Kennon v Spry

[2008] HCA 56

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(Judgment by: Heydon J)

Kennon
v.Spry

Court:

Judges: French CJ
Gummow J
Hayne J

Heydon JKiefel J

Legislative References:
Family Law Act 1975 - s 4(1); s 79(1); s 85A; s 106B
Matrimonial Causes Act 1959 - s 86(1)
Matrimonial Causes Act 1857 (UK) - s 45
Bankruptcy Act 1966 - The Act
Matrimonial Causes Act 1859 (Eng) - s 5
Finance Act 1940 (UK) - s 43
Corporations Act 2001 - The Act
Duties Act 1997 (NSW) - s 163U(1)
Land Tax Assessment Act 1910 - The Act
Matrimonial Causes Act 1859 - s 5

Hearing date:
Judgment date: 3 December 2008

Canberra

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Judgment by:
Heydon J

[143] The background to these appeals is set out in the reasons for judgment of Gummow and Hayne JJ. It is convenient to adopt the abbreviations there employed.

The question in the appeals

[144] The question in the appeals is whether the Family Court of Australia had power to make the orders it did under s 79(1) of the Family Law Act 1975 (Cth) (the Act). That depends on whether, in the language of s 79(1):

(a)

the proceedings were "proceedings with respect to the property of the parties to the marriage or either of them"; and

(b)

the orders could be described as "altering the interests of the parties to the marriage in the property".

Section 4(1) of the Act defines "property" thus:

" property ", in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.

The proceedings before Strickland J

[145] Strickland J treated the property of the ICF Spry Trust (the trust) as part of the asset pool of the parties: [2005] FamCA 1181. By para 4 of his Honour's orders, the husband was ordered to pay the wife $2,182,302. That sum was significantly in excess of his net assets of $1,732,381 ($1,790,108.15 less $57,727.15 for legal costs). Strickland J considered, however, that the husband's assets were not limited to $1,732,381. He thought that the assets of the trust could be "treated as his property" once the 1998 instrument (excluding himself and the wife from having or obtaining any interest in capital) and the 2002 instrument (setting up the children's trusts) were set aside. The setting aside of the 2002 instrument caused the assets of the trust to increase by $4,760,152. Strickland J implicitly accepted that the order to pay $2,182,302 would not be just and equitable to the husband unless the assets of the trust could be "treated as his property". He appears to have concluded that the assets could be "treated as his property" for two reasons, which are not entirely consistent. The first reason was that Strickland J considered it was open to the husband to reinstate himself as a beneficiary of the trust by revoking the 1983 instrument or cl 2 of it. The second reason was that even though the husband was, after the 1983 instrument, no longer a beneficiary of the trust, his powers as trustee gave him sufficient "control" to cause the trust property to be regarded as his own property.

The proceedings before the Full Court

[146] The second of Strickland J's reasons was expressly disfavoured in the Full Court by both Bryant CJ and Finn J, and apparently also disfavoured by Warnick J. However, Strickland J's first reason, or a variant of it, was upheld by Warnick J, who considered that the husband could "reverse his election". Bryant CJ, while disagreeing with Warnick J, advanced another reason: that the 1983 instrument could be cancelled by agreement between husband and wife. Finn J disagreed with both Warnick J and Bryant CJ in these latter respects.

The position of the husband and the wife after the 1983 instrument

[147] The central issue is whether, even if the 1998 instrument and the 2002 instrument are set aside, it can be said for s 79(1) purposes that by 1983 either spouse had "property" in the assets of the trust.

[148] The 1983 instrument was not set aside by the courts below. The wife has not attempted to have it set aside at any stage. It deprived the husband of any possibility of beneficial interest in the trust. That left the wife as one of the "beneficiaries" of the trust as defined in cl 4 of the trust, being a person married to one of the issue of the husband's father. But she had no entitlement to any part of the income or capital before the "date of distribution" as defined in cl 4 or at the time when the trust was terminated under cl 5. She could only receive income or capital if the husband, as trustee, decided to pay it, and that lay in "his absolute discretion": cl 6. ^[87] If the trust were terminated before the date of distribution pursuant to cl 5, she had no entitlement: the fund was to be equally distributed among the male beneficiaries other than the husband. ^[88] At the date of distribution the fund was to be divided among such of the beneficiaries as the trustee thought fit -- a class which included the wife -- and, in default, among the male beneficiaries other than the husband: cl 7. ^[89] Should cl 6 and cl 7 fail, the fund was to be held for charitable purposes. ^[90]

[149] Under the trust, the wife was the object of a bare fiduciary power of appointment. So was the husband. These are not propositions which the wife did or could contest. Indeed, she accepted them. From 1983 the husband ceased even to be an object of the power.

