POPE v DPR NOMINEES PTY LTD & ORS No. SCGRG-96-1003 Judgment No. S337 [1999] SASC 337

BLEBY J: The Pope Family Trust was constituted by deed of settlement dated 5 November 1974 ("the Trust Deed"). The settlor was Oliver Edgar Pope, and by the Trust Deed he appointed the defendant DRP Nominees Pty Ltd to be the trustee of the Trust. The Trust is a discretionary family trust. The settlor's son, Desmond Roy Pope (the appellant) is not a beneficiary of the Trust. The beneficiaries are the appellant's now estranged wife, the appellant's children and his grandchildren.

The two directors of the trustee are the appellant and W B Finnie & Co Pty Ltd. The appellant is a director of W B Finnie & Co Pty Ltd, and its shareholders are the appellant, his wife and three daughters. The appellant has the largest individual shareholding but not a majority of the shares.

Besides his three daughters, the appellant has two sons, Desmond Oliver Pope ("the plaintiff") and Darryn Scott Pope. There is also an adopted daughter, Debbie Kaye Pope.

E & D R Pope Pty Ltd is a company effectively controlled by the appellant. The plaintiff worked for that company for a number of years after leaving school, but there has plainly been a deterioration in the relationship between the plaintiff and the appellant for some time. The plaintiff has not received any allocation from the Trust since 1983. Allocations have been made to the three natural daughters and to Darryn.

The plaintiff became concerned about certain matters concerning the administration of the Trust, and on 14 May 1996 he commenced these proceedings, initially seeking the appointment of an inspector of the Trust pursuant to s84C of the Trustee Act 1936 ("the Act"), for the purpose of investigating the administration of the Trust. The material before the Master suggested possible breaches of trust on the part of the trustee, and the Master, on 11 September 1996, determined to appoint an inspector.

The trustee initiated an appeal to the Full Court against that determination, which appeal was abandoned on the day of the hearing, the trustee being ordered to bear the costs of the appeal on a solicitor and client basis.

On 16 July 1997 the Master appointed Mr Russell Heywood-Smith to carry out the inspection. Further proceedings took place trying to confine the powers of the inspector, but the inspector's interim report was submitted on 22 February 1998.

It is not necessary for present purposes to elaborate on the detail of the inspector's report. He reported that a number of aspects of the administration of the Trust required further investigation, but at that stage of the investigation he was able to report that:

(1) the Trust had been operated without appropriate accounting records;

(2) the affairs of the Trust had been intermingled with affairs of entities associated with the trustee;

(3) the trust had entered into transactions not for its benefit, but for the benefit of associated entities, especially O E & D R Pope Pty Ltd; and

(4) a pattern of distributions excluding certain beneficiaries was discernible.

Following that report, the plaintiff was given leave to amend the summons to seek additional relief. At the time of the decision presently under appeal, the summons relevantly claimed the following relief:

