She was survived by her husband, the plaintiff, and her two children from her previous marriage, the first defendant and Charles Swanson.

When the fund was established, the deceased and first defendant accepted appointment as trustees and the deceased was the sole member. The deceased was also the founder of the fund.

Upon the deceased’s death, the first defendant became the sole trustee of the fund. At the time of the deceased’s death, the death benefit payable was estimated to be $450,416.

Although the deceased executed a death benefit nomination on 12 May 2003 to the benefit of her grandchildren, the nomination had expired, and in any event, purported to direct the benefits to persons other than dependents. No other written nomination was executed by the deceased.

On 17 April 2017, the first defendant resolved as surviving trustee to pay the entire benefit of the fund to herself. Also on 17 April 2017, the first defendant purportedly appointed the second defendant as a trustee of the fund pursuant to section 41(1)(b) of the Trustees Act 1958 and the trustees resolved to distribute the fund to the first defendant.

The plaintiff in his personal capacity, and in his capacity as the executor of the deceased’s estate, sought to remove the defendants as trustees of the fund, the appointment of a new trustee and an order that the defendants repay to the fund any sum that has been distributed, together with interest.

The plaintiff asserted that the defendants did not give real and genuine consideration to the interests of the dependents of the fund and the distribution made from the fund should be set aside.

In its decision, the court considered whether the defendants properly exercised their discretion in resolving to distribute the proceeds of the fund on 17 April 2017; that is, whether they acted in good faith, upon real and genuine consideration and in accordance with the purpose for which the power was conferred.

It also considered whether the trustees should be removed and replaced with an independent trustee.

The defendants submitted that the fund deed afforded them absolute and unfettered discretion. They also submitted that it would be impossible if, in the context of a trust intended to benefit a particular family, a trustee who is a family member could not take part in decisions that benefitted her.

They also submitted that the trustee had a general power of appointment, which was tantamount to ownership, and the plaintiff was misconceived in asserting that such a power creates an inherent conflict.

The defendants said that it was the deceased who placed the first defendant in the position of conflict, with the knowledge that the first defendant could exercise the power of distribution to her own benefit, effectively saying that if the first defendant wanted all of the proceeds she could take them.

As such, according to the defendants, the exercise of the discretion in favour of the first defendant was entirely consistent with the purpose for which the fund was set up, as indicated objectively by the terms of the fund deed.

In her decision, Justice Kate McMillan stated that contrary to the defendants’ submissions, the power of distribution provided in a clause of the deed is a special power, in accordance with which the trustee must distribute the proceeds of the fund to one or more individuals who fall within the class of objects identified.

“The fact that the first defendant falls within the class of objects did not negate her duty to exercise the power in good faith, upon real and genuine consideration, and for the purposes for which the power was conferred,” Ms McMillan said.

Justice McMillan also stated that the appointment of the second defendant as co-trustee only served to compound the personal acrimony between the parties and demonstrated an ignorance or insolence to the circumstances at hand.

“While it can be accepted that the need to avoid a conflict of duty and interest may have been modified regarding the first defendant, the same cannot be said in relation to the second defendant; that is, the second defendant was not appointed at the establishment of the fund and the deceased may not necessarily have intended that the second defendant hold a power of disposition from which his wife could benefit,” she said.

The first defendant’s decision-making process regarding the appointment of the second defendant and ensuring that the fund remained compliant with the SIS Act, she said, appears inadequate.

She concluded that the defendants exercised the discretion afforded without real and genuine consideration to the interests of the dependents of the fund and the exercise of discretion is set aside.

“In the context of an improper exercise of discretion, and significant personal acrimony between the first defendant and plaintiff, the defendants are to be removed as trustees of the fund,” she said.

“The plaintiff is to file further submissions in relation to the identity of a trustee, or director of a corporate trustee, in light of the intention of the fund to be a compliant superannuation fund for the purposes of the SIS Act.”