[150] If in 1983 neither spouse had "property" in the assets of the trust, it would not be necessary to engage in tasks which consumed the energies of the parties to a very large extent, namely to consider the correctness of Strickland J's reasons for concluding that the assets could be "treated as" the husband's property, or Warnick J's reason, or Bryant CJ's reason. If neither spouse had "property" in the assets, the proceedings could not have been proceedings with respect to the assets, and the parties would have no interests in the assets to be altered. The courts below did not examine this line of thought. Perhaps the parties did not invite them to. But in this court it was raised.

The positive argument of the trustees and the husband, and the positive argument of the wife

[151] The trustees and the husband to some extent advanced a positive argument that neither spouse had property in the assets of the trust. That argument concentrated on the position of the spouses as objects of the trustee's power of appointment (as they both were before 1983, and as she was thereafter). The wife advanced a separate positive argument as her "primary fundamental submission". It concentrated not on the position of the spouses as objects of the trustee's power of appointment, but on the position of the husband as trustee coupled with the absence of any beneficial interest in any person. It is convenient to examine these arguments in turn.

The positive argument of the trustees and the husband summarised

[152] Mr D F Jackson QC, who appeared for the trustees of the children's trusts, submitted that no one was entitled in possession or reversion under the 1981 instrument, but that the objects of the trustee's power of appointment merely had hopes or expectations coupled with a right of due administration of the trust.

[153] Mr A J Myers QC, who appeared for the husband, supported that submission. Although one of the orders sought by each of Mr Jackson and Mr Myers in their respective written submissions in-chief was consistent with these submissions, ^[91] the submissions were put somewhat briefly, largely in answer to questions from the court and only in oral address in reply.

[154] Messrs Jackson and Myers did accept that a word like "property" is a word of very general and shifting meaning and that when used in a statute it takes its meaning from the context and objects of the statute. They contended that even if the wife's right of due administration of the trust were assumed to be a right of property, it would not fall within s 79(1)(a) of the Act. That is because the "proceedings with respect to the property of the trustees or either of them" in this case were not proceedings with respect to the right of due administration. They were proceedings with respect to assets -- land, shares and money -- not proceedings with respect to the right to ensure that those assets were duly administered. That is, the wife had no proprietary right in "the assets in respect of which the right to due administration exists"; she only had a right to due administration, and that was not property the subject of the proceedings.

[155] Mr Myers adopted a submission of the judges of the Family Court to a joint select committee of the Parliament of the Commonwealth. The committee's report records the submission thus: ^[92]

Although the court has wide powers to deal with property under s 79 it can deal directly only with legal and equitable interest [sic] which a spouse holds in relation to property. The court cannot deal directly with the unascertained interest which a spouse may have in a discretionary trust.

The attitude of the wife to the positive argument of the trustees and the husband

[156] In Gartside v Inland Revenue Cmrs, ^[93] Lord Wilberforce (Lord Hodson concurring) held that the death of one of the objects of a bare power of appointment of income did not fall within the following words in s 43 of the Finance Act 1940 (UK): "an interest limited to cease on a death has been ... determined ... after becoming an interest in possession". In his opinion the objects had no "interest" because no single member of the class had any right to income, and, even if they were considered collectively, they had no right to income because the trustees could accumulate the whole of it. ^[94] The objects did not have "an interest, in more than the broadest popular sense , in the fund ". ^[95] Lord Reid (Lords Morris of Borth-y-Gest and Guest concurring) held that the object of a bare power of appointment did not have an "interest", and even if there were an "interest" it was not an "interest in possession". He said: ^[96]

"In possession" must mean that your interest enables you to claim now whatever may be the subject of the interest. For instance, if it is the current income from a certain fund your claim may yield nothing if there is no income, but your claim is a valid claim, and if there is any income you are entitled to get it. But a right to require trustees to consider whether they will pay you something does not enable you to claim anything. If the trustees do decide to pay you something, you do not get it by reason of having the right to have your case considered: you get it only because the trustees have decided to give it to you.

[157] The wife accepted the applicability to the trust of what Lords Reid and Wilberforce said. She submitted, citing what their Lordships said: ^[97]

No member of the nominated class of objects had a beneficial or proprietary interest in any of the corpus or income of the Trust. What any object had under the Trust was a mere expectancy; an expectation or hope that the trustee may exercise his discretion in his or her favour by the making of a gift.

