Re EM McPherson Settlement [2024] VSC 744 (4 December 2024)

The Ethel McPherson Settlement Trust, and the Application

1 In 1972, spouses Barbara Hamer and David Hamer, now deceased, caused a Trust to be established by a Deed of Settlement dated 27 June 1972.[1] Ethel McPherson, Barbara's mother, was the settlor. Ethel McPherson settled $100 on the trustee[2] to be held on trust for beneficiaries including Barbara and David Hamer and their children and remoter issue. Shares in a family investment company, Barham Pty Ltd, were also transferred to the Trust, and over time the assets of the Trust have grown in value to around $20 million.[3]

2 The Trust was established on the advice of accountants, and in response to concerns about ongoing management of the family financial affairs. Barbara Hamer had been concerned to ensure that there were appropriate financial arrangements in place, after experiencing the unexpected death of her father William, Ethel McPherson's husband, at a time when he had not made plans for the family's future business and financial position.[4]

3 The current Trustee, David Berry, has applied to the Court[5] for orders pursuant to s 63A, alternatively s 63 of the Trustee Act 1958 (Vic) approving the extension of the vesting date of the Trust, which is currently 30 June 2030 at the latest. The Deed contains no general power of amendment, so that the Trustee is unable to make these changes without authorisation of the Court. Approval is also sought for the following changes to the Deed:

(a) widening the class of beneficiaries under the Trust to include companies and trusts in which members of the existing class of beneficiaries have an interest or potential interest;

(b) to give the Trustee a power to choose the method for determining the 'net income' and 'income' of the Trust, and provide for how those concepts are dealt with in default of the Trustee exercising that power;

(c) to give the Trustee a power to stream the income of the trust and allocate and deduct expenses and outgoings against income or capital;

(d) to give the Trustee the power to hold amounts of income or capital that have been allocated to beneficiaries on sub-trust, separately from other Trust assets; and

(e) to insert a general power of amendment.

4 The originating motion was supported by affidavits of Barbara and David Hamer's sons Richard Hamer and Andrew Hamer, [6] and of the Trustee David Berry.

5 Barbara and David Hamer had three children, Richard, Fiona and Andrew. Richard has three children (Amelia, Caroline and Thomas Hamer); Fiona has two children (Jessie and Charles); and Andrew has three children (David, William and Alexander).

6 After the death of Barbara Hamer in 2020, her children entered into a deed of family arrangement in respect of her estate and the Trust. It was agreed that Barbara's daughter Fiona Hamer would receive two farming properties from her mother's estate, would waive her interests in the remaining assets of the estate, and would disclaim her interest in the Trust. As part of this arrangement she resigned as an appointor and formally disclaimed all interests in the Trust. Fiona also agreed that, to the extent that distributions were made to her lineal descendants, she would make a payment of an amount equal to that distribution to the families of her siblings Andrew and Richard.[7]

7 Richard and Andrew Hamer gave evidence of the Trustee and beneficiaries having received taxation advice as to the consequences of the trust vesting, which included capital gains tax related consequences with respect to the shares in Barham held by the Trust.[8] The legal advice also advised that it would be in the best interest of the beneficiaries to have the terms of the Trust amended, to further estate and succession planning and manage taxation liabilities.[9] The Advice, given by Nathan Yii Lawyers by letters dated 6 October 2021 and 24 November 2021, was in evidence.[10] The solicitor had also prepared draft deeds of amendment which would give effect to proposed changes. The draft deeds provide four alternative proposals, with Version 1 being the Trustee and beneficiaries' preferred version. Version 2 of the amendment deed is the same as Version 1 except that it does not include a new power of amendment. Versions 3 and 4 have a different definition of vesting date, should that be regarded necessary in light of certain legal restrictions on extending vesting periods, discussed below.

8 The beneficiaries of the Trust have been informed of the proposed amendments to the Deed. Richard, Fiona and Andrew Hamer and their children provided their written consent to the proposed variations.[11]

9 Some months after the proceeding was issued, one of the beneficiaries of the Trust, Jessie Moritz, daughter of Fiona Hamer, gave birth to a daughter, Maya. As a lineal descendant of Barbara and David Hamer, Maya is a beneficiary of the Trust. This, with the realistic potential for further descendants of Barbara and David Hamer to be born, makes it necessary for the Court to consider approving the arrangements on behalf of Maya and other future beneficiaries, pursuant to s 63A of the Trustee Act.

10 None of the beneficiaries opposed the amendments or wished to be named as a defendant in this proceeding seeking the authorisation of the amendments.[12] Having regard to the minor and potential unborn beneficiaries of the Trust (Relevant Beneficiaries), orders were made for the appointment of a Contradictor, Ms Kay Chan of counsel. Ms Chan provided advices in relation to the proposed amendments. Having regard to the availability of the Contradictor and the comprehensive submissions made by her, I regarded it as appropriate to proceed on the application made by the Trustee without separate representation for the minor and unborn beneficiaries of the Trust.[13]

11 As some of the proposed variations involved taxation consequences, solicitors for the Trustee informed both the Federal Commissioner of Taxation and the Commissioner of State Revenue of the proceeding, with a request that they advise whether they sought to be joined. Both Commissioners declined to be joined.[14]

12 The nature of the amendments for which approval is sought raises the following matters for consideration:

(a) the principles to be considered in determining whether it is appropriate to exercise powers under s 63A of the Trustee Act;

(b) whether an extension of the vesting date of the Trust is to the benefit of the Relevant Beneficiaries, and fair and proper;

(c) the appropriate form of any substituted vesting date clause and perpetuity period, having regard to whether the Court has power to approve a change from a common law perpetuity period to a set number of years, having regard to s 5 of the Perpetuities and Accumulations Act 1958 (Vic);

(d) whether it is to the benefit of the Relevant Beneficiaries, and fair and proper, to amend the Deed to widen the class of beneficiaries to include companies and trusts in which beneficiaries have an interest, where existing beneficiaries are limited to natural persons who are descendants of the settlor's daughter and husband;

(e) whether the broadening of the beneficiary class would constitute a resettlement of the Trust rather than a variation, or would destroy the 'substratum' of the Trust;

(f) whether it is appropriate to approve variations to the Trust which are primarily or solely directed to avoiding adverse tax consequences or achieving advantageous tax outcomes for the Trust or beneficiaries;

(g) whether it is appropriate to approve new powers in the Trustee enabling the streaming of income and capital of different classes, and allocation of expenses or outgoings against different classes of income or capital, to define 'income' and 'net income' of the Trust, and to include a clause in the Deed enabling the Trustee to set aside amounts allocated in favour of particular beneficiaries, to be held on a sub-trust;

(h) whether it is appropriate to include a new general power of amendment in the Deed; and

(i) whether if the amendments cannot be authorised by the Court pursuant to s 63A of the Trustee Act, they could be authorised pursuant to s 63 of the Act.

13 In summary, I have concluded that it is appropriate to approve the proposed arrangement insofar as it seeks amendments to the Deed to extend the vesting date and provide a perpetuity period of 80 years, and to introduce the amendments relating to streaming powers of the Trustee to streaming of income, holding property on sub-trust, and defining income and net income. I will approve amendment of the definition of 'beneficiary', subject to certain qualifications as to the wording of the amendment. I have concluded that it is not open to approve the introduction of a general power of amendment of the Deed.

The Court's powers under the Trustee Act

Relevant provisions of the Trustee Act

14 Section 63A of the Trustee Act provides:

(1) Where property, whether real or personal, is held on trusts arising, whether before or after the commencement of this Act, under any will settlement or other disposition, the Court may if it thinks fit by order approve on behalf of -

(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of minority or other incapacity is incapable of assenting; or

(b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class (as the case may be) if the said date had fallen or the said event had happened at the date of the application to the Court; or

(c) any person unborn; or

(d) any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined -

any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees or managing or administering any of the property subject to the trusts:

Provided that except by virtue of paragraph (d) of this subsection the Court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.

(2) In the foregoing subsection protective trusts means trusts specified in paragraphs (a) and (b) of subsection (1) of section thirty-nine of this Act or any like trusts, the principal beneficiary has the same meaning as in the said subsection (1) and discretionary interest means an interest arising under the trust specified in paragraph (b) of the said subsection (1) or any like trust.

(3) ...

15 'Property' and 'trust' are defined for the purpose of the Trustee Act as follows:

property includes real and personal property, and any estate share and interest in any property, real or personal, and any debt, and any thing in action, and any other right or interest, whether in possession or not

...

trust does not include the duties incident to an estate conveyed by way of mortgage, but with this exception the expressions trust and trustee extend to implied and constructive trusts and to cases where the trustee has a beneficial interest in the trust property, and to the duties incident to the office of a personal representative, and trustee where the context admits, includes a personal representative, and new trustee includes an additional trustee; ...

16 Section 63, which is relied on as an alternative source of power to approve the proposed amendments, provides:

Power of Court to authorize dealings with trust property

(1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other 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 trust instrument (if any) or by law, the Court 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 (if any) as the Court thinks fit and may direct in what manner any money authorized to be expended, and the costs of any transaction are to be paid or borne as between capital and income.

(2) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order.

(3) An application to the Court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.

Principles on the exercise of power under s 63A and s 63 of the Trustee Act

Section 63A

17 Section 63A empowers the Court to authorise an 'arrangement' varying or revoking all or any of the trusts, on behalf of any person with an interest under trusts who are not capable of consenting. Powers of this nature have been regarded as providing a statutory extension to the rule in Saunders v Vautier, which is to the effect that beneficiaries who are sui juris (ie have full capacity) and together absolutely entitled to the trust property, may exercise their proprietary rights, notwithstanding the terms on which the trust was settled, to call for the trust property.[15]

18 The word 'arrangement' in s 63A is used in a wide sense to cover any proposal which may be put forward for varying or revoking the trusts, including administrative matters and variations in beneficial interests.[16]

19 In Perpetual Trustees Victoria Ltd v Barns,[17] the Victorian Court of Appeal considered a trustee's application for an order under s 63A approving a variation to a trust on behalf of the trust's only beneficiary, who lacked capacity to consent. The Court noted that s 63A requires the Court to be satisfied of two things, first that the arrangement would be for the benefit of the relevant person; and if so, whether that arrangement is by its nature a proper and fair one. The Court gave the following guidance as to the considerations involved:[18]

In determining whether an order under s 63A(1)(a) should have been made and now should be made, the court must first be satisfied that the arrangement was and is both for [the beneficiary's] benefit and a fair and proper one overall. It must take into account the purpose of the trusts and the intention of the testator. The court should engage in a 'businesslike consideration of the arrangement, including the total amounts of the advantages which the various parties obtain, and their bargaining strength'.

20 In Re Perenna Nominees Pty Ltd McMillan J referred to Barns, and also summarised the effect of other authorities as to the principles relevant for the court in considering whether to exercise the power in s 63A, as follows:[19]

(a) Whether the arrangement would be for the benefit of the beneficiaries who are unable to supply consent. In this regard, it has been noted that benefit is not restricted to financial benefit and can encompass other non-financial benefits, such as social, familial, moral or educational benefits.

(b) Whether the arrangement is by its nature a fair and proper one overall, taking into account the particular advantages which the various parties will gain from the arrangement, and their respective bargaining strength.

(c) Whether the arrangement is consistent with the purpose of the trust and the testator's intention in establishing it.

21 It has been observed that in considering an arrangement and its impact for infants and unborn persons, the Court may consider whether any risk involved in the arrangement is one that an adult would be prepared to take, so that the Court is prepared to take that risk on behalf of those persons.[20] However recent authority casts some doubt on the utility of that approach,[21] while reaffirming the importance of the two stage approach of determining whether the arrangement would be for the benefit of beneficiaries on whose behalf the authorisation is given, and that the arrangement is, in its nature, a proper and fair one.[22]

Section 63

22 The Trustee relies in the alternative on s 63 of the Trustee Act in the event that the Court does not accept that the arrangement constituted by the amendments could be authorised pursuant to s 63A.

23 There have been differing views expressed as to whether statutory powers in the terms of s 63, which refers to the Court conferring by order powers relating to 'management or administration' of trust property or various types of 'transaction', can be used to authorise a variation to the terms of a trust. In Re Dion Investments Pty Ltd[23] the NSW Court of Appeal disapproved of an earlier trial division decision, Stein v Sybmore Holdings Pty Ltd, in which it had been held that s 81(1) of the Trustee Act 1925 (NSW) (in equivalent terms to s 63) could be used to extend the duration of a trust.[24] The Court of Appeal agreed with the trial judge, that a variation of the terms of a trust is not a 'transaction' within the scope of the statutory power,[25] and that s 81(1) would not extend to approving inclusion of a wide discretionary power to alter the terms of the trust as the trustee thinks fit.[26] In Re Arthur Brady Family Trust, Philip McMurdo J distinguished the first instance decision in Re Dion Investments on the basis that the language of the relevant Queensland section was broader than that of s 81(1) of the NSW Act. However his Honour did express the view that an amendment of a trust deed could be characterised as a 'transaction'.[27]

24 In Victoria, the analysis of the Court of Appeal in Re Dion Investments has been followed by McMillan J in W E Pickering Nominees Pty Ltd v Pickering, where her Honour concluded that s 63 does not permit authorisation of a variation of a trust deed to introduce a general power of amendment.[28]

The current provisions of the Deed and the proposed variation

25 The vesting date of the Trust is defined in cl 1(c) of the Deed, as follows:

"the Vesting Date" means whichever is the earlier to occur of -

(i) the Thirtieth day of June Two thousand and thirty;

(ii) the date which is twenty years after the date of death of the last to die of the children now living of the said Barbara May Hamer and the said David John Hamer; and

(iii) a date nominated by the Trustee pursuant to clause 9 hereof and reached without the Trustee having revoked such nomination.