"4. That the report of Mr Russell Heywood-Smith as Inspector of the Pope Family Trust dated 22 February 1998 be received by the Court as a final report of the inspector into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936. 5. That the defendant DRP Nominees Pty Ltd be removed as trustee of the Pope Family Trust forthwith. 6. That Scott Kershaw, Official Liquidator, or such other person as the Court deems fit be appointed trustee of the Pope Family Trust in place of DRP Nominees Pty Ltd and be invested with all of the powers conferred on the trustee of the Pope Family Trust according to the provisions of the Indenture dated 5 November 1974 and such further or other powers as the Court deems fit. 7. In the alternative to paragraph 6 herein, that Scott Kershaw, Official Liquidator, or such other person as the Court deems fit, be appointed Receiver and Manager of the Pope Family Trust. 8. That the Pope Family Trust be wound up. 9. In the alternative to paragraphs 4, 5, 6, 7 and 8 herein; 9.1 An order that the report of Mr Russell Heywood-Smith as Inspector of the Pope Family Trust dated 22 February 1998 be received by the Court as an interim report of the inspector into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936. 9.2 That the Inspector of the Pope Family Trust be directed to investigate the matters in respect of which he has expressed the view in his report of 23 February 1998 warrant further investigation. 9.3 That the Inspector have available to him all of the powers vested in an inspector pursuant to Section 84D of the Trustee Act, 1936. 9.4 That pending the completion by the Inspector of his investigations into the Pope Family Trust and the delivery of a final report by the Inspector pursuant to Section 84E of the Trustee Act, 1936 the defendant be removed as trustee of the Pope Family Trust. 9.5 That pending the delivery by the Inspector of a final report into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936, Mr Scott Kershaw, Official Liquidator, or such other person as the Court deems fit, be appointed trustee or interim trustee of the Pope Family Trust. 9.6 That pending the delivery by the Inspector of a final report into the administration of the Pope Family Trust pursuant to Section 84E of the Trustee Act, 1936, the trustee of the Pope Family Trust be restrained from dealing in any way with the assets of the Pope Family Trust until further order or in the absence of prior written approval from every one of the beneficiaries of the said trust. 10. That the plaintiff have his costs of and incidental to this action from the defendant on an indemnity basis or, alternatively, to be taxed on a solicitor and client basis if not agreed. 11. A declaration that the defendant be restrained from indemnifying itself out of assets of the Pope Family Trust in respect of any liability for costs of and incidental to this action. 12. That the fees of the Inspector in conducting his investigation into the Pope Family Trust be met by the defendant and that the defendant be restrained from indemnifying itself out of trust assets in respect of such liability. 13. Further to paragraphs 10, 11 and 12 herein, that in the event that the defendant is unable to meet a liability for: 13.1 the plaintiff's costs of and incidental to this action; and/or 13.2 the Inspector's fees, it be ordered that the directors of the defendant pay such costs and fees. 14. In the alternative to paragraph 13 herein, that in the event that the defendant is unable to meet a liability for: 14.1 the plaintiff's costs of and incidental to this action; and/or 14.2 the Inspector's fees, it be ordered that such costs and fees be met from the Pope Family Trust estate prior to the trustee of the said trust exercising his discretion to distribute any income or capital thereof to the beneficiaries entitled to received the same. 15. Such further or other order as the Court deems fit."

The plaintiff had filed a consent to act of two Adelaide based accountants as possible alternative nominees to the person mention in paragraph 6 of the amended summons.

On 28 July 1998, the appellant wrote to the court indicating that he did not intend to be represented, and that he would abide the decision of the court.

When the amended summons first came before the learned trial judge, primarily for the purpose of dealing with the application to remove the trustee and to appoint replacement trustees, the trustee intimated through its counsel that it was desirous of retiring from the trust, and that the appellant wished to appoint two new personal trustees in its place, pursuant to clause 10 of the Trust Deed. I will have occasion to refer to the text of clause 10 later.

The only evidence before the trial judge about possible retirement and the identity of the proposed new trustees was contained in a letter dated 12 August 1998 from the appellant to the solicitors for a group of beneficiaries in which he said: "I have been approached by the trustee..... to replace DRP Nominees Pty Ltd with a trustee who is wholly independent.....", and then indicated who he proposed to appoint. That letter was exhibited to an affidavit filed on behalf of the relevant group of beneficiaries.

The plaintiff objected to the trustees proposed to be appointed. Affidavits subsequently filed suggested, and it was a matter of some argument before the trial judge and before this court, that the two trustees proposed were Melbourne based business associates of the appellant and shared financial interests with him. However, for present purposes, it is not necessary to embark upon a consideration of the suitability or otherwise of those persons as trustees.

When the application for removal and replacement of the trustee was called on for hearing on 27 August 1998, despite his earlier intimation, the appellant appeared by counsel and sought and obtained leave to intervene. Counsel for the plaintiff applied for and obtained an order joining him as a defendant, in view of the contentions which he advanced relating to the issue of appointing new trustees.

No affidavit or points of defence had been filed by the trustee, although in fairness, it had not been directed to do so. However, at no stage, during the course of a number of directions hearings before the trial judge, did the trustee indicate that it would consent to an order of removal. There was no evidence then placed before the court by the trustee as to its intention to resign.

Full argument was presented on behalf of the plaintiff on 27 August in support of his application for the orders then being sought. The hearing was adjourned until 2 September.

