Cachia v Westpac Financial Services Limited

Beneficiaries of the Trust and its vesting date 7The late George Grant's Will defines the beneficiaries of the Trust in clause 6(iii) as follows: (iii) the beneficiaries of the Grant Family Testamentary Trust shall be:- (A) my son Robert Thomas Grant; (B) any child or grandchild of my said son Robert Thomas Grant born before the vesting date; (C) any spouse of my son Robert Thomas Grant; (D) any company which now or before the vesting date is incorporated of which a Director or person who beneficially owns a share carrying a right to vote at general meeting is a beneficiary by reason of a preceding paragraph of this subclause (E) the Trustee or Trustees of any Trust whether now existing or hereafter created ("the Secondary Trust") of which a beneficiary is a beneficiary and where the provisions of the Secondary Trust require a vesting date and that the beneficiaries thereunder shall always be such as not to cause this Deed to breach any applicable rule or law against perpetuities; 8Mr Robert Grant, the Trustee, currently: (1) has three children, Simon Benjamin Grant born 3 March 1995 (now aged 18), Joel David Grant born 28 August 1996 (now aged 17) and Michael Peter Grant born 16 December 1998 (now aged 14); (2) has no grandchildren, and, (3) is married to Mrs Vicki Janice Grant. There are currently no companies or trusts qualifying as beneficiaries of the Trust within the categories in cl 6(iii)(D) and (E) of the Will. 9The Trustee's wife, Mrs Vicki Grant, and his eldest son Simon Grant expressly support this application, through their affidavits. The Trustee's and Mrs Grant's two other minor children, Joel and Michael, were not separately represented in these proceedings. The Trustee was a necessary party to these proceedings: Uniform Civil Procedure Rules ("UCPR"), r 7.11. But all persons having a beneficial interest under the Trust need not be parties: UCPR, r 7.12. This application was not dependent for success upon the consent of any beneficiary. The Court saw no need to join any beneficiary or have the minor beneficiaries separately represented. 10The vesting date of the Trust is defined in cl. 6(iv) of the Will as "the date first to occur" of the following dates: (A) the eightieth (80th) anniversary of the date of my death; (B) such earlier date on which my Trustee in its absolute discretion determines that the Grant Family Testamentary Trust should be wound up; 11As Mr George Grant died in February 2007, the Trust will vest in February 2087 unless the Trustee elects for an earlier winding up under clause 6(iv) of the Will.

The condition of the Bondi property and difficulties in funding renovations 12The Trustee gave evidence, which I accept, in relation to the current state of the Bondi property and its present need for renovations. My findings based on that evidence are the following. 13Since the 1960's the Bondi property has markedly deteriorated. Its current poor condition makes it difficult for the trustee to find and retain tenants. Indeed in 2004 and 2005, during Mr George Grant and Mrs Grant's lifetimes, some of the tenancies in the Bondi property had to be terminated to allow compulsory works to be carried out under notice from Waverly Council. Since 2009 the Bondi property has been re-tenanted but handymen and service providers are regularly required to conduct repairs at the site. 14According to a valuation report, prepared in September 2012, the Bondi property is now worth $3,000,000. But the Trustee expects that if the substantial repair and improvement works that he proposes could be undertaken to the property, its market value would probably double. The proposed works are estimated to cost $1,470,000, and are the subject of a February 2013 development application to Waverley Council. 15The Trustee says: that once the works are finished he and his family would live in a specially fitted out two level section of the Bondi property; and, that the rest of that property could then be rented out, to generate Trust income. 16An important incidental benefit from the redevelopment for the Trustee's family is that they will be able to abandon their present rented accommodation and live more comfortably at the Bondi property. The Trustee says, and I accept, that without the development "it would be considerably more expensive for alternative comparable accommodation to be purchased for my family to live in". 17The units in the Bondi property are currently let for approximately $550 per week. This represents a comparatively low rental return for this property, which is not presently being utilised to its full potential, because of its poor condition. The Trustee expects that once the renovations are completed the average rent per unit would increase from about $550 to about $700 per week. The substantial renovations planned would avoid the repairs and renovations, now required due to the present poor state of the building's amenities. 