[158] The wife thus accepted that "the objects had no interest in possession nor an immediate entitlement to income as it accrued, receiving a vested interest only when and to the extent the trustee, in exercising his discretion, distributed trust capital or income to them". For that proposition the wife relied on a statement in Pearson v Inland Revenue Cmrs by Viscount Dilhorne ^[98] that in the legislation there under consideration the words "'interest in possession' ... should be given their ordinary natural meaning which I take to be a present right of present enjoyment".

[159] The wife, then, agreed with the contention of the trustees and the husband that she had no beneficial interest in possession arising out of her right to "be considered as a potential recipient of benefit by the [trustee] and a right to have [her] interest protected by a court of equity". ^[99] Members of the court did raise with counsel for the wife the question whether her right to due administration meant that she was "entitled" to property. Counsel then said he wanted to put the matter on two levels or in two ways. The first way was his "primary fundamental submission". ^[100] "The second way is that it may be that the wife's right to due administration of itself can be treated as a matter to which [she] is entitled in possession" (emphasis added). But, although alluded to once later, this was no more than a courteous acknowledgment of, or a forensically tactful gesture to, the idea advanced by members of the court. Counsel for the wife never in fact put the "second way" in detail. Indeed, he never returned to the subject in any significant fashion. This course was not the result of oversight. It was taken because counsel for the wife did not wish to advance the "second way". He did not wish to advance it because the contrary of it was seen as a necessary step towards acceptance of his "primary fundamental submission". That primary submission was that if there were no owner in equity for an estate of freehold in possession, "the trustee is entitled to the whole estate in possession, both legal and equitable". ^[101] And counsel for the wife never put a submission that once the 1998 instrument and the 2002 instrument were set aside, the wife's potential enjoyment of the whole of the assets of the trust (in the event that the trustee's power of appointment was exercised in her favour to that extent) was property of a party to the marriage. Any submission of that kind would have been equally damaging to the wife's primary argument. However, the case is not to be decided merely in accordance with the tactical manoeuvrings of the parties, or their agreement on particular legal outcomes. The wife's agreement with the positive argument of the trustees and the husband does not make it right. Is it right?

The positive argument of the trustees and the husband is correct

[160] The position of an object of a bare power. The proposition asserted by Lords Reid and Wilberforce in Gartside ^[102] was that the object of a bare power of appointment out of assets has no proprietary interest in those assets, but only has a mere expectancy or hope that one day the power will be exercised in that object's favour. In that case it was asserted in an estate duty context. It has been asserted many times and in many contexts. Thus a settlement of an "interest whether vested or contingent" does not capture a payment of money pursuant to a bare power of appointment. ^[103] The object of a bare power of appointment cannot assign the "rights" the object has. ^[104] An injunction restraining a defendant from removal of "assets" was not contravened by transactions causing the defendant to cease to be an object of a bare power of appointment. ^[105] The "interest" of the object of a bare power of appointment did not fall within the following definition of "property" in the Corporations Act 2001 (Cth):

... any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action. ^[106]

[161] The position of a residuary beneficiary of an unadministered estate compared. It is true that the object of a bare power of appointment has "a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity". ^[107] But although the position of the object of a bare power of appointment is sometimes compared with that of a residuary beneficiary of an unadministered estate, it is very different. The right of a residuary beneficiary of an unadministered estate to have the estate duly administered ^[108] can be assigned ^[109] or devolve upon death. ^[110] The residuary beneficiary, while having no beneficial interest in any particular asset of the unadministered estate, ^[111] is correctly described as being entitled to the appropriate share of the residuary estate ^[112] and hence as having "property" within the meaning of a broad legislative definition of that expression. ^[113] None of these characteristics are shared by the object of a bare power of appointment. The object's position depends on the discretion of another. The position of the residuary beneficiary of an unadministered estate does not.

[162] Assignability. In particular, it is of some significance that the object of a bare power of appointment is incapable of assigning the relevant rights. ^[114] In National Provincial Bank Ltd v Ainsworth, Lord Wilberforce said: ^[115]

Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.

Of course, what "property" means depends on the context in which and the purpose for which the word is being used. But Lord Wilberforce's statement has been approved more than once in this court. ^[116] And on one of those occasions Mason J said: ^[117]

Assignability is not in all circumstances an essential characteristic of a right of property. By statute some forms of property are expressed to be inalienable. Nonetheless, it is generally correct to say, as Lord Wilberforce said, that a proprietary right must be "capable in its nature of assumption by third parties". [Emphasis added.]

That points against treating the rights of the wife, as an object of a bare power of appointment, as falling within the words of the definition of "property" in s 4(1) of the Act: "property to which [she] is ... entitled, whether in possession or reversion".

