to bring proceedings was disputed. 2 Mr Wheeler's standing depends on his showing that he is the Trustee under Appointment of New Trustee of the Avoca No 4 Trust. This is so because it is the plaintiff's case that the business the subject of dispute is conducted by a partnership under a document bearing date 23 November 1999. The document has been admitted. The document has not been executed, but I am to understand that the parties to it have conducted their affairs in accordance with its terms.

3 When identifying the partners the document identifies Partner Two in one of a series of definitions under clause 1.1 in these terms: "'Partner two' means Crackup Pty Ltd acting in its capacity as trustee of the Trust or the Trustee or Trustees for the time being of the Avoca No 3 Trust." 4 Other evidence shows that the Trustee of Avoca No 3 Trust was not Crackup Pty Ltd at the date shown on unexecuted partnership agreement, and that Crackup Pty Ltd was the trustee of another trust called Avoca No 4 Trust. Later, by documents which are in evidence, Crackup Pty Ltd appointed Mr Wheeler as new trustee of the Avoca No 4 Trust. 5 The circumstances which existed at the date on the partnership deed, in particular that Crackup Pty Ltd was not the trustee of the Avoca No 3 Trust, but was a trustee of the similarly named Avoca No 4 Trust, in my opinion show that the reference to the Avoca No 3 Trust in the definition of "Partner two" is a misnomer, and the partnership agreement should be understood to have been intended to accord with the actual situation of Crackup Pty Ltd when it identified Partner two.

6 This conclusion is supported by the evidence of Mr Steven Doyle, Solicitor, who attests to the fact that his firm prepared documents to confirm to a plan or sketch which he has produced, and the plan shows that it was contemplated that the partner would be Avoca No 4 Trust. He says that the reference to Avoca No 3 Trust is a typographical error. 7 With or without Mr Doyle's evidence to that effect, I would conclude, on the probabilities, that the partner referred to in the document according to which the parties conducted their affairs was intended to be Crackup Pty Ltd as trustee of the Avoca No 4 Trust. The misnomer should be disregarded and Mr Wheeler, under his appointment as new Trustee, should now be regarded as representing that Partner. 8 Subject to the difficulty which I will proceed to address, the Deed of Settlement of the Avoca No 4 Trust, which is exhibit B, contains provisions in clause 29 dealing with the appointment and removal of trustees. It does not cover all circumstances in which a trustee may leave office. Clause 28 provides for automatic vacation of office in some stated circumstances. Clause 29 is in the following terms: (1) The Appointor for the time being or in the event of there being no Appointor the legal personal representatives of the last surviving Appointor who was an individual and who died whilst he was Appointor and if there be different legal personal representatives in respect of different parts of his estate then the legal personal representatives nominated for the purpose in any Will of such survivor and in default of such nomination the legal personal representatives who obtained first in point of time probate or other the legal right to administer any part of the estate of the survivor will be entitled by oral declaration or notice in writing or deed or in such other manner from time to time as the Appointor in the discretion of the Appointor may determine at any time and from time to time- to remove any Trustee hereof; to appoint any Trustee or Trustees to appoint a new Trustee or Trustees in the place of any Trustee who is removed who resigns his Trusteeship or ceases to be a Trustee by operation of law;

PROVIDED THAT if there is no Appointor named in the schedule or if at any time there is no one entitled to exercise the power of the Appointor hereinbefore conferred the statutory and other rights of removing and appointing Trustees hereof may be exercised by the Trustees or by the legal personal representatives or (if the Trustee be a corporation) the liquidator of the last surviving Trustee;

(2) Upon the removal or appointment of a Trustee the new or continuing Trustees will cause to be endorsed upon this deed immediately after such removal or appointment a memorandum of the removal or appointment and any person acting on the deed or with notice of the terms thereof will be entitled to rely on any such memorandum or the absence of a memorandum as evidence of the persons who are at that time the Trustees of this settlement

9 Counsel for the defendant has contended to the effect that for an effectual appointment of a New Trustee compliance with subclause 29(2) and the making of an endorsement are necessary. So far as the exhibit shows there has not been any endorsement, and I should act on the basis that that is the whole position. The exhibit is a copy, but I should conclude, on the evidence which the parties have chosen to put before me, that the original deed does not bear any relevant endorsement. 10 Counsel contended that the endorsement is a pre-condition for the appointment of New Trustee to be effective. He pointed to the concern of a person such as his client to know who they were dealing with as a Partner, and as Trustee or New Trustee of the Trust which is a partner. This is a real concern and one which compliance with subclause 29(2) would satisfy.

