IN THE SUPREME COURT OF NEW ZEALAND

SC 40/2007

BETWEEN                       GEORGINA KAIN, GEORGE HARRY COUPER KAIN, GEORGE CHARLES KAIN, GEORGE THOMAS CARLTON KAIN AND GEORGE MICHAEL KAIN First Appellants

AND	GEORGE THOMAS CARLTON KAIN Second Appellant

AND	JONATHON RHODES HUTTON First Respondent

AND	WILLIAM ALEXANDER XAVIER COUPER
Second Respondent

AND	ANNETTE ELIZABETH COUPER Third Respondent

AND	WAYNE KEITH STARTUP Fourth Respondent

AND	GEORGE THOMAS KAIN Fifth Respondent

AND	MARY HUTTON Sixth Respondent

Hearing	10 June 2008

Court	Elias CJ Blanchard J Tipping J McGrath J Anderson J

Counsel	J S Kós QC, J V Ormsby and  J W A Johnson for Appellants
M R Camp QC for 2nd Respondent
R A Osbourne for 6th Respondent

CIVIL APPEAL

10.00 am

Kós	May it please the Court I appear with my learned friends Mr Ormsby and
Mr Johnson for the appellants.

Elias CJ	Thank you Mr Kós, Mr Orsmby, Mr Johnson. Camp	If the Court pleases, I appear for Mr Couper. Elias CJ	Thank you Mr Camp.
Osborne          If  the  Court  pleases,  I  appear  for  Mrs  Hutton.    My  learned  friend’s submissions indicate I have adopted his submission incorrectly Ma'am.  I have referred to the fact that I appear also for Mrs Hutton who has no role in this appeal.  So I only appear for the third respondent.

Elias CJ	Thank you.  Yes Mr Kós.

Kós                 If the Court pleases I have prepared a skeleton argument and also a diagram which shows the relevant transactions which are under challenge in this appeal.  In accordance with the notion that it is a skeleton, I can say that although I understand from the Court, from the Registrar, that we have a reserve day and could press past one your Honours for two days not just one, it is certainly the intention of all counsel to try and dispose of this matter in the course of a day, subject only of course to your Honours’ enthusiasm for interrogating counsel.

Elias CJ          Yes well perhaps I should indicate that we won’t be able to sit after 4pm today and so it may be necessary to go into tomorrow but we are grateful for the indication that you will try and complete during the day.

Kós                 I think even before 4 o’clock Ma'am we should be so, as I say subject to the caveat I mentioned a minute ago.  Now your Honours will now have in front of you

Elias CJ	How are we to take that?

Kós                 You mostly see how I take and receive it.   I have provided for your Honours a skeleton argument in a diagram and can I start with just a couple of opening observations before I go to the skeleton.  This appeal challenges two dispositions of assets by the trustees by what has been called the old Mangaheia Trust, pursuant to powers expressed or implied in that trust deed.   Prior to those dispositions, the appellants were discretionary objects of capital under the trust, they were also default takers of capital under that trust.  The capital of the trust comprised two substantial farms, the Mangaheia Farm which is some 6600 acres in the Gisborne area, Tologa Bay area, and the Ponui Farm 1900 acres in the Hawkes Bay area, and of course there was stock on both farms.  That is essentially the capital of the trust.   And, as I say, the appellants were

discretionary  objects  of  capital  under  the  trust  and  default  takers  of capital.

Following the dispositions, the appellants’ interests were eliminated and the capital was resettled on new objects, including persons who are not objects of the original trust.  The dispositions occurred simultaneously on the 19th of July 1999, and it may be useful at this point to look then at the diagram which shows the two dispositions.  All of the events identified on the diagram were the events that occurred on the 19th  of July 1999. The first thing that occurred was the formulation of a new Mangaheia Trust with Mr Hutton and Mrs Couper and Mr Startup as the trustees of that.   The old Mangaheia Trustees retired and Mr Hutton, Mrs Couper and Mr Startup were appointed trustees to the old Trust as well as of course being trustees to the new.

Elias CJ          Can you just remind me, where in the case on appeal do we find the old Trust deed. I am sorry I should have flagged it but I haven’t.  Volume 3 is it?

Kós	It is in Volume 3, the blue, do you have the same colour coding I have
Ma'am.  It is blue I think.  Yes

Elias CJ	I don’t seem to have a volume, of course here it is.

Kós                 Yes page well I think the numbering we had better use is the bottom right hand corner.  Page 560.

Elias CJ	Thank you, yes that’s fine.

Tipping J	We are using the numbers in the bottom right hand corner are we?

Kós                 Yes we are Sir.   We could try and be ambidextrous, I could use both occasionally.   The consistent series right through the volumes is the bottom right hand corner.  And looking at the chart, you will see on the right hand side, sorry on the left hand side, the old Mangaheia Trust which is the document we have just looked at, and it identifies there the first box should be discretionary objects of income, I’m sorry the words “objects of income” have fallen out.   And then the next class, default takers, and then capital discretionary objects and default takers.  Now as a result of the dispositions that I have mentioned, and in particular the second disposition which we will come to in a moment, all the red references, all those interests, were eliminated.

The first transaction was the Ponui appointment and we see that in the middle of the page at the top, where approximately a quarter of the assets of the trust, the Mangaheia Trust, being shares in Ponui Farm, were appointed to Mrs Couper and the appointment is to be found at page 616 of  that  same  volume,  and  then  were  vested  by  transfer contemporaneously into a new trust, the Annette Couper Ponui Trust, which you see at the top right hand side, the objects of which were

entirely different from the objects, or largely different I should say from the objects of the old trust.

McGrath J      The others are significant there aren’t they, because it seems there was a huge flexibility in who the objects of the Ponui Trust could be?

Kós	Absolutely Sir. McGrath J	It is not just the family.
Kós                 No  it  is  not  just  family.    No  I  mean  if  one  looks  at  the  objects Mrs Couper  we  see,  it  was  an  object  of  that  trust,  and  she  was  a discretionary capital object as we see in the old trust, because there she is in black in the list of discretionary capital objects.  She wasn’t a default taker.  But the others, the daughters, the siblings, the parents and all the other interests including companies, trusts and charities, were entirely novel.  So it is the first transaction, that was exercised by way of a power of appointment and the objection to that power of appointment by the appellants is that it was a fraud on that power because of the introduction of new objects and that was the finding that Justice Panckhurst made, overturned in the Court of Appeal, it is Justice Panckhurst’s conclusion that we seek to support here.

The second disposition was the resettlement of the remaining assets of the Mangaheia Trust, the shares in Mangaheia Farms Limited, and that was transferred by way of an advancement via a deed poll.  The deed poll which we will be looking at I imagine in some detail is in the blue volume at 613.  And if we look at that document for a moment, this is the document that affects the transfer of the remaining assets to the new trust. And we see at page 614 the provision of the deed is all there on one page.

Tipping J	There is no cross-appeal is there on this

Kós	No.

Tipping J        No, so we can take it that it is accepted that it is an invalid exercise of a power of advancement but Mr Camp is presumably going to try and support it on the same basis as the Court of Appeal

Kós                 That is the way I take it.  In other words, Mr Camp’s argument will be that if this wasn’t an advancement, because that was invalid, then it could be done by way of appointment, and so what he seeks to do is have this Court substitute a different power for the one that was exercised by the trustees.  Now I say a different power from the one exercised, because when one looks at this document, one sees that what they were clearly trying to do was exercise the power of advancement, the implied power of advancement found in section 41, the Trustee Act.   How do we see that?   First of all we see that in Recital C it refers to the old trust providing statutory powers of maintenance and advancement contained

in the Trustee Act, with a proviso that the proviso in section 41(a) is omitted, but that doesn’t matter here.

Elias CJ	So you are at page 620? Kós	614 Ma'am, the deed poll.
Elias CJ	Oh yes thank you.  I was looking at the top ones.

Kós                 Ah sorry yes.  So you will see the Recital C Ma'am which refers to the statutory powers of advancement and then in D the trustees in reliance on the decision in Pilkington in the House of Lords have determined to resettle  the  trust  fund  in the  new  trust  principally  for  the  benefit  of Annette Couper and the grandchildren of Janet Richmond Kain.   And then  in  the  operative  part  below,  in  pursuance  of  the  powers  of  the trustees under the old trust deed, and I suggest to you that that must be a reference back to the powers referred to in Recital C because they are the powers that are recited.   The trustees resettled the trust fund and the whole trust fund is hereby transferred to and resettled in the new trust.

Tipping J	Well it is pursuant to the powers to resettle.

Kós	Well yes I will come to that.   There are no express powers to resettle.
And so the ordinary means of resettling a trust, there are two.  First an express power to resettle and there is none here.   And secondly, I will also come to that also in a moment in the skeleton, and secondly by the exercise of the power of advancement.

Tipping J        Well resettlement doesn’t envisage a partial distribution I wouldn’t have thought.

Kós                 No.  That of course is part of what has already occurred because there has been a partial distribution, the first in time was the Ponui partial distribution, followed then by this, the

Tipping J        Well if this is to be valid at all, it has to be valid I would have thought under the powers that were exercised for the Ponui transaction.

Kós                 And  the  powers  exercised  in  the  Ponui  transaction  were  clearly  an appointment.

Tipping J	And an advancement of the date of distribution, pro tanto.

Kós                 Yes.  But it is clear, with respect, that the powers at least that are recited in the deed, and when we look at it we look at the legal advice that was received by the trustees before they exercised this power, what was contemplated, the power contemplated and intended to be exercised was a power of advancement.  And my submission will be that it is no part of equitable jurisdiction for a Court to correct the power that has been exercised  when  the  parties,  when  the  trustees  intend  to  exercise  one

power and cannot validly do so the Court doesn’t then say well we will substitute another power for that.

Elias CJ	Well it is a fairly unattractive technical argument though, is it not? Kós	The argument I am advancing Ma'am.
Elias CJ	Yes.

Kós                 It is a very conventional equitable argument.   I imagine it has only become  conventional  by  reason  of  it  being  seen  to  be  attractive previously.  It is absolutely clear when one looks at the authorities that the Courts in a situation where there has been non exercise of a power that might have been available, the Courts do not say we will substitute the exercise of that power for it.   What they do is to say the original exercise of the power is invalid, it is avoided, the property goes back to the trustees and they must reconsider and exercise the power, the correct power, if they wish to do so.

Elias CJ	Why don’t you look at the substance of what was done. Kós	That is the substance.
Elias CJ	What they called it?

Kós	What they called it, yes.

Tipping J        Is  there  not  power  in  some  circumstances  to  rectify,  but  I  don’t understand there is any application to rectify the deed poll.

Kós	None here.

Tipping J        You can get at it I understand even with a deed poll where there is no direct other party, through an application to rectify.

Kós                 That is so but the fundamental argument that we make in relation to relief is the proper course here, particularly given the overall circumstances which we will talk about, including the conflicts of interest associated with the exercise of powers here by the trustees, for instance, it is clear for instance when one looks at the effect of the transactions that have occurred  on  the  diagram  page,  that  there  has  been  a  preference  to Mrs Hutton.   Mrs Hutton was the wife of the trustee, Mr Hutton, who exercised the power.  There has also been a preference to Mrs Couper, and Mrs Couper was at least a participant in the resettlement of Mangaheia, although she did not participate in the Ponui appointment, so she participated in the transaction in the second disposition but not the first.   So in those circumstances looking at the substance, in my submission the conventional equitable approach which is that the misuse of the power is void, the property returns to the trust from which it came, and it is then for the trustees to exercise the correct power, if they wish

to, in light of the circumstances then before them. It is the proper course.

If there is a single text that best characterises the argument for the appellants, it is that appears in paragraph [27] of the judgment of the Court of Appeal, not in this case, but in Wong v Burt which is in the large bundle of authorities at paragraph [27] which is page 95.  And there the Court of Appeal which included

Elias CJ	Sorry what tab?

Kós                 Tab 15 Ma'am.  And there the Court of Appeal, which I see numbered one of your Honours present, said at paragraph [27] that there is a fundamental juristic principle that any form of authority may only be exercised for the purposes conferred and in accordance with its terms. This principle is one of general application.  Now I submit to the Court that that is the underlying theme in this case.   We say that the powers purportedly exercised to effect the two resettlements were not validly exercised for those purposes, and that the resulting transfers from the old Mangaheia Trust are void.   If the trustees of the old Mangaheia Trust, and the trustee is now the Public Trust so it is an independent trustee, if they see that it is appropriate to appoint to the objects of the old Mangaheia Trust which include Mrs Couper, they can do so, they can do so by the exercise of a power of appointment.  But it is not for the Court to substitute its judgment for those of trustees, that is the authority which I will take the Court to.

Blanchard J    I  am  getting  a  little  confused  here  because  you  are  jumping  around between fraud on power and inappropriate exercise of power of advancement.   As I understood it, you are attacking in relation to Mangaheia the three-quarters of the pie-chart, the exercise of the power of advancement but I didn’t understand that you were saying that there was a fraud on a power there.

Kós	No I am not.

Blanchard J    So I think you have got to approach your argument stage by stage rather than muddling it all up.

Kós                 I  am  advised  Sir.    I  was  simply  trying  to  deal  with  these  things collectively by way of opening.  I am now going to turn in the skeleton to Mangaheia  itself.    Let  me  now  do  that.    Turning  to  the  skeleton argument, it is submitted at the first paragraph that the old Mangaheia Trust contained no express power to resettle.   This is the matter I discussed with your Honour Justice Tipping a moment ago and in that respect it can be contrasted for instance with the new Annette Couper Ponui Trust entered into on the 19th  of July 1999, which contained an express power to resettle, and I have given the page reference there. Clause 4 of the old trust does not contain a power of advancement. Power of advancement if it exists here is one that isn’t implied by statute

under section 41 of the Trustee Act.   And powers of appointment and powers of advancement are materially different in my submission.

Blanchard J    Well page 574, it is set out there.  It picks up section 41 but it doesn’t expressly, with the usual omission.

Kós	I am sorry you are quite right Sir. It is an express power within the trust.

Tipping J	It doesn’t actually matter which it is does it? Kós	No it doesn’t matter no.
Tipping J	It doesn’t matter which it is.

Kós	Unless section 41 were excluded altogether. Tipping J	Quite.
Kós                 Now the submission I make at 2, is that the power of advancement in the old trust deed could not be used to effect the resettlement under the deed poll.  It is clear in my submission, for the reasons we have seen, that the trustees intended to exercise the power of advancement in section 41. We have looked at the deed poll.   It is also worth looking just for a moment in the blue volume at the legal advice that was received by the trustees,  in  fact  were  received  by  Mr  Couper  who  initiated  the
resettlement from Sainsbury Logan on the 5th of March 1999, and that is at page 593 in the bottom right hand corner.

Tipping J	Is this common ground that we can look at this is it? Kós	Yes it is.  It was discovered.
McGrath J	And what was that page number again? Kós	593 Sir.
Tipping J        I don’t think it matters myself what legal advice they got.  They clearly haven’t got any power to do what they did.  The question is whether or not it is right to, as it were, bring them up by another route.

Kós                 Yes I would agree with your Honour subject to one caveat, which is that equity looks at the intention of the appointor, and so it is relevant to see what the intention is.

Tipping J        But it is not in dispute is it, that Mrs Couper was not an object.  She was not entitled, and there was no consent anyway.

Kós	Correct.

Tipping J        So the only way this can be saved I would have thought is by some mechanism such as appeal to the Court of Appeal.

Kós	Yes.

Tipping J	And Mr Camp presumably doesn’t dispute that. Kós	As I understand it.
Tipping J	Because there is no cross-appeal.

Kós                 As I understand it, which would, on that basis, then deal with 2.2, 2.3, 2.4 and 2.5 of the outline.  Because I understand that is uncontroversial.

Tipping J        Yeah, well I am not wanting to sort of cut you short Mr Kós but I mean it seems quite plain that it is undoubtedly so.

Kós                 Well the Court has such [inaudible] as they wish of those particular paragraphs, but it is clear, the power of advancement could not be used in this case.  Two points, I am sorry there are two points.  The first is the power of advancement was intended to be used and secondly could not be used.   So then the question is, moving to 3, whether this could be saved in the way that the Court of Appeal saved it, which was in effect to say that the resettlement of Mangaheia, the three-quarters of the pie, could in effect and should in effect be treated as if it were done in the same way as Ponui.   That is to say by the exercise of the power of appointment in favour of Mrs Couper, followed then by an advancement under section 41 or under the express clause.  In my submission it could not be so done for the reasons that are set out in paragraph 3.  Firstly, it is clear  that  the  trustees  did  not  intend  to  exercise  the  power  of appointment.

Tipping J        Well it could have been that way.  The question is whether the Court can treat it as having been done that way.

Kós	Yes that’s right. Tipping J	Isn’t that the crunch? Kós	I agree.
McGrath J      Sorry Mr Kós can you just come back, just tell me essentially the flaw in the reasoning of Mr Weir’s in advancing Pilkington’s case.

Kós                 Yes.  The flaws are really, Pilkington’s case can be used, an advancement can be used to resettle a trust provided that the resettlement is only on objects of the power of advancement.

McGrath J	And outsiders can come in as long as it is incidental or is that not

Kós	Purely incidental.

McGrath J      Purely incidental.  And is that the reason why you say Pilkington’s is of no assistance because this was not an incidental incorporation of the outsiders’ objects.