[163] Unreasonable results of extending " property ". If the arguments of Mr Jackson and Mr Myers under consideration were to be rejected, it could only be because the definition of "property" was given an extended meaning. It would be an extended meaning which would lead to a wholly unreasonable result. For it would mean that if a discretionary trust existed under which a wife was among a class of objects of a bare power of appointment having thousands of members who had nothing to do with her family or the husband's family, the Family Court of Australia would have power to make a s 79(1)(a) order altering her "interests" in the assets of that discretionary trust favourably to her. It may be suggested that the absurdity can be overcome by postulating that the court, properly exercising its discretion, would never do so if its order was adverse to the interests of objects other than the husband and the wife. That is to postulate a "discretion" which can only be exercised one way. A "discretion" which can only be exercised one way is not a discretion at all. The result that the court has a "discretion" which it can only exercise one way is wholly unreasonable. It is an outcome which strongly suggests that there is in truth no power to consider exercising so empty a "discretion" because the wife's status as an object of the bare power of appointment is not within the definition of "property". "If giving an extended meaning to a word in an Act ... leads to a wholly unreasonable result, that is a very strong indication that the word was not intended to have that extended meaning". ^[118]

[164] The wrong property rights. Even if, contrary to the reasoning employed above, ^[119] the wife's rights are "property" rights, they are not forms of property to which the proceedings were directed. The proceedings were directed to obtaining orders enabling the wife to gain access, directly or indirectly, to the assets of the trust. In those assets she had no property. Ultimately, then, the question what "property" means must be understood in the context in which the word is used in the legislation containing it. In s 79(1)(a) of the Act the word "property" is used in the context of granting a power to make an order altering the interests of the parties, or one party, in the property. Where the enjoyment by the wife of the property of the trust after the 1983 instrument depended not on any decision by her, but on a decision to be made by the trustee in his "absolute discretion" -- and the husband need not have remained either the trustee or her husband -- there appears to be no work for s 79(1)(a) to do. The difficulty of altering anything which the wife had in a manner useful to the wife suggests that she had no "property" to be altered.

[165] What language would do ? It is possible to conceive of statutory language which could go as far as the wife's goals require. Thus s 163U(1) of the Duties Act 1997 (NSW) provides:

(1)

A person or a member of a class of persons in whose favour, by the terms of a discretionary trust, capital the subject of the trust may be applied:

(a)

in the event of the exercise of a power or discretion in favour of the person or class, or

(b)

in the event that a discretion conferred under the trust is not exercised,

is, for the purposes of this section, a "beneficiary" of the trust.

Section 163U(2) provides:

(2)

A beneficiary of a discretionary trust is taken to own or to be otherwise entitled to the property the subject of the trust.

The Dictionary defines "discretionary trust" as meaning:

... a trust under which the vesting of the whole or any part of the capital of the trust estate, or the whole or any part of the income from that capital, or both:

(a)

is required to be determined by a person either in respect of the identity of the beneficiaries, or the quantum of interest to be taken, or both, or

(b)

will occur if a discretion conferred under the trust is not exercised, or

(c)

has occurred but under which the whole or any part of that capital or the whole or any part of that income, or both, will be divested from the person or persons in whom it is vested if a discretion conferred under the trust is exercised.

Had the Act contained language of that kind, the wife would have been a "beneficiary". But no equivalent to that language appears in any relevant provision of the Act. The language actually employed in the Act is not apt to give the court power to make s 79 orders in relation to the assets of a "discretionary trust" ^[120] of the type illustrated by the trust by reason merely of the right of objects of the power of appointment to enforce due administration and to be considered for favourable exercise of the power. Accordingly the submission made by the judges of the Family Court to parliament was correct. ^[121] So are the arguments of Mr Jackson and Mr Myers.

The wife's primary submission

[166] Submission not put below. Counsel who appeared for the wife in this court did not appear in the courts below. Although the primary argument which he advanced in this court was formulated, both in the notices of contention ^[122] and in argument, in terms capable of being read as suggesting that it had been put to the Full Court, nothing in either the three judgments delivered in that court or in Strickland J's judgment suggests that it was put in either court below. A perusal of those of the voluminous oral and written arguments of the parties in both courts which have been placed before this court supports the view that it was not put. At trial the husband simply denied that the assets of the trust were property of either party to the marriage since neither had a beneficial interest in them. The wife appeared simply to have assumed that s 79 was capable of being applied. The wife seems to have done so on the basis of the "control" theory relied upon by Strickland J. However, although the written submissions of the trustees and the husband in this court gave the argument so little attention as to suggest that they did not recognise it, they did not contend that this court could not entertain it. It is regrettable that this court is deprived of the views of the courts below on the wife's primary submission, but in the present circumstances that is no bar to its being considered.