26 Clause 1(b) defines 'the Trust Period' as meaning 'the period commencing on the First day of July One thousand nine hundred and seventy one and expiring on the Vesting Date'.

27 Clause 9 of the Deed, referred to in paragraph (iii) of the definition of 'Vesting Date', provides for the nomination of a vesting date earlier than is provided by clauses (i) and (ii):

(1) For the purposes of Clause (1)(c) the Trustee may at any time nominate a date which if it occurs before both the Thirtieth day of June Two thousand and thirty and the date which is twenty years after the date of death of the last to die of the children now living of the said Barbara May Hamer and the said David John Hamer shall be the Vesting Date. Any such nomination may be made by specifying a calendar date or a date defined by reference to events. Each such nomination shall be revocable before the arrival of the date so nominated and the power hereby given may, accordingly, be exercised from time to time.

(2) The Trustee shall have an absolute discretion -

(a) whether it will at any time exercise the power conferred by sub-clause (1) of this clause; and

(b) if at any time or from time to time it does exercise that power, as to the date it so nominates.

28 The Hamer family members wish the Trust to be continued to enable existing and future beneficiaries to benefit from the Trust beyond 30 June 2030, and for as long as possible without the inconvenience and cost of winding up the Trust. They also want the Trustee to have flexibility to distribute the income and capital of the Trust over a longer period and beyond 30 June 2030.[29]

29 The question of whether the amendment should be authorised under s 63A involves two main issues:

(a) whether it is appropriate, having regard to whether it is for the benefit of the beneficiaries, and fair and proper, to approve an extension of the vesting date; and

(b) what form the amendment providing for an extension may take, having regard to the fact that, as explained below, there are considerations as to whether the Court has power to substitute a statutory perpetuity period for the existing common law period, and the Trustee has proposed, in response to this issue, several alternative amendments to give effect to an extension of the vesting date.

30 The amendment which is put forward as the Trustee's primary position is to amend the definition of 'vesting date' in cl 1(c) of the Deed, with corresponding amendments to cl 9(1) of the Deed. Clause 1(c) would read:

"the Vesting Date" means:

(i) 80 years from the date of this Deed; or

(ii) Such earlier date as the Trustee in its absolute discretion may determine to be the vesting day.

The perpetuity period applicable to this settlement is the period of eighty years beginning with the date of execution of this deed ...

31 For clause 9(1) the following terms are proposed:

For the purposes of clause (1)(c) the Trustee may at any time nominate a date which occurs before the 80 years from the date of this Deed to be the Vesting Date. Any such nomination may be made by specifying a calendar date or a date defined by reference to events. Each such nomination shall be revocable before the arrival of the date so nominated and the power hereby given may, accordingly, be exercised from time to time.

32 It is submitted by the Trustee that the primary amendment is enabled by s 5 of the Perpetuities and Accumulations Act which permits the specification in a settlement instrument of a perpetuity period of up to 80 years.

Whether an extension of the vesting date would be for the benefit of the Relevant Beneficiaries and is a fair and proper arrangement

33 The Trustee identified the following reasons why an extension of the vesting date would be beneficial for the beneficiaries and potential unborn beneficiaries:[30]

(a) the extension would allow more time for potential beneficiaries to be born and potentially benefit from the income and capital of the Trust;

(b) there would be more time for existing and potential beneficiaries to be considered for distributions from the Trust;

(c) all living beneficiaries consented to the extension of the vesting date;

(d) the Trust was established as a long term vehicle for the Hamer family's business and financial interests, which were continuing, and there was no apparent reason for the specific vesting date to have been selected; and

(e) the Trustee and beneficiaries had received tax advice as to the consequence of the Trust vesting, to the effect that the shares in Barham held by the Trust would, on the vesting of the Trust and distribution to beneficiaries, lose their pre-CGT status. That would mean that sale of the shares in the beneficiaries' hands would be subject to CGT.

34 The Contradictor submitted that the Court may accept that:

(a) the extension of the vesting date will be of benefit to potential unborn beneficiaries of the Trust, as it will afford them a longer time to come into existence,[31] and will also be of benefit to Maya because it affords a longer period of time in which distributions from the Trust could be made in her favour;[32]

(b) the extension is not necessarily inconsistent with the settlor's expressed intention to make provision for her daughter Barbara May Hamer and her Husband David John Hamer ... and their issue';[33] and

(c) on a 'businesslike' assessment of the arrangement, as one that would allow the Trust to preserve assets and capital which would otherwise be paid in tax, it can be accepted as being to the beneficiaries' benefit.[34]

35 With respect to the issue of an arrangement having a purpose of obtaining a tax advantage, the Contradictor acknowledged authority to the effect that 'the court should not decline to exercise its power to approve a variation, if it be otherwise appropriate to do so, merely because one of the objects of the variation was to obtain some tax advantage'.[35]

36 I accept that it would be to the benefit of Maya and any unborn beneficiaries for the vesting date to be extended, as it will permit a longer period during which Maya may potentially benefit from distributions from the Trust, and during which potential new children may be born in the Hamer family and qualify as beneficiaries.[36] Although this potential for further beneficiaries to be born may have the effect of expanding the class of beneficiaries and thus potentially diluting the income available for distribution to individual beneficiaries, this is a largely hypothetical detriment. That is both because it is not possible to anticipate how many further beneficiaries may come into existence, but also because, this being a discretionary trust, the beneficiaries are objects whose interests must be considered, but who would have no entitlement to distributions.[37]

37 It is also apparent that there would be a benefit to the adult beneficiaries in extending the vesting date so that the Trust does not vest in 2030. Although the beneficiaries would face the possible detriment of not having their interests vest in under 6 years, but will have that entitlement deferred, the adult family members plainly see the continued existence of the Trust as being to their overall financial benefit. All adult beneficiaries have signed consents to the execution of any of the four variations of the proposed amendment deed.[38] Richard Hamer, Andrew Hamer, David Hamer, William Hamer and Caroline Hamer have also given evidence that they wish the Trust to continue, including because of the tax advantages the Trust provides with respect to income from the family assets held by the Trust, and because it will offer a method of holding assets protected from liability in their various professions.[39] Vesting will give rise to exposure to potential capital gains tax liabilities on the Barham shares in the hands of the beneficiaries and there is a benefit in deferring the crystallisation of those liabilities.[40] Vesting will bring an end to the Trust which has, on the evidence, served as a suitable vehicle to hold substantial investments for the family, consistent with the original intention at settlement.

38 The fact that a significant purpose for extending the vesting period is to defer adverse taxation consequences is not a reason to decline to approve the variation, which is for the benefit of beneficiaries for several reasons.[41]

39 I accept that the extension of the vesting period and addition of an express perpetuity period of 80 years will be to the benefit of the Relevant Beneficiaries, and that it is a fair and proper amendment.

The power to authorise a change in perpetuity period to a fixed number of years

40 It is recognised by the Trustee that an issue arises as to whether, because the manner in which the vesting date is currently defined means that the Trust currently has a common law perpetuity period, the Court has the power to authorise a variation of the vesting date to a set period of years.

41 The reasons why this issue arises are as follows.

42 In Victoria, the common law rule against perpetuities applies. As explained by McMillan J in Re Perenna Nominees, in the modern formulation of the rule:

... in order to be validly created, any interest in property which does not vest upon its creation must vest no later than 21 years after the termination of a life in being at the time that the interest was created. The rule places a temporal limitation on the period between the creation of a contingent future interest and the time at which that contingent interest will vest, in order to prevent the making of dispositions which tie up assets indefinitely and stand in the way of the free sale and transmission of property.[42]

43 The common law rule was interpreted as invalidating any non-charitable trust which would, or may merely possibly, when viewed at the time of its commencement, continue beyond the perpetuity period.[43]

44 The common law principles have been modified by the Perpetuities and Accumulations Act. Section 5 of that Act relevantly provides:

(1) Save as in this Act otherwise provided where the instrument by which any disposition is made so provides the perpetuity period applicable to the disposition under the rule against perpetuities instead of being of any other duration shall be such number of years not exceeding eighty as is specified in the instrument as the perpetuity period applicable to the disposition.

(2) ...

(3) If no period of years is specified in an instrument by which a disposition is made as the perpetuity period applicable to the disposition but a date certain is specified in the instrument as the date on which the disposition shall vest the instrument shall, for the purposes of this section, be deemed to specify as the perpetuity period applicable to the disposition a number of years equal to the number of years from the date of the taking effect of the instrument to the specified vesting date.

45 The Act in s 2 defines the terms 'disposition' and 'instrument' as follows:

disposition includes the conferring or exercise of a power of appointment or any other power or authority to dispose of an interest in or a right over property and any other disposition of an interest in or right over property; and references to the interest disposed of shall be construed accordingly;

...

instrument includes a will, and also includes an instrument, testamentary or otherwise exercising a power of appointment whether general or special but does not include an Act of Parliament;

46 Justice McMillan's observations in Re Perenna Nominees provide a clear summary as to how s 5 affects determination of the perpetuity period in an instrument:[44]

Thus, following the introduction of the Perpetuities and Accumulations Act, the perpetuity period applicable to any disposition made within an instrument can be set in one of three ways. First, under s 5(1), an instrument may expressly specify a period of less than 80 years as the perpetuity period which applies to a disposition. Secondly, as per s 5(3), if an instrument does not expressly specify a perpetuity period, but does specify a 'date certain' at which a disposition will vest, then that 'date certain' will be deemed to set the perpetuity period which applies. Finally, if an instrument specifies neither a perpetuity period nor a 'date certain' for vesting, then the common law rule against perpetuities will apply.

47 In that case, her Honour concluded that a vesting date which was expressed to be the last of three dates, including dates expressed by reference to the date of death of beneficiaries, and one date fixed as forty years from the date of execution of the trust deed, did not provide a 'date certain' within the meaning of s 5(3) of the Perpetuities and Accumulations Act.[45] As a result, the trust deed also not having identified a perpetuity period as provided for by s 5(1), it was deemed to have a perpetuity period set by common law, being 21 years after the death of a life in being at the time when the interest was created.[46]

48 The definition of 'vesting date' in the Deed in this case, applying her Honour's reasoning in Re Perenna Nominees, also does not contain a date certain as vesting date within the meaning of s 5(3) of the Perpetuities and Accumulations Act, and no other perpetuity period is stipulated in the Deed for the purposes of s 5(1). The effect is that a common law perpetuity period applies.

49 The relevance of that conclusion is that there is then a question as to whether a common law perpetuity period can be replaced by a statutory period relying on the Perpetuities and Accumulations Act, by a court authorised variation. This is an issue which has been the subject of some limited judicial consideration in Australia, but has been discussed in more detail in authorities applying the equivalent United Kingdom legislation dealing with trust variations and perpetuities periods.

50 A helpful explanation of the issue arising with respect to variations of the perpetuities period in reliance on the statutory provision is found in the decision of Blackburne J in Wyndham v Egremont,[47] which described the background to and effect of the decision of Megarry J (as his Honour then was) in Re Holt's Settlement Trusts.[48] Justice Blackburne considered the matter in the context of the judicial power to vary conferred by s 1(1) of the Variation of Trusts Act 1958 (UK), and s 15(5) of the Perpetuities and Accumulations Act 1964 (UK). His Honour explained as follows:[49]

... it is well established that an arrangement under section 1(1) enables the court to approve a variation which includes a new perpetuity period applicable to the settlement in question. In Re Holt's Settlement [1969] 1 Ch 100 Megarry J approved an arrangement which substituted in place of a common law period a new statutory period of eighty years and also added a new twenty-one year accumulation period, both of which were made possible by the Perpetuities and Accumulations Act 1964 ('the 1964 Act') and neither of which was available under the settlement that was being varied, since it took effect prior to the commencement of the 1964 Act on 15 July 1964. ... Megarry J observed that:

"Any variation owes its authority not to anything in the initial settlement but to the [Variation of Trusts Act] and the consent of the adults coming, as it were, ab extra. This certainly seems to be so in any case not within the Act where a variation or resettlement is made under the doctrine of Saunders v Vautier by all adults joining together; and I cannot see any real difference in principle in a case where the court exercises its jurisdiction on behalf of the infants under the [Variation of Trusts Act]..."

Megarry J then went on to consider whether it was permissible to insert a new perpetuity period into the settlement by reference to the statutory period made available by section 1(1) of the 1964 Act. This turned on whether a variation approved by the court in exercise of the jurisdiction conferred by section 1(1) of the [Variation of Trusts Act] constituted an 'instrument' within the meaning of section 15(5) of the 1964 Act. Megarry J held that it did and therefore that it was open to the court to approve the arrangement in that case.