18But the planned works cannot be commenced. The Trust does not have ready funds available for this purpose. The Trustee wishes to borrow from a bank, mortgaging the Bondi property to fund its upgrading. But as these reasons explain, the lack of specific express powers in the Trust instrument has already hampered the Trustee in borrowing on the security of the Bondi property. He wants to amend the Trust instrument before he applies to fund the planned renovation works. I accept that the Trustee will find obtaining such funding difficult. 19In 2012 the Trustee exchanged contracts for the sale of one of the three properties previously held by the Trust. Unfortunately the sale proceeds from that property were insufficient to cover all the Trust's then outstanding mortgage obligations. So the Trustee decided to borrow $400,000 to cover: a shortfall of $160,000 required to wholly discharge an existing mortgage over the Dover Heights property when it was sold; the additional funds required to cover certain repairs then anticipated for the Bondi property; and, the cost of the preparing and lodging the development application for the proposed renovations planned for the Bondi property. 20The Trustee was ultimately successful in obtaining a $400,000 commercial loan from ANZ Bank for these purposes. But the negotiations, and the disadvantageous terms the Trustee was ultimately able to agree for the loan, were, I accept, all markedly influenced by lenders' assessments that the trust instrument did not include important commercial powers that the Trustee now seeks. 21First, the Trustee found that in the course of its search for the loan fund ultimately sourced from the ANZ a number of financial institutions, including National Australia Bank ("NAB"), Credit Suisse AG, Pinnacle Capital and Apollan Investments Pty Limited, simply declined to offer any funding to the Trustee, without there being an express power to borrow in the Will. 22Secondly, the ANZ Bank loan: (1) took far longer to negotiate than the Trustee had expected; (2) required the ANZ Bank to obtain a specific legal advice in relation to the scope of the Trustee's general powers under the Trustee Act; (3) had to be specifically structured to attract the protection of Trustee Act ss 38 and 82A(1A)(a) by limiting the amount which could be spent to renovate the Bondi property to $50,000 (or 30% of that property's value) and by requiring that the rest of the funds be distributed to the Trustee and his wife as a capital distribution allowed under the terms of the Trust; (4) was a loan to the plaintiff both in his personal capacity and in his capacity as a trustee of the Trust and was secured not only by a mortgage over the Bondi property but also by individual guarantees from the Trustee and his wife; and (5) attracted interest rates higher than would otherwise apply to a loan secured by first mortgage of real property. 23If the Trustee's present application is successful, the Trustee intends to use any new loan he may be able to obtain, not only to fund the proposed renovations to the Bondi property, but also to refinance the $400,000 commercial facility the Trustee has obtained from the ANZ Bank. The Trustee expects that he will be able to re-finance the ANZ facility at a lower rate of interest, if the Court makes the orders requested under s 81.

NAB suggests Ancillary Amendments to the Will 24The NAB, from whom the Trustee did not ultimately obtain finance, suggested in correspondence that the following amendments to the Will would be necessary, before the NAB would approve a commercial loan secured on the Bondi property at ordinary commercial interest rates and on ordinary commercial terms: (1) a power to lend/raise money, if the Trustee were to obtain a bill facility to negotiate bills of exchange; (2) a power to operate a bank account to facilitate operating such an account; (3) a power to appoint attorneys, because NAB security documents would require the mortgagor to appoint NAB as his or her attorney; and (4) a right of indemnity, to make this right clear in the Trust instrument. 25After describing the required amendments, NAB also pointed out that the Trustee would be able to amend the terms of the Trust instrument only if: all of the beneficiaries were to consent (which would not be easy as some of them are still minors and some are not yet ascertainable); or, an application the Court were to approve the amendment. The NAB correspondence does not stipulate that the NAB required an express power in the Trust instrument to amend the Trust instrument, as a condition of the loan approval process. But it does show the NAB making clear to the Trustee that because such a power did not already exist in the Trust instrument, the other amendments required (and any future amendments the Trustee might want) would be more costly and difficult to achieve. 26Other amendments were suggested by NAB in the same correspondence, including an amendment that the Trustee may exercise his powers despite a conflict of interest arising from his position as a beneficiary. But as those additional amendments are not pressed, they will not be further considered in these reasons.