[167] Submission summarised. In its simplest terms, the primary submission of the wife was as follows.

(a)

The husband was trustee of the trust, with the powers of an absolute owner to invest or deal in the trust property (cl 9).

(b)

Because the trustee's power of appointment under the trust was a bare power of appointment only in relation to both income and capital, none of the objects of the power had any beneficial interest in possession or reversion. Nor did the classes which were to take in default of appointment in the event of the trust being terminated under cl 5 or on the date of distribution under cl 7.

(c)

If the legal estate in property is vested in a trustee, and there is no person entitled to the property in equity, then in Griffith CJ's words in Glenn, "the trustee is entitled to the whole estate in possession, both legal and equitable". ^[123]

(d)

Accordingly Strickland J had power to make the orders he did regardless of whether the husband was an object of the power of appointment or not.

Rejection of the wife's primary submission

[168] Amplitude of orders. These contentions were supplemented by arguments about the amplitude of the orders that may be made under s 79. Their potential amplitude may be conceded; but whether orders, however ample, can be made depends on whether there are interests of the parties in "property". The potential amplitude of the orders does not necessarily point to amplitude in the meaning of "property", and may point against it.

[169] Griffith CJ's qualification. When considering what Griffith CJ said as a general matter, independently of any particular statutory context, it is necessary to note one additional thing which he said: "The essential element of an 'estate in possession' is ... that the owner of it has a present right of beneficial enjoyment". ^[124] The expression "present right of beneficial enjoyment" is ambiguous. It can mean a right of personal enjoyment. Or it can mean enjoyment subject to a trust which narrows or negates any right of personal enjoyment. While in the example Griffith CJ was considering the trustee had "a present right of beneficial enjoyment", it would be a right qualified, perhaps severely, by the terms of the trust. For example, in the trust under consideration in these appeals the husband had no right after 1983 to beneficial enjoyment in the sense of being able to take for himself any of the assets. His only right of beneficial enjoyment was to hold the assets and accumulate the income, so far as appointments were not made out of it, for the benefit of the objects of the power of appointment and for those who would take in default. Even before 1983 the husband had no right of beneficial enjoyment in the sense of personal enjoyment until he decided to make an appointment to himself -- a decision not to be made without some consideration of whether or not appointments should be made to any other member of the class of objects. ^[125]

[170] Vested interests. There is another aspect of the trust to be borne in mind in considering the wife's argument. Clause 7 provides that at the date of distribution (which may be as late as 2068: cl 4) the fund shall be divided among such of the beneficiaries as the trustee thinks fit, and, in default, "shall be divided among all male beneficiaries equally with the exception of the settlor". At the time of the trial there were two male beneficiaries alive, namely two nephews of the husband, Andrew and Richard Gardner. They were then over 18. What, if any, is their interest in the assets of the trust?

[171] Re Brooks' Settlement Trusts ^[126] is a case in which Farwell J considered a marriage settlement giving the income of the fund to the wife for life; directing that the fund be held in trust for such of her issue as she might by deed or will appoint; and providing that in default of appointment the fund be held in trust for all her children who being sons should attain the age of 21 years or being daughters should attain that age or marry in equal shares. One of her children, a son, executed a voluntary settlement whereby he assigned to trustees:

... all the part or share, parts or shares and other interest whether vested or contingent to which the settlor is now or may hereafter become entitled whether in default of appointment or under any appointment hereafter to be made or on failure of any such appointment of and in the trust property ... subject to the wife's settlement.

The question was whether a sum of money which his mother applied to him pursuant to her power under the marriage settlement fell within the voluntary settlement. Farwell J held that it did not, because until the appointment was made, the son had no interest in the fund other than a vested interest in default of appointment: ^[127]

... [F]or the rest, he had nothing more than a mere expectancy, the hope that at some date his mother might think fit to exercise the power of appointment in his favour; but, until she did so choose, he had nothing other than his interest in default of appointment ... Apart from this he was not contingently entitled at all; he had no interest whatever in the fund until the appointment had been executed.

However, before reaching this conclusion, Farwell J said: ^[128]

... [I]n the case of a special power the property is vested in the persons who take in default of appointment, subject, of course, to any prior life interest, but liable to be divested at any time by a valid exercise of the power, and the effect of such an exercise of the power is to defeat wholly or pro tanto the interests which up to then were vested in the persons entitled in default of appointment and to create new estates in those persons in whose favour the appointment had been made.

