Barry v Borlas Pty Limited & Ors

Judgment 1HIS HONOUR: This is an application for an order pursuant to s 81 of the Trustee Act 1925 that the first defendant is empowered and authorised, notwithstanding the exception to the power of amendment contained in paragraph 19(i) of the trust deed, to amend the vesting day specified in the schedule of the trust deed to a date not later than 14 June 2057. 2Other incidental orders are also sought. 3The trust is established by a deed made on 15 June 1977. The trust is a discretionary trust established by the plaintiff for the benefit of his wife, children and grandchildren. So much appears, both from the deposition of the plaintiff and from the terms of the deed. 4The deed establishes three classes of discretionary objects. The primary beneficiaries were described as the plaintiff and his then wife, or other wife or widow, children and grandchildren. 5Under clause 3 of the deed, the trustee has a discretion to appoint income amongst the primary beneficiaries, or, if there is no primary beneficiary living, or in existence at the time of determination, then amongst secondary beneficiaries. 6Clause 6 provides that, on the vesting day, the trustee shall stand possessed of the capital of the trust fund upon trust for all of such of the primary beneficiaries as the trustee might determine and, if more than one, in such shares as the trustee might declare. If on the vesting day, the trustee has not made such a declaration, then the capital is to be held for the Residuary Beneficiaries and, if more than one, in equal shares. The Residuary Beneficiaries were defined as the plaintiff, his then wife and "other, his wife, his widow, his children and grandchildren". 7Only if there was no appointment of capital to the primary beneficiaries and no residuary beneficiaries then living would the secondary beneficiaries be entitled to capital on the vesting day. Three secondary beneficiaries were named. Their prospects of being eligible for consideration as objects to whom income or capital might be appointed are remote. 8The trust deed provides that the "Vesting Day" means: "1. Definitions ... (c) The 'Vesting Day' means the first to occur of the following dates, namely: (i) The day specified in the Schedule as the Vesting Day. (ii) The date being twenty one (21) years after the death of the last survivor of the descendants now living of his late Majesty King George VI. (iii) Such other date as may be fixed by the Trustee as the Vesting Day whether by Deed or Memorandum in writing or oral declaration recorded in the Minutes of the Trustee." 9The date specified in the schedule as the vesting day is 31 December 2026. 10Clause 19 confers power on the trustee with the consent of the principal, who is also the plaintiff, to vary, "all or any of the powers or provisions herein declared concerning the Trust Fund with the exception of the Vesting Day". 11The plaintiff is divorced from his former wife, who was named as one of the principal beneficiaries and residuary beneficiaries. He has since remarried. His present wife and his children are primary and residuary beneficiaries. His former wife has entered into an agreement as part of a settlement of proceedings in the Family Court by which she has released all her right, title and interest, if any, in the trust. 12The plaintiff, with the approval of the other primary and residuary beneficiaries, seeks an order to permit the extension of the vesting day, notwithstanding that the trustee does not have power to vary the trust deed in so far as it fixes a vesting day. 13The reasons for seeking such an extension are that the plaintiff and the other beneficiaries are concerned that the vesting of the trust will have adverse tax implications, which are likely to require the sale of assets currently held in the trust. These include partnership property involved in the conduct of a farm. The plaintiff wishes to ensure that the trust continues beyond his death for the benefit of both his children and his wife and any grandchildren he may have. This was the reason the trust was initially established. As the plaintiff does not have grandchildren at the moment, there will be no grandchildren who could obtain majority prior to the current vesting day. 14The plaintiff has built up the trust's interests in primary production over a number of years and he wishes his children and grandchildren to have a continued association with rural Australia. 15As I have said, the other primary and residuary beneficiaries support the application. It does not appear that the views of the secondary beneficiaries have been sought, but their interest is remote. 16This application is, in all material respects, of the same kind as was considered by Campbell J (as his Honour then was) in Stein v Sybmore Holdings [2006] NSWSC 1004. It is unnecessary for me to undertake an extensive review of authority, or the relevant principles, having regard to his Honour's review of those matters. 17Section 81 of the Trustee Act provides: "81 Advantageous dealings (1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court: (a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and (b) may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income. (2) The provisions of subsection (1) shall be deemed to empower the Court, where it is satisfied that an alteration whether by extension or otherwise of the trusts or powers conferred on the trustees by the trust instrument, if any, creating the trust, or by law is expedient, to authorise the trustees to do or abstain from doing any act or thing which if done or omitted by them without the authorisation of the Court or the consent of the beneficiaries would be a breach of trust, and in particular the Court may authorise the trustees: (a) to sell trust property, notwithstanding that the terms or consideration for the sale may not be within any statutory powers of the trustees, or within the terms of the instrument, if any, creating the trust, or may be forbidden by that instrument, (b) to postpone the sale of trust property, (c) to carry on any business forming part of the trust property during any period for which a sale may be postponed, (d) to employ capital money subject to the trust in any business which the trustees are authorised by the instrument, if any, creating the trust or by law to carry on. ... (4) The powers of the Court under this section shall be in addition to the powers of the Court under its general administrative jurisdiction and under this or any other Act." 18It is settled that an amendment to a trust deed may be a "transaction" within the meaning of s 81(1) (Stein v Sybmore Holdings at [45] and cases there cited). It is also clear that the proposed amendment cannot be effected by reason of the absence of power. In this respect, the clause in this trust deed is the same as the trust deed considered in Stein v Sybmore Holdings (see at [14] and [63]). 19The fact that the trust deed expressly contemplates that the trustee should not have power to amend the deed by altering the vesting date does not mean that the power under s 81 is not available. (See also Perpetual Trustees WA Limited v Attorney-General (Western Australia) (1992) 8 WAR 441.) 20The question is whether the present issue arises in the management or administration of the trust property and whether, in the court's opinion, it is expedient that the transaction take place. 21As to the second matter, in Riddle v Riddle [1952] HCA 12; (1952) 85 CLR 202, Dixon J said (at 214) that the powers conferred by the section are not intended to be restricted by any implication and what is expedient is a criterion of the widest and most flexible kind. 22In Stein v Sybmore Holdings, Campbell J held that the expression "in the management or administration of any property vested in trustees" included taking steps to preserve the property and to make the property financially productive, which included planning to minimise the impact of tax and duty on the trust property and also, the transferring of part or all of the trust property from time to time to those who have become entitled to it. 23I agree with that analysis and I am satisfied that the proposed transaction is one in the management and administration of the trust property. 24I also accept that the transaction, being the proposed amendment to the trust deed, is expedient. Such an amendment will take into account and advance the objectives of the trust, which include providing for the plaintiff's children and grandchildren, if any. It is also expedient because it will minimise or, at least, delay the impact of both state and federal taxes. (See Stein v Sybmore Holdings at [61].) 25The power under s 81 is discretionary once the criteria for the existence of the power are satisfied. The fact that the beneficiaries support the proposal is a sound reason to exercise the discretion in favour of the application. 26For these reasons I make orders 1, 3 and 4 in accordance with the summons. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 July 2012