On that morning, the trustee filed an extensive affidavit sworn by the appellant relating to his dealings with the plaintiff and the administration of the trust over a number of years. From its content and the fact that it was filed by the trustee, its purpose could only have been to oppose the orders then being sought by the plaintiff for removal of the trustee. It did not place any proposal before the Court that it should resign. The only reference to that possibility was in part explanation for not filing points of defence, where the appellant said:

"3.2 [T]he Trustee understands that many of the matters that have been raised by the plaintiff in his Points of Claim will be effected by (sic), or must at least await finalisation of the Trustee's desire to retire, the Appointor's proposal to appoint New Trustees and the Plaintiff's contention that it is entitled to have the Court appoint a new Trustee of the plaintiff's choice."

However, there was no suggestion in the affidavit that the directors of the trustee had ever considered that the trustee should resign. Further affidavits were also filed on behalf of the trustee.

Many factual matters were in dispute. However, the learned trial judge was able to make the following observation:

"What we now see is a situation in which, undoubtedly -

* there has been a total failure, at all times, to maintain proper trust records as required by the Act and regulations; trust funds have been consistently intermingled with those of a corporate trading entity controlled by [the appellant]; and there is every reason to believe that the purported trustee's minutes as to allocations are spurious and that the meetings which they purport to evidence did not take place;

* large money loans have been raised on the security of the major trust asset and have been on-lent, on an unsecured basis, to the corporate entity controlled by [the appellant];

* the structure of the trust management arrangements are such that they inherently give rise to conflict of interest situations;

* it is plain, even on his own affidavit, that the trust has been administered not on an independent, objective basis - but to reflect the personal views and wishes of [the appellant] - regardless of whether he has acted in good faith or not;

* a significant number of the persons who are potential beneficiaries have, with good reason, lost faith in the Trustee;

* [the appellant] seeks to appoint as new trustees persons who are plainly business associates of his and who could not, by any stretch of the imagination, be categorised or perceived as independent; and

* questions will need to be considered as to whether any breaches of trust sounding in damages have occurred and what action may need to be taken in relation to them."

Although it was a finding of the trial judge, I am not concerned about the identity of the persons proposed as trustees by the appellant, and I am not concerned to resolve questions as to their suitability to act as trustees.

In response to the plaintiff's submissions that the trustee should be removed and the new trustees should be appointed by the court, the appellant submitted that there was no jurisdiction to make the orders sought and that even if there were, such was the state of the conflict of evidence that no orders could properly be made at that time without resolving the factual disputes on oral evidence.

The appellant argued before the trial judge that whatever may be the court's power to remove the trustee, there was no jurisdiction in the court to appoint new trustees where the relevant trust instrument conferred a power of appointment which the donee of the power was capable of exercising and was willing to exercise. The power of appointment was contained in clause 10 of the Trust Deed which reads:

"10. In the event of the Trustee resigning from its appointment hereunder or being otherwise unwilling or unable to act or effectively to perform its functions hereunder then the power to appoint a new trustee being a company or a new trustee being a natural person or persons shall reside in the Settlor in the first instance and failing him in the said Desmond Roy Pope during his lifetime PROVIDED that in the event of new trustees being natural persons being so appointed then they shall not be less than two in number PROVIDED FURTHER that subject as aforesaid the provisions of Part V of the Trustee Act 1936 as from time to time amended shall apply to the appointment of new trustees hereunder."

It was said that the pre-requisites contained in s36 of the Trustee Act 1936 could not be satisfied where the appointor under the instrument was able and willing to exercise the power of appointment vested in him. Section 36 of the Trustee Act 1936 reads as follows:

"(1) The Supreme Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult , or impracticable so to do without the assistance of the court, make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there be no trustee. In particular, and without prejudice to the generality of the foregoing provision, the court may make an order for the appointment of a new trustee in substitution for a trustee who is convicted of an indictable offence, or has been adjudicated bankrupt or made an assignment or composition or arrangement with his creditors under any Act in force in that behalf, and may remove such last-mentioned trustee."