Draft Proposed Amendments 27At the Court's invitation, the Trustee provided to the Court after the hearing a draft of the proposed Deed Poll ("Draft Deed Poll") showing the precise amendments that the trustee proposed to the terms of the Trust instrument. These amendments, are set out as an attachment to the Trustee's proposed short minutes of order and in summary they confer on the Trustee, in addition to the powers already granted under the Will, powers to: (a) advance and lend moneys to, and to borrow and raise moneys from any persons, firms, corporations, bodies, associations or governmental or municipal bodies upon such terms with or without security or interest as the trustee should deem fit and to secure the repayment of those moneys by mortgaging or charging (by fixed or floating charge or otherwise) all or any part of the Trust Fund including any property which may subsequently be acquired by the trustee so that it will form part of the Trust Fund; and any mortgage or charge created or purporting to be created under this clause shall be valid in all respects irrespective of the actual application of the moneys borrowed and the rights of the mortgagee or chargee shall take priority in all respects over the rights of the beneficiaries hereunder and all other persons whatsoever; (b) open any account or accounts with any financial institution and to operate such account or accounts and to draw, make, accept, endorse, discount, issue or otherwise deal with any promissory note, bill of exchange, cheque or other negotiable or transferable instrument; (c) effect improvements, alterations, additions or repairs to any leasehold or freehold land forming part of the Trust Fund (including any buildings situated thereon); (d) delegate in writing the exercise of all or any of the powers or discretionary authorities hereby conferred on the trustee and to execute any powers of attorney or other instruments necessary to effectuate such purpose, provided that written consent to such delegation is first obtained from each natural person beneficiary referred to in clauses 6(iii)(B) and (C) of the Will (such consent in the case of a beneficiary who is a minor to be obtained from that beneficiary's parent(s) or guardian(s)); (e) give any guarantee, undertaking or indemnity for payment of moneys or the performance of any contract, obligation or undertaking by any person, firm, company, corporation or association upon such terms with or without security as the trustee shall deem fit and to secure any such guarantee, undertaking or indemnity by mortgaging or charging (by fixed or floating charge or otherwise) all or any part of the Trust Fund including any property which may subsequently be acquired by the trustee so that it will form part of the Trust Fund and the rights of the mortgagee or chargee shall take priority in all respects over the rights of the beneficiaries and all other persons whatsoever; (f) be indemnified out of the assets for the time being comprised in the Trust Fund against liabilities incurred by it in the execution or attempted execution or as a consequence of the failure to execute any of the trusts, authorities, powers and directions hereof or by virtue of being the trustee; (g) by written or oral resolution or deed revoke, add to or vary all or any of the provisions contained in the Will (including this clause) including but not limited to the powers of the trustee, provided that: (i) the trustee obtains the prior written consent of each natural person beneficiary referred to in clauses 6(iii)(B) and (C) of the Will (such consent in the case of a beneficiary who is a minor to be obtained from that beneficiary's parent(s) or guardian(s)); and (ii) no such variation, alteration or addition is to have the effect of varying, altering or adding to: (A) the beneficial entitlement to any amount set aside for any beneficiary prior to the date of the variation, alteration or addition; (B) the persons or legal entities who are within the definition of beneficiaries pursuant to the Will. 28The Trustee argues that the proposed amendments should be approved in this or an alternative form under Trustee Act, s 81. The Draft Deed Poll will be marked Exhibit A in these proceedings.

Trustee Act s 81 - Advantageous Dealings 29Trustee Act, s 81 enables the Court to confer additional powers on the Trustee to enable the Trustee to enter into transactions that are expedient in the management of Trust property. It 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. (3) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order. (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. (5) This section applies to trusts created either before or after the commencement of this Act." 30The Trustee seeks an order under Trustee Act, s 81(1) conferring on the Trustee the power to amend the terms of the Trust instrument to confer on the Trustee the powers set out in the form of the Draft Deed Poll. 31Authority has established the scope of Trustee Act, s 81, which was generally modelled upon the Trustee Act 1925 (UK), s 57. In Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004 ("Stein") Campbell J has gathered and analysed the principal authorities on the operation of this section relevant to the present application: Stein at [37] - [44]. 32His analysis shows the following elements. First, it is necessary to identify a "sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure or transaction", which is proposed (described in these reasons as "the proposed dealing"): Stein at [37]. Secondly, it is necessary to enquire whether the proposed dealing is in the Court's opinion "expedient" in the management or administration of any property vested in trustees: Stein at [38] - [42] and Ku-ring-gai Municipal Council v the Attorney -General (1954) 55 SR (NSW) 65 ("Ku-ring-gai") at 74. And thirdly, the proposed dealing must be one which "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". 