D. In the alternative to B and C above, that the will evidences the wishes of the Otto Ekstein in respect of the affairs and management of the trust and thereby binds the trustee, pursuant to clause 25 (as inserted by the deed of 13 January 1986) of the deed to exercise the powers under the trust so as to give effect to those wishes.
13 There are numerous other claims that go to the administration of the estate which were not addressed in argument and which may need to be considered if any of the principal contentions of the plaintiff succeeds.
14 The first defendant trustee says that the amendment of 21 February 1977 is void for uncertainty and denies the main claims of the plaintiff and says that if the provisions under clause 9 of the deed were exercised by will then the exercise was a fraud on the power. There is in addition a pleaded defence of laches which was not argued and a claim for relief under s85 of the Trustee Act 1925 which can be left aside at the moment. The second defendant denies the plaintiff's main claims and any obligation to distribute benefits other than so far as is possible, to distribute estate assets in accordance with the will.
15 By cross-claim the executor seeks declarations that on the proper construction of the will of the deceased clauses 9, 13(c) and 13(e) are of no effect, that clause 10(a) takes effect as if the words "regardless of the legal entity in which it is vested including property owned by the trust" and the words in 10(c)(ii) "shall as far as possible exclude the assets of the trust and" were omitted from the will and that in clause 10(a) and 10(c)(ii) the word "undivided" were omitted.
16 It is necessary when considering the pleadings to understand that in the amended statement of claim filed in court the paragraph numbering has been amended in ink but the defences refer to the paragraph numbers as typed, not as hand written.
The validity of first amending deed
17 This question was not the subject of a great deal of argument by the defendants. In general there is no reason why a power cannot be exercised by will if the trust instrument so provides. A fund can be settled upon A upon trust for B for life and after the death of B as to both capital and income for persons appointed by A by deed or will with provision in default of appointment. The words of the amending deed are perfectly clear; thus their intention is clear. In some cases the original deed provides for exercise of power by "deed or oral resolution" (see clause 2(a)(iii) and 21). The amending deed provides another means of exercise. It is not uncertain. However, that would not mean that powers envisaged to be exercised at a particular time could be validly exercised by will operating before that time as that may be inconsistent with the deed. As I will indicate I consider that the reasonable interpretation of clause 9 requires the power to determine capital entitlement to be exercised at the distribution date; it would therefore not be a power capable of being exercised by will coming into force prior to distribution date. The deed clearly envisages that beneficiaries entitled to consideration in the exercise by the trustees of their discretion are persons living at the date of exercise of discretion. But insofar as a power can properly be exercised by will in a manner not inconsistent with the proper construction of the deed, the first amending deed is not uncertain and I consider it effective. It was held in Kearns v Hill (1990) 21 NSWLR 107 that powers of amendment should be given effect in accordance with their terms and not be held circumscribed by some principle of primary purpose. In the same way amending deeds should be given effect so far as it is possible to do so.
Has there been an exercise of power by will?
18 Whether a power exercisable by will has in fact been exercised is a question to be determined in each case, having regard to the terms of the power and the terms of the will: see for example In re Knight deceased [1957] 1 Ch 441. Generally a reference in a will to the specific power or to the property subject to the power is sufficient to indicate an intention to exercise a special power of appointment: In re Weston's Settlement [1906] 2 Ch 620. The deceased's will does refer to trust property in clause 9, 10(a), 10(c), 13(c) and 13(e) and purports to distribute it by will. Insofar as the deceased held a power of appointment or appropriation by will I consider he intended to exercise it. Whether his intentions were successful is another matter.
19 It must be borne in mind that property passing under a general power of appointment exercised by will vests in the legal personal representative of the deceased: s46B(1) of the Wills Probate & Administration Act 1898; that however is not the position with property passing under special powers. This poses a problem with clause 10(c) of the will directing the trustee of the will to distribute the deceased's estate and the trust assets in a particular way without the executor having the trust assets within his control. It also poses a problem under clause 13(c) - which where it refers to clause 11, clearly intended clause 10 - because although it is a term or direction "to my trustees" it is clearly a direction to Mr Ward-Harvey and in any event the deceased is not his own trustee and neither is the trustee of the trust his trustee. On its face, the will attempted to dispose of trust assets as if they were assets of the deceased available for distribution under his will as his assets. In so attempting it fails, but that does not determine the matter.
Has there been a determination of distribution date and a determination of beneficiaries to take on that date?
20 Mr J C Campbell, QC, senior counsel for the plaintiff, argued that the will, by clauses 9 and 10 made such determinations as required by clauses 2(a)(iii) and 9 of the trust deed. This requires a decision that the testator, by his will, determined his date of death to be the distribution date and by clauses 9 and 10 of his will distributed to beneficiaries entitled to the trust fund.
21 There are considerable difficulties with this argument. Clause 9 of the trust deed envisages the determination of the trust by distribution to beneficiaries. Clause 9 of the will does not envisage distribution, but rather purports to create life interests in parts of the property 148 Milson Road, Cremorne, presumes the continued existence of the trust to manage the property, carry out structural repairs and to collect rent, and then purports to distribute the remainder interest in the property by giving it to Mr Paul Ekstein on trust for his children and the children of the plaintiff who survive the plaintiff and attain twenty-eight years. Those grandchildren of the testator are not beneficiaries under the trust deed so that the plaintiff would need to argue that the will also operated as a valid appointment of additional beneficiaries under clause (b)(ii) of the Schedule, although that clause would not allow the vesting to be contingent on attaining twenty-eight years. Therefore that would need to have been altered as well.
22 Mr Campbell appreciated these problems and put forward an alternative distribution date, determined by the will as being the date of death of the plaintiff. That was not pleaded and in any event is an argument, I think, without substance. The words of clause 9 of the will could not support such a finding and neither could the words of clause 9 of the trust deed.