The learned trial judge chose not to rely on s36 of the Trustee Act but relied on the inherent power of the court to make an order for general administration of the trust in order to remove the trustee and appoint a new one, regardless of the provisions of clause 10. In accordance with that inherent power, and in the light of the evidence then before him, the trial judge proceeded to order the removal of the trustee and the appointment of the two alternative trustees proposed by the plaintiff. He was not prepared to allow the matter to go to trial on oral evidence because the areas of dispute focussed more on "matters which (were) essentially peripheral to the core issues to be addressed for present purposes ... The critical question is whether, on the facts beyond real dispute, such has been the mode of conduct of the trusts that the administration has been unsatisfactory to the degree that, on any view, the Trustee ought to be removed and replaced."

Before the trial judge, the trustee, in general terms, supported the submissions of the appellant and, in particular, that the trustee should be permitted to resign and the appellant permitted to appoint new trustees in its place. The trial judge noted, however, that the evidence merely showed that the trustee was willing to resign to make way for a replacement trustee, and the fact that the trustee was now being removed by the court would not give rise to the exercise of any power under Clause 10 of the Trust Deed.

The appellant now appeals against the order of the trial judge. He objects to the intervention by the court where the trustee had signalled its intention to resign. He goes as far as to say that the court had no power to make the appointment. Alternatively, he says that in the exercise of its discretion the Court should have allowed the trustee to resign and should have allowed the appellant to have appointed the new trustees proposed. There are other grounds, but it is not necessary to recite them all. The issue is whether the court had power to make the appointments at all, and whether it should have done so in the light of the intimation coming directly from the trustee that it was willing to resign, and of the intimation from the appellant that he was prepared to exercise his power of appointment under Clause 10.

The trustee has not appealed against its removal. There is no challenge to the findings of fact by the trial judge. Neither the trustee nor any of the other beneficiaries were represented on the appeal, although they had appeared before the trial judge. The appellant did not challenge the ability of the court to remove the trustee and did not argue that there were no grounds on which the removal could have been ordered. His only concern appears to have been over the power of the Court to appoint new trustees.

I have already observed that the learned trial judge invoked the inherent power of the court, rather than rely on s36 of the Trustee Act. It is not necessary to decide in these proceedings whether the inherent power is wider than s36 where there is a power in another to appoint, or whether s36 merely reflects the policy by which the court is guided in the exercise of its inherent jurisdiction (see Ford and Lee "Principles of the Law of Trusts" at para [8280]).

The fact of the matter is that the trial judge was faced with a factual position of having received a report from a court-appointed inspector disclosing serious and apparently ongoing breaches of trust by the trustee. They were breaches which, it was not contested, were sufficient to justify the trustee's removal. The report at the same time impeached the conduct of the appellant as director both of the trustee company and of the corporate co-director of the trustee in respect of transactions in which he or a company or companies controlled by him had an interest. Some of those transactions required further investigation. There was a possible intimation through an affidavit filed by one of the beneficiaries that the trustee might retire. That indirect intimation suggested that retirement was plainly conditional upon the appellant being able to appoint. The intimation was given only after the Court was seized of an application to remove the trustee. Apart from that oblique suggestion the trustee, on its face, and in view of the lengthy affidavit filed midway through the hearing, was opposing any order of removal of it by the court.

It was quite clear that the issue which the court had to determine on the plaintiff's application was the removal of the trustee. Faced with what must have appeared to have been the inevitable, the plaintiff sought to intervene to endeavour to preserve to himself the right to appoint new trustees. It does not matter for present purposes whether the trustees he proposed might have been sympathetic to the appellant's interests.

The words "expedient" and "inexpedient" used in s36 are words of wide meaning. "Expedient" may mean advantageous or merely appropriate or suitable to the circumstances of the case. "Inexpedient" of course has the opposite meaning. In the circumstances of the case before the trial judge, it was expedient to appoint new trustees. In view of the attitude of the trustee, it was both inexpedient and impracticable to do so without the assistance of the court. The court was therefore empowered to make an order for the appointment of new trustees in substitution for the existing trustee. Whilst the section makes specific reference to substituting a trustee for one who is convicted of an indictable offence, or who has been adjudicated bankrupt or who has made an assignment or composition or arrangement with his creditors, those are not the only circumstances in which it is contemplated by the act that the court may make an order.