33The authorities commonly discuss an additional requirement for s 81 orders: that "a question has arisen in the management or administration of property invested in the trustee": Ku-ring-gai, at 74. I agree with Campbell J's obiter comments in Stein at [43] that this additional requirement is one "derived by a process of construction [of s 81] that I cannot see but that I am bound to follow". In Stein Campbell J commented that a "question" here must really be the same as a "problem": Stein at [43]. If Trustee Act, s 81 includes such a prerequisite, I am satisfied that there is the necessary "question" here in the sense of a problem, which prompted the Trustee to make this application and moreover that such a question arose in the management or administration of property vested in the Trustee. This, so called, additional requirement needs no further consideration. 34The Court retains a discretion not to make the orders: Stein at [65]. This is clear from the language of Trustee Act s 81 ("the Court may") even if the requirements of the section are satisfied. In Stein Campbell J stated that commonly there is a "considerable, and perhaps total, overlap between factors that established expediency, and the factors that lead a Court to decide that as a matter of discretion it was appropriate to exercise the power under s 81". Campbell J said in Stein that he could only think of one circumstance in which a Court would be likely to hold that it was "expedient" in the s 81 sense for a particular dealing to be entered into, and that the trustee lacked the power to enter that dealing, but in the exercise of that discretion the Court would not give power for that dealing to take place: Stein at [65]. That example was if there were "some means, other than the making of an order under s 81 by which the same practical objective could be achieved as would be achieved if the power to enter a deal were conferred". It was not suggested in this case that any such discretionary factors arise. 35At the highest level, Courts have emphasised the broad scope of Trustee Act, s 81 when assessing whether a proposed dealing is "expedient". In Riddle v Riddle (1952) 85 CLR 202 at 214, Dixon J, as his Honour then was, said that s 81 was "conferring very large and important powers on the Court" which depend upon the Court's opinion of what is "expedient" a "criterion of widest and most flexible kind". And his Honour emphasised the practical nature of the Court's responsibility in the exercise of the power under s 81 (at 214) "The responsibilities imposed involve business and financial considerations, but responsibilities of that description have always fallen on Courts of administration". 36For the reasons which follow each of the elements of s 81 is satisfied in this case.

(1) The Proposed Dealing 37What is the proposed dealing here? The application suggests two possible proposed dealings: a borrowing/mortgage transaction to fund the development of the Bondi property; and, amending the Trust instrument in the form of the proposed Deed poll. 38As to the first, Trustee Act s 81 makes clear that an application under that section may relate to a particular sale, lease, mortgage, surrender, release, disposition, purchase, investment, acquisition, expenditure or transaction planned by a trustee. And the Trustee intends to solve a specific issue through this application. He wants to fund $1.5 million in improvement works to the Bondi property. But even though the application is not supported by direct evidence of a mortgage/borrowing proposal to a particular financial institution to fund those works which proposal is being thwarted by deficiencies in the Trust instrument, it is nevertheless quite clear: (1) that such a mortgage/borrowing is proposed; (2) that it will take place if and when Waverley Council gives approval to the development application for the Bondi property; and (3) that the development will need to be funded by the Trust entering such a mortgage/borrowing. What will be useful for the Bondi development will also be useful for similar transactions in the more distant future. 39But the second possible proposed dealing is more relevant here. The Trustee's application is not one just for Court orders which themselves confer borrowing, lending and similar powers on the Trustee. Rather the Trustee's application is for the power to make amendments to the Trust instrument without coming back to the Court. It is well established that a "transaction" in Trustee Act, s 81(1) may include an amendment of a trust deed: Re Bowmill Nominees Pty Ltd [2004] NSWSC 161 ("Bowmill") at [16], James N Kirby Foundation v Attorney-General (NSW) [2004] BSWSC 1153 at [15]; (2004) 62 NSWLR 276; Stein at [45] and [46], and Re Application of NSFT Pty Limited as Trustee of Neil Stathem Family Trust [2010] NSWSC 380 ("NSFT") at [17]. The present application is about a proposed dealing in this sense. The Trustee does not so much want s 81 orders authorising classes of transaction. He wants amendments to the trust deed, authorising those classes of transaction. 40Section 81 authorises the Court to make orders that confer power to enter proposed dealings, which may be described either specifically by reference to an individual transaction, or in general terms. Section 81(1)(a) itself makes this clear: empowering the Court to confer on trustees "either generally or in any particular instance" the necessary power for the purpose. Moreover, in Riddle Dixon J says that s 81 is not "confined to cases where a specific investment is found to be expedient so that the basis of the order must be the particular investment". In my view, the making of orders to give the Trustee power to amend the Trust instrument to facilitate a range of future commercial transactions is within the scope of s 81. 41The first requirement for the application of Trustee Act s 81(1) is satisfied.