11 The Deed of Settlement has contractual operation among the parties to the deed, and persons who are privy to their interests, and the defendants are not in that group. 12 I do not regard this observation, important as it is, as exhausting the significance of subclause 29(2), because persons dealing with the Trust could and reasonably should inform themselves about the provisions of the Deed of Settlement including the provisions about appointing new trustees, and would naturally, if they turned their minds to it, address what is found in clause 29, including subclause (2), and consider what implications the absence of an endorsement had.

13 It would be reasonable for such persons to take the position that, in the absence of an endorsement, it should not be assumed that a person claiming to be appointed a New Trustee had in fact been so appointed. This is no less reasonable because the outsider dealing with the Trust and its purported Trustee was not himself a party to the Deed of Settlement or privy in interest to those who were. 14 The defendant's counsel referred me to the decision of Young CJ in Eq in Lewis v Nortex Pty Ltd [2001] NSWSC 511, where his Honour considered the effect of a clause in the Trust Deed which prescribed machinery for the appointment by an appointor of a succeeding appointor in these terms:' "Any Appointor who is entitled to act as Appointer for the time being may whilst he is entitled so to act nominate by notice in writing under his hand a person (whether an individual or a corporation and wherever resident or incorporated) to be his successor as Appointor (hereinafter called a 'Succeeding Appointor') and upon delivery of such notice and after endorsement of such memorandum and upon the person that entitled to act as Appointor shall be the Appointor to the exclusion of any Appointor who would become Appointer under any other provision of this Deed including any provisions in the Schedule relating to the Appointors." 15 It will be seen that the machinery for which that clause 32(1) provided was not the same as that provided for in clause 29 of the Deed of Settlement; an aspect of the machinery in clause 32(1) was delivery to Trustees of notice of the appointment of a successor and endorsement by the Trustees, and this led his Honour to give consideration, in some detail, to what was meant in the context by the word "delivery." "Delivery" is a word which gives recurring difficulty, particularly in the context of deeds, but is not part of the present machinery. 16 In my respectful view Justice Young's conclusion at paragraphs 56 and 61 that the endorsement was essential and that the appointment took effect as of the date of the endorsement, was a decision on the meaning and effect of clause 32(1). I do not doubt that his Honour's conclusion was correct, but it is not applicable to the matter under my consideration.

17 The terms of clause 32 in that case, in language which it is difficult to mistake, made the effectuality of the succeeding appointment depend on actually carrying out the procedure and making the endorsement. This is clear from the latter words of the clause: ".... and after endorsement of such memorandum ... the Succeeding Appointor shall be the Appointor to the exclusion, of any [other]"

The terms of the document before me require me to make a fresh address unassisted by the decision in Lewis v Nortex . 18 I would make several observations on the operation of clause 29. One is that an appointment of a New Trustee is not, in all cases, required by subclause 29(1) to be in writing; it can be by oral declaration as well as by written notice or deed. 19 A second observation is that the provisions of subclause 29(1) appear, on their terms, to empower the appointor himself to perform the entire process of appointing a new trustee; there is no expression of conditionality of the exercise and there is no suspension or postponement of its effect until some condition is fulfilled. Upon the language of subclause 29(1) on its own the whole exercise of a new appointment is fulfilled by the act of the appointor. 20 A further observation is that according to its opening words subclause 29(2) begins to operate when there has already been, or at the moment when there is, an effectual appointment of a New Trustee. 21 The obligation to make an endorsement arises "upon the removal or appointment of a Trustee", the assumption being that that has already happened. This is not suitable language with which to impose a condition on the effectuality of what had earlier happened. The language speaks in terms appropriate to impose a duty on the trustee to cause the endorsement to be made immediately; immediately, that is, after the removal or appointment. 22 The provision relating to entitlement to rely on a memorandum, and to rely on the absence of a memorandum as evidence is not expressed to provide that there is to be no other means of establishing who are the Trustees, or of establishing how persons interested in settlement, or other persons, may ascertain who the Trustees are. There is no available implication that that was intended. 23 That is to say, the provisions of subclause 29(2) do not purport to limit the range of evidentiary material which could be available to establish who the trustee from time to time was. That is not an object which the provisions of a Deed of Settlement, or any other inter partes arrangement, could achieve. It is not within the power of the parties to the Deed to change the law of evidence. 24 In my opinion, on the true meaning and construction of clause 29, including subclause (2), the absence of a memorandum of the appointment of a New Trustee does not determine whether the plaintiff has in fact been appointed as trustee, or limit the field of inquiry. Other evidence, that is exhibit E, copy Deed of Appointment, establishes definitively that he was so appointed. There is really no reason, on the probabilities, to think otherwise. I find that he was so appointed and has standing to bring the proceedings as New Trustee of the Partner referred to as Avoca No 4 Trust, and I will continue to conduct the proceedings on that basis.

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