It was expedient for the court to appoint new trustees because of the obvious need to replace the existing trustee. Speaking on behalf also of Evatt and McTiernan JJ, Dixon J said in Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572 at 580-581:

"The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorize the Court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight."

The circumstances as found by the trial judge amply justified the exercise of his discretion to order the substitution of the trustee. It was expedient for him to do so notwithstanding the power of the appellant to appoint upon a resignation of the trustee, because there was no certainty that the trustee would resign unconditionally, and on the face of the inspector's report the appellant had been involved in the breaches of trust. His conduct would need to be subjected to further inquiry and scrutiny by the trustee to be appointed. In those circumstances it was quite inexpedient that he should be permitted to appoint the new trustees.

As the action taken by the learned trial judge, on its face, was in accordance with the provisions of the section, is there any relevant authority which would qualify the ability of the court to take such action? The appellant relied on a number of authorities by which it was suggested that the ability to take such action was qualified, both in the exercise of the court's inherent jurisdiction and when acting under s36.

Re Hodson's Settlement [1851] EngR 617; (1851) 9 Hare 118; 68 ER 439 involved a petition under the English predecessor to s36 for the appointment by the court of two trustees in substitution for one trustee who had died and for one continuing trustee. According to the petition, the continuing trustee wished to be relieved of the trusteeship and the appointor had refused to appoint unless he received a corrupt consideration. At the hearing of the petition there was evidence, on which the court acted, that the continuing trustee did not consent to the exercise of the power by the court and did not desire to be discharged. There was also evidence that the appointor was willing to appoint, unconditionally, a trustee to replace the deceased trustee. The court declined to make the appointment. The case is cited for the proposition that the section does not authorise the court to appoint a new trustee where a power to appoint one is vested in a party who is capable of exercising it, and willing to do so. In my opinion the case does not support such a wide proposition except when there are no other circumstances rendering it expedient for the court to act. There were no such grounds in Re Hodson. In this case, however, there were acknowledged grounds for the removal of the trustee. The trustee's offer to resign, if indeed it was such, did not alter in any way the existence of those grounds on which the court could and should have acted. The court was empowered to act by reason of those circumstances and indeed was obliged to act in the interests of the beneficiaries of the trust. It cannot be the case that where an appointor is capable of appointing and is willing to appoint a new trustee, the court is deprived of its power to do so under s36, notwithstanding that there are other circumstances which render it expedient for the court to act. It may well be correct, as in Re Hodson, for the court not to act where there are no other grounds justifying intervention by the court. The appellant's willingness to appoint in this case, if the trustee were to resign, did not displace the other grounds on which it was expedient for the court to act under s36.

In Re Higginbottom [1892] 3 Ch. 132 the executors and trustee of a testator's estate both died. By the will of the last survivor, his widow became the trustee. She too died, and by her will she appointed her daughter as executrix. After the widow had died and before her will was proved, a group of beneficiaries under the original will applied to the court for appointment of their nominees as trustees. An order was made appointing the nominees, but no order vesting the trust property in them was made. The daughter/executrix, having by then been granted probate of her mother's will, applied for and succeeded in having the previous order revoked. Once again, there were no other grounds rendering it expedient for the court to act, and the court quite properly allowed the appointment of the widow to proceed. Put quite simply, the court will not intervene under s36 or its equivalents merely where the applicant prefers to have someone else appointed other than the nominee of the person who has the power to appoint.