(2) Expedience of the proposed dealing 42The term "expedient" " in Trustee Act s 81(1) refers to expediency "in the management or administration" of the property held upon trust: Ku-ring-gai at [74] and Bowmill at [14]. It bears its ordinary meaning of "advantageous", "desirable", "suitable to the circumstances of the case": Riddle at 221-222 per Williams J; Stein at [47]. 43Expediency means "expediency in the interests of the beneficiaries" of the trust: Riddle, at 214 per Dixon J and Stein at [48]. But it is doubtful that the transaction has to be expedient for "the trust as a whole", especially in case of a discretionary trust where, as here, the Trustee has an express power to choose among the beneficiaries and to distribute to only some of them: Stein at [50]. 44It is no doubt possible but difficult for the Trustee to borrow money without the additional powers he seeks to have incorporated into the Trust instrument. But there are "expedient" dealings which now "cannot be effected" without the Trustee having the power to amend the Trust instrument the Trustee proposes. The Trustee could for example borrow at a more competitive interest rate and without the additional costs of satisfying lenders about deficiencies in the Trust instrument. This kind of expedient dealing "cannot be effected" now principally because of the absence of powers expressed in the Trust instrument, notwithstanding the powers that the general law may confer outside the Trust instrument. Some of these powers exist under the Trustee Act and some exist in the Trust instrument in more limited form. These reasons discuss the nature and limits of these existing powers below under the heading "Expedience - the Trustee's existing powers". But I accept the absence of these powers expressed in the Trust instrument in the precise form in which they are now sought to be inserted by amendment is a problem, which prevents these expedient transactions being effected. 45It is therefore "expedient" in the management or administration of the Trust's property for the Court to confer a power to amend the Trust instrument on the Trustee to allow him to add these powers to the Trust instrument, and perhaps in future to add other powers. 46The second requirement for the application of Trustee Act, s 81 is satisfied.

(3) Absence of the necessary power under the instrument or under general law 47The next element required for the operation of Trustee Act s 81 is that the proposed dealing "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". This application seeks to confer a power on the Trustee to amend the Trust instrument so that it will express his powers as Trustee to transact a range of future dealings. 48The Will does not presently provide the Trustee with any power to vary the terms of the Trust without an application to the Court. There are only two possible avenues now to amend the Trust instrument: an application to Court under Trustee Act, s 81 (like the one the Trustee moves on in theses proceedings); or, an amendment made with the consent of all the beneficiaries: Bowmill at [9]. But because some of the beneficiaries are now minors this is not presently possible without an application to the Court. There is now in my view a clear "absence of...power" within s 81 for the Trustee to make the desired Trust instrument amendments, without a Court application. 49Future Court applications to amend the Trust instrument will expose the Trust to avoidable costs. A need to avoid the cost and inconvenience of such applications under the Victorian equivalent of s 81 was recognised in Colonial Foundation Limited v the Attorney General of the State of Victoria [2007] VSC 344 at [9] per Smith J ("Colonial"). The amendment sought in Colonial related to removal of restrictions of the trustee's existing power to vary the trust. Smith J noted in Colonial that "the deed already has broad powers, in fact, of amendment and what is proposed is not in fact a significant change". The problem here is more fundamental: the Will does not include any amendment power. 50The third requirement for the application of Trustee Act, s 81(1) is thus also satisfied.