51 Justice Blackburne was not required in Wyndham v Egremont to approve the replacement of a common law perpetuity period with a statutory period. However, his Honour expressed his agreement with Megarry J that there is ample power to insert a perpetuity period by reference to the statutory period in the Perpetuities and Accumulations Act 1964 (UK).[50]

52 The reasoning in Re Holt's Settlement has been applied in this Court in Re Gengoult-Smith Family Trust.[51]

The submissions of the Trustee and the Contradictor as to the form of amendment

53 That a common law perpetuity period applies to the Trust is common ground between the Trustee and the Contradictor. However, the submissions diverge somewhat on the issue of whether the Court can, pursuant to s 63A, approve a variation of the common law perpetuity period to a set period of years. Such a variation could only be made pursuant to the terms of s 5 of the Perpetuities and Accumulations Act. As that section permits only the stipulation of a period 'by instrument', the Trustee and the Contradictor acknowledged that it would be necessary that the 'arrangement' for the purposes of s 63A would, coupled with the Court order, constitute such an instrument within the terms of s 5.[52]

54 The Trustee submits that the Court can approve a variation of the vesting date pursuant to s 63A. In Re Plator Nominees Pty Ltd the Court approved the extension of the vesting date of a family trust from 30 June 2012 to a date not later than twenty one years after the death of the last living relative of a particular family member.[53]

55 Whether a change can be made from the common law perpetuity period to a set period of years relying on s 5(1) of the Perpetuities and Accumulations Act raises an additional question, as to how the terms of s 5(1), which refer to a period specified in an 'instrument', would apply to such a variation. The Trustee relied on the English cases, including Re Holt's Settlement.[54]

56 The Trustee submitted that the consents of the adult beneficiaries, and the amendment deed giving effect to the arrangement, 'coupled with the order of the Court' effected the variation.[55] As to what the 'instrument' was in the present case, the Trustee's position at the hearing was one which reflected the observations in Re Holt's Settlement, namely that:[56]

... the deed to be executed setting out the variation arrangement, the consents of the beneficiaries that are before the Court, and the Court's order approving the arrangement on behalf of Maya and the potential unborn beneficiaries would constitute either a composite instrument or separate instruments. In either case, that would be sufficient to meet the requirements to fix a perpetuity period under s 5(1) of the Perpetuities and Accumulations Act 1968 (Vic).

57 The Trustee referred to authorities considering the meaning of 'instrument', which demonstrated that a court order can constitute an instrument,[57] and that the ordinary meaning of instrument is sufficiently broad[58] to encompass an order of the court. In support of the proposition that the reference to 'instrument' may be more than one instrument, counsel referred to s 37(c) of the Interpretation of Legislation Act 1984 (Vic) which provides that unless the contrary intention appears, words in an Act in the singular include the plural.

58 The Contradictor initially submitted that the reasoning in Re Holt's Settlement provided a foundation to conclude that the 'arrangement', coupled with the order under s 63A could constitute an 'instrument' capable of 'disposing' an interest in or a right over property, so that it was permissible to invoke s 5(1) of the Perpetuities and Accumulations Act to insert a statutory perpetuity period.[59]

59 In the course of the proceedings the Contradictor provided further advice[60] noting the decision, delivered after her initial memorandum of advice, by the NSW Supreme Court in Cisera v Cisera.[61] In that case, the Court held that an order made under the NSW equivalent of s 63A, being s 86A of the Trustee Act 1925 (NSW), does not have the effect of varying the terms of the trust directly. It was submitted that this case cast doubt over the reasoning in Re Holt's Settlement to the effect that an order of the Court did effect such a variation[62] and could constitute an 'instrument' for the purposes of the UK Perpetuities and Accumulations Act. The Court in Cisera observed that following Re Holt's Settlement, the decision of the House of Lords in Inland Revenue Commissioners v Holmden[63] clarified the effect of the exercise of power to vary a trust conferred by s 1(1) of the Variation of Trusts Act 1958 (UK). Lord Reid stated that the Court does not, under that Act, itself amend or vary the trusts of the original settlement; it is the arrangement between the beneficiaries themselves that effects the variation and has the consequence of binding the beneficiaries, and the Court is simply supplying the consent of those minor or unborn beneficiaries who cannot consent. That statement of the law was noted with apparent approval by the Court of Appeal in Perpetual Trustees v Barns.[64] Further, in Cisera Parker J noted that the language of s 86A (which is relevantly the same as s 63A) does not, unlike the equivalent sections in Western Australia, South Australia and Tasmania, make express provision as to the effect of an order of the Court authorising an arrangement, in varying the terms of the trust or binding trustees and beneficiaries.[65]

60 The Trustee accepted the principle affirmed in Cisera that the Court's authorisation by order under s 63A does not of itself vary the terms of the trust. The variation is effected by the consent of adult beneficiaries and the authorisation of the Court giving consent on behalf of those who cannot consent.[66] However, it was submitted that the outcome in Re Holt's Settlement did not turn on a conclusion that the Court's order alone effected the variation, but that this was done by the arrangement, with the parties' consent to it, coupled with the order of the Court.[67]

61 After the hearing in this matter, time was given to allow the filing of further submissions on issues which arose in the course of the first hearing. During that time the judgment in Re Gengoult-Smith Family Trust[68] was delivered. In that case Moore J approved, pursuant to s 63A, a variation to a discretionary trust deed which extended the vesting date for the trust and introduced an 80 year perpetuity period. Justice Moore, noting the authority of Re Holt's Settlement, concluded that the arrangement coupled with the order of the Court would be an 'instrument' for the purposes of the Perpetuities and Accumulations Act. The Trustee submitted that this Court should follow that decision as a matter of comity, unless persuaded it was plainly wrong;[69] and that the decision was not plainly wrong for the reasons addressed in the submissions based on the English authorities.[70]

62 The Contradictor submitted that there may be reason why the decision in Re Gengoult-Smith Family Trust would not be followed. It was submitted that in following the decision in Re Holt's Settlement, the reasons in Re Gengoult-Smith Family Trust 'do not disclose the basis of the Court's finding that an arrangement coupled with an order of the Court is an 'instrument by which the disposition is made'' within the terms of s 5(1) of the Perpetuities and Accumulations Act.[71]

63 In light of the further submissions made by the Contradictor on Re Gengoult-Smith Family Trust and focussing more closely on the reference in s 5(1) to the instrument 'by which the disposition is made', counsel for the Trustee submitted that it is the original trust deed that settled the property and that this settlement is 'essentially the disposition of the property' for the purposes of s 5(1).[72] This was consistent with the Trustee's earlier submissions that s 5(1) provides a way in which the trust deed, as the 'instrument by which any disposition is made' may stipulate a perpetuity period of a fixed number of years.[73] However, counsel for the Trustee contended for a slightly different position to that originally taken in that it may be necessary also to include the original trust deed as a component of the elements which constitute the 'instrument' for the purposes of s 5(1). It was submitted:[74]

... the court order, combined with the consent of the beneficiaries and potentially also the original trust deed itself, they're either a composite instrument together, or they give effect as separate instruments, to the variation. It's the original trust deed that's important because that's what the disposition is made under.

64 Ultimately, with this position as to how the relevant 'instrument' is to be understood, I did not see any significant differences between the position taken by the Trustee and the Contradictor. The primary issue raised by the Contradictor was that there be proper consideration given to the composite phrase, 'instrument by which any disposition is made', rather than a narrow focus on the word instrument alone, which was taken into account in the Trustee's final position.

65 There is plainly authority in this Court approving the general proposition that the Court has power to approve an arrangement extending the vesting date of a trust.[75]

66 There is also authority, in Re Gengoult-Smith Family Trust (and Re Holt's Settlement to which it refers), that:

(a) a common law perpetuity period may be replaced with a statutory period relying on s 5(1) of the Perpetuities and Accumulations Act, in a case where approval of the variation is required from the Court pursuant to s 63A; and

(b) an arrangement, coupled with the consents of adult beneficiaries to the arrangement and an order of the Court under s 63A, may constitute an instrument for the purposes of s 5 of the Perpetuities and Accumulations Act.[76]

67 Given that authority, I consider it is open to me to approve the amendment of the perpetuity period and the extension of the vesting date to the specific period of 80 years from the date of the original Deed, as sought in preferred variation 1.

68 However, my reasoning for that conclusion may differ to some degree from that expressed in Re Gengoult-Smith Family Trust[77] in that I do not consider that the terms of the proposed arrangement, and the adult beneficiaries' consent to the arrangements, coupled with the order of the Court under s 63A, of themselves constitute an 'instrument which gives rise to the disposition' for the purposes of s 5(1). I consider that the 'instrument' must comprise the original trust Deed, as amended by the deed of amendment the subject of the arrangement, with the consents of the parties and an order of the Court under s 63A, which provides the consent for the beneficiaries who are not sui juris. It may be that this conclusion was implicit in Moore J's reference to 'the arrangement' in Re Gengoult-Smith's Family Trust. However given the argument that was addressed to this issue, and the complexities in the issue disclosed by various authorities it is appropriate that I identify the reasoning for the conclusion that I have reached.

Instrument 'by which any disposition is made'

69 First, the 'arrangement' in this case for which approval is sought, insofar as it involves the amendments to which the parties consent, does not in my view involve a 'disposition' within the terms of s 5(1) of the Perpetuities and Accumulations Act. There is no disposition of property within the ordinary sense of that word involving some change in ownership of or interests in property. As defined in that Act, a disposition 'includes the conferring or exercise of a power of appointment or any other power or authority to dispose of an interest in or a right over property and any other disposition of an interest in or right over property'.[78] It is an inclusive definition, which may expand on the natural meaning of disposition. That ordinary meaning will involve in my view at least a situation which directly, or indirectly, involves some disposal of or alienation of an interest in or right over property. [79] There is nothing in the variations proposed in the alternative proposed deeds of amendment the subject of the arrangement proposed in this case which have that effect. The deeds of amendment also do not involve any conferring or exercise of a power of appointment which would fall within the extended meaning of disposition as defined in the Perpetuities and Accumulations Act.

70 The instrument by which the relevant disposition in this case was made was the original Deed, by which the Trust was settled. That the primary focus of s 5(1) is the deed by which a settlement is made is reinforced by the terms of s 5(3), which refer to the situation where no period of years is specified 'in an instrument by which a disposition is made as the perpetuity period applicable to the disposition'. If no date is specified, 'the instrument shall ... be deemed to specify as the perpetuity period applicable to the disposition a number of years equal to the number of years from the date of the taking effect of the instrument to the specified vesting date'. The fixing of the perpetuity period by reference to the date of the taking effect of the instrument by which a disposition is made indicates that s 5 is referring to the instrument which originally settled or created the trust.

Instrument which 'specifie[s]' the perpetuity period

71 Taking into account the terms of s 5(1), which refer to a perpetuity period being 'such number of years not exceeding eighty as is specified in the instrument', the consents do not themselves 'specify' a particular perpetuity period. Nor will the order of the Court itself specify a perpetuity period; it will be directed to approving the arrangement which introduces that period. It is only the deed of amendment which now includes the new perpetuity period, and it will be the Deed following amendment which will include that period.

Do the original Deed, with the deed of amendment, consents and order of the Court, constitute an instrument for the purposes of s 5(1)?

72 The question is, therefore, whether the original Deed, read with the relevant deed of amendment, and the consents of the adult beneficiaries to the arrangement to be effected by that deed; and the order of the Court approving that arrangement on behalf of the minor and future beneficiaries, will constitute an 'instrument by which any disposition is made' which 'specifies' a perpetuity period for the purposes of s 5(1) of the Perpetuities and Accumulations Act.

73 It is clear from the authorities that it is not the order of the Court made under s 63A or equivalent statutory power in other jurisdictions which effects the variation to the trust deed. It is the consent of the sui juris beneficiaries to the terms of the arrangement, with the Court order providing the approval on behalf of the beneficiaries who cannot consent, which effects the variation arrangement and makes it binding. The rationale for this conclusion is clearly explained in the House of Lords decision in Holmden.[80] Their Lordships confirmed that the binding effect of an arrangement approved by the court under the statutory variation provision did not derive from the court order, which did not amend or vary the trusts; rather the sui juris beneficiaries were bound by reason of their consent to the amendments, and the Court supplied the consent for the minor or unborn beneficiaries.[81] Lord Wilberforce explained his view as to the manner in which a variation approved by the Court under the equivalent to s 63A takes effect, based on that statutory provision being an extension to the principles in Saunders v Vautier:

If all the beneficiaries under the settlement had been sui juris, they could, in my opinion, have joined together with the trustees and declared different trusts which would supersede those originally contained in the settlement. Those new trusts would operate proprio vigore, by virtue of a self-contained instrument - namely the deed of arrangement or variation. The original settlement would have lost any force or relevance. The effect of an order under the Variation of Trusts Act, 1958, is to make good by act of the court any want of capacity to enter into a binding arrangement of any beneficiary not capable of binding himself and of any beneficiary unborn: the nature and effect of any arrangement so sanctioned is the same as that I have described.