Similarly, in Re Brockbank; Ward v Bates [1948] Ch. 206 the trustees of a will were the plaintiff and the defendant. The plaintiff desired to retire from the trusteeship. The testator's widow and children, the beneficiaries of the estate, wanted a bank to be appointed as new trustee. The defendant refused to concur in the exercise of a statutory power of appointment. The plaintiff and the beneficiaries applied to the court for an order directing the defendant to concur. In dismissing the application Vaisey J said at 209:

"The claim of the beneficiaries to control the exercise of the defendant's fiduciary power of making or compelling an appointment of the trustees is, in my judgment, untenable. The court itself regards such a power as deserving of the greatest respect and as one with which it will not interfere, as is shown by the case of In re Gadd (1883) 23 Ch. D. 134 of which it will suffice if I read the headnote: 'A decree for the administration of the trusts of a will directed "that some proper person be appointed" a trustee of the will in the place of a deceased trustee. The power of appointing new trustees was given by the will to the surviving trustee, who was the defendant. The plaintiff took out a summons to have A.B. appointed trustee, and the defendant a summons to have C.D. appointed. The summonses were adjourned into court and Bacon V.-C., appointed the nominee of the plaintiff. Held, on appeal, that the decree did not take away from the defendant the power of appointing new trustees, though after decree he could only exercise it subject to the supervision of the court; that if he nominated a fit and proper person such person must be appointed, and the court would not appoint some one else on the ground that such other person was in the opinion of the court more eligible, and that if he nominated a person whom the court did not approve the court would not itself make the choice, but would call on him to make a fresh nomination. Held, therefore, that the appointment of A.B. must be discharged.'."

The court also relied on Re Higginbottom (supra), but once again the circumstances were such that there were no other grounds made out for depriving the defendant of his statutory power to appoint or to remove him from office. The principle is clear enough. In my opinion it just has no application to this case. The court is certainly not deprived of its power to appoint under s36 merely because there exists a power of appointment in someone else: Re Fauntleroy [1839] EngR 958; (1839) 10 Sim 252; 59 ER 610, followed in Re Foxhall (1847) 2 Ph. 281; 41 ER 951. The exercise of the power will depend on a number of other circumstances as to whether it is expedient to do so.

It is still theoretically possible for a person who is dissatisfied with the administration of a trust to bring an application for general administration of the trust by the court (see Supreme Court Rules 103 and 63.04ff). The history and demise of the general administration action is helpfully summarised by Young J in McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 633ff. That action has now virtually been superseded by actions of the type the subject of this appeal, where nominated and specific relief is claimed rather than by way of the cumbersome process of general administration by the court. Where a general administration order had been made, a person having the power of appointing new trustees could still exercise the power but the court would see that they did not appoint improper persons: Tempest v Lord Camoys (1882) 21 Ch. D. 571 at 578. Re Gadd (supra) is also authority for the proposition that such appointment can only be made if it is not contrary to the terms of any particular order for general administration. It follows, as has been held in Re Cotter; Jennings v Nye [1915] 1 Ch. 307, that where there is a partial administration order, the donee of the power of appointment is entitled to exercise it without the approval of the court unless, for example, an inquiry is ordered as to the appointment of new trustees, or proceedings are taken for the purpose of having new trustees appointed. In Re Hall (1885) 33 W.R. 508 there was an application for a general administration, but certain inquiries only were directed to be undertaken by the court, including whether any and what persons had been appointed new trustees, and whether any and what proceedings should be taken. The defendant, in the exercise of a statutory power, appointed a new trustee. A motion to restrain him succeeded, the court's inquiry being directed to the very question of the appointment of trustees.

In Attorney-General v Clack [1839] EngR 385; (1839) 1 Beav 467; 48 ER 1021 an information was filed for the purpose of having new trustees of a charity appointed. The surviving trustees, without the sanction of the court, appointed new trustees. The Master of the Rolls held that pending those proceedings the donees of the power ought not to have exercised it. So it was in this case, where the court was seized of an application to remove the trustee on grounds unrelated to the appellant's failure to appoint, it was not open to the appellant, in collaboration with the trustee, to arrange for the appointment of someone else.

In my opinion the power of the court to act under s36 was clearly established. Furthermore, in my opinion, the very grounds which empowered the court to proceed under s36 justified the exercise of the court's discretion, if there was indeed any room for the exercise of a discretion, in preventing the appellant from making the appointment, or from not appointing itself the trustees nominated by the appellant.

Some argument was directed to the question of whether the exercise by the appellant of the power of appointment was the exercise of a fiduciary power or whether, in exercising the power, the appellant bore a fiduciary duty to the beneficiaries which would affect his ability to make the appointment.