Expedience - the Trustee's existing powers 51The expedience of the Trustee using a power to amend in the way he proposes, can be seen from a short survey of the present form of the Trust instrument. Powers exist under the Will and at general law to improve/repair property, to borrow funds and grant security, to operate bank accounts, to delegate duties, as does a right of indemnity. But these powers are less extensive than those that the Trustee proposes to add through a power of amendment. 52Powers to improve/repair Trust assets. Clause 8(d) of the Will presently provides the Trustee with power: "To manage any real property including any interest therein with all the powers on that behalf of an absolute owner including power to repair and insure and to lease the property for any term and upon such terms and conditions as Trustee shall think fit." 53The works the Trustee plans for the Bondi property could not be classified as part of managing the property. They are more than "repairs", and thus do not readily fall within the scope of clause 8(d). They are major renovations to the property. 54Powers to make improvements are provided for in Trustee Act, s 82, which allows the Trustee to apply for Court authorisation to pay or apply capital money of the trust for particular improvements to land or existing buildings. And Trustee Act, s 82A provides that, without Court authorisation, a trustee may affect expedient improvements up to the prescribed cost of $50,000 or 30 per cent of the value of the land. But deploying s 82 would involve another Court application and I accept the Trustee's evidence that deploying the s 82A powers alone would not allow the Trust to wholly fund the proposed renovations to the Bondi property, by committing only Trust assets. 55Power to borrow and grant security. No power to borrow funds or grant security for such borrowings is conferred on the Trustee in the Will. Trustee Act, s 38 provides that a trustee is authorised to borrow money and grant security to fund capital payments for purposes otherwise authorised under the Trust Deed. But s 38 is unlikely to be sufficient to authorise all the possible future borrowing needs of the Trust. The Will is deficient in conferring powers to effect improvements to the Trust property. It would be difficult for the Trustee to justify borrowing for the proposed works at the Bondi property under Trustee Act, s 38. 56Power to lend money. Trustees have general power under Trustee Act, s 14 to invest trust funds in any form of investment, unless expressly forbidden by the trust instrument. Trustee Act, ss 14A to 25 regulate a trustee's obligations in relation to such investments. The express power of lending under the Will clause 8(c) is associated with advances to beneficiaries. But the terms of the proposed lending powers are clearly stated and in for broader terms than under the present clause 8(c). 57Power to open and operate accounts with financial institutions. The Will does not refer specifically to a power to open and operate bank accounts. The power to open and operate bank accounts is a power incidental to the power to borrow. Including this power in the Trust instrument would be expedient in the management or administration of Trust property. 58Powers to delegate duties. The Will does not give the Trustee power to delegate his duties. Trustee Act, s 53 provides that a trustee may "instead of acting personally" employ and pay agents, to transact trust business. Section 53 enables a trustee to delegate to any person all the trustee's powers and duties, other than his discretionary powers and the receipt and payment of money: see Jacobs Law of Trusts in Australia, 7th ed at [1730]. The Trustee could nevertheless probably delegate his discretion in minor matters of administration: see Jacobs Law of Trusts in Australia, 7th ed at [1731]. The amendment of the trust deed to include broader powers of delegation with the consent of beneficiaries is expedient to allow, for example, a family member to manage the Bondi property in the Trustee's absence. 59Trustee's right of indemnity from the assets of the Trust. The Will does not refer to the Trustee's right of indemnity out of trust property. But the existence of the implied indemnity at general law is confirmed in Trustee Act, s 59. But I accept the Trustee's evidence that it is desirable that amendments to the Trust instrument should expressly include this right.

The Form of Orders - the limits on the extent of proposed powers 60Limits on two of the powers in the proposed amendments require short comment: the power to delegate the Trustee's duties, and the power to amend the Trust instrument. 61Proposed power to delegate Trustee's duties. The Trustee submits that the proposed power to delegate included in the Draft Deed poll would not prejudice the interests of the beneficiaries because: (1) it is expressly limited by a requirement that the proposed delegation is approved by each natural person beneficiary referred to in clauses 6(iii)(B) and (C) of the Will (such consent in the case of a beneficiary who is a minor to be obtained from that beneficiary's parent(s) or guardian(s)); and its exercise would be limited by the doctrine of fraud on power. I see no reason not to confer a power to amend on the Trustee who proposes to introduce a power to delegate in this form. 62The proposed power to amend. In Re Application of NSFT Pty Limited as Trustee of Neil Stathem Family Trust [2010] NSWSC 380 ("NSFT") Biscoe AJ expressed reservations about conferring a blanket power to amend under s 94 of the Trustee Act 1973 (Qld), the Queensland equivalent of s 81. As to a proposed amendment to a trust instrument providing the trustee, in that case, with a blanket power to amend the Trust instrument his Honour said at [21]: "However, the plaintiff's proposed blanket power of amendment of the trust deed goes too far because it is not confined to what "is expedient in the management or administration of any property vested in a trustee". It would be so wide as to empower the trustee to vary the trust deed in unrelated ways; for example, to re-define the classes of Eligible Beneficiaries. Therefore, in my view, it would go beyond what is permitted by s 94(1)." 63As a result of these concerns his Honour limited the proposed amendment. He allowed power to vary the trust only "to deal with any issue arising in the management or administration of the Trust Fund with respect to the identification or classification of property comprising the Trust Fund and income for the Trust Fund for tax or accounting purposes as shall to the Trustee seem expedient". Biscoe AJ prescribed specific areas for which the Trustee's power to vary the Trust instrument cannot be used. 64Unlike the Queensland Trustee Act, s 94, the New South Wales Trustee Act, s 81 includes words defining widely the scope of the power, as one "subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries as the Court may think fit": s 81(1(a). So, s 81 allows powers to be conferred which will involve some variation to the rights of beneficiaries. 65But the presently proposed formulation of the power to amend expressly precludes any variation of the identity of the beneficiaries or of the beneficial entitlement to any amount already set aside for any beneficiary. Any other amendment would require prior written consent of each natural person beneficiary (including parents or guardians of the beneficiaries who are minors). And the equitable doctrine of fraud on power referred to in Cachia v Westpac Financial Services Limited (2000) 170 ALR 65 and Lock v Westpac Banking Corporation (1991) 25 NSWLR 593, would in any event prevent the Trustee from effecting amendments "altering the substratum" of the Trust. 66The powers to amend which are sought can be conferred on the Trustee.