Kós                 Entirely.   Now Mr Weirs, to give Mr Weirs credit at least for the first stream of his advice which we see at pages 595 to 596, said that he believed that the method, at paragraph [441] at the bottom of the page
595, we believe that the method of resettlement utilising section 41, and he could of course have referred to the express clause that your Honour Justice Blanchard referred to, and relied on Pilkington’s case as permissible in the case of Mangaheia.  We do not believe, however, that it will be safe to resettle on a new trust which included beneficiaries who were not beneficiaries of the existing trust.  And then to ram it home “in other  words,  we  do  not  think  it  safe  to  resettle  on  a  trust  with  an expanded class of beneficiaries”.  So, so far, 10 out of 10 to Mr Weirs. The problem comes later on when, for reasons we don’t know, on the next page Mr Weirs has prepared a suit of documents, which he encloses in his letter of 19th  July 1999, which include precisely this resettlement on a range of objects beyond the scope of the original objects of the Mangaheia Trust. So that is where the flaw entered into the picture.

Now at 3.1 of the skeleton and I wanted just to emphasise two points. The first is I have said there contrast the Ponui transaction, which is at page 617 of that volume, in my submission it is clear the trustees did not intend to exercise the power of appointment because had they done so they would have undertaken exactly the same form of transaction that they did for Ponui.

Tipping J        Well it was fundamental that you had to have an advancement of the date of distribution which they clearly did not do for this purpose.

Kós                 Yes.  They could have appointed to Mrs Couper and then exercised the power of advancement in relation to her.  That is what they did for Ponui. It is expressly not what they did for Mangaheia.   The other matter I wanted to draw attention to in paragraph 3.1, there is the reference there to Gosset’s Settlement and I don’t need to take the Court to that authority, except to say that the point there made by the Master of Rolls Sir John Romilly, was that one should give the Court should give effect to the expressed intention, and that one should not substitute one power for another.   That was a similar case where a power of advancement had been used but the transaction would have been better effected by way of a power of appointment.  And Sir John said in that case “the expressed intention must be given effect to.

Secondly,  at  3.2,  in  my  submission  the  transaction  and  form  and substance   is   at   complete   odds   with   an   appointment   absolute   to Mrs Couper  followed  by  an  advancement  under  section  41.     The operative part refers to resettlement and to a transfer to a resettlement in

the new trust.  In my submission it is clear in that situation that the power to appoint could not have extended to a new trust with different objects, it couldn’t have been a legitimate exercise of a power of appointment. That is reinforced by the next point which is that the grandchildren of Mrs Kain, who are objects of the new trust,

Elias CJ          Sorry that last is a stand-alone point really.  It is not really contingent on accepting the form in which the parties have expressed themselves.

Kós                 I agree Ma'am.  I don’t want, I have never argued in any Court I think, at least not since I was about 25, that form should prevail over substance.  I learned  that  very  early.    But  what  is  clear  at  least  is  that  intention prevails.

Elias CJ	Yes.

Kós                 And that is slightly different from a question of mere form but you are absolutely right in respect the second point is a stand-alone one.  So is the third.  Which is that if a power of appointment was exercised in this case, it  couldn’t  have  been  exercised  because  it  can  only  be  exercised  in relation to objects of the power of appointment, and plainly that grandchildren of Janet Kain were not such objects.   We see that by looking at the diagram.  The grandchildren of Janet Kain were only, as we see under the old trust, discretionary objects of income.  They were not, they had no interest in relation to capital either expectancy or entitlement.   And both the deed poll and certainly the new Mangaheia Trust had the effect of exercising, if this was to be or could be a power of appointment, of exercising that power of appointment, that substituted power, in favour of new objects.

The  fourth  point  at  3.4,  is  that  the  power  of  appointment  was  not exercised absolutely for Mrs Couper, and we have looked at the discovered legal documents, the legal advice, the discovered documents show neither a sale by Mrs Couper to Mangaheia and an acknowledgement of debt, or a payment by direction with a gift, the effect of which would have been to have incurred a gift duty liability in excess of $750,000, given the value

Tipping J        Well they did it by one step and you can’t really treat them as having done it by two steps.

Kós	Well that is my submission. Tipping J	There is all sorts of ramifications.
Kós                 Yes, it would be, apart from being I mean because we are dealing here with new objects, if this was permissible as an appointment as opposed to an advancement, then we would be dealing under the second transaction with a fraud on a power as well.  Because it would be expressly for the benefit of new objects.  It would also be a denial of the interests of the

revenue in relation to gift duty.  So there are all sorts of issues here. Now that in itself a good reason why the Court shouldn’t step in and act as substitute trustees and re-arrange the transaction but rather follow the conventional  course  which  is  to  avoid  the  transaction  and  give  the trustees an opportunity to reconsider their position, which will include if they wished to appoint to Mrs Couper how they went about it.

Tipping J        I am not entirely clear in my mind Mr Kós, and no doubt you will be coming to this, the precise mechanism by which the Court of Appeal deemed this to have been done.

Kós	Well I

Elias CJ	It is not very clear.

Kós                 No I have spent hours looking at this and I am not clear either I am afraid.

Elias CJ	Paragraph [88].

Tipping J	Well I thought you might be able to shed greater light on it than some. Elias CJ	Mr Camp might be able to.
Kós                 I think that would be the appropriate course and I will reply as may be appropriate.   The fifth point I make at 3.5, is that if the power of appointment had been exercised, then the interests of Mrs Couper and the grandchildren would have been fixed, and they would no longer have been discretionary beneficiaries and yet when one looks at the deed poll, the  document  at  page  614,  it  is  clear  on  the  deed  poll  they  were considered to be discretionary beneficiaries.  That is clear, for instance, in Recital D where the resettlement is of the trust fund and the new trust principally for the benefit of Annette Couper and the grandchildren of Janet Richmond Kain, who are discretionary beneficiaries under the old trust.   That is the really the same point again, the earlier point again. Clearly the intention here was an advancement not an appointment.

Elias CJ	Discretionary objects.  Sorry I am just thinking. Kós	Sorry what I said discretionary beneficiaries. Elias CJ	Well I mean it is appropriate too, but it is may be
Kós                 I would normally use, with respect, the expression your Honour has, which is discretionary objects, but the recital there refers to discretionary beneficiaries, I think that’s how

Blanchard J	I think that is the way everybody talks about them in this country. Elias CJ	I always talk about them as objects.

Kós	Well

Elias CJ	I am not in this country.

Kós                 Either way, it probably has the same result.  The next point, I don’t think I am going to trouble the Court with Re Moon.  If my friend makes some point of Re Moon I’ll come back to it but in my submission he has misconstrued that case in his submissions.  What Lord Esher said at  page
286 is very clear.   There’s no inconsistency in this case between the recitals and the operative part.   But if my friend submits that there is, well I will revert to that topic.   Moon is an authority which has precedence.

Tipping J	You can resettle pursuant to a power of advancement. Kós	Absolutely.
Tipping J	That’s the point isn't it. Kós	Yes.
Tipping J	Well we’ll wait to see what the counterpoint is.

Kós                 That’s right.  You can.  It is a much more complicated process to resettle by way of a power of appointment.   It has to be done in two steps. Whereas the power of advancement can be done in one step as a result of Pilkington.

Elias CJ          It’s not part of your argument that, you say that you can resettle by power of advancement in reliance on Pilkington’s case.

Kós	Yes.

Elias CJ          Quite different circumstances but it’s not part of your case that you're arguing in fact that that case should be confined at all because it’s not necessary for you to go there.

Kós                 No, not at all.   It’s a very broad power and it could have been used provided that Mr Weir’s advice in his original letter of advice to Mr Couper had been followed.  Which is to say to confine the exercise of the power of advancement to the objects of that power and that the objects of a power of advancement are persons entitled.   And as I go on to say I think a little later, in fact I’ve already skipped over it.  The irony in this case is that the only persons entitled as at the 19 July 1999, the only persons who could have been the subject of the exercise of were the appellants.  Because they were the only persons entitled as at that stage.

Tipping J	They had the default interest in capital.

Kós                 Yes.

Elias CJ          There had to be an appointment. Kós                 There had to be an appointment. Elias CJ          Yes.
Kós                 Yes, to go past them.  At 3.6 I submit that if clause 4 had been exercised it followed by then an exercise of the power of advancement either under the express provision or s 41.  The trustees would still have needed the written consent of the appellants which was not given and in my submission the Court’s consent cannot be granted retrospectively.  This is a matter that is covered in my principal submissions at paragraphs 47 to
52.  Again the point is an academic one as it was in relation to the power of advancement because there is no prior appointment at all in my submission.

The next point I make is that there must be a triggering event for property rights to pass under trustee powers.  In this case the triggering event will be the exercise of the trustees’ discretion in relation to the power being exercised but they did not exercise that discretion under the power of advancement.  And I’ve referred there by way of analogy to the judgment of the High Court, Your Honour Justice Tipping in fact, in the Motor Wix which dealt with the rights of first refusal.

Tipping J        That’s struggling a bit isn't Mr Kós.

Kós                 Well  what  appealed  about  that  authority  Sir  was  that  it  was  the expression “triggering event”.

Tipping J        Oh, I see.

Kós	Resulting in a right that was therefore a right in property. Elias CJ	There’s no appointment unless property passes is there.
Kós	There’s no property passing unless there’s an appointment. Elias CJ	But an appointment is a conferral of property.
Kós                 Yes it is.  It’s the creation of an entitlement to property.

Elias CJ          Yes, I just don’t see that notions of triggering events really, it’s the substance that you're looking at.

Kós                 Yes.

Elias CJ          Did the property pass through appointment.

Kós                 That’s  right  but  there  must,  the  triggering  event  is  the  appointment, nothing more than that.

Blanchard J    But here there's an additional complication that because of the peculiarity of this deed, the date of distribution had to be shifted first.

Kós	That’s, yes that’s a good point.   I'm sorry, it's not one I’ve addressed.
The date of distribution would have to be moved forward.

Blanchard J    I don’t recall ever seeing a deed with a provision like that.  It struck me as very strange but I don’t have vast experience.

Elias CJ          But if you appoint and property passes you have moved the distribution forward.

Blanchard J	Well I'm not sure that that’s so with the way this deed goes.

Tipping J        No, that’s what I was getting at when I said they hadn't advanced the date of distribution.

McGrath J      You could appoint without in fact the date of distribution having arrived and still be a valid appointment but it would only take effect surely when the date of distribution did arise.

Tipping J	That may well be right.

Kós                 If  that’s so  then  one  would  have  to  be,  again  it  comes  back  to  the question of intention.  In the pure exercise of a power of appointment, if we imagine there had been one at all, then the question will be, was that a double act.   Did that both move forward the date of distribution and appoint capital, or did, as Your Honour Justice McGrath suggests, only do the second.

Elias CJ          But hang one, wouldn't it pro tanto, in respect of the property that was transferred,  move  the  date  of  settlement,  move  the  settlement  date forward but as to the balance that property would still be held, if there was any, that property would still be held on the same trusts.

Kós                 Provided it was clear that the trustees, in exercising the power, that being the triggering event, had intended the property to move at that point in time as opposed to the point in time directed by the deed.

Elias CJ          But isn't that what appointment is.   Sorry this is what I said before and I might be quite wrong about this, I had understood that appointment was that the transfer of the property.

Kós	No, not necessarily.  An appointment can be either contingent or vested. Elias CJ	Ah, yes.

Blanchard J    Here arguably there was no power to make an appointment of capital unless you'd moved the date of distribution first.

Kós	You would need.
Blanchard J	I don’t know that I'd want to get too hung up on that point but there it is. Kós	Yes the difficulty is of course it’s relatively easy for me to try and
analyse the Ponui appointment, where there actually is an appointment, and I can talk to Your Honours about what that appointment did.

Blanchard J	They moved the date of distribution there.

Kós                 Yes they did.   What we’re dealing with here is a notional substituted exercise of the power of appointment by the Court of Appeal.  And I’ve no idea how to construe that, whether it involved, it must have involved, necessarily by the Court of Appeal approving the transfer, a moving of the date of distribution but that doesn’t receive a line of discussion.

Tipping J        I thought the way this deed was structured that the appointment could only take place on the date of distribution.  Hence if you want a partial appointment you have to pro tanto advance the date of distribution.  And that’s exactly what they did for Ponui, all other issues on Ponui aside.

Kós	Yes.

Tipping J        So this is what I was trying to get at Mr Kós when I said a few minutes ago that they didn’t advance the date of distribution so they couldn't have been purporting to exercise the power of appointment.   Because it was only exercisable on the date of distribution as I read the deed.

Kós                 Well the point is well taken in relation to the exercise did occur which appears on any view to be an exercise of the power of advancement in any case.

Tipping J	Well quite but.

Kós                 If it were a power of appointment then it certainly doesn’t undertake the change of the date of distribution which is referred to in the middle, well at the end of the clause on the middle of page 566.   And that’s where there is a proviso that the trustees can in their discretion from time to time by deed appoint a date or successive dates of distribution of the whole or any part of the trust fund earlier than the date beforesaid, which is 2050.

Tipping J	But this is another issue for the Court of Appeal’s method.

Kós                 Yes.   And it's one which I'm sorry to say has received no attention whatever in the submissions of myself or indeed anyone in this case.

Tipping J        The Court of Appeal’s view must imply that the Court can advance the date of distribution.   I'm sorry to use the word advance in two senses. But bring forward the date of distribution.

Kós	Bring forward, yes.

Tipping J	Now there may be, but I know of no authority that goes that far.

Blanchard J    I  doubt  that  the  Court  thought  it  was  exercising  the  power  of appointment.

Tipping J        Well it was deeming the trustees to have exercised it in a way which implied, is the better way of putting it, I agree.

Kós                 Yes.  And that leads then to the next point that I make in my submissions in fact, which is that at 4, my submission of equity does not here, that is to say in these circumstances, treat as done what was not done.   And that’s for a variety of reasons.   The first is that to do otherwise cuts across the settlor’s intentions and the trust deed under which the settlor has conferred property rights on certain individuals and not on others. And provided different powers and different discretions to be exercised in relation to different individuals.   And it’s fundamental that those powers must be exercised correctly when property rights are being removed, the point in a sense made by the Court of Appeal in Wong v Burt with which I began today.

The second point is that equity does not intervene to exercise a power that has not been exercised.   This is the matter I was addressing with Your Honour the Chief Justice earlier.   And in my submission the authorities are very clear when one looks at Halsbury and at Farwell.

Elias CJ	Do we have Farwell in the authorities. Kós	Not in the bundle but I’ve got copies. Elias CJ	I’ve got a copy thank you.
Kós                 Those are the relevant references.  One of the features of powers is that although it seems to sporadically produce books by Lords of letters of the
19th century - Farwell is father and son over the course of the last century and Professor Thomas in the 1990’s. The actual principles don’t seem to change very much.  So the principles in Farwell in 1916 are precisely the ones set out in Halsbury in 1998.  And what the authorities there say in a nutshell is simply this, that equity does not grant relief for the non- exercise of a power unless that has been caused by the fraud of the person thereby benefiting.  What it means is that if a power has been used which could not validly be used, the exercise of that power is void, the property reverts to the trust from which it’s deemed never to have left, and it’s then for the trustees to exercise afresh their powers.

Elias CJ          I don’t have any trouble with the propositions here.  My concern is that it would be open to the Court to say, although the trustees didn’t invoke that power, that is the power that they have exercised, looking at the matter as one of substance.  Now do I understand that these authorities say no, they have to be consciously invoking the particular power.

Kós	Yes. Elias CJ	Alright.
Kós                 Because in my submission one starts, and this is for instance the effect of decisions like Gossett and Re Lawrence which is not in the bundle but which is referred to in the outline, which say, one looks at the power that has been purportedly exercised, that the trustees thought they were exercising. Was that or was that not valid.  If not valid, then the Court doesn’t say, well there’s another power in the suite of powers available to trustees which could be exercised in lieu.

Tipping J        You see in some leads express reference to a purported power and then it says and all other powers us enabling or something like that but there's nothing like that here is there?

Kós                 No it's a very old-fashioned form of deed, and I suppose the power your Honours is referring to is in fact quite an old-fashioned expression as well.

Tipping J	Well yes.

Kós	But it's not found in this one.

McGrath J        What's the mischief Mr Kós are there different considerations if the power of advancement is used or as opposed to the power to appoint? You have got these propositions from old cases and respected old text but can we just come to the substantial mischief.

Kós                 The substantial mischief is that if the power of appointment was used it could not be used to resettle for the benefit of non-objects of the original trust.  The power of appointment could only be used for the benefit of the original persons who are objects of the trust.

McGrath J	You are really saying that power could not be used at all. Kós	Couldn’t be used in this way.
McGrath J      But if we had a case where one of the powers was on the face of it used because the deed says so, but another power could have been used.  The other power could have been used, what's the real mischief in sort of saying  well  let’s  treat  the  matter  as  having  been  the  subject  of  the exercise  of  that  power.    I  mean  at  the  different  considerations  that trustees have to take into account, that I think must be the crucial aspect.

Kós                 Well  the  power  of  advancement  can only  use  for  the  benefit  of  the objects for power of advancement, that’s a more limited class, because they must be persons entitled, in this case the power of advancement could only be used the 19 July 1999 for the benefit of the appellants, and no one else.

Anderson J     There are three things that would have to occur to lawfully achieve what they purported to achieve.   The first is there would have to be an appointment of Mrs Couper under the first part of clause 4.

Kós	Yes Sir.

Anderson J     Then there would have to be a deed accelerating the date of distribution pursuant to the penultimate proviso in clause 4, then there would have to be a new deed with Mrs Couper as the settlor.

Kós	Yes, I agree.

McGrath J      But that’s the mischief is then the consents that would otherwise be required, don’t have to be sought of you.

Kós                 Yes, but it's more than that with respect.  The mischief here is that one cannot go from red to green across the diagram.

Elias CJ          Well you couldn’t use the power of advancement and more directly there wasn’t an appointment.

Kós	Yes.

Elias CJ          Whether or not they thought they were using their power of appointment, but there wasn’t a power appointment.

Kós                 Yes and I say as a matter of equitable principle that’s it but if I have to address mischief, which you Honour Justice McGrath wants me to address, then the mischief here is the conversion from red to green.  In other words it is by this transaction, including an appointment in a single transaction, not three, as your Honour Justice Anderson posited, to have moved to a position where the red are eliminated and the green are introduced.

