procedural. Declaration made that the trustee is empowered to vary each of the trusts by extending the vesting date from 15 July 2015 to 15 July 2050. Order made in accordance with prayer three of the Amended...
Key principles
The power to vary trusts conferred by clause 2 of the trust deeds, which permits the trustee to 'alter or vary or absolutely revoke all or any of the trusts and/or powers......
The words 'and in lieu of the trusts and/or powers so revoked' in clause 2 qualify only the power of revocation, not the power to alter or vary, because in the case of a...
The objective intention of the parties to the deed, as revealed in the words used, permits the trustee to vary the Trust Deed in any respect except as specified in the deed itself.
An extension of the vesting date constitutes a 'variation' of the trust for the purposes of clause 2.
Issues before the court
Whether the trust deed confers power on the trustee to extend the vesting date
Whether s 81 of the Trustee Act 1925 (NSW) empowers the Court to confer a power on a trustee to extend the vesting date
Plain English Summary
The Supreme Court of NSW held that a trustee has power under the trust deed to extend the vesting date of a discretionary trust where the deed contains a broad power to 'alter or vary' the trusts. The Court rejected arguments that qualifying words limited this power, following a recent decision of McDougall J. The Court noted that s 81 of the Trustee Act cannot be used to confer powers the deed does not contain, but this was not needed as the deed itself conferred the power. The extension was permitted provided it complied with the 80-year rule against perpetuities.
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Judgment (1 paragraphs)
[1]
EX TEMPORE JUDGMENT
These proceedings concern three trusts of which Boreas Pty Ltd ("Boreas") is trustee. The trusts were created at the instigation of Mr Philip James Bull, ("Mr Bull") following receipt of legal advice in 1970, for his wife, Judith Wayne Bull, ("the Judith Trust"); his son, Duncan James Bull ("the Duncan Trust"); and his daughter, Georgina Louise Bull now Ohlsson ("the Georgina Trust"), and there is evidence from Mr Bull that he did not appreciate until late 2012 that the trust was to vest as early as 2015. There is evidence of the lack of appreciation that the trust would vest this year has led to an absence of forward financial planning involving the three trusts that would see the principal beneficiaries, that is, Judith, Duncan and Georgina disadvantaged if the vesting date was not extended. The principal beneficiaries in each case wish to see the trust continue in a fashion that the trust has been operating for many years rather than vest.
Cited legislation
2 cited instruments linked from this judgment.
The Amended Summons on which the plaintiff, Boreas and Mr Bull move, seeks inter alia a declaration that the trustee is empowered to vary each of the trusts by extending the vesting date provided in each deed i.e. 15 July 2015 to 15 July 2050. Mr Bull is a beneficiary of vesting under each of the three trusts as well as being the 'architect' of the trust with the benefit of legal advice in 1970. Mr M.R Pesman SC appears for Mr Bull and now for Boreas as well, as Boreas was originally the first defendant but is now a second plaintiff.
Each of Judith, Georgina, Duncan and another daughter, Diana (for whom the Diana Trust was established in similar terms, but without an early vesting date) filed submitting appearances and by their affidavits filed in the case, support extension of the vesting date to 15 July 2050, which is eighty years after the date of the establishment of the trust. The sixth to twelfth defendants are minors, aged five to fourteen years and are grandchildren of Mr Bull. Mr C. Alexander of counsel instructed by the parents of the minors appears for the sixth to twelfth defendants, who having had the benefit of legal advice, support the application. Mr Alexander pointed out that although there is a theoretical benefit for the children of an early vesting since they are beneficiaries on vesting but not, on the face of the deed, entitled to income whilst the trust is continuing. The trustee does have a discretion not to distribute to them on vesting indeed to any beneficiaries and historically, whilst not required to do so, monies have been paid from the income to the benefit of the grandchildren under each trust. The thirteenth to seventeenth defendants are adult children of Mr Bull's sister and Mr Pesman informed the Court that they consent to the vesting date of the three trusts being extended.
A number of affidavits were read and they are that of Philip, of 25 May 2015; Judith, of 27 May; Georgina, of 28 May; Duncan, on 28 May and an affidavit of the accountant assisting the trustee, Mr Graham Dudley Short of 7 June 2015; and a further affidavit of Mr Anthony Nicholas Houen of 26 May 2015, the solicitor for Mr Bull and the trustee and Boreas. Mr Houen's affidavit deals with delay in applying for relief here, he explaining why although the problems discerned in late 2012, it is only recently that steps have been taken to bring the matter to Court. Some of the material in the affidavits is relevant to an application under s 81 of the Trustee Act 1925 (NSW) ("the Act") which is the subject of the application in prayer 1 of the Amended Summons but not the question of the trustee's power.