23 Clause 10 of the will presents the same sort of difficulties. On its plain words, it treats the trust assets as distributable by will. It assumes the executor will be in control of them. Although as events have turned out the possibility has not arisen, clause 10(a)(i) envisages the continued existence of the trust, clause 10(a)(ii) would or could effect a distribution of trust assets to persons not trust beneficiaries, and clauses 10(c) and 10(e) envisage division of trust assets by the trustee of the will, not by the trustee of the settlement.
24 The fact that an appointment is to an extent valid and to an extent beyond power, does not make the whole appointment ineffective. So far as it is good, the appointment operates as a valid appointment. Neither does an appointment to trustees of a will in trust for proper objects make the appointment invalid although generally it would be for the settlement trustees to effect the transfer to the objects of the power, particularly if the interests appointed were not vested: Busk v Aldam [1874] LR 19 Eq 16. But much depends on the wording in question: see Thomas: Powers 1998 7/42 - 7/47. Nevertheless it is necessary to bear these difficulties in mind when deciding whether or not a power has been exercised. One must decide here whether the will operated (1) as a determination that the distribution date was the date of death of the testator, (2) as a determination of beneficiaries entitled at that date of distribution, (3) if the provision for grandchildren is to be upheld then that the will operated to alter the beneficiaries under the trust.
25 I determine that no such conclusion can be drawn. I do not think it could be assumed that the intention of the deceased was to do all these things by will or that the will had such an effect. Clause 9 of the will is inconsistent with it. There is no doubt that the deceased did wish to dispose of the trust assets by will, but without far more precise language I consider it not possible to find that he exercised the powers necessary to bring this about. The whole language of the will is against such a finding and the language of clause 9 of the trust deed envisages payment of money or transfer of assets, not the creation of interests for life and in remainder.
Did the testator by will exercise the power under clause 11 of the trust deed to appropriate property to beneficiaries.
26 Mr Campbell argued, I consider correctly, that the shares of the beneficiaries in income under clause 8(b) of the trust deed were shares vested but subject to divestment upon the trustee exercising discretion to pay income to one or more to the exclusion of others. The shares of beneficiaries in capital pass in the same way on the distribution date. Thus clause 11 applies to those interests. It would be taking the relatively simple language of clause 11 to the extreme to hold that clause 9 of the will made an appropriation pursuant to trust clause 11 powers. Contrary to the argument of counsel for the plaintiff, I do not consider that the trustee can, in advance, determine to appropriate more than income for the current year. But that is only one problem. For the reasons previously given I do not think that there was an appropriation, even in part by clause 9 of the will. So far as clause 10 of the will is concerned, in the same way difficulties exist. The provisions of clause 10 and clause 13(e) would require a mixing of trust and estate assets, rather than an appropriation. Even if one could regard clause 10 of the will as an appropriation of the trust fund by will to the beneficiaries under clause 10, clause 10(c)(ii) would provide a direction as to exercise of discretion rather than an actual appropriation. I consider this argument of the plaintiff fails.
Effect of clause 25 of the trust deed
27 This clause was inserted by amendment made on 13 January 1986. Insofar as he attempted by will to direct disposition of trust assets as part of his own assets that attempt by the testator failed. Nevertheless the wishes of the deceased as to the disposition of trusts assets are, I consider, evidenced by clauses 9 and 10 of his will and perhaps also by clause 13(c), although it is likely that some of the clause 13(c) directions will be impossible to implement as the assets would not fall under the control of the trustee of the will or of the trustee of the settlement. The question is whether the first defendant, as trustee of the trust, is obliged to exercise discretions as to determination of distribution date, distribution to beneficiaries, appropriation to beneficiaries and additions to the list of trust beneficiaries so as to carry out the intentions envisaged in the will. The first defendant trustee argued through his counsel that this would fetter the discretions vested in the trustee and thus the court should not declare the trustee bound to exercise powers so as to give effect to the testamentary wishes. I do not consider that correct. The trustee is bound to carry out the trust. The terms of the deed include clause 25 which must not be considered as some provision of little importance. If the trust deed gives true discretionary powers to the trustee during the lifetime of the original trustee, then circumscribes those powers so that the trust turns more towards being a strict settlement then that is because the trust deed so provides.
28 It was also argued that a discretion to give effect to the wishes of the deceased in regard to the "affairs and management" of the trust was an administrative provision rather than one operating so as to determine trust interests. However, I see no reason why the words should not carry their normal meaning. The affairs of the trust have I think, a wide embrace extending to exercise of power to determine interests.
29 I consider that clause 25 of the trust deed is a clear and valid direction binding upon the trustee. It follows from this that the third of the principal claims of the plaintiff succeeds, even though it was apparently thought to have less chance of success than the others.
30 Finally I add that there was no basis to conclude either exercise of power or obedience to the trust would be a fraud on the power.
General matters
31 It follows from what I have said up to the present time that the second defendant, being the executor of the will of the deceased, is bound to distribute the estate assets in accordance with the terms of the will. It might have been possible to give effect to clause 10(c) had I held that there had been an exercise of power of appointment under clause 9 of the trust or an appropriation under clause 11 of the trust deed. As I have not so held the executor will hold the whole of the estate upon the trusts set out in clause 10 of the will. No argument was directed towards the relief sought in the amended statement of claim in claim 10, which went to the interest in private companies and partnerships. There was no basis for that relief. In the same way in view of the decision I have come to the relief sought in paragraph 12A is not available, although there will be a need for co-operation between the defendants to bring about the proper distribution of the assets of the estate and trust.
Cross claim
32 The executor seeks certain declarations as to the proper construction of the will in the events which have occurred. I will deal with these claims in turn.