Tipping J        Although I think also Mr Kós part of the mischief without prejudice to that is that the trustees discretions, different considerations could well come to bear as to whether they should exercise it as a discretionary power, discretionary trust power like this, depending upon which power they are purporting to exercise.

Kós                 That is so, and in addition to that point, there is the point I raised before about the question of conflict.  Is it appropriate for instance, for trustee Mr Hutton to participate in the appointment in favour of his wife, an appointment which gives, sorry I beg your pardon that’s the second step,

well the appointment would be to Mrs Couper and it would be then a matter for her, and it would have to be her freewill alone without any pre- consideration or involvement of the trustees for her to then appoint to other persons.

Elias CJ          But  that’s  way  downstream,  you  don’t  need  to  go  there  on  your argument.

Kós                 Correct.  At the moment what I do have is a transaction which is by one power but not the power that could have been used, without the other supplementary elements or essential elements that your Honour Justice Anderson identified and which has the effect of preferring the wife of one of the persons exercise of the power, and indeed the trustee Mrs Couper herself exercising the power.  It's notable for instance, and I will come back to this point, but it's notable that when the Ponui appointment at the top of the page was conducted, where there was an appointment directly to Mrs Couper, she did not participate in that decision.  Let me show you that, it's at page 616, bottom right hand corner, and that is the deed of appointment of partial distribution of the Ponui transactions, the one at the top of the page, of the quarter of the pie, and at recital F it records that the beneficiary who was Mrs Couper.

Elias CJ          Sorry just noting in terms of the discussion it is participated that has gone on, that this is a partial distribution.

Kós	Yes, because it is only a part of the assets, or part of the capital.

Elias CJ          Yes, my point being though that it is a distribution, it's advancing the distribution.

Kós	Yes I am sorry, that’s quite so. Tipping J	Are you referring to recital F.
Kós                 Yes I am, although if you are just taking your Honour Chief Justice’s point, if one looks at D and E one sees there the and also operative Part 1, one sees that in that case there was an express exercise of the power to advance the date of distribution.  So that is absolutely clear in relation to this transaction.

Blanchard J	So they knew how to do it if they wanted to do it? Kós	Yes.
Tipping J	Well it does seem bizarre that they chose a different route. Anderson J	A bet each way.
Tipping J	Yeah for Mangaheia, and Ponui and now they are being told they got that
Mangaheia wrong, but we will treat them as if they have gone the other

route, which they deliberately didn’t take, for some reason, we don’t quite know why do we?

Kós                 But again one has to assume that was done deliberately, and so the question is, is it appropriate for a court, the Court of Appeal in this case to  repair  what  is  such  a  different  transaction  by  determination  by attention, and if we see that in relation to conflict that Mrs Couper has declared to her co-trustees her interest and has consented to her decision being taken by them, and the offer to part cl4 has the same effect.  So coming then to the question of mischief, had there been an appointment in this case, and assuming the appointment were only to a proper object which Mrs Couper could have been would she have been an appropriate person to participate in that, well clearly not on the approach that was taken on the Ponui deed.  So again the question comes, who should make that decision.   Should the Court make it and assume it's simply being Mr Startup in this case, or is it Mr Startup and Mr Hutton.   And the position now of course is that both the old trusts and the new trusts remain  extant,  and  the  trustees  have  all  changed  by  consent,  so  the trustees are now the Public Trust.   The Public Trustee I think in Christchurch, somewhere, the Public Trustee, Auckland I gather.  Thank you.

Open at my skeleton at 4.3 at my submission equity will repair the defective exercise of a power only if the defects are not of the essence or the power, that is to say they don’t involve the granting of relief that defeats the intention of the donor of the power, now what that means in my submission is that the power to repair is used very sparingly and the authorities that are referred to by my friend and some which I refer to there like Eardley Wilmot a case which involve a slip.  Eardley Wilmot was a case where a power of appointment had been exercised, but the in exercise  on  the  power  of  the  appointer  referred  to  a  deed  in  1819, whereas the fact the one he meant to refer to was in 1839.

Tipping J	Well that’s a classic rectification case. Kós	That’s exactly right.
Anderson J     The position here is that you have three crucial documents all executed on the same day.  One taking route A and one taking route B.  It must be assumed that for reasons we don’t know, a deliberate decision was made in route A not to go route B.  And we don’t know why they did that and we shouldn’t impute to them an intention which was plainly contrary to what they actually intended.

Kós	Yes well I am gratefully adopt that. Anderson J	I am just trying to summarise your argument Kós	Well I gratefully adopt that argument.

Tipping J	It always sounds better when it comes from the Bench. Elias CJ	Not always.
Kós                 That’s one of the tragedies of being counsel.  And at 4.5 I refer to the issue of conflicts and I need not traverse that again.  So at this point I can really sum up my argument in relation to Mangaheia and it is simply in five to say that the transaction should be set aside, the trust property treated as if it had never left the Mangaheia Trust.  The reality is that in this case neither power could be utilised in this case, to affect the resettlement that has been affected.  You could not go from red to green by either method.   The new independent trustee, the Public Trust can consider whether an appointment with the certain Mangaheia assets to Mrs Couper is justified.   In light of the other provisions that she has received, which I note and my friend has forgotten to refer to them in his submissions, the 51% of the Hukanui farm and 50% of the Pinecroft farm and Ponui is retained that  are other assets sourced from trust farms that she has received.  And that if your Honours please is all I want to say at this stage on Mangaheia and I turn then to the, it was convenient to deal with it second but it was actually the first transaction, the Ponui appointment is a more confined point, and I approach it in this way.  I first say that that’s contrary to my friends submissions, there is no pleading issue regarding Ponui.   My friend has forgotten, I think and certainly refer to in submissions, that Mrs Couper herself put the validity of the Ponui distribution in directly an issue in her counterclaim, and I have given reference there.

Tipping J	Did she ask for a declaration that it was valid?

Kós                 Yes she did.  The plaintiffs pleadings sought this, and I have given the Court reference to the relevant references of the plaintiffs pleadings, sought the setting aside of the Ponui resettlement on the basis that it was not permitted by the original trust.   From my submission that was perfectly adequate by way of pleading to raise the question of validity of the particular appointment.  The next thing I go to is what is meant by, fraud on a power.   The equitable fraud of course is not the same as tortious or criminal fraud and fraud on a power can be committed by an honest trustee, which is clearly what happened in Wong v Burt because no one could have been more honest that Mr Burt in that particular case, but nonetheless he committed the equitable offence.

Tipping J         It would be better to rename it misuse of a power or something like that wouldn’t it.

Kós                  Yes I agree.  I mean one reason why Wong v Burt one wonders what Mr Burt must have thought, having been declared to have committed a fraud, and but clearly, it's a different species.

Elias CJ	 Fraud on the power. McGrath J	It's an ultra vires concept.

Kós                 Yes  entirely.     It's  a  bit  like  the  discussion  we  had  before  about discretionary objects and discretionary benefits.   The general public understands the word fraud and doesn’t go much beyond that to the associated words on a power.  It I may take the Court to Wong v Burt which is in the principal bundle of authorities at tab number 15.

Elias CJ	Do we have Vatcher v Paull in the authorities.

Kós                 You don’t but I have a copy of that available for the Court, if the Court would like it.

Elias CJ	No that’s fine.

Kós                 The importance of Vatcher v Paull is though that it's, what it does say in this Privy Council decision from the Island of Jersey, which I believe has some authority, but that’s not quite as much in this Court as it would have  below,  Vatcher  v  Paull  says  that  the  question  is  whether  the exercise or the power has been done for the single purpose of benefiting objects of the power or for other purposes as well, so it maintains a high standard.  It allows not add mixture for purposes.  You can't have good purposes and bad purposes, you got a bad purpose and that’s it.  That will be the argument between my friend and I today I am sure.

Tipping J        Any substantive bad purpose other than merely incidental is rendered ineffective.

Kós	That’s my position.

Tipping J        Yes well I will need some help here Mr Kós as to this heavy focus on intention and purpose, signal that.

Kós	Thank you.

McGrath J      There has been further discussion of course when cases like Burton come to play don’t they?

Kós	Re Burt v Wong.

McGrath J	Re Burton.  It's not the final statement of the proposition, Vatcher v Paull

Kós	No.

McGrath J	There's been further elaboration of it..

Kós                 There has and the difficulty one has is that one looks at the case law it seems to wax and wane across a period of two centuries. Vatcher v Paull is the direct descent of a case called Dorbney in 1813.  Dorbney is said one purpose only is allowed and that is to benefit objects.

Tipping J        There are other cases that say if the person in the middle, if you like, you understand  what  I  mean  by  that.    He  and  Mrs  Couper.    If  she  is completely and utterly comfortable and not overbroad or anything like that to do in one step what could have been done in two is not bad.

Kós                 Yes.  That is so but that argument I make Your Honour to the Court on that is that is looking at the wrong person.

Elias CJ	That is what?

Kós                 It’s looking at the wrong person.  The question is not the appointee but the appointor.

Blanchard J    But the appointee’s view on what is being done for her benefit must have some influence.

Kós	Well, let me run through the argument in perhaps the order it comes and
I’ll take Your Honour through that.

Elias CJ          Just um, because it is a loose thread, somewhere in the materials there is an indication and I have looked at the evidence that the original settlor said that his intention was to preserve the farming properties into the future for future generations.

Kós	Yes and also for Mrs Couper and her daughters. Elias CJ	And also for Mrs Couper and her daughters? Kós	Yes.
Elias CJ          Right, I just had wondered whether that intention, the first part of it, could be said to be consistent with the Trust set up?

Kós                 I make nothing of the point.  It could be said to be inconsistent but the, one of the things that has bedevilled this case and has fortunately fallen away long before we got to Your Honours, is the fact that there were multiple trusts here, different rafts of objects all in this together.  So that when Mr Couper was saying that he intended the farms to be preserved or the properties to be preserved for the benefit of future generations it's not clear which trusts he would be talking, he would be talking generalities.

Elias CJ	Yes.

Kós                 But in relation to this Trust when he talked about Mrs Couper and her daughters, it was clear he was talking about this Trust because this was the principal Trust in which Mrs Couper had any interest at all.

McGrath J      Mr Kós, just coming back to your point 8, the focus on whether there is an intention which is bad, if one of the appointors had intentions to

secure another benefit, the point I am making is that some of the latter cases do rather look for the focus of what was the real purpose and intention of the appointor and was that for the benefit of a named object and it, these cases seem to suggest a more general view should be looked at rather than, if you like very particular view of each element that’s taken in Vatcher v Paull because that may be against you if at the end it can be argued by the other side that the reality of this matter is that there was an intention to benefit Mrs Couper.

Kós                 And the question would be, though in that context whether the benefit of non objects which in this case include Mrs Couper’s daughter but also the other person identified in the top lefthand box in the corner of the diagram

Tipping J	The companies etc.

Kós	Yes, were merely incidental.

Tipping J        Well they certainly apparent, if they were going to take the high ground they certainly took high ground here.

Kós                 Yes,  well  submission  is  that  they  were  not  merely  incidental  to  the purpose of benefiting Mrs Couper but the manifest purpose went beyond Mrs Couper to these particular objects and why one can say that in my submission, with some confidence, is because this was all done as a single transaction.   It wasn’t a case where there was an appointed Mrs Couper and she was left to her own free will as to what to do.

Tipping J        I understand that but I think at some stage you will have to take us to the deed for the trust concerned and looking at the sort of powers that Mrs Couper has, almost in relation to her rather discretionary beneficiaries. There is something in there isn’t there that says she can take them out.  I don’t necessarily want you to go there now but I think that the points you have just made, that there are some special considerations in relation to this trust deed that I think we will have to be familiar with.

Kós	I have looked at that point, if I might just have a look at that now and see.
The deed itself is found at page 578 and 7(1)(b) is the clause that Your Honour was thinking of.  Perhaps before we get to 7(1)(b) we should just note who the relevant persons are.   At the bottom of page 580, the discretionary beneficiaries are the settlor, which is Mrs Couper, the final beneficiaries at the top of the next page are defined two thirds of the way down, they are her children, four daughters, then we have siblings, parents, [inaudible] is grandchildren, then any wife or husband at the time being of any beneficiaries, that was for instance Mr Couper himself. Persons who lived with the beneficiary, trusts, companies, charities and anyone then specially introduced under clause 7.1(a).  This is the deed in modern form.

Tipping J	Almost a general power of point.

Kós	Yes.

Tipping J	It’s so wide.

Kós	Yes, yes it is.  It’s such a wide special powers to verge on generality. Tipping J	On being general.
Kós	Yes.

McGrath J      With the power of removal in conjunction with all of this, almost one could say colloquially to put the argument against you, it's almost as though it was left to her alone to decide these things, the bequest was to her alone.

Kós                 Yes that’s, that’s an argument that hasn’t been raised.  I’ll need to think about that.

Blanchard J	It’s certainly the way I saw it when I read it.

Elias CJ	If it's a general power of appointment it is property in her hands.

Tipping J        To appoint herself.  But of course the appointor under this trust are the trustees.

Kós	That’s right.  But the power to appoint to remove is reserved to settlor. Tipping J	Is reserved to the settlor.
Kós	That’s in 7.1. Tipping J	Yes. Do you say the
Kós                 Power  to  appoint  under  7.1(a)  and  to  remove  beneficiaries  7.1(b)  is reserved for the settlor.

Tipping J	She remove all beneficiaries herself? Elias CJ	Yes.
Kós	Ah, she can remove all beneficiaries other than the final beneficiaries.
So she cannot remove her daughters who are the final beneficiaries. Tipping J	But she could confine the discretionary beneficiaries to herself.
Kós	She could define the discretionary beneficiaries to herself, that’s true.

Blanchard J	So it's very much her trust.  I find this part of your argument pretty weak
I am bound to say.

Kós	Well that’s a direct assessment. The Court	Laughter.
Blanchard J	For the reason being this seems to me to be her trust.
Anderson J	A vehicle by which she can use the money that has been appointed to her. Blanchard J	And there’s plenty of old authorities which I would have thought would
uphold doing it in this way, benefiting the object by benefiting the people the object has as members of the family.

Kós                 Well this is a point of novelty to me I am afraid.   It's not something which has been averted to say, I need to respond to it I think carefully.

Blanchard J	Well it kind of leaps off the page when one reads the trust.

Kós	Yes, it kind of does if you’re not immersed in several years of this matter
I am afraid.

Elias CJ          Is it then important to your argument that the final beneficiaries were not objects of the initial trust and could not be removed by the settlor, so it's not a general power of appointment that she has.

Kós	It's certainly important from the sense that they clearly are objects of the
– I think there are two points.  The first is Your Honour’s one, which is that because she can’t remove the final beneficiaries they clearly remain objects of the appointment.

Blanchard J    But there are plenty of cases, some of considerable antiquity where it's been considered that an appointment which includes children is for the benefit of their parent.

Kós	That is so if it is done incidentally as opposed to directly I think. Blanchard J	Oh no, no I don’t think so at all.
Elias CJ          That is a slightly different point though.  That’s a very valid point and you need to address that.  I was rather still thinking about that if this had been a power in which, if this a mechanism unto which she could take the whole property at her option, then really all you would be contending against is the manner of ownership, the form in which property had been appointed to her.  The only circumstance which it seems to me changes that, is that she can’t remove the final beneficiaries.  But that’s where you need to deal with Justice Blanchard’s point.

Kós                 Yes I collide with that proposition which I recognise.  I’ve seen it myself in the authorities.

Blanchard J    There’s another point.   If you look at 7.1 she has power to appoint or remove trustees.  A classic method by which one controls trust.  There are constraints on that obviously but, if her co trustees are not prepared to administer the trust in a way in which she feels comfortable with, she would have considerable ability to remove them and replace them with people who she felt more comfortable with.

Kós                 I think the reality, if the Court pleases, is not having considered the significance of 7.1(b) in conjunction with the point that Your Honour, Justice Blanchard makes which is that if the sole appointments, sorry the sole object or invariable object of the power that cannot be removed is a child, which is the position in terms of 7.1(b) because it only refers to discretionary  beneficiaries  and  the  only  final  beneficiaries  are  her children.

Tipping J        I don’t think the beneficiaries are the object of the power are they?  The objects of the power must be the discretionary beneficiaries, that is, they’re the final beneficiaries, the default people.

Kós                 Yes although they are I think more so to be treated objects of the power because they have a contingent or indeterminable interest as opposed

Tipping J        I think they have a contingent interest and that goes back to your earlier point and there can be no doubt about this method of the position of final beneficiaries, but they are not objects of the power it seems to me if they are not actually in that list.

Kós                 Yes well that is not a helpful argument against my argument because that raises a further difficulty, clearly.

Tipping J        I started this year running by taking you up on the Vatcher v Paull proposition, one of the intentions is to secure a benefit from person of the object of the power.  That is suggesting is that is a bit out of date now but you’ve got to look at the reality and the reality is whether the benefit is for the object.  Now in this case Mrs Couper and it seems to be looking at the matter broadly in those terms, you do have to take account of the trust.   Now this is assuming that you are successful on your argument that this was all fixed up as one transaction on which I would have thought you had a fairly strong argument but when you come back to it, isn’t the modern approach to look at the reality as to whether the overall disposition is for the benefit of the object and not for the others who happen to have been incorporated into trusts that gives effect to it.

Kós                 I accept that and I would have answered that by saying yes but in this case you have a range of, such a range of discretionary objects that clearly if it's all part of one transaction, then this is the exercise of the power that goes beyond the objects of the original trust on the power, the difficulty I have is the one

Elias CJ	She’s in control.

Kós	She’s in control.