Mr Pesman accepted that the Court of Appeal's decision in Re Dion Investments Pty Limited [2014] NSWCA 367, presents an obstacle to the contention that a vesting date can be extended by virtue of s 81 the Act. I am bound by that decision, with which in any event I respectfully agree, and Mr Pesman does not now press for relief in terms of prayer 1 of the Amended Summons.
I should also note that whilst it is theoretically possible that more grandchildren may yet be borne to Duncan and Georgina, on their evidence this is most unlikely.
The question for determination is whether the Trust Deed in the case of each trust empowers the trustee to extend the vesting date. Clause 2 of the Duncan Trust Deed, for example, provides that the Trustee may, prior to vesting date
"by deed…alter or vary or absolutely revoke all or any of the trusts and/or powers (other than the power herein contained and the power contained in Clause (3) hereof) herein declared concerning the Settled Fund or any part thereof…to arise therefrom from after the date of any such alteration, variation or revocation and in lieu of the trusts and/or powers so revoked to appoint and resettle in such manner and upon such trusts subject to such conditions and in such proportions and with such powers and to such ends intents and purposes as the Trustee may in its absolute discretion from time to time think fit…"
see p 55 of the court book, Exhibit A.
The plaintiffs contend that the power to extend the vesting date is found in the words, "to alter or vary or absolutely revoke all or any of the trust and/or powers" set out in the Trust Deed.
In a recent Court of Appeal decision in Segelov v Ernst & Young Services Pty Ltd [2015] NSWCA 156, the Court affirms a principle that trust deeds are to be construed according to the rules of construction of contracts. Gleeson JA stated that:
"[t]he first matter to note is that the rules for construction of contracts apply also to trusts. Accordingly, the search for "intention" is only a search for the intention as revealed in the words used by the parties, amplified by the facts known to the parties: Byrnes v Kendle."
The plaintiffs argue that the words used in the trust are broad, and refer to the fact that Mr Bull deposed to the fact that his intention was that the family trust
"would keep going after I died and the wealth within the trusts would continue to be available for my wife, my children and my grandchildren"
In accordance with Segelov, Mr Bull's subjective intention is not relevant, rather it is the objective intention gained from the Trust Deed that is of importance.
In this case there is no express limitation of power in relation to the vesting date (as was the case for example in Stein v Sybmore Holdings [2006] NSWSC 1004). There are express limitations on the power in the Trust Deed in relation to other matters, for example, clause 3.
The power to extend the vesting date of the trust was considered by McDougall J in Andtrust v Giovanni Andreatta [2015] NSWSC 38. The clause in Andtrust is similar to the clause in the present case. In Andtrust McDougall J said:
"It does not seem to me to be stretching language unduly to say that a trust to distribute or hold income up until a defined date, and upon that date to distribute capital, is "varied" if that defined date is extended. Thus, as a matter of language, it seems to me that the power to vary the trusts set out in the deed should be taken to include a power to vary them by extending the time for which they are to enure."
Andtrust confirms that the vesting date of a trust can be amended where it is permitted under the terms of the trust deed and does not breach the rule against perpetuities. I can see no reason not to adopt the approach taken by McDougall J in that case.
Mr Pesman quite appropriately drew my attention to a contrary argument arising from the middle portion of the clause 2 (commencing "and in lieu") which on one view, qualifies the whole phrase, "alter or vary or absolutely revoke" (and later "such alteration, variation or revocation"). Mr Pesman submitted that the qualification only makes sense if applied to revocation because in the case of a variation nothing is required to be revoked. I am persuaded by his submission.
I read the objective intention of the parties to the deed to permit the trustee to vary the Trust Deed in any respect except as specified. An extension of the type of vesting is a variation and there is no obvious reason to read it down except in the manner identified by McDougall J, that is in relation to the rule against perpetuities. That rule is now enshrined in s 7 of the Perpetuities Act 1984 (NSW) and specifies a perpetuity period applicable to an interest created by settlement as eighty years from the date on which settlement takes effect, for the period not to offend the rule.
As Mr Pesman pointed out, in Andtrust McDougall J drew attention (see [9]) to the fact that if there is a power the trustee can exercise it and how he exercises it is a different question. But given that all the principal beneficiaries and the discretionary beneficiaries support the extension of a vesting date, I think it is clear that the trustee would be entitled to proceed to exercise the power that it has by virtue of the powers clause of each Trust Deed, should it consider it to be the expedient course in the interest of the trust.
In this matter, I therefore make a declaration in terms of prayer two of the Amended Summons and make an order in accordance with prayer three of the Amended Summons. I note the terms of prayer four to give meanings to the declaration in prayer two.
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Decision last updated: 16 June 2015
Declaration made that the trustee is empowered to vary each of the trusts by extending the vesting date from 15 July 2015 to 15 July 2050. Order made in accordance with prayer three of the Amended Summons.