74 Subsequently, in Goulding v James, Mummery LJ expressed the same reasoning while also noting that the Saunders v Vautier principles are not limited to revocation of a trust and creation of new trusts, but also apply where the terms of the trust are rearranged or varied:[82]

First, what varies the trust is not the court, but the agreement or consensus of the beneficiaries. Secondly, there is no real difference in principle in the rearrangement of the trusts between the case where the court is exercising its jurisdiction on behalf of the specified class under the 1958 Act and the case where the resettlement is made by virtue of the doctrine in Saunders v Vautier [1841] EngR 629; (1841) 4 Beav 115, [1835-42] All ER Rep 58 and by all the adult beneficiaries joining together. Thirdly, the court is merely contributing on behalf of infants and unborn and unascertained persons the binding assents to the arrangement which they, unlike an adult beneficiary, cannot give. The 1958 Act has thus been viewed by the courts as a statutory extension of the consent principle embodied in the rule in Saunders v Vautier. The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor to subject property to the continuing trusts, powers and limitations of a will or trust instrument.

75 The focus is, therefore, on the arrangement which has been consented to by the beneficiaries and which the Court is asked, pursuant to s 63A, to approve on behalf of beneficiaries who were unable to consent. In this case, the arrangement is the making of a deed of amendment to vary the terms of the Deed. The beneficiaries have consented to varying the terms of the Deed in one of four proposed deeds of amendment. I will return to the issue of the consent being expressed by reference to alternative deeds, but for present purposes it suffices to consider the position where beneficiaries consent to amendments to a trust deed being effected by a specific deed of amendment. The effect of the deed of amendment will not be to replace the Deed, but to amend its terms, so that the Deed will, upon execution of the deed of amendment, read as if varied. The Deed in this case will, if amendments to the definition of vesting date in cl 1(c), and the terms of cl 9(1) are made, then specify an 80 year perpetuity period, which is the outcome contemplated by s 5(1).

76 The Deed, by which the disposition was made, will then, as amended by the deed of amendment specifying the perpetuity period, be capable of satisfying the elements of the description of the instrument in s 5(1). In my view it is, therefore, the original Deed, the deed of amendment, the consents of the sui juris beneficiaries and the order of the Court under s 63A which can be considered, together, to be the instruments for the purposes of s 5(1).

77 It may be that this is simply an explicit way of describing the components of the 'arrangement' under s 63A,[83] given that an arrangement involving variation to the terms of the Trust must be effected by a deed of amendment and is the embodiment of the arrangement to be approved.

Multiple instruments together may be regarded as one instrument for the purposes of s 5(1)

78 I also accept the submissions of the Trustee, with which the Contradictor expressed no disagreement, that multiple instruments may be regarded as either a composite instrument for the purposes of s 5(1), or that the reference to instrument in s 5(1) may, having regard to s 37 of the Interpretation of Legislation Act, incorporate the plural.

79 Section 37 applies subject to any contrary intention. There is nothing in s 5 of the Perpetuities and Accumulations Act or its wider context which would suggest any intention to limit the reference to 'instrument' to the singular only.

80 It is plain from the reasoning in Re Holt's Settlements, followed in Re Gengoult-Smith Family Trust, that more than one element may, read together, constitute an instrument, it having been accepted that the arrangement coupled with the order of the Court could constitute a relevant instrument.

81 In these circumstances I accept that the 'instrument by which the disposition is made' in s 5(1) is the original Deed, the deed of amendment, the consents of the adult beneficiaries and the order of the Court.

The terms in which the consents of the adult beneficiaries are expressed

82 The terms of the consents are such that they provide consents to different formulations of the deed of amendment in the alternative. The principle that beneficiaries may vary the terms of a trust by agreement applies only where they can obtain unanimous agreement on the terms of the variation.[84] Although the beneficiaries have in terms consented to any of the four variations, it would be desirable that there be clear and unambiguous consensus as to the variation on which the beneficiaries all agree. Further, and more critically, there will (for reasons discussed below) be some further variation which will in my view be necessary in order for the proposed amendments to be appropriate. The consents do state that consent is given to amendments in the various alternative deeds of amendment, and to:

Amendments to the terms of trust that the Court otherwise approves and/or consent to on behalf of the unborn beneficiaries as it sees fit, or to such amendments in a form of drafting different to that in Deed of Amendment 1 or Deed of Amendment 2 that the Court otherwise approves and /or consents to on behalf of the unborn beneficiaries...

83 However, I consider it necessary for the beneficiaries to consent to the terms of the amendment finally approved to ensure coherence between the deed of amendment, Court order, and consents both for the purposes of the instrument required under s 5(1) of the Perpetuities and Accumulations Act and to ensure that there is no potential for ambiguity as to the terms by which the parties are bound.

84 In these circumstances, I will hear the Trustee and Contradictor on whether it is appropriate to have the beneficiaries execute further consents in light of my reasons, or whether it is open, as submitted by counsel for the Trustee,[85] to make orders subject to consents being executed.

(a) it is in the interests of the beneficiaries, including the minor and any unborn beneficiaries, that the vesting date of the Trust be extended and that this element of the proposed arrangement is fair and proper; and

(b) it is open to vary the Deed to substitute for the existing common law perpetuity period a perpetuity period of a specific period of 80 years, in reliance on s 5(1) of the Perpetuities and Accumulations Act, and also to substitute a vesting date which is 80 years from the date of execution of the original Deed.

86 I consider it appropriate, therefore, to approve the amendments relating to extension of the vesting date and inclusion of an 80 year perpetuity period identified in Variation 1 of the proposed deeds of amendment.

87 The Deed, by cl 1(a), defines the beneficiaries of the Trust settlement as follows:

"the Beneficiaries" means -

the said Barbara May Hamer

the said David John Hamer

the children and remoter issue born before the expiration of the Trust Period of the said Barbara May Hamer and the said David John Hamer

and "a Beneficiary" means any of the Beneficiaries:

it is expressly provided that any person legally adopted before the expiration of the Trust Period by the said Barbara May Hamer and the said David John Hamer or by any such child or remoter issue as aforesaid shall for the purposes of this Indenture be a child or remoter issue (as the case may be) of the said Barbara May Hamer and the said David John Hamer...

88 The Trustee seeks to amend the Deed to widen the class of beneficiaries to include:

(a) other trusts in which any member of the current class of beneficiaries is a beneficiary, or holds a direct or indirect interest; and

(b) companies in which any member of the current class of beneficiaries has a beneficial interest in a share.

89 The terms of the amendment proposed, which are the same in each of the variations of the deeds of amendment proposed in the Application, are as follows:[86]

The following words to be added in clause 1(a) of the Trust Deed after the words 'the children and remoter issue born before the expiration of the Trust Period of the said Barbara May Hamer and the said David John Hamer":

..."the trustee of any other trust of which the said Barbara May Hamer, the said David John Hamer, the children and remoter issue born before the expiration of the Trust Period of the said Barbara May Hamer and the said David John Hamer, or any one or more of them is a beneficiary or holds a direct or indirect interest (whether present, contingent, expectant or otherwise) and any company in which the said Barbara May Hamer, the said David John Hamer, the children and remoter issue born before the expiration of the Trust Period of the said Barbara May Hamer and the said David John Hamer or any one or more of them has a beneficial interest in a share (where [sic] present, contingent, expectant or otherwise) ...

90 The Trustee's position is that this variation is appropriate as the Trustee and beneficiaries had received the Advice to amend the Deed in this way for the following reasons:

(a) to allow more flexibility in trust distributions amongst the beneficiary class by allowing distribution to companies in which they have an interest, as well as to them individually;

(b) to allow trust income or capital gains to be distributed to such companies with revenue or capital losses, so those losses can be used against such amounts; and

(c) to allow distributions to be made to companies, which could be taxed at the standard corporate rate of 30%, rather than potentially up to 47% for individual beneficiaries. Advice has been provided that taxed profits from Barham could be distributed to a corporate beneficiary of the Trust without any additional company tax being paid due to franking credits.[87]

91 Evidence was given that Richard Hamer has interests in trusts and companies and wishes for those entities to be able to receive distributions from the Trust, and also wishes to set up a new company to receive distributions.[88] Andrew Hamer's evidence is that his family group has interests in three trusts, which are involved in operating a business, and that two of the trusts have carried forward income tax losses.[89] They both desire the flexibility to manage their tax liability by using tax losses to absorb income from the Trust.[90] Richard and Andrew also give evidence that they wish to minimise the accumulation of assets in their personal name which would be available for division amongst their creditors, in the event of bankruptcy.[91]

Submissions of the Trustee and the Contradictor

Whether the change is for the benefit of Maya or unborn beneficiaries

92 The Trustee submitted that the evidence establishes that the proposed change is beneficial to the existing beneficiaries, and would also be potentially beneficial to the Relevant Beneficiaries who may also wish in future to access the same flexibility in managing tax liability. It is submitted that:[92]

...[T]he additional trust and company beneficiaries are limited to those in which existing beneficiaries have an interest. In other words, there are no new individual beneficiaries being introduced by the amendment that would dilute the possibility of current and future unborn beneficiaries receiving distributions from the Trust.

93 The Trustee submits that the amendment is supported by the decision in Thomas Hare Investments Pty Ltd (as Trustee of the Hare Family Trust) v Hare.[93] In that case, Habersberger J approved under s 63A an amendment that had the effect of broadening the class of beneficiaries. In that case the broadening was not done by expanding the definition of beneficiaries (which already included companies) but by stipulating that these companies included those of which the appointor's son and daughters were beneficial shareholders, and which were acting in the capacity of a trustee of a trust from which beneficiaries had received income.

94 The Trustee submitted that because the beneficiaries of the Trust are objects of a discretionary trust with no interest in the Trust assets, whose rights are limited to being considered for potential distributions, it is inapt to consider their rights as being diluted by the increase in scope of the beneficiary class.[94] The Trustee also submits that it is significant that, on vesting, only the living children of Barbara and David Hamer take the capital and income of the Trust[95] and it is not proposed to alter that clause to provide for vesting in the broader class of beneficiaries including corporations and trusts if that variation is made.[96]

95 The Contradictor submitted that the Court should not accept the contention of the Trustee that the additional trust and company beneficiaries will not dilute the interests of unborn beneficiaries because they are limited to entities in which the beneficiaries have an interest. The Contradictor observed that the proposed variation necessarily expands the pool of beneficiaries of the Trust and gives a new choice to the Trustee to distribute to current beneficiaries in their individual capacity or to a company or trust in which they have an interest. She submits (emphasis in the original):

Further, the proposed new definition ... is very broad. Any company in which a beneficiary has a minor shareholding is eligible; any company in which one beneficiary has any interest - 'contingent, expectant or otherwise' - in one share of that company is eligible to receive a distribution. The proposed amendment clearly expands the pool of beneficiaries of the Trust. The expansion of the pool necessarily dilutes the beneficial interest of potential unborn beneficiaries.[97]

96 The Contradictor did also submit, however, that it would be open for the Court to find that the proposed variation does not cause detriment to potential unborn beneficiaries if it was accepted that any financial detriment to them caused by the widening of the pool is balanced by the financial advantages arising from anticipated tax savings.[98]

97 The Contradictor submitted at the hearing that the exercise of assessing whether the proposed amendment would benefit minor and unborn beneficiaries, or be to their disadvantage, involved a significant degree of speculation. She submitted that it could, however, be accepted that 'the benefits to Richard and Andrew Hamer are concrete and likely' as the proposed variation 'is driven by the tax advantages that could accrue to them and their existing companies'; but the 'nature of the benefit to Maya and unborn beneficiaries on the other hand is far less concrete and likely'.[99] The Contradictor referred to the decision in Re The Pickering Family Trusts[100] as an example of a case in which a proposed variation was not approved because the sole purpose of the arrangement was to give effect to a succession plan agreed between family members, including through distribution of the remaining assets of the trust to individual family trusts in which the beneficiaries had interests. Justice Lyons was not satisfied that the arrangement as proposed provided a benefit to minor or unborn beneficiaries, as any benefit to them in their capacity as future potential members of individual family trusts were illusory and not real.[101] His Honour approved a revised arrangement which was supported by evidence and undertakings by the trustee, including to the effect that the corpus distribution power in the family trusts would not be exercised before the expiration period of 18 years, unless to a minor or future beneficiary for the purposes of the maintenance, education, benefit or advancement in life of that beneficiary.[102]

The reference to 'living' beneficiaries in distribution clause

98 During the initial hearing of the application, I raised with counsel for the Trustee and the Contradictor how I should approach, in considering the proposed variation to broaden the class of beneficiaries from the current class of exclusively natural persons to trustees and corporations, the distribution power of the Deed in cl 3. That clause provides as follows (emphasis added):

During the Trust Period the Trustee shall hold the Trust Fund upon the following trusts: -

(a) In each Financial Year the Trustee may pay to or apply for the maintenance, education, advancement or support or otherwise howsoever for the benefit of all or such one or more (as the Trustee in its absolute discretion may decide) of the Beneficiaries living from time to time at the date of such payment or application the whole or such part, if any, (as the Trustee in its absolute discretion may think fit) of the income of the Trust Fund: such payment or application shall be made in such manner as the Trustee in its absolute discretion shall think fit and if and insofar as during the Trust Period or any part thereof such payment is made to or such application is made for the benefit of two or more of the Beneficiaries, the amounts of income so paid or applied shall be in such proportion or proportions as the Trustee in its absolute discretion shall decide. In particular, but without limiting the generality of the foregoing provisions of this paragraph -

(i) the Trustee may personally so pay or apply the same;

(ii) in the case of a Beneficiary who is not sui juris at the time, the Trustee may make such application for the benefit of that Beneficiary by paying the same to the parents (or one of them) or to the guardian for the time being of that Beneficiary for any one or more of the aforesaid purposes and in that event the Trustee shall not be bound to see further to the application thereof; ...[103]

99 No variation was proposed to the wording of that clause. I requested submissions as to:

(a) whether the reference to beneficiaries 'living from time to time' may, if the amendment to the definition of 'Beneficiaries' was made, nevertheless prevent distributions to any beneficiaries but the natural persons; and

(b) whether the reference to beneficiaries 'living from time to time' manifested any intention on the part of the settlor that the Trust was intended to be for the purpose of benefitting natural persons only, and if so, what consequences that intention had for the application and the Court's ability to approve the variation.