Elias CJ          She’s totally in control and so the only way really that your argument has any legs is if the final beneficiaries, if that circumstance takes it beyond the, makes it fraud on the power, and that is a very difficult argument for you to make since there are grandchildren.

Tipping J	Well in clause 6.1 it makes it a very theoretical proposition. Blanchard J	Yes.
Kós	Said in the sense that their interest is clearly determinable.

Blanchard J    Silent beneficiaries don’t get anything for 80 years if the trustees decide otherwise.

Kós	Yes unless that date of distribution is advanced. Blanchard J	Yes.
Elias CJ          So this is really only a form in which property appointed to her will be held it seems to me.

Blanchard J    You have to have final beneficiaries in order to have validity in the trust and it would be ridiculous for her to be a final beneficiary because she was never going to be alive in 80 years time.

Kós	Yes.

Tipping J        This is something that could have been done without question with an interval of three months.  What they have done is compressed and I have to say Mr Kós that I think the substance of this is that she was clearly, never mind what the intentions were re appointor, the only worry I would have if there was any suggestion that the arm had been put on to her so to speak to agree if you like to the onwards settlement that is involved in this, so wasn’t really her free will and choice.

Kós	Yes.

Elias CJ	But it is her property.

Blanchard J	Why would you strong arm her into

Tipping J	I’m not suggesting there is any such here

Kós                 I think what the Court has identified is an argument which hasn’t been identified at any stage before and certainly not in written arguments here, which is that in substance it is as if the appointment was to her given her ability to remove those other objects.

The Court	Yes, yes.

Tipping J        Well it's certainly not an argument raised in terms against you, to be fair to you.

Kós                 Yes  and  to  be  unfair  to  me,  it’s  something  I  probably  should  have identified by reference to that particular clause.  But I think facing it, it becomes academic having to argue beyond to the next point I was going to raise which is, it’s not just a question of strong arming but free will in this context means whether there is a legal or moral expectation that she will act in a particular way, but that’s beside the point I think in light of where we’ve got to.

Tipping J        I think it has to be because the impression I have, she wasn’t cross- examined or there was no suggestion from others and brothers which the Chief Justice has said, it's counter intuitive anyway. Because there was nothing wrong with it from her point of view, she had the effect of it all in her own hand.

Kós                 Not in light of the analysis that is given now.  It's clear I think that on the evidence he didn’t have to be cross-examined in relation to the question of what her intent was or expectation was because Mr Hutton had already given evidence which I have summarised in 10.2 of the outline, where he said that what he does in effect is, in his evidence, is to confirm the existence of a scheme.  But this will not avail me in light of the fact that if there was such a scheme well it went effectively no further than her.  I think I

Elias CJ          Sorry, may it help you a lot in your other argument because this route was chosen to benefit her and the outcome in the other transaction was simply to remove a class of objects, the benefit already having or substantial benefit already having been conferred.

Kós                 Yes as I think on the face of matters at least, at least an arguable form or power to engage in an appointment as part of a single transaction, so an appointment plus a resettlement where that includes beneficiaries including discretionary beneficiaries who are other than the original objects of the power of appointment.   But I can’t I think realistically unless I receive any signal from my left, argue beyond the reality here that it is most unlikely I will persuade this Court that there is a fraud on the power when in fact the power to correct the position was in her hands in any event.

Tipping J        8.1 doesn’t exactly help you either Mr Kós on this unfortunate analysis for your point of view.   I mean there’s belts and braces all over this, which means she could have ended up with all this back in her own hands if she wanted to.

Kós	Yes subject of course to the fact the power there is vested in the trustees.

Elias CJ	She controls the trustees. Kós	Yes, well that’s true.
Elias CJ	Would it be helpful if we take the morning adjournment now Mr Kós.

Kós                 I think it would be most helpful.   You may not hear much from me afterwards, thank you.

Morning Adjournment 11.21am

Court Resumes 11.40am

Kós	I’m grateful for the interval, in words of the authority Monty Python, The
Black Knight in the Holy Grail, I’m not quite dead yet.

Kós                 Let me see if I can refocus the argument and see if I have any part of me still alive.  There are four points.  The first is that what we are concerned with here is the intent of the appointor, that is to say the trustees.  And if they had an intention to benefit non objects then that is a bad exercise of the power.  If that was an actuating factor in the exercise of the power of appointment, it is a bad exercise.  Secondly, there is nothing looking then at the position of the appointee here, Mrs Couper.   There is nothing giving her primacy except her ability to remove other beneficiaries, that’s important but it doesn’t give her primacy.

Blanchard J	And the trustees.

Kós                 And the trustees.   But it doesn’t give her ab initio primacy amongst beneficiaries.  It does not mean that she is ab initio the sole beneficiary.

Anderson J     Well that line of argument requires  an  examination  of  the  nature  of benefit.  She’s gone from benefit to primacy, different animals.

Kós                 Ah, yes but my, let me run the four arguments out and see if we can work our way through them.  The third point is, in light of the powers in the trust deed, is there actually an expectation on the part of the appointor, I’m looking at the intention of the appointor, that Mrs Couper would not benefit any of the discretionary beneficiaries, in other words, to put it another way, was there actually any expectation that she would exercise the power to remove other beneficiaries.

Elias CJ	Why does that matter?

Kós	Because, this comes to my fourth point. Elias CJ	Oh.
Kós                 Because clearly there was a trust established for the benefit of others besides objects of the power.  They are named as beneficiaries, they were

referred to in the transactions that preceded the exercise of the appointment and the relative evidence is referred to in 10.1, 10.2 and
10.3 of the outline.   Clearly, therefore, looking at the intention of the trustees, the intention of the appointor, which is the proper party to look at from the perspective of fraud on a power, there was an intent to benefit those persons.  There is potentially a saving, but that doesn’t mean the saving comes through the ability to rectify that by removing all those foreign objects.  But that does not mean that there wasn’t an intent on the part of the appointor to exercise, to confer a benefit on non objects.  And in my submission it is as simple as that.  That is the requirement for fraud on a power.

McGrath J	Back to Vatcher v Paull, that is the proposition.

Kós                 Yes,  its  back to  Vatcher  v  Paull.    You  look  at  the  intention  of  the appointor.

Tipping J        Well that is where you and I had a little dialogue Mr Kós and I signal that I am not sure that it is sound to put everything on that because I am trying to get to the vice that this doctrine is really designed to prevent and I would have thought it was to stop people who are a legitimate object of a power, being as it were prevailed upon as part of a composite transaction, to benefit a non object.

Kós                 No I think that’s, I think with respect that is looking again at the wrong person.  It is not appointee focused. The doctrine is appointor focused.

Tipping J        Well that is why I am debating with you whether that is entirely correct, whether that should be the position.   Such a heavy focus on the appointor’s

Elias CJ          But even if it is on the appointor, on your argument it is to use the appointee to achieve the object.  So isn’t it really the same, don’t those two things come together.

Kós                 I don’t think they do, with respect, because the issue is whether, the reason you focus on the appointor is because it is the appointor that has the power to transfer the property out of the trust.   So, therefore, one focuses  on  the  trustee  and  what  the  question  is  in  transferring  the property out of the trust by the exercise of the power of appointment, are they benefiting proper objects, let’s to say the beneficiaries, the existing objects, or are they seeking by that course to benefit others.   If they appoint in favour of an appointee, and a range of other objects which clearly in this case were charities, and companies and other persons

Elias CJ	Unspecified charities. Kós	Yes unspecified.

Tipping J        But what can you, Mr Kós, if a potential valid appointee comes to the appointor and says look I understand you are considering appointing in my favour, rather than doing that I would like you to appoint directly to a trust which I am going to set up for the purpose.

Blanchard J	Certainly of a standard family trust.

Tipping J        Now there are early cases, one of them is by the name of Goldsmids, Goldsmids as they became, where exactly that happened and that was held to be valid.  I don’t say exact, I don’t think it was a case of a person actually approaching the appointor but that in substance is the nature of the transaction.  Now how can one reconcile that with the heavy focus on the appointor’s purpose.   The appointor’s purpose was to get the asset directly  to  the  non  object  but,  in  effect,  at  the  request  or  with  a completely free concurrence of a valid appointee.

Kós                 That is where the question becomes “is there a transaction between the appointor and the appointee which represents a scheme by which others are also to benefit”.

Blanchard J    But if it is all being done for her benefit and she is benefiting from the inclusion of the non objects, because then members of her family and any charity that she is interested in, then that is being done for her benefit.

Kós                 But if the deed provides and it is part of the purpose to effectively transfer in the single bargain these other objects, then that effectively takes the property away from the existing range of objects and confers it on a new range of objects.  And it is not saved by the fact that she can rectify the position by removing

Blanchard J	Well it seems to

McGrath J      It is more than a saving provision.  She has control and that seems to me is a very important and distinct element in relation to all of the cases that you are relying on.

Blanchard J	I  take  a  power  of  persuading  that  this  isn’t  done  for  the  benefit  of
Mrs Couper.

Tipping J        The fact that it may actually ultimately in physical terms benefit others, the doctrine isn’t so narrow that the money has literally got to go into the pocket of a valid appointee, is it.  Even if that appointee wants the money to go straight onto someone else.   I am trying to unshackle this in my head, what you might call the rather, you are quite right when you say there has been a shift over two centuries.  The very early cases I think are more liberal.   Then in the second half of the 19th  century we got this rather more rigid formulaic.   Everything turns on intent of appointor. Contemporaneity  was  a  vice.    And  I  just  think  that  is  getting  too formulaic.

Kós                 Yes the question, again it comes back to the question of the transfer of property from existing objects to new objects and whether the trustees, whose  obligations  are  in  relation  to  the  existing  objects,  by  the transaction they undertake with the appointee, are in effect going to benefit persons who are strangers to the existing trust.  Now that, in my submission, must follow when you have the range of objects that were provided for in this trust.  I don’t accept, with respect, I cannot accept that there was this argument that the range, the fact that you have a wide range of beneficiaries in this case means that all you are doing is benefiting Mrs Couper.   If that was so, then there should have been simply an appointment to Mrs Couper.

Anderson J	[inaudible] advised then to set up the trust on these terms.

Kós                 Precisely  and  she  could  have  done  so.    Because  she  has  done  it  in consequence of a scheme with the trustees.   That is the evidence of Mr Hutton.

Tipping J        What about the creditor cases where it is a valid appointment to pay money directly to a creditor of an appointee, to stop him from going bankrupt or being struck off a professional, there are cases, as I recall, under this sort of heading.   Well clearly the direct benefit is to the creditor.  But the very strong indirect benefit is to the valid appointee.

Kós	It is an equal benefit to the appointee. In a sense that is just a post-box. Tipping J	It discharges an existing indebtedness.
Kós	So clearly in that situation it does benefit the appointee.

Tipping J        But I am just struggling for some sort of touchstone that doesn’t appear formulaic.  You seem to be, with respect, to be taking or advancing the proposition that if there is any physical potential benefit to a non object. Physical in the sense of cash or an asset.  That invalidates

Kós                 I say, and I said at the outset of this argument, that it would turn on the question of whether Vatcher v Paull and Topham remained regardless of being the correct authorities in this Court.  It turns on whether the intent of the appointor is to benefit others apart from the existing trustees, sorry existing beneficiaries or objects, giving the trustees’ obligation to those existing objects.

Blanchard J	It all depends on what you mean by benefit.

Kós                 Yes I understand that.  That is the question Justice Anderson put to me before.   And what that means, in my submission, is to confer in effect property or an expectation of property being transferred from the existing trust to those persons.  If the trustees did not expect that Mrs Couper, as the appointee, would, if they didn’t, well if they intended only to benefit Mrs Couper, then the appointment should have been to Mrs Couper and

only otherwise a narrow range of potentially incidental beneficiaries such as  the  children.    The  authorities  for  instance  suggest  that  to  benefit parents is not a benefit to an appointee.  So it’s a narrow range.

Blanchard J    Well if that authority I would say that is ridiculous.  It would obviously be of benefit to be able to transfer some of your wealth to a parent in certain circumstances.  Similarly with siblings.

Kós                 But  the  issue  is  whether  the  appointor  should  be  party  to  that arrangement. That is the issue.

McGrath J      But what do you say about, let’s use your term “saving potential”, I don’t like the term but what do you say about that.  I mean the reality being that if that is what she decides she wants to do is the qualification.  It is not

Kós                 And that takes us back to Vatcher v Paull and I suspect that it probably should take us to about the end of this discussion but what Vatcher v Paull says and what Topham says is that you look at the intent of the appointor and in that situation my submission is that you would not expect the benefit not to be conveyed to the third party in that context. The appointor, having made provision for others, would not expect that Mrs Couper would exercise her powers under section 6 and 7 and so restrict the range of potential beneficiaries as to cure or save the appointment.

Blanchard J    Probably  didn’t  expect  also  that  she  would  exercise  her  powers  to actually make distributions to parents and siblings if they didn’t need it.

Kós	But that is clearly my submission.  A benefit depends on those strangers

Blanchard J	It is a real benefit to her to have that ability if she wants to do it. Kós	She would have the ability of the appointment to her alone. Tipping J	Mr Kós I think
Blanchard J    No no no.  She would then run up against problems of gift duty.  This is a very sensible mechanism for enabling her to benefit members of her family when they need it.

Elias CJ          It  is  a  holding  mechanism,  it  is  a  way  of  holding  property  that  is conveyed to her.

Blanchard J	The old cases on what is a benefit simply don’t wash in modern society.
One has to look at what, at how things are structured in a modern society in order to determine what modern society would regard as a benefit.

Kós                 That  is  certainly  I  understand  the  proposition  but  the  other  way  of looking at it is to say that that is in effect the trustees exercising a power

to expand the existing trust by the inclusion of additional beneficiaries which they simply do not have the power to do.

Blanchard J	Well that is the argument.

Elias CJ          Well it is a question of whether it is a fraud on the part, whether it is outside the scope of the power of appointment.

Kós                 That’s right, which in my submission must be used for the benefit of the existing objects.

McGrath J      To what extent can we take into account that in modern society it is considered convenient for fiscal reasons to hold property in a trust, to hold  property  that  is  earning  income  in  a  trust?    I  am  not  talking obviously death duties out of it by the time this matter was settled but it now it enables income to be spread around.

Kós                 I don’t think with, I can’t immediately see how that would alter the application of the doctrine.   The question is here whether in effect the trustees are bound by duty to benefit the existing objects.

Blanchard J    But there are English cases where the beneficial effects of what was done when one looked at capital transfer taxes, capital gains taxes, that was all taken into account in deciding what was beneficial.

Kós                 Yes  I  understand  that  and  that  must  be  so  but  does  it  alter  the fundamental proposition about how a power of appointment in a trust may be exercised in terms of the scope of persons who may be the beneficiaries thereof.

Blanchard J	I can’t see why not.

Kós                 Well that is clearly the difficulty I am confronting your Honour in the argument.

Anderson J     Can I just suppose the trustees said to the potential appointee, we are going to appoint this to you.  Jolly good says the prospective appointee, my accountants tell me I should put in a trust, that is the sensible way to avoid all sorts of problems.  I want you to send it straight into that trust. Oh no I couldn’t possibly do that, that’s a fraud on a power.   It is nonsense when you put it like that.

Kós                 No but the difference there is whether it is dictated by the trustees or dictated  by  the  appointee.    In  this  situation  the  evidence  was  that Mr Couper, the settlor, talked to Mr Hutton and said that he wanted provision to be made for Mrs Couper, who was an object of the power, and Mrs Couper’s daughters, who weren’t.   Mr Hutton says in his evidence, and that is set out at paragraph 10.2, that the documents were set up to achieve that purpose.  That is the situation then where the form was mandated by the trustees, the appointor, as opposed to the appointee

simply  taking  and  whether,  either  immediately  or  a  period  of  time afterwards, choosing to hold them in a different form.

Anderson J	But the appointee was perfectly happy with that.

Kós                 Absolutely.    The  question  and  I  say  that  is  the  issue  on  which  my argument turns.  It stands or falls on whether you look much beyond the appointor to the appointee, to the appointee’s circumstances and whether the appointee’s powers in effect here can be said to be restrictive of the range of objects.

Anderson J     It  does  seem  with  respect  more  a  case  of  form  over  substance, particularly when one looks at the family relationships.

Kós                 Well I can see how your Honour would say that but, in my submission, if one doesn’t take a strict line of this, then what one is doing is mandating a form of variation on the existing trust.

Anderson J	Well I can see how you can see that too. Kós	Yes.
McGrath J      I can see certainly understand the need to maintain a strict line in this area but the question is whether in fact, given the power, to my mind the power that Mrs Couper has in the whole thing, and the discretion she maintains in respect of strangers who have come in, doesn’t mean that looking at it realistically this is for her benefit rather than theirs in any significant measure.

Kós                 Yes that would effectively enable what I call a saving clause to permit therefore a wide resettlement on non objects on the basis that the appointee could always exercise that power to reconstrain that range. Now that is the advice of the, the advice of the approach on my submission.

McGrath J	I don’t think we are opening a lot of floodgates if we took that approach
Mr Kós.

Kós                 Well I suppose the reason for that is probably that the principles in relation to fraud on a power are well understood and are well observed so in the ordinary course powers of appointment are exercised in a limited fashion.   In the ordinary course the power of appoint is made to the appointee and the appointee is given full authority as to what they do.

McGrath J	You see a lot more consistency in the huge number of cases here than I
do I would have to say.

Kós                 Well the principle is simple enough in the sense that the conveyancer, who is advising or preparing the documents, knows not to engage in a

combined transaction in which other persons who are strangers to the trust benefit from it.

Tipping J	How big an interval do you have to have?

Kós                 It is not so much, the interval is in the mind of the appointor.   It is necessarily a temporal question.

Tipping J        No but if you appoint to the appointee directly and he or she on the same day with your knowledge settles to a trust including original non objects, that is going to be attackable to.