Farwell J quoted ^[129] the following passage from his own edition of Farwell on Powers:

The exercise of a power of appointment divests (either wholly or partially according to the terms of the appointment) the estates limited in default of appointment and creates a new estate, and that, too, whether the property be real or personal.

One other passage from Farwell on Powers is relevant: ^[130]

The existence of a power of appointment does not prevent the vesting of the property subject to the power in the persons entitled in default of appointment, until the power be exercised.

Further, Lord St Leonards was adamant that the interest of the class taking in default of appointment was not contingent, but vested. ^[131] The donee of the power in Re Brooks' Settlement Trusts was not, unlike the donee of the power in this case, a trustee, but that makes no difference. ^[132]

[172] The husband's two nephews are not entitled in possession. Their interests are vested, but vested only in interest, not possession. Their position, though, highlights the fact that even if Griffith CJ's words are considered as a general or abstract proposition, under the trust the entitlement of the trustee "to the whole estate in possession, both legal and equitable" is a highly qualified entitlement.

[173] The context of Griffith CJ's words. But it is not satisfactory merely to consider Griffith CJ's words as a general or abstract proposition. The meaning of words in statutes, and the application of general equitable conceptions in relation to those words, must depend on the nature and context of the particular statute. Griffith CJ was seeking to determine whether the appellants in the case before the court -- the testator's three sons, among whom the testator's residuary estate was to be divided after a period in which the trust income was to be accumulated -- were liable to pay land tax. Griffith CJ was considering the meaning of the word "owner" in the Land Tax Assessment Act 1910 (Cth). In particular he was considering the following words in the definition of "owner" in s 3: "every person who ... whether at law or in equity ... is entitled to the land for any estate of freehold in possession". He considered that "estate in possession" in s 3 had the meaning which Butler's notes to the 10th edition of Fearne on Contingent Remainders gave it: "a right of present enjoyment". ^[133] Griffith CJ said: ^[134]

This is not only the natural, but the only just, interpretation that can be put on the words. For the tax is an annual tax, and the "owner" of the land is the person who is in the present enjoyment of the fruits which presumably afford the fund from which it is to be paid.

[174] The present context. Accepting the correctness of what Griffith CJ said, it does not follow from the fact that the trustee of the trust in these appeals was entitled to the whole of the trust assets, both legal and equitable, and hence to the present enjoyment of them, subject to his duties as trustee, that for the purposes of the definition of "property" in s 4(1) of the Act the assets comprised property to which he was entitled in possession or reversion. That is because the purpose of the definition is to enable the parts of the Act to which it relates to function. The interests of one spouse as trustee, even in circumstances giving that spouse entitlement to the whole of the assets in possession, are not "property" of the type contemplated by the Act. If they were, it would follow in divorce proceedings that the assets of the trust could be disposed of to the wife at the expense of other members of the class of objects of the power of appointment. That class did not include only the wife and the children. It included the husband's two sisters, their spouses, and their children (of whom, by the time of the trial, there were four). ^[135] The conclusion that a power of this kind exists, even if, as the wife submitted, the court would not as a matter of discretion exercise it adversely to third parties, is surprising. It is surprising that the court should even have to consider the exercise of discretion in those circumstances. It is so surprising that there must be a flaw in the reasoning that led to it. The flaw is the transposition of Griffith CJ's words from the context of the land tax legislation he was considering to s 4(1).

[175] Conclusion. The definition of "property" in s 4(1) contemplates interests in property either owned otherwise than as trustee, or owned as beneficial interests in a trust, so that those interests can be adjusted by orders made under s 79. The definition does not contemplate entitlements as trustee. The wife's submissions would enable a trustee who is not in law entitled to any personal enjoyment of the trust property, and who could never by his or her own act become entitled to any personal enjoyment of it, to be treated as though he or she were so entitled. The wife's submission would mean that if a husband (or a wife) were trustee of a discretionary trust having a bare power of appointment among persons who are not related to the trustee, and who did not include the trustee, the trustee would be, within the meaning of the definition of "property" in s 4(1), "entitled" to the assets, and the "interests" of the trustee reflected in that entitlement would be altered to the advantage of the other party to the marriage. In Ascot Investments Pty Ltd v Harper, Gibbs J said: ^[136]

... [I]t would be unreasonable to impute to the Parliament an intention to give power to the Family Court to extinguish the rights, and enlarge the obligations, of third parties, in the absence of clear and unambiguous words ...

Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it. ^[137]

Mr Jackson cited these statements. Counsel for the wife attempted to distinguish them, but not convincingly. The words used to define "property" in s 4(1) are not sufficiently "clear and unambiguous" to validate the wife's argument. Further, just as s 79 does not permit the Family Court to ignore the existence of conditions and covenants affecting property which limit the rights of the party who owns the property, so too it cannot ignore the existence of trust obligations which limit the rights of a party who owns the property and holds the office of trustee.

A subsidiary argument advanced by the wife

[176] The wife drew attention to the fact that so long as the husband remained trustee he, being both trustee and one of the objects of the power of appointment, would be free lawfully to distribute income and capital to himself. This proposition was only true for the pre-1983 period, for after the 1983 instrument (which was not set aside below and which the wife never asked to be set aside) the husband was no longer an object of the power of appointment. Even in the pre-1983 period, however, the husband did not have any property. His position, by reason of being both trustee and object, was not that of a person entitled in possession or reversion. A "general power of appointment" is sometimes said to be "equivalent to property", ^[138] because it enables the donee of the power to appoint to any legal person or charitable purpose in the world, including the donee. That is true in the sense that if a general power is exercised in favour of the donee, the donee becomes owner. But a general power is not the same thing as ownership. Thus in Re Armstrong; Ex parte Gilchrist ^[139] Fry LJ said:

No two ideas can well be more distinct the one from the other than those of "property" and "power" ... A "power" is an individual personal capacity of the donee of the power to do something. That it may result in property becoming vested in him is immaterial; the general nature of the power does not make it property. The power of a person to appoint an estate to himself is ... no more his "property" than the power to write a book or to sing a song. The exercise of any one of those three powers may result in property, but in no sense which the law recognises are they "property." In one sense no doubt they may be called the "property" of the person in whom they are vested, because every special capacity of a person may be said to be his property; but they are not "property" within the meaning of that word as used in law. Not only in law but in equity the distinction between "power" and "property" is perfectly familiar, and I am almost ashamed to deal with such an elementary proposition ...

That being so, have the Courts ever said that such powers are "property?" If they have, it would be our duty to follow their decision. But no such imputation can with propriety be cast on the Courts of Law or Equity; they have always recognised the distinction between "power" and "property."

As Lord Sumner said, "the right to exercise a power is not property". ^[140] Thus a covenant to settle after-acquired property does not catch any property over which the covenantor has a general power of appointment unless and until the power is exercised in favour of the covenantor. ^[141] Hence a general power of appointment is not ownership. It is truer to say that the donee of a general power of appointment is " for all practical purposes in the position of beneficial owner of the property", ^[142] has "a right of disposition which is in many respects the equivalent of property" ^[143] and is " virtually the owner". ^[144]

[177] In any event, the husband's power was not a general power of appointment. It was only a power to appoint among a class of objects to which he belonged, not anyone in the world. And he had no entitlement to any more than any other member of the class.

Applications to amend notices of contention and for special leave to cross-appeal

[178] The applications. The wife sought leave to amend her notices of contention. The contention she wished to advance was that ss 79 and 85A of the Act enabled and permitted the husband to deal with the assets of the trust and the children's trusts so as to comply with para 4 of the orders made by Strickland J. She also sought special leave to cross-appeal with a view to this court making new orders based on s 79 or s 85A or both.

[179] Section 79. So far as these applications rest on a desire to invoke s 79, they are futile in view of the conclusion reached above that the assets of the trust were not property in which the husband or the wife had interests.

[180] Section 85A: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 ; [1950] HCA 35. So far as these applications rest on a desire to invoke s 85A, ^[145] they face the difficulty that s 85A was not relied on in the trial or in the Full Court. It was first raised by the wife in the course of oral argument before this court. The wife argued that the nature of the orders she sought at trial was clearly brought to the attention of the other parties. That is true, but in the second amended application for final orders which does this, while s 106B and Pt VIIIAA of the Act are referred to, s 85A is not. No order specifically depending on s 85A was applied for. This has some significance, because the application of s 85A depends on characterising the trust as an ante-nuptial or post-nuptial settlement. That is a question arguably capable of having factual elements not investigated at trial. The wife submitted that it was "essentially" a question of construction. However, in seeking to answer it favourably, she did not rely only on the terms of the trust, but also relied on evidence, including testimony. If she was right to rely on evidence -- a proposition contested at least by the trustees -- then it would have been open to the husband to have called evidence on the point.