100 The Trustee filed further submissions[104] and the Contradictor filed a responding further advice[105] and a hearing was listed for the Trustee and Contradictor to address the remaining issues.

Submissions as to the intention of settlor, destruction of the substratum of the trust, and resettlement of the trust

101 The second question identified at [99] above raised the relevance, if any, of the intention of the settlor to the application to amend the definition of 'beneficiary'. The Trustee and the Contradictor agreed that the intention of the settlor per se had no relevance.

102 The Trustee submitted that because s 63A is 'merely a statutory extension of the rule in Saunders v Vautier', pursuant to which the beneficiaries may by agreement overbear and defeat the settlor's intention,[106] the intention of the settlor is not relevant to the proposed arrangement. However, because the arrangement would benefit the family of Barbara and David Hamer, it would in any event be consistent with the settlor's original purpose. In assessing what will benefit the family, the views of the family should be paramount, particularly as Andrew and Richard Hamer are the default beneficiaries who would receive all capital and income of the Trust if it did vest by June 2030 as originally provided.[107]

103 The Contradictor agreed that the wishes of the settlor do not matter, and insofar as any other intention was relevant to the exercise of the Court's power under s 63A, that intention was to be found objectively in the wording of the trust instrument, applying the natural and ordinary meaning of the words used in the context of the entire document.[108]

Whether the amendment destroys the substratum of the Trust or would constitute a resettlement

104 The Contradictor also raised, in the context of the issue of the intended purpose of the Trust, the need to consider that the amendment may be unacceptable on the basis that it could be regarded as a resettlement of the Trust rather than a 'variation' within the scope of s 63A; or that it would contravene the principle that a Court cannot approve an arrangement the effect of which is to 'destroy the substratum of the trust'. The Contradictor referred to the observations of Megarry J in Re Ball's Settlement Trusts that if an arrangement changes the whole substratum of the trust, it may be that it cannot be regarded as merely varying the trust, but would constitute a resettlement of the trust_._[109]

105 The Contradictor referred to the consideration of this principle by Macaulay J in Re McGowan, where his Honour was required to consider the exercise of an amendment power (in a trust deed rather than the statutory variation power), to broaden the definition of 'beneficiary'.[110] In that case, his Honour described the concept of the 'substratum' of the trust as its 'basic purpose', and concluded that if an amendment was made which was in conformity with and promoted the purpose of the trust, it would not destroy the substratum of the trust and could be approved.[111] The Contradictor accepted, applying this analysis, that the question was essentially whether a resettlement of the trust would occur, and that in this case, the proposed amendments do not create a new trust, and there would be continuity of trust assets and of some beneficiaries.[112]

106 Counsel for the Trustee accepts that s 63A, by its express language (any 'arrangement varying or revoking all or any of the trusts, or enlarging the powers of the trustees or management or administering any of the property subject to the trusts') cannot be used to authorise a resettlement. It was submitted that the question of whether an amendment involved a destruction of the substratum of the trust, and whether there was a resettlement, had traditionally involved the same principle, in that a consideration of the effect of an amendment on the substratum of the trust is part of the question as to whether there has been a resettlement or not.[113]

107 Counsel for the Trustee relied on Kearns v Hill,[114] Re McGowan, and Commissioner of Taxation v Clark[115] for the proposition that the current principle relating to resettlement was that so long as there is some degree of continuity of trust property, trust membership and the regime of trust obligations, there will be no resettlement.[116] In this case, there was continuity of the Trust property, the objects of the Trust and generally the regime of trustee obligations.[117] The Trustee submitted that the relevant purpose should be regarded as being 'essentially to benefit the family' and possibly also to 'have a tax effective vehicle for holding family wealth'.[118]

Submissions as to the significance of the reference to beneficiaries 'living' from time to time in the Deed

108 On the issue of the reference to beneficiaries 'living from time to time' in cl 3(a), counsel for the Trustee acknowledged in further written submissions that in addition to that reference, the power of advancement in cl 5(a) of the Deed also contained clauses which contained the following phrase (emphasis added):[119]

... pay the same to any one or more of the Beneficiaries exclusively of the other or others of them for his or her own use or benefit ...

109 The Trustee submitted that the reference to 'living' in cl 3(a) was apt to refer to companies. Counsel observed that the trust deed in Thomas Hare had an original list of beneficiaries which included family members and 'any company in which any of the beneficiaries hold shares', and that the distribution clause nevertheless appeared to refer only to 'beneficiaries living from time to time' (the entirety of the clause not being evident from the reported judgment).[120] This issue was not the subject of any comment by the Court in that case.

110 The Trustee also referred to Lygon Nominees Pty Ltd v Commissioner of State Revenue[121] in which the class of general beneficiaries included 'any body corporate in which any beneficiary owns or holds a beneficial share', but the power of distribution gave the power to distribute to 'general beneficiaries living from time to time'. Counsel also observed that dictionary definitions of 'living' encompassed the concept of 'in actual existence or use', such as living languages,[122] so that living could include something that was in actual existence or use, like a company, even though it was not human.[123] It was also submitted that guidance could be gained from cases relating to children in utero being referred to as being alive notwithstanding that they have not yet been born.[124]

111 The Trustee submitted that the Court could make a declaration to the effect that 'living' in cl 3(a) would include companies and corporate trustee beneficiaries once the beneficiary class is expanded. Alternatively, if it was not accepted that the reference to 'living' in cl 3(a) would include corporate and trustee beneficiaries as well as natural persons, the Trustee sought to have the Court approve a further amendment under the arrangement, which changed the reference in cl 3(a) from 'living from time to time' to 'living or in existence from time to time'.[125]

112 The Trustee also referred to cases in which 'he', 'she', 'his' and 'her' could refer to inanimate objects or legal persons.[126] Again it was submitted that cl 5(a) extended to companies and corporate trustee beneficiaries, and that the Court should make a declaration to that effect. Alternatively if the Court was not so persuaded, the Trustee sought approval of an amendment to that clause from 'his or her own use or benefit' to 'their or its own use or benefit'.[127]

113 The Contradictor submitted that objectively and contextually construed, the reference to 'living' beneficiaries, read with the existing definition of beneficiaries, was to living human beings.[128] The words 'living' and 'his or her' disclosed an intention that the class of beneficiaries comprised exclusively of natural persons.[129]

Further submissions and evidence as to benefit to Beneficiaries of an amended definition of Beneficiaries, and alternative narrower definitions

114 The Trustee also filed further affidavits from the adult grandchildren of Barbara and David Hamer - Caroline Hamer, David Hamer, and William Hamer - in which they gave evidence as to their current situations. Each gave evidence to the effect that they did not have any company or trust in place to manage their financial affairs, but that they may establish such entities in future, both to manage their financial affairs, and to protect themselves from any liability which may arise from their professional work.[130] Each of them confirmed that they anticipated that the amendments sought in this application were in their best interests and in the best interests of the beneficiaries as a whole.

115 Finally the Trustee responded in submissions to the concern raised by the Contradictor as to the breadth of the proposed new definition of beneficiaries. The Trustee's primary position was that the proposed definition was appropriate in its breadth. However, if the Court was not satisfied with that formulation, two alternative definitions could be considered. Both of the alternative definitions limited the companies in which a beneficiary held a beneficial interest to private companies, and the second alternative also limited the companies to being ones in which the beneficiary had a controlling interest.[131]

Principles relevant to an amendment to broaden the beneficiary class

116 The Trustee relied primarily on Thomas Hare as providing authority as to why the arrangement to extend the beneficiary class in this case should be approved. However, there are some relevant differences between the amendment approved in Thomas Hare and the amendment sought in this case, which mean that the question of whether this specific amendment should be approved must be considered on its own terms. The amendments in Thomas Hare had been made pursuant to an amendment power in the deed. Approval had been sought nunc pro tunc to the amendments made on the basis that it was thought, after the amendments, that they may have been beyond the amendment power and distributions to companies acting as trustees may also have been ultra vires. Materially, for the purposes of this case, the amendments had two differences.

(a) In Thomas Hare the original definition of beneficiaries was not limited to natural persons but included, as well as named Hare family members, 'any company in which any of the beneficiaries hold shares'.[132] The amendment was to clarify that a company acting as trustee could receive distributions. There was no need to consider whether it was appropriate to expand the class beyond solely natural person beneficiaries to companies and trusts.

(b) The amendment, in adding trust interests, was framed in a more limited way than the current amendment, in referring to 'any trust estate of which any named beneficiary is a vested or contingent beneficiary'.[133] Justice Habersberger observed, as to the impact of the proposed amendments:[134]

...The order ... effectively allows a discretionary trust to be interposed between the Hare Family Trust and the beneficiaries of that trust. However the interposed discretionary trust is qualified by the requirements that the children of Thomas Hare must be the shareholders of the interposed trustee company and that the children of Thomas Hare, who are already beneficiaries of the Hare Family Trust, must receive a share of the net income of the discretionary trust in the relevant year of income.

What this variation will achieve is greater flexibility in distributing the benefit, and tax burden, of the income from the Hare Family Trust than would otherwise be the case, as at present the income is to be distributed personally to the children of Thomas Hare in their individual capacity.

The proposed variation to the Deed in this case, and the evidence as to how the wider description of beneficiaries may affect distributions from the Trust in practice, does not provide the same qualifications as to how income will be distributed amongst the wider pool to the various beneficiaries.

117 Other authorities in which the Court has approved or accepted the appropriateness of an amendment which had the effect of broadening the beneficiary class include:

(a) Re McDonald Family Trust (No 1) where an amendment to the definition of beneficiaries to include not only legally married partners of family members but de facto partners was approved by the Court pursuant to s 63A.[135]

(b) Re McGowan,[136] in which Macaulay J held that amendments made by a trustee pursuant to an amendment power, including the enlargement of the class of beneficiaries, were valid. The amendment enlarged the beneficiary class from named individuals and (in case of their death) their children to family members, a charitable institution, a corporation in which any beneficiary owns more than 50% of the shares, and a trustee of any trust which the trustee nominates as beneficiary.[137]

(c) Kearns v Hill,[138] in which the Court held that an amendment of the definition of beneficiaries in a discretionary family trust, to include a class of discretionary beneficiaries who were the children of the existing class of primary beneficiaries, was a valid exercise by the trustee of a power of variation.

Destruction of the substratum of the trust or resettlement

118 The 'substratum' principle appears to have originated in the judgment of the Full Court in Re Dyer; Dyer v Trustees, Executors & Agency Co Ltd.[139] In that case a trustee sought to vary the object of a charitable trust which had been established for the purpose of establishing and maintaining a permanent orchestra for the State of Victoria. One question before the Court was whether a power in the deed for the settlor to vary all or any part of the trusts or powers empowered him to alter the objects of the trust. Justice Martin observed:[140]

It would be strange if the donor who desired to help in founding a fund for a particular purpose, and who expected others to contribute to that fund, attempted to reserve to himself a power to change the whole substratum of the gift, not only as regards his own donation, but also the donations of others who subscribed money for the particular purpose. A power to revoke is common in deeds of this nature, and I cannot believe that the draftsman would not have included such a power had it been intended that the donor was to be entitled to benefit an object other than the one nominated in the deed.

119 Justice Martin's observations were cited with approval by Megarry J in Re Ball's Settlement,[141] where his Honour said:

... I borrow with gratitude from the language of Martin J. If an arrangement changes the whole substratum of the trust, then it may well be that it cannot be regarded merely as varying that trust. But if an arrangement, while leaving the substratum, effectuates the purpose of the original trust by other means, it may still be possible to regard that arrangement as merely varying the original trusts, even though the means employed are wholly different and even though the form is completely changed.

120 More recently, judicial views have been expressed as to the limited relevance of the substratum principle to contemporary trusts. In Kearns v Hill, Meagher JA (Mahoney and Clarke JJA agreeing) noted that cases in which the Court had read down trust variation powers did exist, including Re Dyer. He then observed:[142]

In the Duke of Bedford's it was held that, in determining the ambit of a variation clause it is legitimate to consider its scope and evident purpose, but that consideration is not of much use when the evident purpose of the power is to ensure maximum flexibility. In Re Dyer it was held that the power of variation contained in a particular trust deed did not extend to varying the trust in a way which would destroy its "substratum". That, again, is not really helpful in the present context, where either it is impossible to locate any substratum at all, or alternatively, the relevant substratum is the benefit of the descendants of a named person, and the interests of that class are being actively promoted rather than diminished by the 1988 deed poll. I put to one side the obvious consideration that each deed must be considered in its own particular context, so that no other deed executed in different circumstances and in different language can decide the fate of a given deed. I also put to one side the equally obvious consideration that the conditions which existed in England in 1850 are not necessarily the same as those which existed in New South Wales in 1970. On the other hand, it is impossible to discern in the deed of trust any intention that the list of beneficiaries contained in cl 1 should remain perpetually inviolate.