Kós	No.  The authorities are clear on that and that is the passage from Thomas
that I have cited.

Elias CJ          Well  it  is  critical  to  your  argument  that  he  intended  to  benefit  her daughters’ non objects.

Kós                 And yes Ma'am, and actuated the trustees in that motive.  So the settlor, Mr Couper, the settlor of the original trust, had that intention, it didn’t matter if Mr Couper had that view, he didn’t matter, he wasn’t the appointor.  The appointor was the trustees, or early trustees.

Elias CJ          But you really can’t, it seems to me, call in aid the companies and the charities and so on.  It really does seem to come down to the fact that he intended to benefit the daughters and the argument is the very narrow one, or the judgment is a very  narrow  one,  of  whether  intending  to benefit her daughters is an incidence, is an incident of benefiting her.

Kós	Yes.

Tipping J        Yes well that certainly sharply focuses.  Are you saying that the original settlors’ declared intent carries through to the appointee trustees

Kós	Yes I do.

Tipping J        becomes their intent and that is so patent that, although there may have been some indirect benefit to Mrs Couper from that, it should be deemed outside what is allowed.

Kós                 Yes because the documents were prepared for Mr Couper originally and then as we see in the final letter from Mr Weirs accompanying to the trustees.

Tipping J        Well I think that is the best possible way it can be put, with respect, that there was a clear intent throughout to benefit non objects, viz the daughters and the benefit to them is not such as is overwhelmed, if you like, by the benefit to their mother.

Kós                 It may indeed be that the what I call the saving approach, it may result, as your  Honour  the  Chief  Justice  suggests,  in  the  exclusion  of  the companies and the charities and anyone else added on the basis in the sense the trust

Elias CJ	They are not there, until she identifies, they are not there.

Kós                 But what is clear is that she would be highly unlikely, and the appointor would consider it highly unlikely, given the circumstances in which the appointment was established, that she would exercise those powers to remove, for instance, her daughters for whom the thing had been established in conjunction with her and also, for instance, her parents.

Tipping J        It could be tested I suppose by saying what would have happened if the settlement was solely for the benefit of her daughters.   Is that a big enough benefit to a non object to, as it were, overwhelm the incidental or indirect benefit to the mother.  I know that is not what has happened but I am just trying to explore this question of sort of completing benefits, if you like.  What I and I see the force of that Mr Kós, but what is wrong with it if it is wholly with her concurrence.  In other words, she says oh that is a jolly good idea, this will save me a lot of hassle, it will save me the task of setting up my own trust.
Kós	What it is effectively doing is expanding the range of the existing objects. Tipping J	It may be but what is wrong with that if that is exactly what she would
have done had she got it absolutely.

Kós                 Well we don’t know the answer to that but we do know that if that approach is right then the doctrine of fraud on a power simply has no substance.

Tipping J        Oh yes it does.  It has substance where like the case where they said you can have a thousand pounds, we will appoint you a thousand pounds, provided you appoint to so and so five hundred of that.

Kós                 But let’s take Wong v Burt.  In that particular case there was a power to appoint capital to the mother.  The mother was concerned that some of her grandchildren were disadvantaged because the will trusts provided for capital to be, sorry income to go to the children of live, sorry only to live children and one of her children had pre-deceased her.

Tipping J	No substitution, that was the problem wasn’t it?

Kós                 Yes.   Now in that case, in that case notwithstanding the fact that the appointment, the capital could have been appointed to her absolutely, the
$250,000 could have been appointed to her absolutely and she could then have lent it separately and distinctly to the children.   But withstanding that fact and notwithstanding the fact that it was clearly for her benefit for her benefit to do so, the Court of Appeal concluded that that was

fraud on a power.   Now you can’t, in my submission, desegregate the settlor’s, the trustees’ intention, the appointor’s intention in that way.

Elias CJ          But this is different.  It seems to me that you are placing a huge amount on the settlor’s stated intention and we haven’t got into the differences between objective intention and motive in this in any event.   But the reality is that she controlled it.  She could just take the lot herself.  She could exclude the daughters.  She was wholly in control.  And that must bear on what the effect was and in the end, when you are looking at fraud on a power, objective effect must be pretty important.

Kós                 Yeah, in Wong v Burt the intent was, the patent intent was to benefit the children, the grandchildren who were non objects.  In this particular case the patent intent was

Elias CJ          But was achieved.   That couldn’t be undone.   Here she was given the ability to follow through on that motive but she was equally given the ability to deny it.

Kós                 Well that becomes a very difficult distinction in my submission because it does have the effect of treating that power as a saving power and the question we have been looking at fraud on a power and its conventional focus on the intention of the appointor.   Does the appointor seriously expect that that saving will be used.   In other words, that the patent provision for daughters and siblings and parents will be so.

Elias CJ          Aren’t you past the intent by that stage.  The intent is the structure he put in place, that is what been, that is what is carried in.   As to his expectations about how it might be used, it seems to me that you are past all of that.

Kós                 Well that intent covers a wide range of potential objects, as we have already discussed.   So if the saving clause doesn’t bite, then in my submission the prima facie position applies which is that one assumes that by making that provision the benefits will be conveyed.  Clearly she can do that; clearly she can exercise a power to exclude it.  But that is ex- post factor.

Blanchard J    Well we don’t know what Mr Couper’s views, if they are to be attributed to the trustees, were of all the powers that were given under the new trust deed.  One therefore simply reads them and says well there they are.

Kós                 Well Mr Couper’s intentions, to some extent, are probably less material than Mr Hutton’s.

Blanchard J    Yes.  I accept that.  But we don’t what his views of those powers were either.

Kós	That’s true.  All that there is

Blanchard J    Why were they put there if they were never intended to be used, might be the question.

Kós                 Well what Mr Hutton said was, this is in the green volume, at pages 493 on, at paragraph 85 he says that Mr Couper had expressed a wish that Mrs Couper be looked after and he also told me he wanted to provide for Mrs Couper’s children.  I knew this had also been the wish of Mr Dixon, who was then a trustee.  At 87 he refers to the fact that Mr Couper had asked Sainsbury Logan to draw up the documents.   He received the documents  and  read  them,  discussed  them  with  Mr  Startup  and Mr Couper, and referred them to Chapman Tripp for their advice.  And then at 89 he talks about the documents and the order in which they were to take effect, including the deed of appointment and partial distribution, which is the second bullet point, and then he says that these four documents were intended to give effect to two separate transactions, the first to the shares in Ponui transferred to Mrs Couper who would then settle these into a new trust.  So what is clear is that he had received the documents; he considered the documents, took legal advice on the documents and understood that they would be dealt with in a single package.  In other words, there was no expectation that there would be an appointment to Mrs Couper and Mrs Couper would then sit around thinking about what she might do with it.

Tipping J        The initiator of this proposal was Mr Couper, so the trustees were in effect doing his bidding.

Kós                 Well they say, if you look further down paragraph 90, he said he thought he exercised his discretion appropriately and not under dictation.   It is certainly not submitted here

Tipping J	No no, not to that extent but clearly he, the genesis of it came from
Mr WAX Couper.

McGrath J	This followed a discussion that Mrs Couper had had with him, didn’t it. Kós	I am not certain about that.
McGrath J      There is something in someone’s submissions about, that took me to a passage I think in her evidence.

Blanchard J    But  he  clearly  thought  that  Mr  Couper  was  wanting  to  benefit Mrs Couper.  If you read on, “I took account of the wishes of Mr Couper. On my reading of that deed Mrs Couper was a discretionary beneficiary and I was not surprised Mr Couper might wish to see her benefit”.

Kós	Yes.  Well I

Blanchard J	So he saw this as a way of benefiting her.

Kós                 Well I don’t doubt that.  That’s, she clearly was a power, an object of the power of appointment, and the power of appointment was exercised for her.  The objection is only that others also are named.  I can’t take the argument  beyond  the  point  I  have  taken  it  to.    It  depends  on  an application of Vatcher v Paull, it depends on also saying that one should have a reasonably straightforward rule as opposed to one that permits, for instance, a resettlement on a range of objects that then in effect saves it by having a power vested in the appointee to eliminate other non objects of the original power.  That is the argument.

Tipping J        Well on this concept of benefit, I wonder whether there is anything to be derived from section, not directly of course, from the way benefit has been approached in relation to the section 64(a), which is the section allowing variations of trusts to take place, if generally to the benefit of and so on, where a fairly expansive view has been taken in the authorities of what constitutes benefit.   Now that being a sort of general policy, admittedly from the legislature, in that area, I wouldn’t have thought the two areas were that far removed from each other to make it inappropriate to rely to some extent on the connotations of what amounts to benefit.

Kós                 But there is a fundamental difference.  And the fundamental difference is that in the 64(a) cases beneficiaries, whose interests are diluted, can appear and be heard, and on the application.  Whereas in this case, what is done is simply done by feat of the appointor.

Tipping J        And the Court has to approve on behalf of beneficiaries so not born or not sui juris.  Yes that is a valid point Mr Kós certainly.

Kós                 If your Honour pleases I think that is probably as much as I want to say on Ponui.

Elias CJ	Thank you very much Mr Kós.  Yes Mr Camp.

Camp              It may be convenient to say a few words about Ponui seeing that that is the fresher argument at the moment.

Elias CJ	Yes.

Camp              Just to pick up a question that Justice Blanchard had just asked, and that my learned friend addressed, of whether, he said we don’t know what Mr Couper thought of the Annette Couper Ponui Trust Deed, and perhaps nor the trustees.   That reference that my friend had just taken you to which was volume 2, page 495.  Mr Hutton’s evidence makes it plain that the Annette Couper Ponui Trust Deed is not in the bundle of documents that is in front of the High Court.  So we have no evidence whatsoever of anybody’s view about the terms or powers that that trust deed has.  That reference is immediately underneath, in paragraph 89, underneath the listing  of  the  documents  it  says  “the  shares  in  Ponui  were  to  be transferred to Mrs Couper who would then settle them into a new trust (that new trust is not included in the bundle).

Tipping J	Well that seems extraordinary in retrospect. Camp	Yes it does.
Blanchard J	How did it get in front of us.

Camp              I think it got put in for the Court of Appeal because by then the argument that emerged in closing in the High Court required that the document actually be looked at.  But it wasn’t the subject of evidence in the High Court because it wasn’t there. And I stay with that issue
Elias CJ	But the circumstances of the execution were the subject of evidence. Camp	Yes  Ma'am.	Oh  yes  I  am  not  saying  that.	The  structure  of  the
transaction was understood but Justice Blanchard’s question we don’t know Mr Couper’s view of the breadth of the terms of the Ponui Trust.  I am simply saying we don’t know anybody’s, because it wasn’t there and I point to Mr Hutton’s evidence.  And I will just stay with that evidence issue briefly because, in my submission, it does come down to a question of what were the trustees’ intentions in effecting this transaction.  Now the objective reality is quite plain that Mr Couper has expressed the view that he would like to benefit his wife and that he would like to see his stepchildren benefited as well.   That is Mrs Couper’s children.   It is beyond  belief  that  Mrs  Couper  would  not  wish  to  benefit  her  own children but what is now being put forward is a proposition that she was somehow strong-armed into benefiting her own children under this trust.

Tipping J        I  don’t  think  that  was  being  advanced.    I  used  that  expression  as  a situation that might cause concern but I don’t think Mr Kós adopted that proposition at all.

Camp              Well in my submission it is necessary for him to say that the trustees had an intention to benefit non objects that made his a fraud on the power. And that was not pleaded; it was not the subject of evidence; it wasn’t put to any of the trustees nor was it put to Mrs Couper.  If the topic had been live, it is beyond question that Mrs Couper would be saying of course I wanted to benefit my children.  All the members of this Court have been saying isn’t that the most natural response that you could imagine to somebody saying I intend to exercise a power of appointment in your favour.  She says good, can we put it in a trust for me and the kids. That is the essence of this transaction.

Elias CJ          But the argument is that it is not her intention that matters in this and there is a clear intention expressed in the evidence, on the part of the trustees to benefit the daughters who were not objects.   That is the argument.

Camp              Yes I will come to that part of it but it would have been answered had there been a pleading raising the question of, as between you Mrs Couper

and the trustees, is that effectively an illicit bargain that you have struck that I will only exercise this power if it is done in this area.  That would have been addressed.  The reason why it wasn’t addressed is the absence of pleading.  As to whether

Tipping J        But the intent in one sense clearly was to benefit non objects because that was the natural consequence, at least the potential to benefit, was the natural  consequence  of  the  structure.    So  the  fact  that  it  wasn’t  put doesn’t seem to me to be, your argument surely lies elsewhere that there is nothing wrong with that.

Camp              I will come to that Sir but just as a preliminary, in my submission the cases that the Court of Appeal referred to at paragraph [112] are on all fours with this situation where trustees or persons with the ability to exercise a power to appoint know full well that in the single rolled up transaction they are benefiting (a) the object; and (b) non-objects.  And they say, there’s a list of authorities that I’ll take you to, they say, the courts of equity have always treated that as a situation where because of the concurrence of the object of the power, with the transaction that’s occurring, it's to be treated as (a) an absolute appointment to the object of the power and (b) a resettlement on what can include non-objects.

Tipping J	Is this at [112]?

Camp	That’s paragraph [112] of the Court of Appeal’s judgment Sir which I. Tipping J	Well this is Goldsmid for example.
Camp              Yes  Sir  and  I  put  in  a  supplementary  bundle  because  I  realised subsequently that neither the appellants nor respondents had put in those cases that are seen at [112].  And I’ve also put in what may well be the source page from a text on Thomas on Powers.   I’ve put that in the supplementary bundle at tab 6 and it’s the last page in it, numbered 48. And if one goes to that supplementary bundle tab 6 page 48 and looks at footnote 66.

Elias CJ	Sorry which is it?

Camp              This is the supplementary bundle Your Honour.  It’s called Second, Third and Sixth Respondents’ Supplementary Bundle.  Last page under tab 6.

Tipping J	What case are you referring to?

Camp              I’ll go to the text in a moment Sir.  But if one looks at footnote 66, you will see the cases that the Court of Appeal set out in paragraph [112] including Goldsmid, Thomas v Simpson, Daniel v Arkwright, Foot and Purdon’s Estate and Birley.   And because I also refer to a Langston doctrine in the other bundle, I just note at this point that that footnote cross-references back to a paragraph.

Tipping J        Just pause please I'm sorry.  We’ve got in your tab 6 is it?  There's no identification of where this comes from in the bundle.

Elias CJ	It’s Thomas is it?

Camp	It’s Thomas Sir and it should.

Tipping J	Aren't you supposed to put the source of it? Camp	Yes.
Blanchard J	Well he did actually.

Camp	Well it did on the front page Your Honour. Blanchard J	There’s an index.
Tipping J	Oh is there an index I'm sorry.  So this is Thomas on Powers.

Elias CJ          Mr Camp I read the Court of Appeal paragraph [112] and I read this paragraph or the text to footnote 66 as dealing with the absolute appointment immediately followed by a settlement by the appointee.

Camp	No Ma'am.  Well, the cases referred to in the footnote are not doing that.
The cases are very largely those of a single transaction. Elias CJ	Are they.
Camp	Being treated. Elias CJ	As if it were two. Camp	As if it were the two. Elias CJ	I see.
Camp	Yes.

Tipping J        Goldsmid was a single transaction whereby the appointment was directly to the trustees of the settlement, not via the object.  But this shows that the question of whether it's one or two transactions is a very artificial way of looking at it in my view when one looks at the substance of what's happened.   And whether it’s done on the same day as two transactions or on the same day as one I would have thought it would be very odd if that drove the outcome.

Camp              In my submission yes, and that’s why if I just go to that main bundle of authorities of mine Sir.  I had included the other Thomas reference.  The topic arises twice in Thomas.  It’s the same topic.  The first time it's in chapter 4 on the rule against perpetuities and the second time is the one

we’ve just looked at which is the fraud on a power.  But I've put in in that main bundle of authorities at tab 11, I've put in a passage which is about the doctrine in Langston v Blackmore and this is the paragraph 433 and when we were just looking at the supplementary bundle I was mentioning that the footnote we were looking at there referred back to the same paragraph.   And It says, reading from under the heading “Doctrine in Langston v Blackmore”, “When the donee of a special power of appointment executes an instrument in exercise of the power, with the concurrence of an object of the power to whom the donee might validly appoint the whole of the property, and the instrument provides for the settlement of that property (say, upon that object for life, remainder to such wife as he should marry, with remainder to his children, and for want of children ultimately to other persons), such an appointment is not necessarily open to objection on the ground of remoteness, nor indeed on the ground that it may introduce persons who are not objects of the power.   The appointment will be held, if the facts warrant it to be in substance an appointment to the object absolutely, followed by a settlement by him to those particular trusts.”  And then the next piece is about mainly authorities on land.

And footnote 90 then sets out cases which include two of the cases that are in the other Thomas reference that we earlier looked at, that’s Thomas v Simpson and Daniel v Arkwright which are also the Court of Appeal’s paragraph [112] cases.  Now I'm only saying that to lock together the two passages and to say that regardless of whether in modern times the issue of benefit is now looked at with rosier spectacles, this line of authority which is perfectly old, certainly accepts that you can in a single transaction benefit non-objects so long as it is done with the concurrence of the object of the power.

Tipping J        Yeah that’s the last line of the citation isn't it, provided the object’s concurrence to the appointment.

Camp	Yes.

Tipping J        That seems to me to be the key point.   It must be a free, unoverborne concurrence.