[181] The trustees and the husband contended that since no s 85A questions had been agitated at trial, they could not be agitated on appeal. They relied on the rule that "[w]here a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards". ^[146] Beyond a reference to the adducing of evidence as to the likely future needs of the possible beneficiaries under the trust, the trustees and the husband did not specifically identify what the evidence would have been which by any possibility could have prevented any s 85A point from succeeding, but the wife's reliance on evidence dehors the terms of the trust itself gives plausibility to what the other parties claimed.

[182] There are other difficulties with these applications. In view of the fact that this judgment dissents from the orders proposed by the other members of the court, it will be brief in dealing with the other difficulties.

[183] Post-nuptial settlement ? The trust was not created in 1981. As the courts below found, it was created in 1968, when the husband prepared the document recording the terms of the trust which he did not sign until 1981. Since the husband did not marry until 1978, the trust was not post-nuptial (contrary to the wife's submission). It was made 10 years before the husband married. This difficulty cannot be overcome by treating each disposition of property to the trustee of the trust after the marriage as the creation of a separate trust. To do so is artificial. And to do so is foreclosed by cl 3 of the trust, which defines "the fund" as meaning "the trust fund from time to time in existence." There was one "Trust" on which various items of property were held as a mass, not several "trusts" in identical terms in each of which a series of individual items of property were held separately.

[184] Further, there is a factual obstacle to accepting the multi-trust theory. Strickland J's mind was admittedly not focused on this precise issue because the parties had not raised it. But the language he used in making findings of fact is consistent only with the assets being transferred from time to time into one trust -- the trust -- not a series of trusts. Thus he said (at [164]):

[164] A trust vehicle was used in order to accumulate and use the assets and the income, and ... this does not detract from the circumstance that the assets were the assets of the parties when they went into the Trust. Instead of accumulating those assets in their own names , a tax effective family trust was used with a view to benefiting the family. [Emphasis added.]

It was not submitted that this conclusion was wrong.

[185] This point, incidentally, reinforces the view that the principles stated in Suttor ^[147] do not permit s 85A issues to be considered at this stage. Ultimately the validity of the "multi-trust" theory would depend on the terms upon which the owners of the assets from time to time transferred them to the husband. There is a difference between transferring an asset to the husband as trustee of the trust and transferring an asset to the husband as trustee, to be held on a separate trust having the same terms as the trust. It would be necessary to examine what was written and said when the transfers took place. It has not been shown that the evidence called in that respect is complete.

[186] Made in relation to the marriage ? But can the trust be said to be ante-nuptial? For a settlement to be an ante-nuptial or post-nuptial settlement, it must have a nuptial character: it must have been "made in relation to the marriage". That is, it must have been made in contemplation of the particular marriage in relation to which s 85A is invoked. ^[148] There is nothing in the "recitals or substance" ^[149] of the trust to suggest that it was. The fact that there are persons who are not connected with the marriage to which the settlement is said to relate who are "substantial potential beneficiaries" prevents it being ante-nuptial or post-nuptial. ^[150] At the time of the trial, apart from the four children of the husband and wife, the beneficiaries included the husband's sister, her three children and the daughter of the husband's deceased sister. The beneficiaries in future would include any person who married those five people, together with the issue of those marriages. In 1968 it was foreseeable that the beneficiaries would in due course be as numerous as they have turned out to be, and are likely to be in future. Further, however wide the words "made in relation to the marriage" in s 85A(1) are, and their breadth can vary from statute to statute, they cannot be stretched to establish the necessary relationship between the making of the trust in 1968 and the marriage in 1978. The relevant settlement must be made in relation to the marriage, not simply in relation to marriage.

Conclusion

[187] The conclusions just arrived at indicate that there was no point in setting aside the 1998 instrument and the 2002 instrument as a means of giving the wife indirect access to the assets of the trust: those assets were not "property" within the meaning of that word in s 79. That makes it unnecessary to consider the four bases on which Strickland J, Bryant CJ and Warnick J sought to defend Strickland J's orders. In view of the fact that this is a dissenting judgment, it is not necessary to deal with what was called the "financial resources" issue, in relation to which Finn J held that if the 2002 instrument were not to be set aside, so that the assets of the children's trusts were not to be treated as property subject to s 79(1)(a) orders, those assets should have been treated as a financial resource of the husband, with the result that there would be some adjustment in favour of the wife by reason of s 75(2)(b) of the Act. Nor is it necessary to consider whether the matter should be remitted to the Full Court, and on what issues. There is also no point in considering whether, if the appeals were allowed, the wife should have to pay the costs of all the appellants, or only one set.

[188] It is sufficient to indicate that the appeals should be allowed, the applications to amend the notices of contention should be dismissed and the applications for special leave to cross-appeal should be dismissed.