Rayner & Ors v N J Sheaffe Pty Limited & Ors [2010] NSWSC 810

New South Wales Supreme Court

CITATION : Rayner & Ors v N J Sheaffe Pty Limited & Ors [2010] NSWSC 810

HEARING DATE(S) : 16, 17, 23, 24 June and 20 July 2010

JUDGMENT DATE : 27 July 2010

JURISDICTION : Equity Division

JUDGMENT OF : Lindgren AJ

THE COURT 1. DECLARES that the purported removal by the third defendant, through her attorney, the second defendant, of the third plaintiff as trustee of the Sheaffe Family Trust (the Trust) and the appointment of the first defendant as the trustee of the Trust in its place by Deed dated 16 July 2008 was invalid and of no effect. 2. DECLARES that notwithstanding the purported removal and appointment referred to in para (1), the third plaintiff remained in office as trustee of the Trust. DECISION : 3. DECLARES that subject to any offsetts, the first and second defendants are jointly and severally liable to reimburse the Trust for all and any Trust moneys expended, and to account to the Trust for all and any Trust property disposed of, since 16 July 2008 without the consent of the third plaintiff given through the first and second plaintiffs. 4. DECLARES that the purported removal by the third defendant through her attorney, the second defendant, of the trustee of the Trust and the appointment of the fourth defendant as trustee of the Trust in its place by Deed dated 16 June 2010 was valid and effective. 5. ORDERS that the first and second defendants pay three quarters of the plaintiffs' costs of the proceeding. 6. ORDERS that the costs, if any, of the third and fourth defendants be paid out of the funds of the Trust.

CATCHWORDS : Power of removal and appointment of trustee in deed of settlement establishing discretionary trust – appointor (mother) appoints attorney (daughter) by enduring power of attorney – appointor/donor comes to suffer from dementia and to lack mental capacity – directors of trustee company are three sisters of whom the attorney is one – disputation between the three sisters, the two outvoting the attorney on the board of directors of the trustee company – attorney exercises mother's/appointor's power of appointment by removing company as trustee of the discretionary trust and appointing a company in which she is sole shareholder and director as trustee in its place – in course of hearing of proceeding brought by the two sisters, the attorney/sister accepts that her company had not been eligible to be appointed as trustee under terms of the discretionary trust and she appoints independent accountant to be trustee – whether she had bound herself as part of a family arrangement not to use her power of attorney to exercise the power of appointment at all – whether appointment of the accountant was in breach of fiduciary duty