Camp              Yes, yes.  In my submission there’s absolutely no evidence here that this was other than the free and full unfettered wish of Mrs Couper and it stands to reason that when it's her children that we’re talking about, why on earth would there be.  So that’s why I say that there was a real onus on the appellants if they wanted to advance this at trial to get it out into the open  because  it  cried  out  to  be  addressed  specifically  in  evidence. Because of the way it emerged it simply wasn’t.  That shouldn't be taken to my disadvantage.  I don’t accept that the matter is live because Mrs Couper sought a declaration of validity.  She wasn’t seeking that against a fraud on the power pleading, there simply was no fraud on the power pleading, and she can't be.

Elias CJ	Why did she need a declaration of validity then?

Camp              Mr Osborne is perhaps the person that best addresses that.  I imagine that once the main pleading has put in issue the validity of the transaction and it did, in paragraph 66 of the second amended statement of claim it said, “These two transactions are invalid because they were done at the dictation of Mr Couper.  And they were unreasonable because they cut out the Kains.”  So there was a pleading.

Elias CJ	Can you take us to that, I'm sorry, I haven't looked at it, I should have. Camp	Certainly.
Elias CJ	Just give me the reference.

Camp              That’s in folder 1A at page 135 and I will take you briefly to it.  It says, under the heading Mangaheia Settlement at page 135 the foot of the page. “On 3 November 1999, the First, Third and Fourth Defendants purported to distribute all the shares in Ponui (an asset owned by the Mangaheia Trust) to Mrs Couper; to resettle the balance of the assets into a new trust with Mrs Couper and her children as beneficiaries to the exclusion of the plaintiffs.”

Now I’ll take you onto the relief sought in a moment, but that is the whole of the pleading relating to Mangaheia until we get to the relief part.  It doesn’t actually even mention the Annette Couper Ponui Trust. And it never does later on.  Now when we get to.

Elias CJ	Well that’s what is referred to in 66(b) isn't it.

Camp	Distributing the shares to Mrs Couper is.  But that’s all it says. Elias CJ	Oh I see, of course, yes I see.
Camp	It doesn’t say.

Elias CJ	Yes, it doesn’t deal, yes.

Camp              The second half, yes.   There is then in the relief sought at 144, “Fifth Cause of Action – Mangaheia Resettlement”.  “The decision of the First, Third and Fourth Defendants to distribute and resettle was not permitted because it did not confer a power to add beneficiaries; decision dictated by Mr Couper which the trustees did not make personally; and made in bad faith; unreasonable because no real or genuine consideration of the plaintiffs; made partially and with bias.

Now that doesn’t actually even use the word Ponui.

Elias CJ	No but it is dealing with both the resettlement and the distribution.

Camp	It was treated as such. Elias CJ	Yes.
Camp	So yes it was accepted that there was some sort of a challenge. Tipping J	Was there particulars given or sought of bad faith.
Camp	No, no there wasn't.

Tipping J	Well you're vulnerable to anything that came along that would remotely. Camp	Your Honour this was filed on the day the hearing started.
Tipping J	Well I'm not interested in that Mr Camp. Camp	No.
Tipping J	If this was the pleading. Camp	Yes.
Tipping J        And there were no objections or no requests, aren’t you better off in the broader highway that there was nothing wrong with this transaction anyway.

Camp              I'd  certainly  not  eschew  it  Sir.    But  I  simply  say  that  the  pleading deficiency should rest on the appellant.

Tipping J        Well any evidentiary lack I don’t think can be called against you.  I'd be with you that far but frankly I don’t think this is a case for minute examination of the pleadings.

Camp	Fine.

Tipping J	One would hope not at this level. Camp	No.
Anderson J	The challenge is to the decision, not to the appointment. Camp	Yes.
Tipping J        Well that’s it.  I mean my blood pressure rises every time I look at the pleadings in this case, so perhaps that’s why I'm sort of self-protecting.

Camp              No, not at all.  No, no.  Well we actually asked for a pleading to be filed because there had been some points of claim given that didn’t seek relief and we said.

Tipping J	Any lack of evidence on the subject I agree can't be counted against you.

Camp	Thank you Sir.  Yep, leave it at that.  I do say that primarily this is Mrs
Couper benefiting because she controls. Tipping J	That’s your primary submission.
Camp              That’s my primary submission.  I actually think that takes strength from what I was just covering about those passages from Thomas on Powers where non-objects are treated as being able to participate because the rolled up transaction with the concurrence of Mrs Couper is seen as a two-stage process.

Elias CJ          Well  in  your  case  you  don’t  really  need  to  point  to  any  actual concurrence because you can infer it because she has the power to do what she likes.

Camp	Well, yes, yes.

Elias CJ          I mean in cases where in fact property has been alienated to non-objects through the transaction, it may be necessary to go rather further in showing that the object concurred.  But in this case it would seem really not necessary.

Tipping J	No beneficial interest passed under this transaction to a non-object. Camp	No.
Tipping J	They simply became the potential recipients of largesse. Camp	Yes, yes Sir, I accept that Sir.  Yes.
Tipping J	That really it seems to me with respect is the kernel of your clients’ case.
Now I'm not saying that I'm necessarily agreeing with it but that has to be the kernel doesn’t it.

Camp	Yes, yes.

Tipping J        That your client, sorry, Mrs Couper had reserved to herself complete flexibility including vesting the whole lot on herself.

Camp              Mm, yep.   And she did actually give evidence that she considered it appropriate as a transaction so that she’s not silent on it in that sense.

Tipping J	No.

Camp	But Your Honour I think that’s.

Elias CJ          Have you given us the reference to that evidence.  Don’t take time now but.

Blanchard J	Is it the piece that’s quoted by the Court of Appeal. Camp	Yes it is.
Elias CJ	Right thank you.

Camp	I have given you the reference actually in my submissions. Elias CJ	Yes, yes.
Camp              Unless Your Honours think there’s more I should assist on Ponui, I’ll turn to Mangaheia, in case there’s something I should say on Mangaheia.

Elias CJ	Yes perhaps you should.

Tipping J	Well I think there might be Mr Camp.

Camp              Yes I gained that impression Sir.  I have to accept as a starting point that, as Justice Anderson and others have observed, here are two transactions where we’ve just looked at the Ponui one so we understand exactly what was  being  done  and  the  sequence  of  it.    And  the  trustees  in  the Mangaheia one have done something different.   And they’ve talked of s 41 and they’ve talked of In re Pilkington.   And they’ve talked of the power of advancement.  And then they’ve carried out a transaction.  And it's quite likely that, unless one follows the Court of Appeal’s rationale on how s 41 could be used, that otherwise the s 41 route here could have difficulties.

Tipping J	Well you're not challenging the Court of Appeal’s, no.

Camp	No I haven't cross-appealed.  I'm supporting the Court of Appeal Sir. Tipping J	Well you're supporting what they did ultimately.
Camp	Yes.

Tipping J        But you don’t challenge that this, to be justified all, you have to deem them to have gone down another route.

Camp              That’s right Sir although in the alternative the Court of Appeal says, you can do it under s 41 but that’s only as an alternative.   The primary proposition the Court of Appeal has picked up and expounded is that this could be done under clause 4.

Blanchard J	Are you saying they could do it under s 41.

Camp	I'm saying the Court of Appeal says that Sir, yes, and I support it yes. Blanchard J	Well we might need to hear you on that.

Camp	Yes, sure.  Well I.

Blanchard J	It seems to me that’s got considerable difficulties. Camp	Thank you.
McGrath J	Clause 4 was your alternative argument in the Court of Appeal was it not. Camp	Clause 4 was my primary argument in the Court of Appeal Sir.
McGrath J	Primary, okay.

Camp              I said, look this is what they wanted to do.  The issue should be, have they got the power to do it and is it proper for the Court to validate what was a meritorious transaction.

Tipping J        Well they certainly had the power.  The question is whether they should be deemed to have exercised it.

Anderson J	When they deliberately didn’t.

Tipping J	When they deliberately didn’t go the Ponui route.

Camp	It’s unfortunate that there is the Ponui route sitting there. Anderson J	On the same day.
Camp              To cause that sort of contrast.   But if one is looking to whether one validates this transaction then the first starting point is yes they have the power.

Blanchard J	We can't validate it, it’s either valid or it isn't.

Camp              Okay, sorry, misuse of the word.  Hold it to be valid.  But the starting point is that they have the power.  And I'm not saying this then is a sort of a mitigation plea, hearts and flowers thing, but both courts below have said it was an entirely proper exercise of the power to look at one of the farms being used for Mrs Couper’s primary benefit because ironically, with the multiplicity of trusts that had existed and the multiplicity of beneficiaries, the vast majority of these farms did not provide for Mr Couper’s wife to be a beneficiary.  So this was the only one where it was likely.   And the other ones are and were primarily, well had the Kain children  and/or  grandchildren  as  discretionary  beneficiaries.    But  the point is in none of them does Mrs Couper feature in a significant way.

And just to clear up one matter in Mr Kós’s skeleton at paragraph 5.1, he said  that  the  provision  Mrs  Couper  is  to  receive  includes  51%  of Hukanui.   That’s not so.   The judgment in the High Court was that a

transaction under which Mr Couper had been going to transfer the 51%
of Hukanui which he owned.

Tipping J	Well look that’s got nothing to do with the present issue. Camp	Alright.
Tipping J	It’s just what the new trustee might be able to do if coming at it afresh.

Camp              Yes, alright.  Well all I'm saying is that it was a very proper transaction for the trustee to embark on and in my submission there's nothing wrong in that situation with the Court then seeing whether there is a way in which it can be said that the trustees (a) have the power and under this document have in fact used that power.

In my submission the, I’ll just turn to my friend’s, clause 4 is plainly wide enough to allow for there to be an appointment in favour of Mrs Couper.  An issue then arises whether this deed is utilising clause 4 and in  my submission  it’s  not  inappropriate to  read  it  as  using  clause  4 because the operative part of the deed says that it relies on the powers that the trustees have.

Tipping J        To resettle, not to distribute.   I find it extraordinary that if they were intending to exercise their powers under clause 4 they would not have included it somewhere in the deed poll.  They’ve gone to a lot of trouble to include s 41 and Pilkington.   It’s quite unusual in my experience to have reference in a recital to a deed to a decision of the Court.

Camp	Yes.

Tipping J        So if that’s what they were about Mr Camp, why on earth would they not say, pursuant to the powers vested in us in clause 4 of the said trust deed. I mean it’s elementary.

Camp              Well one’s entitled to just look at the operative part of the deed as being the power Sir.

Tipping J        But there you’ve got problems because of the word “resettled”.  This is not a resettlement of the trust.

Camp              Well Sir under the paragraph [112] cases that the Court of Appeal refers to in Ponui that we were talking about before, a single transaction which benefits non-objects of the power is to be seen as both an appointment and a resettlement by the object of the power.

Tipping J	Not a resettlement, a settlement.

Camp              A settlement by the object of the power.   So that legally the route is available and what Your Honour is saying is that you're not attracted to finding that it's open because of the words that have actually been used.

Tipping J        What I would be more sympathetic to is not to pretend that that’s what they were trying to do, but to say that they’ve clearly not used a power available to them but they can after the event be taken to have done so in order to validate.

Camp              Well, yeah.   I'm more than happy to put it in those terms Sir because maybe that, because that’s what I was meaning to do in saying that because.

Tipping J	Well that’s not how I heard you. Camp	I'm sorry.
Tipping J        I heard you as trying to persuade me or us that really this is what they were about.

Camp              Well no, I'm saying that, I mean what they were obviously about we shall never know because there was no evidence on the topic.

Blanchard J    Well  pretty  obviously  they  were  trying  to  exercise  a  power  of advancement.

Camp	Well they were trying to benefit Mrs Couper is the broader way to put it
Sir.

Anderson J     But they give her no control whatsoever.  You're forced to argue that they have effectively appointed to her but the terms of the appointment give her nothing except an expectation under the rearranged deed and in that way it's fundamentally different from the Ponui set-up.   She’s not a settlor under the new deed, the new trust.

Camp	No, she is the primary beneficiary so-described isn't she. Anderson J	Well she’s a beneficiary.
Tipping J        Well look, what’s your best case or best authority for saying that when trustees have fired a shot down route A which fails, they can, provided they have the power to achieve their object down route B, the Court will treat them as having taken route B.   Because that really is I think the distance you have to go.

Camp	Yes.

Tipping J        Because you're not going to persuade me that they intended to use their powers under clause 4.   Against what they did in Ponui, it’s made the more vivid by Ponui.  But it’s pretty plain even on the face of the deed poll.

Camp              Well can I start at my friend’s 4.2 in his skeleton.  Because he says there equity does not intervene to exercise a power that has not been exercised. And refers to Breadner v Granville-Grossman which is at tab 16 of his authorities.  I don’t know that we need to go to it as an authority but it is authority  only  for  the  proposition  that  equity  does  not  intervene  to exercise a power that does not exist.   Not that has not been exercised. What happened in that case was that the trustees had to have exercised a power that they had by a specific date and they got it wrong by a day. They were a day late in trying to exercise it.  And no-one quite knows why.  But the counsel in that case argued that even when the power had expired, there could be an extradition to the doctrine of In re Hastings Bass to say, well if they had exercised it this is what they would have done.

Blanchard J	What is the doctrine in In re Hastings Bass.

Camp	Well we’d better go to the case Sir, it’s tab 16 of my friend's cases.
Otherwise I'm likely to embroider rather than take Your Honour directly to it.  Page 543 Your Honour of the judgment and I apologise, it’s not my photocopying but I apologise for it.   Paragraph 62 is vaguely visible about a third of the way down the right hand page.  And it says, “So far as the present case is concerned, the most important point about the Hastings-Bass principle is that it has been developed and explained as a principle whereby the courts will hold to have been ineffective something which the trustees have in fact done.  In this case, by way of contrast, Mr Warren’s argument would involve.”

Blanchard J    Could I suggest you go back to paragraph 58 because my eye goes over there and I think he’s saying what the principle is.

Camp	Oh sorry Sir.

Elias CJ	It's an emerging principle.

Camp              Yes.  Yes it's “an emerging principle which may be applied to exercises of powers by trustees, and it has obvious affinities to the much more developed area of principle in which courts will apply when judicially reviewing the exercises of statutory powers by public authorities.   If trustees, in exercise of one of their express powers, take an action which on the face of it falls within the letter of the power, the action may nevertheless be held to have been ineffective if (1) the trustee fails to take account of something which they ought to have taken into account or (2) the trustees take into account something which they.

Blanchard J	So it’s not about savings.

Tipping J	No, it's bringing sort of public law concepts a little bit into trustee law. Blanchard J	It's just not relevant here.

Tipping J	Yes.

Camp              Well what I was advancing Sir was that in that paragraph 62 the counsel was  advancing  a  new  principle  or  an  extradition  of  a  principle  in Hastings Bass is how it was being put to the Court and the Court said, no, once the power of the trustee is dead and gone, there is no authority that will allow it to be revived.  So I don’t accept.

Tipping J	Well it’s the reverse of Hastings Bass. Camp	Yes.  So I don’t accept that.
Elias CJ          You can’t come to a result that the Court thinks would be reasonable.  Is that what it is?

Camp              Yeah, well it’s, if we’re staying with Monty Python skits, it is a dead parrot.

Elias CJ	Yes.

Camp	And that’s all it is. Elias CJ	Deceased.
Camp	Yes.

Anderson J     Mr Camp could you help me with this please.   If I understand you correctly you're saying that the trustees could have achieved the same result by way of an appointment and then a subsequent deed.

Camp	Yes.

Anderson J	But under the new trust, the settlor is not the appointee but Mr Couper.
So the implication must be that if it’s been an appointment, it’s been appointed to him and then he’s set-up a new trust.  There’s nothing that gives her anything except a potential interest under the trust as reformed. So it is nothing more nor less than a resettlement for which there has to be some authority.  And it can't be an authority based on an appointment.

Camp              Well Your Honour I have to argue that clause 4 is wide enough to allow of that and that this deed has to be seen as (a) an appointment and (b) inferentially advancing the date of distribution in relation to the assets that are included in this particular settlement.

Anderson J     But clause 4 wouldn't allow an appointment of Mr WAX Couper would it.

Camp	Ah, no.

Anderson J	Yet he’s the settlor in terms of the new trust.

Camp	Yes.  Which looks wrong Sir.  But it’s. Tipping J	And is wrong.
Camp              But if one looks to the effect of the transaction, it is to take the asset out of the Mangaheia Trust and to put it into a new trust which.

Anderson J	As beneficiaries who were not in the original trust. Camp	Yes and Mrs Couper who was.
Elias CJ	And excludes beneficiaries who were.

Camp              Yes, which is exactly what you would do if you were exercising a power of appointment in favour of a specific individual.

Anderson J     Well let’s see how that would work then.  Let’s say we want to achieve this result.  And a result equivalent to what we’ve done.  We will appoint to Mrs Couper.   Then Mrs Couper will set up a trust where she is the settlor and has all the settlor’s powers.  But that’s not what you’ve got. You’ve set up a trust where Mr Couper is the settlor with all the settlor’s powers to remove trustees and all the rest of it.

Camp              I accept that the easy answer is that if you want to do this transaction you do a Ponui.

Anderson J     Which   would   have   a   different   settlor   and   therefore   a   different beneficiary.

Camp              I appreciate that but the misnomer of Mr Couper as settlor is unfortunate but it doesn’t.

Blanchard J    I don’t think it’s a misnomer at all.  It’s merely the vehicle.  The transfer is not to Mr Couper.  The transfer or the appointment if there was one is to the new trustees, Hutton, Mrs Couper and Startup.

Camp	Yes thank you.

Blanchard J    The role of Mr Couper was simply to set up the vehicle which was to be the recipient.

Camp	Yes, thank you for the suggestion.
Anderson J	If you could change the trustees you have power to remove them. Blanchard J	Exactly.  There may be problems with it as a vehicle but I don’t think the
fact that he was the, it could have been a solicitor who set it up. Anderson J	Yes, true.