Conclusions and Orders 67I am therefore satisfied therefore that the orders the plaintiff seeks should be made. 68The Court makes the following orders: (1) Pursuant to section 81 of the Trustee Act 1925, the plaintiff have power to amend the terms of the Grant Family Testamentary Trust established by the Will of George Grant made on 30 January 2002 ("Will") by written instrument in the form of Exhibit A in these proceedings, so as to confer on the plaintiff power to: (a) advance and lend moneys to, and to borrow and raise moneys from any persons, firms, corporations, bodies, associations or governmental or municipal bodies upon such terms with or without security or interest as the trustee should deem fit and to secure the repayment of those moneys by mortgaging or charging (by fixed or floating charge or otherwise) all or any part of the Trust Fund including any property which may subsequently be acquired by the trustee so that it will form part of the Trust Fund; and any mortgage or charge created or purporting to be created under this clause shall be valid in all respects irrespective of the actual application of the moneys borrowed and the rights of the mortgagee or chargee shall take priority in all respects over the rights of the beneficiaries hereunder and all other persons whatsoever; (b) open any account or accounts with any financial institution and to operate such account or accounts and to draw, make, accept, endorse, discount, issue or otherwise deal with any promissory note, bill of exchange, cheque or other negotiable or transferable instrument; (c) effect improvements, alterations, additions or repairs to any leasehold or freehold land forming part of the Trust Fund (including any buildings situated thereon); (d) delegate in writing the exercise of all or any of the powers or discretionary authorities hereby conferred on the trustee and to execute any powers of attorney or other instruments necessary to effectuate such purpose, provided that written consent to such delegation is first obtained from each natural person beneficiary referred to in clauses 6(iii)(B) and (C) of the Will (such consent in the case of a beneficiary who is a minor to be obtained from that beneficiary's parent(s) or guardian(s)); (e) give any guarantee, undertaking or indemnity for payment of moneys or the performance of any contract, obligation or undertaking by any person, firm, company, corporation or association upon such terms with or without security as the trustee shall deem fit and to secure any such guarantee, undertaking or indemnity by mortgaging or charging (by fixed or floating charge or otherwise) all or any part of the Trust Fund including any property which may subsequently be acquired by the trustee so that it will form part of the Trust Fund and the rights of the mortgagee or chargee shall take priority in all respects over the rights of the beneficiaries and all other persons whatsoever; (f) be indemnified out of the assets for the time being comprised in the Trust Fund against liabilities incurred by it in the execution or attempted execution or as a consequence of the failure to execute any of the trusts, authorities, powers and directions hereof or by virtue of being the trustee; (g) by written or oral resolution or deed revoke, add to or vary all or any of the provisions contained in the Will (including this clause) including but not limited to the powers of the trustee, provided that: (i) the trustee obtains the prior written consent of each natural person beneficiary referred to in clauses 6(iii)(B) and (C) of the Will (such consent in the case of a beneficiary who is a minor to be obtained from that beneficiary's parent(s) or guardian(s)); and (ii) no such variation, alteration or addition is to have the effect of varying, altering or adding to: (A) the beneficial entitlement to any amount set aside for any beneficiary prior to the date of the variation, alteration or addition; (B) the persons or legal entities who are within the definition of beneficiaries pursuant to the Will.

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: 07 November 2013