Regardless of the powers contained in s36 of the Trustee Act, the court has and may exercise a general supervisory jurisdiction over the administration of trusts, in order to ensure that the trusts are properly executed. As the Privy Council said in Letterstedt v Broers (1884) 9 AC 371 at 386-387:

"It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate..... In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries."

A power of appointment has therefore been described as a power of a fiduciary character and its exercise as a duty of a fiduciary nature to the cestuis que trust: Re Skeats' Settlement; Skeats v Evans (1889) 42 Ch. D. 522 per Kay J at 527. That is a decision which was followed by Kekewich J in Re Newen; Newen v Barnes [1894] 2 Ch. 297 at 308. In Re Burton; Wily v Burton [1994] FCA 1146; (1994) 126 ALR 557 Davies J cited those two decisions with approval and said at 559:

"But perhaps the more important point is that the power to remove a trustee and to appoint a new trustee is neither a general power of appointment nor a power which may be executed in the interests of the appointor. The interests of persons other than the appointor must be taken into account. The power is a trust or fiduciary power, being a power conferred by a deed of trust, and must be exercised accordingly, in the interests of the beneficiaries. A power, even though not a fiduciary power, must be exercised solely in furtherance of the purpose for which it was conferred. In Duke of Portland v Topham [1864] EngR 339; (1864) 11 HLC 31; 11 ER 1242, the Lord Chancellor, Lord Westbury said at HLC 540; ER 1251: Without farther dwelling on the matter, in as much as your Lordships concur in opinion, I think we must all feel that the settled principles of the law upon this subject must be upheld, namely, that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying into effect any bye or sinister object (I mean sinister in the sense of its being beyond the purpose and intent of the power) which he may desire to effect in the exercise of the power. When the power is contained in a deed of trust, the donee of the power is even more constrained to act in the interests of the persons for whose benefit the power was conferred."

It may be an over-simplification to suggest that all powers of appointment are fiduciary in nature. See Finn "Fiduciary Obligations" (1977) at pp270-273. However, that is not to say that fiduciary obligations do not arise in some circumstances in the exercise of a power of appointment. As this court has held in Duke Group Ltd (in liquidation) v Pilmer [1999] SASC 97 at [716]- [736] fiduciary duties will arise where there exists a power or discretion, to be exercised in the interests of and for the benefit of another, and where that other is vulnerable in the sense that the relationship is one of trust and dependency. That will undoubtedly arise, as in this case, where beneficiaries rely on the integrity of the appointor to appoint a competent person to carry out the terms of the trust. The most important single component, however, is the duty to act with loyalty to and in the interests only of another. A person cannot be said to be acting in the interests solely of that other where his own interests conflict with those of the other.

The circumstances in this case were such that a fiduciary duty arose on the part of the appellant to decline to make the appointment, and were such as to require the court to restrain him from making the appointment if he sought to do so. All the necessary criteria were present, particularly the duty to act in the interest only of the beneficiaries. The interest of the beneficiaries required the appointment of a trustee who would properly carry out the terms of the trust, and who would proceed to recover any trust property to which the trustee might be entitled as against any other person. In the circumstances of this case, that could include taking proceedings against the appellant or against companies in which he has an interest, and which have had dealings with the trustee in the past. The appointment of a new trustee or the nomination of a person to be appointed trustee by the appellant immediately places him in a situation of conflict between the interests of the beneficiaries on the one hand and the interests of himself and the companies which he controls on the other.

To the extent that the court had a discretion not to allow him to proceed with the appointment, it was, in my opinion, duty bound to exercise that discretion against the exercise by him of the power of appointment. In my opinion it became both inexpedient and impracticable to appoint new trustees without the assistance of the court.

For these reasons, it is my opinion that the trial judge had power under s36 of the Trustee Act to make the order that was made, and that to the extent to which he had a discretion to make the order, the discretion was properly exercised. The learned trial judge relied on the inherent jurisdiction of the court to justify his order. There is no doubt that there is such jurisdiction associated with the inherent power to make an order for general administration of a trust. It is at least as wide as the power conferred by s36, and in my opinion the exercise of the inherent power falls to be determined upon the same principles as those to which I have referred.