Camp              It may be that the draftsman was recollecting that Mr Couper was the settlor of the original trust, which he was.   I'm not trying to get any further into the draftsman’s mind but I just note that that was the case. But yes the point I was trying to develop is that in a sense that’s merely a notional vehicle.  What we get at the end of the transaction is a trust in respect of which Mrs Couper is said to be a primary beneficiary and then I accept that it goes on to add her children who are non-objects of the previous power.  And at that stage I revert to the paragraph [112] line of authority that we’ve talked about, as did the Court of Appeal, to say, with concurrence, that’s okay.

Blanchard J    We’ve moved somewhat away from the point that you were addressing and that is that you need to point us to an authority that where a power, and in this case a power of advancement, has purported to be exercised, and that’s invalid, that you can go to another power that you find somewhere else and say, well it’s legitimate to treat them as if they had exercised that other power.   What’s your best authority for that proposition?   Because it seems to me that you have to advance that proposition in order to succeed.

Camp              Yes I accept that I'm one step back from the situation where a trustee doesn’t refer to a power and the authorities that then say, that’s fine as long as they’ve got the power, it doesn’t matter that they don’t refer to it. What Your Honour’s putting forward to me is the proposition that they may have referred to other powers but still have this power available.

Blanchard J	Yes.

Camp              And in that situation is it satisfactory.  Maybe I’ll look over lunch Sir and just tell you what the best is because we are within a couple of minutes of that.  But the.

Tipping J        I suspect there isn't one, that’s the problem Mr Camp.  You must know this is your problem.  If you had one, surely you’d have it now.

Camp              Well Sir what was going through my mind was something that’s similar to the Hastings Bass proposition.  There are cases which have said that where you're exercising a power, and you have either power one or power two available to you, then you can’t be treated as having used power two when you’ve said you’ve used power one if you should have considered different things were you in fact using the other power.

Blanchard J	Yes.

Camp              That is if you took into account wrong things or failed to take into account right things because you were using power one instead of power two.  Now I'm fairly sure that there is authority to that end Sir.  And my submission is that there is no difference whatsoever between the matters that need to be considered by these trustees under the powers that are

referred to in the deed or under clause 4 including an advancement of the date of distribution.  Because the sole issue here is whether it is fair and just for the trustees to favour Annette Couper at the expense of the Kain children.  And the evidence is quite clear that that was in the minds of the trustees and that they have looked at the degree of benefit that the Kain plaintiffs got from the other trusts of which these people were trustees and came to the view that it was right and proper that there should be an exercise of the power in favour of Mrs Couper.

Elias CJ	Which power. Camp	Power number two. Elias CJ	Power of appointment.
Camp	Yes, power of appointment.

Tipping J	If you are extinguishing contingent beneficial interests. Camp	Yes.
Tipping J	Should you not do it properly. Elias CJ	Carefully.
Camp	Carefully and properly might be different issues. Elias CJ	Properly is probably better.
Camp	No, no, I was just splitting them to refer to one at a time. Tipping J	Well pick them off one at a time if you like.
Camp	I'm sure Your Honour will.

Tipping J	If you're treating the Chief Justice’s question as first.

Camp              Yes  certainly.    Carefully  in  my  submission  was  answered  by  going through the evaluative exercise, the analysis of what is fair and proper. That’s all I was assuming was involved in that as opposed to the issue of properly which I took to be the form.

Elias CJ          They don’t need to resettle to benefit Mrs Couper.  They can appoint to her.  What they’ve achieved is taking out some of the objects of the trust.

Camp	Well that would be done Ma'am if they appointed, full stop.

Elias CJ          But they didn’t.   That isn't what they’ve done.   And I'm not so fussed about the fact that they didn’t say, here we are exercising a power of appointment as opposed to a power of advancement.   I'm puzzled how

you can say that what they did was an appointment.  Anyway perhaps we should take the adjournment now.   Or do you want an answer to your question.

Tipping J	Oh no, no.

Blanchard J    Well I want an answer to my question which is logically prior.  But the Chief Justice has highlighted another difficulty.   If you persuade us on the prior point you’ve then got to persuade us that this was a proper appointment.

Tipping J        I  would  like  with  my  brother  Blanchard,  as  I  think  I  hinted  several minutes ago, your best authority for doing what you're asking us to do, or supporting the Court of Appeal.  I mean.

Elias CJ	You’ve got to explain what the Court of Appeal did.

Tipping J        Well let’s give him the benefit of all reasonable.   Some aspects of the reasoning are a little elusive but in essence they said look if you’d done it Ponui it would have been alright so we’ll treat you as done it Ponui.  I think you said that yourself.   Now can you do that.   What’s your best authority.

Camp	Yes, thank you Sir.

Elias CJ	We’ll take the lunch adjournment now thank you.

Court adjourns 12.58 pm
Court resumes 2.16 pm

Elias CJ	Yes Mr Camp.

Camp              Thank you Ma'am.   I was invited to deal with the issue of the trustee using one power when another power is available and what the line of authorities might be and if I could start by referring to Tab 1 of my bundle of authorities which is House of Lords Cunningham v Anstrother it’s not directly answering the point but one can see from the headnote per Lord Chelmsford that the donee of a power may execute it without referring to it and without taking the slightest notice of it providing the intention to exercise it.  Now I know Sir but I have got to start and that’s at page 233.  All it’s saying is that if intention is clear you don’t need to have referred to a power at all.

Anderson J     It’s a bit like the lady who was surprised to learn she had been speaking praise all her life without realising it.

Elias CJ	No, no it was a man.

Camp	Well I don’t have a submission to make.

Elias CJ	But hang on, that isn’t in this case is it?

Camp              No it’s not Ma'am it's just a start – it's the neutral position.  It's saying if you don’t say anything at all and you have the power.

Elias CJ          Yes.  Yes you don’t say here I go exercising this power of appointment if you are unmistakingly exercising the power of appointment.

Camp	Yes if you have the power and that can be seen to be the intention. Elias CJ	Yes.
Camp	So that’s the starting point and that’s all.  Second I go to my paragraph
18 of my written submissions where I refer to Eardley Wilmot which is at tab 5 of the bundle but I don’t think we need go there as Eardley Wilmot is very short and I set it out in my submission.  What I set out in Eardley Wilmot and my friend referred to this.

Tipping J	Paragraph what sorry?

Camp	18 Sir of my written submissions. Tipping J	Yes.
Camp              And I have said four lines down that Justice Merkel had referred to Eardley Wilmot as early authority.  There the testator recited his power under a settlement in 1819 to charge 5,000 pounds amongst his children. He had no such power by that settlement but did by a resettlement of
1839.  I just pause at that point to say that if one describes yourself as having a power under a settlement of 1819 when you’ve actually got it under a resettlement of 1839 then it's really being rather kind to it to describe it as an inaccurate and incomplete description.   It’s not a description of the power that you have.   Because you’re saying I have this power under a settlement of 1819 well you don’t.  And the master of the roll is nonetheless held and this is the piece I have set out, it’s effectively the full test of the judgment.

It is an inaccurate and incomplete description of the power; but he had power to dispose of 5,000 pounds and he intended to dispose of it.  Is it to fail because he does not properly describe the instrument under which he derived it.  I think not and I should be overruling many cases if I so held.

Now I don’t have the many cases available to me in the course of the luncheon adjournment but I do submit that Eardley  Wilmot is  really authority for saying that when one describes one power that has another power then the Courts will uphold the exercise of the power that is not described.  It’s really not accurate.

Elias CJ	It’s only the source of the power that is misdescribed.

Camp	Yes.

Elias CJ	I mean the power is the same power.

Camp	Yes.  Yes I accept that Ma'am but it is in a different document.

McGrath J      Aren’t we in the category that you are referring Justice Merkel to as qualifying that statement.  Mainly reliance on the head of power which is materially different from the power conferred.

Camp	Well that is the next state I got to Sir. McGrath J	Okay.
Camp              Because then I turn to Justice Merkel and I have said there and this is in the appellant’s casebook at tab 6 is the Collins passage which referred to and it’s more appropriate to go to that one.  It’s tab 6 page 247 where the extract appears and it's probably best to start at line 45 on page 247.

There was a case involving a earlier trust deed and a later trust deed in relation to pension fund rights or death benefits and as it happened there were  different  considerations  that  might  well  need  to  be  taken  into account under the second of the documents and the trustees have said they were acting under the first of them.  The judgment says at 36:

Counsel for the trustee contended that the fact that the trustee and the tribunal made a decision under the amended deed is not fatal as even a wrong reference to the power will not prevent an exercise of a power from being valid if the intention to exercise the power is otherwise clear.

Elias CJ	The power, the power.

Camp              The  power  yes.    It  can  be  accepted  that  an  incorrect  or  incomplete description of the power exercised is not fatal if the intention to exercise the power is otherwise clear.  However, a quite different situation arises where the exercise of the power relies upon a head of power which is materially different from the power conferred and that’s the piece I set out in my submissions.

It then goes on in the circumstances of the present case I am satisfied that I need go no further than decide, as I do, that the differences to which I have   referred   might   be   material   to   the   issues   which   arose   for determination by the trustee and the tribunal.  And that was because the two deeds had different matters that might be taken into account by the trustees when deciding how to exercise their discretion.  Now our Court of Appeal said at paragraph 84 of the Judgment that they did not see the reference to section 41 and the deed and I’ll turn

Elias CJ          I’ve got a question mark beside this paragraph so I will be grateful if you could explain it to me.

Camp              Paragraph 84.  I didn’t have a question mark next to mine but there we are.  They have said that “We do not consider that the power specifically relied on in the deed poll s 41 is materially different to clause 4.  Both clause 4 and s 41 give the trustees an absolute discretion to advance capital.  Section 41 then has some limitations on it that clause 4 doesn’t. And the trustees shouldn’t be held to a higher standard than clause 4. Now first of all before I explain.

Elias CJ          What does that mean?   The trustees should not be held to a higher standard than what was agreed in the deed.

Camp              First of all Ma'am in my submission what they are doing is examining the question of whether section 41 and clause 4 are materially different heads of power and they are saying that they don’t believe that they are and my submission is they are right to do that.

Elias CJ	Yes.  They are both powers of advancement.

Camp              Well they are both – well clause 4 isn’t the power of advancement so much as a power of appointment with the ability to advance the date of distribution.

Elias CJ	Yes, sorry, yes.

Camp	But nonetheless to achieve the same end so to speak. Elias CJ	Yes, but section 41 is a power of advancement.
Camp              Yes it is and it has, it's a bit ring fenced in that if you are operating under section 41 you must get consent of prior interests and or if you had section 41 in it's pure form you could only go so far as half the interest.

Elias CJ	Yes.

Camp              Which this deed modifies.  So they are saying that sure section 41 lets you do the same transaction and principle in more constrained circumstances than clause 4 does but if you’re looking at the essential nature of what it is that is being done under either the then same sort of thing is being done and therefore it is the same sort of power.

Anderson J     Only in relation to advancement, not in relation to appointment because there  is  no  power  of  appointment  under  section  41  and  it's  the appointment aspect of course that is crucial.

Camp              Well yes Sir but it achieves exactly the same end in the sense that if under section 41 you advance half of the funds to Mrs Couper and you do

so with the consent of the Kain beneficiaries then the fund has been advanced.

Anderson J	Except you didn’t have the consent here.

Camp              No,  no  because  one  wasn’t  going  under  section  41  with  it's  more constrained limitations.  One was doing it under clause 4.

Anderson J     Getting back to the difficulty that I raised with Mr Kós that on the same day you have two quite distinct routes taken and in relation to this particular trust they took route A and not route B deliberately.  And yet your argument requires us to inpute an intention to take route A whereas they deliberately assume route A.

Camp              In  my  submission  I  would  draw  a  distinction  between  process  and substance  and  say  that  yes  I  accept  that  the  process  set  out  in  the document points to a different route but it doesn’t alter the nature of the intention which was to pass the Mangaheia property into this trust for the benefit of Mrs Couper and that’s what they intended to do.

Anderson J     That’s significantly different from the case you referred to a moment ago where a particular power was intended to be exercised and it was just misdescribed or the origin of it was misdescribed.   Here we have an intention not to use a particular power but a different one.

Camp              Well the Court of Appeal says that the mere misdescription of – the fact that section 41 is mentioned when clause 4 exists is not a material misdescription of the power à la Justice Merkel yardstick and therefore that misdescription should not defeat their intention to vest it in Mrs Couper.

Anderson J     But  I,  perhaps  you  could  help  me  with  this.    In  all  probability  two different routes were taken because two different results were intended. In one there was an intention to put all the benefit in the hands of the appointee, in the other there was an intention not to put all the benefit in the hands of the suggested appointee but to retain much of the control in the hands of the original settlor and trusteees.  Different results and that’s why you get different instruments.

Camp              Well Your Honour it would of – with the benefit of hindsight just looking at the Ponui transaction it would have still been possible by using the Ponui route to have just had a somewhat modified new trustee in the Mangaheia transaction in comparison to the Ponui one.

Anderson J	Well they could have used the Ponui process for the whole lot. Camp	Yes, yes.
Anderson J	But they didn’t.

Camp              No but if we are just talking about, is the driver of this desirability of different degrees of control, then that control issue is just in the way the words of the Ponui Trust and or the new Mangaheia Trust.

Anderson J     It's more substantial than that in the Ponui Trust and Mrs Couper became effectively the owner of the fund and the controller of the fund.  But in the Mangaheia one she didn’t.

Camp	Yes, yeah.

Anderson J     But you want the Court to treat it as though she didn’t.  Assume it was valid, completely different result from the Ponui result.

Camp              In my submission that doesn’t mean the powers under clause 4 differ from the powers under section 41 which is the point we are talking to.

Anderson J	Depends how they’re exercised in what the outcome is.

Camp              Yes.  Well yes we haven’t been focussing on the content, the different content  of  the  two  trusts  as  somehow  validating  the  one  and  not validating the other.  There’s nothing wrong in my submission with the Mangaheia Trust as, if what had happened had been an appointment under  clause  4  to  Annette  Couper  absolutely  and  the  settlement  of Annette Couper of a fund for Mangaheia into the Mangaheia Trust as it presently stands.
Anderson J	Then it would have been vulnerable to an argument of fraud on a power. Camp	Well there we get back to does it matter if they are done three months
apart.

Blanchard J    Well  no.    There  is  a  more  fundamental  problem  is  the  one  Justice Anderson is pointing out that it’s not a trust that Mrs Couper controls but also there are other beneficiaries who are not in the new Ponui Trust. There’s Mrs Hutton and there is the grandchildren of the Kains.

Camp	Yes well.

Blanchard J	So it’s much harder to argue that it is all for the benefit of Mrs Couper.
She doesn’t control it and there are people who are not her immediate family.

Camp              Yes, at that point Sir I go back to the paragraph 112 Authorities that the Court of Appeal relies on and say that where there is a rolled up transaction which benefits non objects then the Court treats it as being A an absolute appointment and B a resettlement for the benefit of the object and the non objects and that’s that Langston series of cases that the Court of Appeal relies on.  My submission

Blanchard J    You may need to take us to that to demonstrate a case which has some similarity of fact.  But just before you do and in relation to paragraph 84 of the Court of Appeal, would you look at the second sentence of that paragraph please.

Camp              Both clause 4 and section 41 give the trustee an absolute discretion to advance capital.

Blanchard J    Now aren’t they.   Isn’t the Court of Appeal appearing there to treat clause 4 as a power of advancement.

Camp              Well Your Honour it is a power of advancement in its effect in the sense that you are able.

Blanchard J    Well no it's not.   The power of advancement is a power to advance to someone who has a vested or contingent interest in the capital.  That’s not what clause 4 empowers in relation to Mrs Couper who had no vested or contingent interest in the capital.

Camp              Yes  it  maybe  a  terminology  thing  Sir  but  if  one  goes  back  to  say paragraph 79 talking of clause 4 it says the ability for the trustees to advance capital is further emphasised by another part of clause 4 that says.

Blanchard J	Well that’s just another example of the same error.

Camp              Yes, what I am suggesting is that it may be just a matter of terminology because what does happen under clause 4 is sure, you have to select the person under the power of appointment but with A appointment and B ability to advance date of distributions so that one could take a part of the trust fund and have the effect of advancing it to a particular individual by appointing them under clause 4 in advancing the date.

Blanchard J    You advance something if you bring forward an entitlement.  That’s the meaning of the word advance.

Camp	Yes.

Blanchard J	Mrs Couper had no entitlement to be bought forward.

Camp              No but it was possible under clause 4 to A appoint her and thereby create an entitlement and B advance the date of distribution under clause 4.

Blanchard J	No, hang on that’s a different use

Elias CJ          A different power and indeed both powers are contained in clause 4 aren’t they.  It looks to me there’s been some muddlement here.  It's a bit odd to say section 41 is not materially different to clause 4 when clause 4 includes the reference to the power in section 41 so they are two different  powers  being  referred  to.     So  to  say  that  the  power  of

appointment which is also contained in clause 4 must be equivalent to section 41 seems very odd.

Camp              Well in my submission, what they are saying is that for these purposes, that’s for the purposes of looking at the particular transaction because obviously clause 4 is capable of having more things done under it than can be done under section 41.

Elias CJ          But it's sloppy really to talk about clause 4, that’s what I am really trying to suggest.   You have to look at the powers that are conferred and are being exercised.

Camp	Yes.

Elias CJ          And there is a power of advancement which is obtained under clause 4 by reference to section 41 modifying section 41 and there is a power of appointment.

Camp	Well there’s no doubt that at 77 the Court of Appeal is saying that clause
4 contains a power of appointment and then in 78 says it has the power to advance the date of distribution and having listed out those two 79 then describes the ability for the trustees to advance capital.   Now in my submission that may be a looseness of language because it seems to me that at 79 they are simply describing in proceed what they’ve already described in 78 and 77.  So it may be in using that expression the ability of the trustees to advance capital that looks like it's meaning a power of advancement when in fact it's just a rolled up effect of 77 and 78.