121 Both Kearns v Hill and Re McGowan, which were relied on by the Trustee, considered the issue of resettlement in the context of the exercise by trustees of an amendment power in a trust deed to broaden the definition of the beneficiary class. The Court in each case did not regard such a variation of the trust to be one which would destroy the substratum of the trust.[143]

122 In Cisera, where the Court did conclude that amendments to extend the vesting date of a trust and expand the definition of beneficiaries were beyond the scope of acceptable variations to the original trust, Parker J acknowledged the 'substratum test' and assumed its continuing existence.[144] However his Honour appeared to regard the substratum analysis as a factor to be considered in determining the primary question of whether a proposed arrangement was properly described as a 'variation' or that the changes were so extensive that 'the trust in its changed form no longer answers the description of a 'variation' of the existing trust'.[145]

123 Counsel for the Trustee submitted that there was a potential uncertainty in Australian law which I would be required to resolve, in that the current state of authority gave rise to three possibilities about how the concept of 'substratum of the trust' may now apply.[146]

(a) The first was that the concept of substratum should have no continued operation, as it does not serve any purpose. This was supported by limited overseas authority,[147] and did not find material support in Australian authority. It was not a position advocated for by the Trustee.

(b) The second possibility was that the substratum principle was no more than an application of the doctrine of fraud on the power, the equitable doctrine which requires that a power conferred on a trustee must not be exercised for a purpose, or with an intention, beyond the scope of or not justified by the trust deed.[148] This was suggested by Hely J of the Federal Court in Cachia v Westpac Financial Services Ltd,[149] where his Honour stated that the substratum principle may be 'no more than an application of the equitable doctrine of fraud on the power'. This understanding of the substratum principle was the position advocated for by the Trustee. It was submitted that the doctrine of fraud on the power, as applying to a power of amendment, would simply mean that if the power was in the hands of the trustee or other fiduciary, it must be exercised bona fide and for proper purposes, and if involving a statutory amendment power, it must be exercised bona fide for the purposes for which it is given.[150]

(c) Finally the substratum principle may have an independent operation going beyond the doctrine of fraud on a power.

124 It is apparent from Re McGowan and other cases referred to above that the question of whether amendments or variations would destroy the substratum of the trust has continuing relevance to the question of whether the Court may approve variations to a trust under s 63A of the Trustee Act. In the case of amendments made by a trustee in the exercise of a power conferred by the trust instrument, the question of whether an amendment would destroy the substratum of the trust engages the same considerations as the application of the equitable doctrine of fraud on the power, as explained by Hely J in Cachia[151] and the Court of Appeal of Western Australia in Mercanti v Mercanti.[152] In the case of the Court considering whether to approve an arrangement under s 63A, the relevance is primarily as to whether the changes to the trust to be effected by the arrangement are so significant that the arrangement cannot be regarded as a 'variation' within the terms of s 63A, but as a resettlement of a trust.

125 There may be a secondary relevance, even in the context of a statutory variation of the conception of the substratum test as a species of the 'fraud on a power' doctrine, in that if the arrangement is proposed by the trustee, an arrangement could not be considered to be a fair and proper one if it would be regarded as involving a fraud on the power of the trustee to put forward the arrangement. There is however little utility in considering any such secondary consideration in this case where the beneficiaries, legally advised, agree with the Trustee that the amendments are appropriate and within the purposes of the Trust. The primary question remains whether the arrangement can properly be regarded as a 'variation', rather than a resettlement or a substitution of the trust.

126 In determining that issue of whether there has been a variation rather than a resettlement, it is necessary to consider whether there is a degree of continuity of trust property, trust membership and the regime of trust obligations.[153]

Relevance of tax advantages or minimisation as an objective

127 The authorities to which the Court was referred with respect to a s 63A arrangement having the objective of achieving tax advantages were broadly to the effect that if the arrangement was otherwise appropriate, the Court should not refuse to approve it because one of the purposes of the arrangement was to obtain some tax advantages or defer tax liabilities.[154] The purposes for the amendment in this case did not involve any clearly identified purpose other than obtaining tax advantages. They are either explicitly described by reference to tax related purposes, or, in the case of the reference in the Trustee's submissions to achieving 'more flexibility in trust distributions amongst the beneficiary class', appear to have no other application than to make distributions in the most tax effective way.

128 However, there is nothing in the terms of s 63A which indicates that the Court may not exercise the s 63A power to approve arrangements which have no identified purpose other than for tax related objectives, assuming it is satisfied that the arrangement is for the benefit of the beneficiaries who cannot consent.[155] There is authority that suggests that powers similarly worded to that in s 63A may be exercised where the sole purpose is to achieve a reduction in tax or some tax related advantage.

(a) In Re Arthur Brady Family Trust, where an order approving the extension of the vesting date of a family trust was sought pursuant to s 94 of the Trusts Act 1973 (Qld), the equivalent of s 63 of the Trustee Act, Philip McMurdo J held that it was appropriate to approve the amendment which would defer tax liabilities, given the 'very substantial impact of taxes and duties upon the trust funds' and specifically observed that:[156]

This provision can be used to minimise the taxation liability of or in relation to trust property: Re A S Sykes (deceased);[157] Re Trusts of Kean Memorial Trust Fund,[158] Stein [v Sybmore Holdings Pty Ltd];[159] and Heydon and Leeming, Jacobs' Law of Trusts in Australia.[160]

(b) Authority on the early variation of trust statutes recognised that a primary objective of that legislation was to enable trusts to be tax effective. In Re Weston's Settlement, an application under the Variation of Trusts Act 1958, Harman LJ stated:[161]

This is an essay in tax avoidance naked and unashamed, and none the worse for that, says the applicant. Indeed the [primary] judge agreed that this court is not a watch-dog for the Inland Revenue, and it is well known that much and perhaps the main use which has been made of the Act has been to produce schemes of variation of English trusts which will have the effect of reducing liabilities either on capital of the trusts or on the income of the beneficiaries.

(c) In Ridgewell v Ridgewell,[162] a more recent United Kingdom authority, amendments were sought under the equivalent of s 63A. The Court held that the 'benefit' to beneficiaries who cannot consent may be a financial benefit, and continued:[163]

This financial benefit can take the form of the mitigation of tax liabilities which would otherwise fall on the Trust Fund. In general it is no objection to an application under the 1958 Act that its purpose, or primary purpose, is the avoidance or mitigation of tax.

129 The Contradictor submitted, correctly, that no Victorian authority had been identified which endorsed the proposition that s 63A could be used to approve variations sought only for the purpose of obtaining some tax advantage or deferral of tax liability, without other non tax-related purposes being identified, nor that such purely tax related advantage was a sufficient benefit for the purposes of the section.[164] She did, however, accept that the outcome of certain cases was consistent with the power in s 63A being exercised to approve amendments which had no apparent purpose other than dealing with trust assets or income to mitigate or defer tax liabilities, such as Thomas Hare. There the amendment broadening the scope of beneficiaries was to provide flexibility in distributing income and spreading the tax burden. As the trust was already a discretionary trust, I infer that the flexibility objective was primarily intended to serve an objective of achieving the most advantageous or efficient taxation outcomes on trust income or distributions.

Would the amendment to broaden the beneficiary class be to the benefit of the Relevant Beneficiaries and be a fair and proper one?

130 The scope of the extension to the beneficiary class in this case is broader than the effect of the changes which were approved in Thomas Hare, Re McDonald Family Trust and Kearns v Hill, in that those variations did not involve expanding the beneficiary class to corporations and trusts. It is necessary to consider this variation closely on its own terms.

131 In considering whether the arrangement would be to the benefit of the Relevant Beneficiaries, and a fair and proper arrangement, it is also important to bear in mind that s 63A provides that the Court shall not approve an arrangement on behalf of any person unless 'the carrying out thereof' would be for the benefit of that person. In Re the Pickering Family Trusts,[165] Lyons JA considered how the question of 'benefit' should be assessed and observed that in his view 'where the arrangement or the carrying into effect of the arrangement involves such risk that any purported benefit is theoretical or illusory, it is not a 'benefit' for the purpose of the proviso'.[166]

132 I have considered the Trustee's submission that there is no relevant potential for dilution of the interests of the Relevant Beneficiaries, or disadvantage to them, by the amendment increasing the scope of the beneficiary class to companies and trusts in which a beneficiary has an interest.[167] This does not, in my view, take a sufficiently broad view of what I am required to consider in determining whether the arrangement is of benefit to minor and unborn beneficiaries, and is a fair and proper arrangement. Although minor and unborn beneficiaries' rights as beneficiaries to be considered for any distributions[168] may not be diminished by broadening the scope of the beneficiary class as sought, it is foreseeable that in practice, the amendment will make it less likely that they will be considered for distributions, for the reasons below. I consider that potential practical disadvantage to be relevant in assessing benefit.

133 First, it is not unlikely that if the class of beneficiaries is expanded to include companies and trusts in which beneficiaries have an interest (or in the case of trusts, an indirect interest) it will be the adult beneficiaries who already have a series of family trusts and shares in companies who are more likely, at least for a time, to be able to receive tax effective distributions. The evidence did not address the issue of distributions in any way that excluded this possibility; it may be that no relevant evidence could be provided given the breadth of the distribution clause and the very broad discretion that the Trustee has in making distributions. However the evidence did establish that the Trustee is seeking the amendments based on the Advice. A key element of the advice to broaden the beneficiary class is to enable the Trustee to distribute to corporate or trust entities which may have revenue or capital losses which trust income distributions may 'absorb'; and that distributions to companies may be taxed at 30% as opposed to individual beneficiaries at 47% depending on their income level.[169] In particular, the advice is that:

A broader beneficiary class will provide the Trustee more flexibility in trust distributions based on Richard and Andrew's circumstances...[170]

134 Although it may be that Maya and other unborn beneficiaries may become the beneficiaries of trusts, which would be beneficiaries of the Trust under the broader definition, it is more likely that adult beneficiaries will in the foreseeable future have interests in corporate entities. The later evidence filed by the Trustee indicates that David, William and Caroline do not currently have companies or trusts to hold their assets, but that they may do in future.

135 Secondly, the beneficiaries of the Trust, being objects of a discretionary trust in which the Trustee has very broad discretionary powers of distribution, do not have any interest in trust assets, nor entitlements to distributions.[171] However I consider it remains relevant to consider the position of Relevant Beneficiaries with respect to the likelihood of future discretionary distributions if the amendment is made. The evidence suggests that the Trustee regards the advice as to the most tax efficient ways of distributing income to be an important factor. It can be assumed that the Trustee will give real and genuine consideration to each of the beneficiaries in considering trust distributions.[172] However, given the (understandable) significance to the Trustee of considerations as to financial efficiency and tax effectiveness, it may also be inferred that distributions may be more likely to be made in the way that is most tax advantageous overall.

136 The evidence does, therefore, give rise to an inference that if the beneficiary class is broadened to include companies and trusts in which beneficiaries have an interest, the companies and trusts may be more likely to receive distributions and the distributions to Relevant Beneficiaries may be diluted.

137 It is also not unlikely, however, that if distributions are made more frequently or in larger amount to companies or trusts than to natural person beneficiaries directly, because of the tax advantages, this may ultimately not result in any financial disadvantage to Maya and any unborn beneficiaries. There is no specific evidence addressing future plans for distribution of trust assets of the kind that has occasionally featured in the cases, and the focus of the legal Advice is on taxation issues and specifically on the position of Richard and Andrew, rather than the needs of minor or future beneficiaries. However, the evidence does demonstrate that in the past years, distributions have been made to all beneficiaries on a regular basis. The financial statements for the year ending 30 June 2020 showed distributions in that year of $60,000 to all beneficiaries with the exception of Barbara Hamer, who received $164,796. The previous year there were distributions only to Barbara and Thomas Hamer; and in the year ending 2021 there were distributions to David, William, Amelia, Alex, Caroline and Thomas Hamer. There were no distributions to Andrew and Richard, nor to Barbara Hamer, who had passed away in 2020, nor Fiona (who had by then disclaimed her interest in the Trust), nor her children Charles and Jessie. In the year ending 30 June 2022 there were distributions to David, William, Amelia, Alex, Caroline and Thomas in equal amounts and larger amounts to both Richard and Andrew Hamer.

138 That past evidence indicates that distributions from the Trust have in practice been made to benefit Hamer family members generally and there is no reason to believe that this will not be a continuing consideration informing future distributions. I also am willing to infer that if there is financial advantage to Richard, Andrew and other adults in the Hamer family from more tax effective allocation of trust income, this will flow to some degree to the broader Hamer family and at least indirectly to Maya and any other unborn beneficiaries. The extent to which that will occur is uncertain, but I regard it as more than hypothetical or speculative, and it is appropriately to be regarded as a 'benefit' to the Relevant Beneficiaries for the purposes of s 63A.

139 My conclusion that the variation would be to the benefit of the Relevant Beneficiaries is subject to altering the definition of 'Beneficiaries' to require a closer relationship between the family member beneficiaries and the corporate beneficiaries, as discussed below.