Elias CJ          Where do I find this hotchpot clause.  The setting out of power 79 which paragraph is it.

Camp	It's clause 4 of volume three Ma'am of the original deed. Elias CJ	Yes I am looking at
Camp	It’s 565.

Tipping J	It’s after and it is declared and provided that. Blanchard J	Yes.
Elias CJ	Ah yes.
Tipping J        That’s the expressed hotchpot version.   But there is also a power of advancement in the powers provision.

Camp	Yes there is Sir that modifies section 41.

Tipping J        The fundamental problem I have with all this Mr Camp is that in this field these documents were documented with a fair eye to precision of language, or attempts at it.  There a fundamental difference between an

advancement and distribution and one just cannot properly use the word advancement for what is actually a distribution because  the advancement carries the hotch potch notion, the distribution

Elias CJ	It may too.

Tipping J        It may too by definition but it would not ordinarily unless there was an express hotch pot provision. So when they talk about advancement I just think it is very difficult to argue that empowerment of advancement properly understood is materially the same as a power to distribute earn. I have a simple mind Mr Camp but it just seems to me to be completely contrary to all the understandings of terminology and the use of terminology in this whole area.

Camp              Your Honour in the sense I have addressed that with Justice Anderson before only to say that in my submission if the outcome of the use of the power is a similar outcome then one can say that for that purpose of that outcome the powers are similar not materially different.

Tipping J	Well the Court of Appeal said they were not materially different. Camp	Yes well that’s the Merkel formulation.
Tipping J	They may not be materially different in ultimate effect. Camp	Yes.
Tipping J	But they are materially different as powers. Camp	Yes.
Tipping J	And your saying if the ultimate effect is the same. Camp	Yes.
Tipping J	Well they have gone down this other route.

Camp              Well no Your Honour, yes I do but with this qualification that if the considerations that you should have to take into account were different then that

Tipping J        Wholly  different.    To  exercise  a  power  of  advancement  is  a  wholly different exercise from deciding whether or not to make a partial distribution or to a point or by means of an appointment.  It is a partial distribution by means of an appointment.

Camp              I’m probably not putting it clearly enough Sir but if the criteria or matters that you should take into account as a trustee were different for the one track to the other track then I would accept that there was a material difference.

Elias CJ          But there may well be.  Because a power of advancement is a power to benefit in response to a need.  Whereas a power of appointment doesn’t require any such assessment does it, it's just, you can have this.

Camp              Well in my submission in our fact situation we just have the issue of advantaging the wife of the settlor Mr Couper and disadvantaging those who by that transaction cease to qualify.

Elias CJ          Why is there a need to advantage her by advancement rather than by appointment?

Camp              Well there wasn’t, the driving intention, the driving principle was to let her have the benefit of the farm.   Now all I am saying is there’s no different considerations.   You’re going to cut up the Kain plantiffs no matters which way you do it and that’s the only – the only competition of practical note really is between Mrs Couper and all her children on the one hand and the Kain plantiffs on the other and that would be the same whether you are doing a section 41 or a clause 4 and that’s what I say the Court of Appeal were saying.

Blanchard J    Well I wondered and I don’t know whether there is any substance in this thought whether the choice of advancement as the route to do it was first thought because they didn’t realise that you couldn’t make an advancement to her.  They probably made the same mistake as the High Court Judge did but whether it was also done because of  a recognition that Pilkington seemed to have loosened up the rules concerning vesting in or benefiting non objects.

Camp	Yes, incidental.

Blanchard J    Well,  yes.     As  compared  with  the  rules  applying  to  powers  of appointment.  In other words it might have been a deliberate choice to go the advancement route.

Camp              Yes, I think I probably did have the same thought Sir but, the problem I have is that the paragraph 112 cases about a rolled up transaction benefiting non objects is quite old law.   So that without Pilkington in place a Ponui transaction could still have achieved the same end for Mangaheia if that route had been followed.

Elias CJ          But Pilkington though was about if they wanted to advance monies to – it was a child wasn’t it?

Camp	Yes.  Yes it was.

Elias CJ          Then they had to set up a trust mechanism, they couldn’t just pay it to the child.  I mean it just seems to be miles away from the effect of what is achieved here and the purpose of a power of advancement.

Camp              Yes.  No sorry, in terms of Justice Blanchard raising Pilkington and the prospect of what drove the draughtsmen, it was the case that Pilkington sort of relaxed their prospect of incidentals being included within the advancement and not – meaning that it would get struck down so that Mrs  Couper’s  children  might  arguably  have  sneaked  in  under  a Pilkington approach to advancement save for the fact that as you say, section 41 wasn’t available.

Blanchard J    But if they did deliberately choose that route in order to get a particular advantage, it seems to me inappropriate for a court to say that failed because they didn’t have power to do it, never mind they could have gone another route, one they eschewed.

Camp              Yes.    Well  all  I  submit  is  that  one  looks  at  what  was  trying  to  be achieved, which was the benefiting of Mrs Couper and children and say that was not a materially different outcome and effect and that therefore the power that they did have should be seen as the one that they were entitled to rely on.

Elias CJ          Was I too hasty to say that there is a hotchpot clause in respect of appointments as well as advancements here because

Camp	I think there is just

Elias CJ	because if it doesn’t apply to appointments

Camp	Yes that one applies to appointments

Elias CJ	Oh that one applies to appointments.  Yes

Camp	That’s what the Court of Appeal is saying.

Elias CJ          And the other one I think s 41 brings it in in terms of advances, yes I was just wondering whether there was a difference in effect.

Camp              The reason they mentioned it in 79 was to say that they weren't that sure that  re-settlement  could  occur  without  the  consent  of  Mrs  Couper because  the  hotchpot  seems  to  count  against  the  ability  to  re-settle because of Henry Morris’s limitations on the words in all respects.   I have answer the question, well I have replied to the question that was asked of me before lunch and if there are no other questions on that part of it then I should move to supporting the Court of Appeals decision that s 41 route is available in the alternative, because that is where the judgment next goes.

Tipping J	 Having said that it wasn’t, there was no power of advancement. Camp	Pardon Sir.

Tipping J        Having said, the Court of Appeal this is, that there was no power of advancement, did they then say there was in the alternative a power of advancement?

Camp              I didn’t think so Sir, I thought that they said in the first place that you could get home a transaction could be validated by looking at it as the exercise of the power under clause 4 together with the consent of Mrs Couper fullstop.

Tipping J        But  you  would  only  need  to  do  that  if  there  was  no  power  of advancement.  Because they would have…perhaps I better let you get out of it.

Blanchard J    And if you could do that there was no need for the power of advantage, it goes in a circle.

Tipping J        I just can’t understand this.   But anyway you will know doubt try and shed some light.

Elias CJ          Before you pass on, can you just explain to me your understanding of paragraphs, first the relevance of the consideration in paragraph 87 of the Court of Appeal decision and then what they meant by paragraph 88.

Camp              The argument being advanced to the Court of Appeal was that the power of advancement to s 41 could not be used to benefit Mrs Couper because she was not entitled to income and there the proposition was that because the substance of the transaction necessarily required what was effectively an appointment in favour of Mrs Couper, because that’s how the transaction should be seen, once one sees that line in place, then she does have a sufficient interest to qualify in income terms under s 41, sorry in capital terms under s 41, because of the decision made to appoint.  And therefore the argument that she.

Blanchard J    But if there was a decision made to appoint, then you could see it under clause 4, I can’t understand how you get to s 41.  I appreciate this is the Court of Appeal’s argument, not your’s Mr Camp.

Tipping J	But you are espousing it aren’t you. Camp	Yes, well I am supporting it Sir.
Anderson J       So what they are saying in effect is well, she wasn’t appointed, but because she could have been, it might possibly have been, we will treat her as some of his entitled in terms of s 41.

Tipping J        That with great respect is nonsense.  I mean you can’t say, she’s either entitled under s 41 or she isn’t.   Now it's clear, she isn’t, you can’t hypothesise that if certain things had happened which would have removed  the  need  to  make  the  power,  to  exercise  the  power  of

advancement anyway, she therefore becomes entitled.   That’s just with great respect, both circular and odd.

Camp	That’s a kind way to put it.

Tipping J        I have got a huge question mark, like the Chief Justice’s question mark.  I have got a huge question mark on both sides of this paragraph.   And please try and justify it if you can Mr Camp, but on the face of it it's just a dog chasing it's tail.

Camp              Well I accept that it's all a rolled up transaction so to speak, because it is all done in the one.   But necessarily the Court of Appeal’s argument, proposition, has to start with saying that the trustees are making the decision to appoint in favour of Mrs Couper and if they stop at that point and say now she has an interest and therefore she qualifies in terms of s 41, so that being the case the route we will take is the s 41 route under the power of advancement now that the doors open.

Tipping J         She would have qualified if something had happened which would have removed the need to exercise the power at all.
Blanchard J	What kind of appointment was it that hypothetically was being made. Camp	One that recognised the existence of the deed that we are talking about.
That is they have decided it's going to be done on the day in the one document and they are saying that our powers are wide enough for us to select Mrs Couper and then to go down s 41 track.

Anderson J	Why.

Camp	That seems to be what they are saying.

Elias CJ          That would not have achieved what they achieved because as Justice Anderson has said it would have entailed passing over a control they wish to retain.   So the effect of what they did was to take out some objects and to bring in some other objects, otherwise it remains the same. So it's a re-settlement.

Camp	Yes

Anderson J	And they describe it as such in the deed poll.

Tipping J        That is a very illuminating word actually.  That’s what they thought they were doing without any power.

Camp	It's bizarre if they had said settlement then that point wouldn’t arise. Tipping J	Re-settled.
Camp	No no, but if they had said settlement in that point.

Anderson J     I think reality is a re-settlement but it brings in someone who was not an object in the original trust.

Camp              I don’t want to be the one chopping and changing but if I do jump back to the previous argument, then under the paragraph 112 cases that’s permissible. It's only now that I am moving onto this.

Anderson J	In certain circumstances.

Camp	In certain circumstances, it's just now that I am moving onto s 41.

Tipping J        But if this new trust has been established, yes I am looking at 88, if hypothetically this new trust has been established to enable Mrs Couper to be a final beneficiary in it, then ex-hypothesise surely, the asset, the subject  of  the  power  of  advancement,  is  already  vested  in  the  new trustees.  Then they come back and say they are in effect sort of seeking to do it twice.

Elias CJ	It's just boot straps.

Camp              Yes what you are saying is the old trust already dead, so the s 41 can’t possibly get off the ground.

Blanchard J	The dog very nearly caught up with it's tail.

Tipping J        Yes it was having a good chomp at it and as I say nearly got there.  But it's just with great respect, it just doesn’t work.  The hypothesis damnifies the need to make the power of advancement at all, because you have already, on the hypothesis, achieved what you have set out to achieve.

Camp              I don’t know that I can support it otherwise than by saying, that you have to just look at it as a, I have got all of these powers and when I start this is the position I start from when I finish that’s the position I finish on. Rather than breaking it into boxes and saying sorry you have already shut that door.

Tipping J        But if this precedent, if we were to endorse this precedent you would get people claiming to be entitled by some extraordinary sort of boot straps argument.  As I say, you are either entitled or you are not.  You can’t be hypothetically entitled.

Camp	Yes I don’t think I can take it further really Sir. Tipping J	It's a very difficult thing to try and
Anderson J	To be contingently entitled [inaudible] but you can’t be only potentially. Tipping J	Well you can’t be entitled on hypothesis.

Camp              Well Justice Tipping’s proposition is that by the time you are entitled then the s 41 powers dead.

Elias CJ	Yes in respect of the old trust. Camp	In respect of the old trust.
Tipping J	There are all sorts of things with respect that are wrong with this reason.

Camp              Well Sir that was the Court of Appeal’s alternative basis for upholding the transaction.

Tipping J        Well it's yours too, and you are not abandoning it.  But you can’t press it any further.

Camp              No I'm not, no I don’t think I can take it further Sir, but I am not abandoning it.  Sir that’s Mangaheia unless your Honours wish to hear it further.  Those are my submissions.

Elias CJ          Thank you Mr Camp.  Mr Osborne you weren’t intending to address us were you.

Osborne	No I don’t intend to follow the benefit of discussions with Mr Camp. Elias CJ	Thank you.  Yes Mr Kós.
Kós                 Thank you your Honours.  Might I make four points about Pouni and two about Mangaheia.  In relation to Ponui and fraud on a power the focus is on intention not effect, and that is so no matter which century and which swinging back and forth between centuries and authorities we apply.  The effect of and that’s the first one I want to make, the focus is on intention. The next question is what is the significance of concurrence of the object. In my submission the concurrence of the object in the transaction is not a relevant consideration Wong v Burt is the authority for that.   The real question is whether the object is free to act as she pleases, or whether a legal or moral duty to the appointor, to apply for non-objects exists as the appointor intends.  I will come back to that point in a moment because I want to take your Honours to a passage from Thomas and my friend didn’t go to and which assists I understand this rolled up case that he was dealing with a rolled up settlement.  The third point I just want to touch on briefly is this, in the trustee the settlor sets the rules.   The settlor defines by the entry into deed the extent of the power or scope, not the power to appoint.  So to allow an object to concur with forming a trust is tantamount for saying that a trust that says pay to X is in effect saying pay to X or for the benefit of X.  Now the Court of Appeal in paragraph
81 referred to the Morris decision. It was by reason of the application the Morris decision that it was considered that the power to appoint in this case did not extend to appointment onto trusts.   In other words the appointment had to be for the benefit of the object, not a trust more generally for the benefit of associated persons or incidentally effective or

beneficial persons.  So if one by looking at the supposed concurrence of the object allows what is a narrow power to become a broader power, a power to settle on trusts as here for the benefit of others, and that is a fundamental change to the approach that conveyances have taken according to authority.  Now my friend Mr Camp made quite a lot of the Goldsmids line of authorities these are the rolled up double settlements. And in a sense those authorities can be seen to be inconsistent with the application of fraud on a power in the purer Vatcher and Topham approach which I contend for.   But it is I think worth and taking a moment to look at what Professor Thomas has to say about that, at the very dying section of my friend’ supplementary bundle, in fact it dies incompletely because there is a word missing which I will have add it.

Elias CJ	Supported is it.

Kós                 Yes that’s it.  Yes well all the excitement now has gone from my territory to reveal that word.  But I think with your Honour Chief Justice got to the text around about paragraph, foot note 66.   Can we go beyond that. Looking at these cases because 66 is the one that deals with the Goldsmid case, the other ones referred to in paragraph 112, Professor Thomas goes on to say the mere existence of a contract or bargain between appointor and appointee for a settlement is not enough to avoid the appointment: it must be shown that, but for the contract or bargain, the appointment would not have been made.  Thus, an appointment made in favour of a non-object may in exceptional circumstances, be upheld if it is made with the consent of an object, whether the subject-matter of the power be property in possession or reversion.   Here’s the important point.   The question in each case is what character, in what character does the appointee take the property, now that’s Professor Thomas lifted that straight from the judgment in Birley v Birley.  In what character does the appointee take the property.   The appointment is in substance for his absolute use and benefit the appointment is good.  But if the appointers purpose is to affect distribution amongst persons not object to the power, the appointee merely being a conduit the appointment cannot be supported.  In the submission I make in relation to that is that this is in this case precisely a conduit case where Mr Couper’s intent to provide for  objects  and  non-objects  was  completed  in  a  transaction  as  he intended, affected by documents prepared by his solicitors and approved by the trustees and immediately settled by Mrs Couper on trusts and on objects.  It is completely unreal to imagine that she would exercise her power to eliminate some of the listed non-objects, given her relationship with them.  The counter of the very point that Justice Tipping put to my friend Mr Camp.  So that’s the point I want to make in relation to Ponui, there are really two points, one was a conveyancing point and the second one was the significance and concurrence.   In relation to Mangaheia, I simply wanted to make one point to your Honours and it is this, the cases that my friend relied on, cases like Eardley Wilmot and Collins, are cases that deal with an intended power mis-described.  They are cases that are similar to any equitable case concerning rectification.  Where the intent is to use a particular power buts it's just been mis-described.  But here the

intent and the power coincided it was just that the power was wholly inapplicable.  So the proper way to look at the question of the power of appointment,  is  that  it  was  a  power  not  exercised,  not  that  it  was exercised by substitution or by some kind of well unstated intent, and so it falls within the principles described in the relevant passage from Halsbury that deals with non-exercise of powers and that is in the reissue of volume 36 at paragraph 961 and what the learned editor there says is in general equity will not grant relief against non-execution of a power as distinct from defective execution even if it occurred through accident or mistake and the only exception identified to that is if the reason for the non-execution or non-exercise of the power was as a result of the fraud of a person benefited by the non-exercise.  So my submission the failure in this  case  to  exercise  the  power  of  appointment  was  (a)  adverted  to because of deliberate intent to exercise the power of advancement and (b) the authorities are such that a courts thence step into what is not a mis- description or rectification case and say well here is another power that can be exercised instead.

Anderson J      That’s just because the Court would then be exercising the powers that only the trustees can properly exercise.

Kós                 Yes and that is so and then the position would be what are the relevant considerations  that  would  apply  and  as  I  think  was  identified  in discussion with my friend Mr Camp a moment ago, considerations that apply as between an advance and appointment are very different.  They involve different classes of person and different considerations and in relation to appointment if what was intended here was a resettlement then it wasn’t just a question of an appointment, there were three powers that will need to be exercised, the power to bring for the date of distribution, the appointment and then the distribution.  So it's a mighty raft of powers that are to be exercised in substitution, not just one.
If your Honours please.

Elias CJ          Thank you Mr Kós.  Thank you counsel for your submissions.  We will take time to consider our decision.

Court Adjourns 3.05pm