The proposed relationship of beneficiaries to companies and corporate trustees is too broad

140 The amended definition of 'beneficiary' which is preferred by the Trustee is, relevantly, to the following effect:

(a) it will include any company, whether a public or private company, in which a beneficiary owns a single share; and

(b) it will include any trustee of any other trust of which the human beneficiaries is a beneficiary, or holds a direct or indirect interest, whether present, contingent, expectant or otherwise.

141 Although the Contradictor submitted that these aspects of the proposed definition of Beneficiary made the definition very broad and would lead to dilution of the beneficiaries' interests, [173] it was accepted that this would not cause detriment to the potential unborn beneficiaries if it ultimately was offset by the financial advantages caused by the anticipated tax savings.

142 I have accepted above that there would be benefit arising from the tax efficiencies and advantages that may be derived from being able to distribute trust income to companies or trusts in which beneficiaries have an interest. However, the evidence and submissions related to companies which were set up by Richard and Andrew, or were proposed to be set up by other adult beneficiaries, which were private companies used in the operation of a family business, or to hold family investments. None of the evidence addressed how including in the class of beneficiaries a public company in which a beneficiary holds a share or shares would be to the benefit of Maya and unborn beneficiaries; nor even to the benefit of adult beneficiaries. Rather it was submitted that the possibility of distributions to a public company in which a beneficiary held a single share was controlled by the ability of a beneficiary to challenge the Trustee's exercise of discretion as not having involved the proper and genuine consideration required in making distributions to an object of a discretionary trust.[174]

143 I do not consider this to be any answer to the lack of evidence as to why it would be appropriate to include such a broad reference to companies as beneficiary, for two reasons.

(a) First, the question is not whether any risk created by the amendment could be controlled in some way; the Court is required by the proviso in s 63A to be positively satisfied that the amendment would be to the benefit of the beneficiaries who cannot consent for themselves. There is nothing in the evidence that could provide a basis for me to be satisfied that it would be to the benefit of those beneficiaries to amend the Deed so as to include any company in which a beneficiary has any interest, no matter how minor.

(b) Secondly, the fact that a beneficiary would have to take legal action to control any hypothetical risk arising from an amendment provides a positive indication that it is unlikely to be to their benefit, and provides a hurdle to the Court concluding that it is a fair and proper arrangement.

144 I am not persuaded that it would be to the benefit of the Relevant Beneficiaries to broaden the definition of beneficiaries to any company in which any beneficiary has any interest. The benefit to beneficiaries of including as a new class of beneficiary a public company is entirely hypothetical. The future beneficiaries' potential interests would be so diluted by a distribution to a public company or a company in which another beneficiary had a very minor interest that it is not possible to conclude that it would be to the benefit of unborn, minor or for that matter other adult beneficiaries.

145 For this reason I consider that the alternative definition of 'beneficiary' proposed by the Trustee in submissions, which refers to private companies in which a beneficiary has a controlling interest, is appropriate. That definition is as follows:[175]

... the trustee of any other trust of which the said Barbara May Hamer, the said David John Hamer, the children and remoter issue born before the expiration of the Trust Period of the said Barbara May Hamer and the said David John Hamer or any one or more of them is a beneficiary or holds a direct or indirect interest (whether present, contingent, expectant or otherwise) and any proprietary company (as defined in section 45A of the Corporations Act 2001 (Cth)[176] or any successor provision or successor Act) in which the said Barbara May Hamer, the said David John Hamer, the children and remoter issue born before the expiration of the Trust Period of the said Barbara May Hamer and the said David John Hamer or any one or more of them has or have a controlling interest whether by way of shareholding (including any rights for the time being attached at any time to such shares), directorship or otherwise howsoever.

146 The breadth of the language relating to the trustee class of beneficiaries, which extends to the trustee of any trust of which a human beneficiary of the Trust is a beneficiary, or holds 'a direct or indirect interest (whether present, contingent, expectant or otherwise)' also merits consideration and was not directly addressed in the evidence or submissions. However, I accept that broad language is appropriate in this context, in order to catch the interests of objects of discretionary trusts, who do not have any proprietary interest in the trust fund, and rather have contingent interests including the entitlement to be considered for distributions.

The broadening of the beneficiary class would not destroy the substratum nor resettle the Trust

147 It was appropriate to consider the question raised by the Contradictor as to whether the significant broadening of the definition of 'beneficiaries' would constitute such a change as to destroy the substratum of the Trust, or a resettlement rather than a variation and so not an arrangement authorised by s 63A. However I have concluded, for the following reasons, that the amendment to the beneficiary class is not precluded by reason of any considerations relating to the substratum of the Trust, nor because it would constitute a resettlement of the Trust.

148 I have concluded above that the authorities relating to the destruction of the substratum of the trust are, in the context of this application for approval of a variation under s 63A, of relevance to the primary question of whether the arrangement constitutes a variation or is so extensive that it in fact constitutes a resettlement of the trust. I can have regard to the basic purpose or 'substratum' in considering that question.

149 The basic purpose of the Trust is in my view appropriately understood in broad terms as being to make provision for and benefit the members of the Hamer family, being the descendants of Barbara and David Hamer. This, as in Kearns v Hill, may be the most specific identification of the substratum of the Trust that is possible to discern. Unlike the class of beneficiaries in Cisera, the definition of beneficiaries was not limited to certain generations of family members but defined by reference to Barbara and David and their children and remoter issue.

150 The evidence indicates that the Trust was established to ensure a stable and tax effective vehicle for holding family wealth. As that is not a purpose that emerges directly from the terms of the Deed, but rather from the extrinsic evidence as to why the Trust was established, it may not be appropriate to take that intention into account. However, if it was appropriate to understand this as a further basic purpose of the Trust, it is also, in any event, very broad and one served by flexibility in the way the Trust may hold family wealth.

151 The terms of the Deed do indicate an intention to benefit the Hamer family members in their individual capacity, including specific concern to make provision for family member beneficiaries who are not sui juris, including minors; cl 3(a)(iii) provides for the application of the trust fund for the 'maintenance, education, advancement or support or otherwise howsoever for all or such one or more (as the Trustee in its absolute discretion may decide) of the Beneficiaries living from time to time'.

152 However, is apparent from the evidence that the adult beneficiaries regard the broadening of the definition of 'beneficiaries' to include companies and trusts in which they have an interest to be a change which would benefit them personally, whether through enabling taxation efficient ways to receive Trust income, or the potential for protecting assets from personal liability. Given the flexibility already inherent in the Deed in relation to the Trustee's powers as to how the fund is to be used to benefit the beneficiaries, including to which beneficiaries and in what amounts the fund may be paid or applied, this is a rational view, consistent with the primary intention to benefit the Hamer family.

153 Despite the significant broadening of the beneficiary class that the amendment would achieve, there would continue to be significant continuity in the beneficiary class, in that all descendants of Barbara and David Hamer remain beneficiaries, and the new beneficiaries are entities in which those individuals have an interest. The amendments also would not effect any change to the trust property. Although, taking all of the amendments the subject of the arrangement as a whole, there would be changes to the Deed governing the Trust, there would also be substantial continuity in the regime of trust obligations affecting the Trust, particularly in circumstances where no approval will be given to the addition of a general power of amendment. The degree of continuity in these matters is indicative of a variation, rather than a settlement.[177]

154 To the extent that the Trust has a substratum or basic purpose, the amendment would also not alter that basic purpose.

Taxation advantages as the primary objective of an arrangement

155 In Re The Pickering Family Trusts, Lyons JA accepted that an arrangement which was to give effect to a succession plan for the family business group which was the major asset of the relevant trust, and had objectives of achieving 'significant tax and other savings to the group' and to trusts of which beneficiaries were objects, was a proper and fair one. [178]

156 As discussed above, it is established that financial benefit in the form of limiting tax payable with respect to trust assets and income or in distribution to beneficiaries, or other tax advantage, can be the 'benefit' for the purposes of s 63A and there is no limitation which precludes approval of a variation for that primary purpose. To the extent that the authorities may be understood as requiring any other non-tax related object for the arrangement, I accept that the objective of providing more flexibility in the management of family business interests on an ongoing basis is both a relevant benefit and a matter which makes the arrangement a proper one which can appropriately be approved by the Court.

157 It is also relevant in the exercise of my discretion under s 63A of the Trustee Act that the Trustee had informed the Australian Taxation Office and the State Revenue Office of the application to amend the Trust Deed, and had (on request from the litigation division of the Australian Taxation Office) provided to that office the affidavit material filed and the proposed deeds of amendment. Both offices advised that they did not intend to intervene in the proceeding.[179]

The variation is to the benefit of the Relevant Beneficiaries and is fair and proper

158 The variation, reworded to refer to private companies in which a beneficiary has a controlling interest, is for the benefit of the Relevant Beneficiaries. I consider with that amendment it will also be a fair and proper one.

Consequences of reference to 'living' beneficiaries in distribution clause

159 The reference to beneficiaries 'living from time to time' in the distribution clause in cl 3(a) cannot, in my view, be read in the current Deed as referring to anything other than natural persons who are living at the relevant time. The cases identified by the Trustee did not provide any authority in a sufficiently like context to support the view that a reference in a trust deed to a beneficiary 'living from time to time' could refer to a company, or to a trust. That is a departure from the natural and ordinary meaning of the word 'living'. The context of the reference includes the definition which refers only to natural person beneficiaries, which confirms that interpretation of cl 3(a).

160 It is clear that the wishes of the settlor are not relevant in determining whether a trust may be varied,[180] so that the fact that the settlor may originally have intended to provide only for distributions to family members who are natural persons does not mean that the variation extending the class of beneficiaries may not be approved to include legal structures in which the beneficiaries have an interest.

161 However, the effect of the reference to 'living' beneficiaries in cl 3(a) must still be considered. Because it is naturally to be understood as referring to natural persons, after the definition of beneficiaries is altered to refer to companies and corporate trustees, as well as the existing family members, cl 3(a) as currently worded would continue to limit the distribution power therein to distributions to family members. This is because the term 'Beneficiaries' may be defined more broadly than the scope of the distribution power and cl 3(a) is still workable even if it is construed as permitting distributions only to natural person beneficiaries and not the legal entities. While it would be necessary to take the context of the broader Deed in its amended form into account in construing cl 3(a), it would not in my view compel an interpretation of cl 3(a) that would mean that 'Beneficiaries living from time to time' should be interpreted to include all beneficiaries. That is primarily because the preceding words in cl 3(a) continue to require that payments or application of trust funds are 'for the maintenance, education, advancement or support or otherwise howsoever for the benefit of all or such one or more... of the Beneficiaries living from time to time'. The words 'maintenance, education, advancement or support' suggests a purpose applying to a natural person, noting in particular the word 'education' which cannot in any sensible way be applied to a corporation and corporate trustees. It would be highly artificial to read the entire phrase as referring to corporate or trust beneficiaries as well as natural person beneficiaries, and for that reason it would be inappropriate to make the declaration sought by the Trustee to the effect that 'living' in cl 3(a) includes companies and corporate trustee beneficiaries.[181]

162 I did not regard Thomas Hare, Lygon Nominees or De Luca and Ricci,[182] relied on by the Trustee for the proposition that a reference to a 'living' beneficiary could refer to a company, to be of assistance. In Lygon Nominees, although the class of general beneficiaries included a body corporate in which a beneficiary held a beneficial share, the distribution power was expressed to include distributions to 'general beneficiaries living from time to time'. De Luca and Ricci, where beneficiaries were defined to include natural persons, trusts and companies, but the distribution clause referred to 'living beneficiaries' also did not provide material guidance on the issue, as the issue was not the subject of consideration by the judge. The wording was not the subject of comment by the Court in either case. The inclusion of that wording in the distribution clauses simply raises the same question as would arise in this case, if the amendment to the definition of beneficiaries was approved, namely whether the distribution power was limited to natural persons notwithstanding the existence of a broader class of beneficiaries. The question remains whether the distribution clause would, if not amended, properly be regarded as limiting the distribution power to living beneficiaries.

163 I also considered that other authorities relied on by the Trustee, including those suggesting that persons not yet born may be regarded as living, did not provide any example arising in a sufficiently cognate context to be of any assistance.

164 I consider it would be more appropriate to amend the words of the distribution clause in the way proposed by the Trustee in the alternative, namely to include in cl 3(a) the words 'living or in existence from time to time', which imports a clear intention to encompass non-human beneficiaries. With that amendment, the proceeding words 'for the maintenance, education, advancement or support or otherwise howsoever for the benefit of all or such one or more... of the Beneficiaries living from time to time' can comfortably be read distributively so that the references to maintenance, education, advancement or support apply to the human beneficiaries and the words 'or otherwise howsoever' refer to all beneficiaries including the corporate beneficiaries. This would ensure that the Deed is clearly understood not only as having an enlarged class of beneficiaries encompassing companies in which beneficiaries have an interest and corporate trustees but that distributions can be made to any beneficiary in the class. The flexibility to make these distributions to any beneficiary in the class was a central element of the purpose for making the amendment to the definition of beneficiary. It would be proper, and give the Trust maximum operational clarity, to make this clear beyond doubt to all who may be affected by the Deed, including the Trustee, the beneficiaries and any person who reads it.

165 It would also be appropriate, to give the Deed a clear and unambiguous operation, to amend the reference to 'his or her own use or benefit' found in cl 5(a) to 'their or its own use or benefit', as also proposed by the Trustee in the alternative.[183]

166 The narrower form of the definition of beneficiaries, and the changes to cl 3(a) and cl 5(a) are not amendments which were included in the various deeds of amendment to which the adult beneficiaries consented. I consider that the originating motion is wide enough to encompass approval of this additional amendment. However, given that the terms of the arrangement in the deeds of amendment and the consents of the adult beneficiaries are an essential component of what will give effect to the amendments, as well as of the 'instrument' for the purposes of s 5(1) of the Perpetuities and Accumulations Act, it will be necessary to ensure that their consents to the finalised Deed of Amendment are obtained. I will hear the Trustee and the Contradictor on this issue and on consideration as to timing of the making of orders after they have had an opportunity to consider this judgment.

Conclusion - broadening the class of beneficiaries

167 For the above reasons, I consider that it is to the benefit of Maya and any unborn beneficiaries, and a fair and proper arrangement, to approve the proposed broadening of the beneficiary class, subject to the following observations:

(a) the definition of 'Beneficiaries' referred to at [145] above, which limits the reference to companies in which a beneficiary has an interest to private companies, in which the beneficiary has a controlling interest, as proposed in the alternative by the Trustee in the course of submissions, is appropriate;

(b) the deed of amendment should also amend the references to the phrase 'living from time to time' in cl 3(a) to 'living or in existence from time to time'; and the phrase 'his or her use or benefit' in cl 5(a) to 'their or its use or benefit'; and

(c) the adult beneficiaries must provide their consent to these amendments to the deed of amendment.

The sub-trust clause amendment and the submissions of the Trustee and Contradictor

168 The Trustee received advice to allow the Trustee to set aside amounts allocated in favour of particular beneficiaries to be held on a sub-trust for them.[184]

169 The purpose of the amendment relates to the application of Division 7A of the Income Tax Assessment Act 1936, which can apply when a trust has an unpaid present entitlement owing to a corporate beneficiary. The Division can have the effect of deeming a dividend to have been paid by the corporate beneficiary to the trust for tax purposes. The legal advice refers to the views expressed by the Commissioner of Taxation in Taxation Ruling TR 2010/3 and Practice Statement Law Administration PSLA 2010/4[185] to the effect that where unpaid distributions from a trust are outstanding and owing to corporate beneficiaries, they will not be regarded as deemed dividends under Division 7A of the Income Tax Assessment Act 1936 if they are held on subtrust for the sole benefit of the corporate beneficiary.

170 The proposed amendment is to add a clause 6B to the Deed, which would read as follows:

6B Any part of the Trust Fund that has been set aside for separate administration by the Trustee for the sole benefit of a beneficiary (whether it be income, net income or capital of the Trust) shall be held on separate trust for such beneficiary ('the Subtrust') and the provisions of this Deed shall apply to the Subtrust as if it were a separate trust.

171 The Trustee submits that this amendment will be beneficial for the Beneficiaries as a whole, assuming that the class of beneficiaries is amended to include corporations, given the potential for all beneficiaries to have an interest in a corporate beneficiary.[186]

172 The Contradictor submits that the Court may accept that this amendment, as with the amendments to introduce a streaming clause and to determine 'net income' and 'income' of the Trust, would provide a financial benefit to unborn beneficiaries by reason of avoiding or minimising prospective liability to taxation. Having regard to English and Australian authority accepting that the fact that one of the objectives of an arrangement is to reduce the tax burden is no reason to refuse approval, she submits that it is appropriate to approve the amendment on behalf of the minor and unborn beneficiaries.[187]

173 The amendment is, in terms, one which will enable the Trustee to hold any part of the Trust Fund on sub-Trust for any Beneficiary, so has the potential to be used in a way which may benefit any of the Beneficiaries including the Relevant Beneficiaries. The evidence does establish that the primary intended purpose of a new power in the Trustee to hold trust property on sub-trust relates to payment to corporate Beneficiaries. It is, therefore, appropriate to consider specifically the question of whether the carrying out of the arrangement would be for the benefit of the Relevant Beneficiaries.

174 As I have noted above in the context of the amendment to broaden the definition of Beneficiary and the inclusion of corporate trustees, the purpose of this amendment in taking advantage of favourable taxation outcomes if trust income is distributed to corporate beneficiaries may make it more likely that distributions are made to the corporate beneficiaries. However, I have also accepted that this will not ultimately operate to the disadvantage of the relevant beneficiaries, as I accept that to the extent that there is financial advantage to adult beneficiaries and companies controlled by them from the more effective allocation of Trust income, this is likely to flow to the Relevant Beneficiaries. I consider that this conclusion applies to the proposed amendment to include the power to hold trust funds in sub-trusts.

175 I also accept for the reasons discussed above that it is acceptable to approve an amendment which is primarily or solely for the purpose of reducing tax liability or the advantageous tax treatment of trust income or distributions to beneficiaries.

176 I am satisfied that the variation to include a power to hold trust funds in sub-trusts is for the benefit of the Relevant Beneficiaries and that it is a fair and proper arrangement.

Inclusion of a power for the Trustee to stream income of the Trust

The streaming clause amendment and submissions of the Trustee and Contradictor

177 It is proposed that the Deed be amended to allow streaming of income and capital of different classes, and the allocation of expenses or outgoings against different classes of income or capital, so that income and capital of different classes can be distributed in a tax efficient way to particular beneficiaries. The amendments are proposed in response to the legal advice[188] that streaming of net capital gains and franked dividends to particular beneficiaries may have tax benefits because those different types of beneficiaries who can most benefit from a particular type of income may have that type of income streamed to them. An example given in submissions is that if there was only one individual beneficiary who had capital losses, then they could receive all capital gains from the Trust to utilise against those capital losses, there being a restriction in the Income Tax Assessment Act 1997 (Cth)[189] on using capital losses only against capital gains and not other types of income.

178 Taxation legislation currently allows the streaming of net capital gains and franked dividends by a trustee, provided that the trust deed includes a power to stream.[190]

179 The form of the proposed streaming clause is framed broadly, to cover the possibility that streaming of other types of income may be allowed in future if there are changes to tax legislation.

180 The Trustee refers to Re Dion Investments as an example of a Court authorisation of an amendment to a trust deed to include a streaming clause.[191]

181 I have accepted that there is support in the authorities for the approval of variations to trusts under the s 63A power where the primary or sole object of the amendment is to obtain a tax advantage or reduce a tax burden on the trust or on beneficiaries. The proposed amendment will enable treatment of trust income which may provide tax efficiencies for beneficiaries.

182 The proposal does not appear to involve any inherent potential to act to the detriment of minor or unborn beneficiaries. With respect to the application for approval of the introduction of a similar power to allocate capital gains considered in Re Dion Investments, Barrett JA noted that the trust deed in that case contained a discretionary power to pay or apply any part of the settled property applying to both income and corpus (clause 4(a)). His Honour concluded:[192]

Because the processes contemplated by the postulated new power would not, of themselves, involve discrimination among beneficiaries (the potential for discrimination being inherent already in the discretion that clause 4(a) entails) creation of the power would not involve any change of beneficial interests or adjustment of the respective rights of beneficiaries.

...

The evidence - particularly the KPMG advice - establishes that it is expedient in the management and administration of the trust property by way of efficient and economical effectuation of clause 4(a) that the powers should be given to Dion Investments Pty Ltd as trustee.

183 The amendment in Re Dion Investments was approved pursuant to s 81(1) of the Trustee Act 1925 (NSW), which is the equivalent of s 63 of the Trustee Act rather than in the terms of s 63A_._ However I consider that in this case, the same considerations provide a basis to conclude that the variation will be to the benefit of the Relevant Beneficiaries, and is a fair and proper arrangement. The proposed streaming power will enable a use of the existing discretionary distribution power in cl 3(a) of the Deed which is both efficient and financially advantageous to beneficiaries, and does not involve any inherent prospect for discrimination as between beneficiaries, noting the broad discretion already inherent in cl 3(a).

184 I am satisfied that the variation is for the benefit of the Relevant Beneficiaries and a fair and proper arrangement to approve pursuant to s 63A.

Inclusion of a power for the Trustee to choose the method for determining the 'net income' and the 'income' of the Trust

The proposed amendment to facilitate defining the income of the Trust, and the submissions

185 The Advice to the Trustee and beneficiaries also recommended amendments to the Deed arising in the context of the differences between the concept of income in trust law, which includes income according to ordinary concepts, such as dividends, rental and interest income; and the concept of income in tax law, which may extend to capital gains.

186 The amendment was recommended to address the impact of the High Court decision in Federal Commissioner of Taxation v Bamford,[193] which was said in the advice to have the following consequences:

... where the trust deed does not define 'income' or 'net income' then:

(a) beneficiaries presently entitled to income (which will not include capital gains) will be taxed on their proportion of the taxable income under section 95 of the ITAA36 [Income Tax Assessment Act 1936] (which will include capital gains); and

(b) to the extent that capital gains are triggered within the Trust but there is no ordinary income generated within the Trust, the Trustee may be taxed (at the top marginal tax rate) in respect of the capital gain, with no access to the 50% CGT discount, unless the Trustee exercises its powers to distribute trust capital to ensure that the full amount of the taxable capital gain is distributed to the beneficiaries.

We would therefore recommend including a definition of 'income' and 'net income' for the avoidance of doubt and to minimise the risk of adverse tax in the future if the Trustee fails to distribute capital.

187 The proposed amendment is to include a paragraph (e) in the definitions in cl 1 of the Deed, as follows:

references to the "net income" of the Trust Fund or to "income' of the Trust Fund net of expenditure (or of any subtrust) shall mean:

(i) the net income or income of the Trust Fund net of expenditure (or of any subtrust) determined by the Trustee using any method whatsoever chosen by the Trustee and, for the avoidance of doubt, can include amounts that would otherwise be gains of a capital nature; or

(ii) if the Trustee does not determine the "net income" or "income" under subclause (i), net income as defined in subsection 95(1) of the Income Tax Assessment Act 1936.

188 As noted above, the Contradictor expressed the view that given the objective of the amendment in reducing the taxation burden, it is open to conclude that this amendment would be for the benefit of the relevant beneficiaries.

Consideration - amendment to facilitate defining income

189 I am satisfied from the evidence, in particular the legal advice as to the context of the proposed amendment relating to determining the net income or income of the Trust, that it is a variation which will facilitate clarity and efficiency in the management of the Trust. Again, it will facilitate the Trustee in managing the Trust income in ways that is most advantageous by reference to tax law, but as discussed above this is an acceptable objective. There is no apparent reason why this would not operate to benefit the Relevant Beneficiaries to the same extent as the other Beneficiaries.

190 In Re Dion Investments, an amendment to similar effect as this proposed amendment[194] was approved as an amendment which would enable a 'more efficient and economical performance' of the trustee's function of administering trust property.[195]

191 I am satisfied that the variation will be to the benefit of the Relevant Beneficiaries and is a fair and proper arrangement.

192 The original Deed does not include any power for the Trustee to amend the Deed, nor any mechanism by which amendments can be effected.

193 The Trustee proposes that a new general power of amendment be introduced in the following form, as a new clause 14 of the Deed:

The Trustee may from time to time as it thinks fit, alter, vary, revoke or add to the Trust Deed including any trust, limitation or any clause whatsoever of the Trust Deed (excluding this clause), whether originally in the Trust Deed or as altered, varied, revoked or added to under this clause 14 from time to time, as the Trustee thinks fit by a further Deed supplemental to the Trust Deed, provided that no amendment, alteration, revocation or addition of the Trust Deed under this clause may:

(a) infringe any applicable law against perpetuities;

(b) be made in favour of or for the benefit or so as to result in any benefit to the Settlor; and/or

(c) affect the beneficial entitlement to any amount allocated for or otherwise absolutely and irrevocably vested in any Beneficiary prior to the date of the amendment.

194 The purpose of the amendment was to avoid the costs of any further court application if the Deed needed to be changed for reasons including any change in the law, particularly taxation law; if 'a bank or financier requests other powers in the Deed in relation to borrowing or otherwise', or '[i]f necessary for implementation of succession planning objectives, such as passing of control'.[196]

Authority on approval of an arrangement involving introduction of a general power of amendment

195 In Re the Alan Synman Family Trust, Ginnane J was asked to approve under s 63A an arrangement to vary a trust to give the trustee a general power of variation. Three of the beneficiaries of the trust were minors. The purpose of the application was to avoid the situation of the trustee having to return to court each time it wished to amend the trust deed. His Honour held:[197]

In this, and in most applications under s 63A, the appropriate path is for a trustee to seek the court's approval of an arrangement to vary specific provisions of the Trust Deed, rather than seeking approval of an arrangement giving the Trustee a general power of variation. By the former path, the Court can, in most circumstances, best assess whether the carrying out of the arrangement would be for the benefit of persons who have an interest under the Trust and who are incapable of giving their assent. It is far more difficult to reach that conclusion when the Court does not have the detail of all the variations that the trustee will make, once given the general power of variation.

196 Justice Ginnane refused to approve the amendment, and noted that the plaintiff in that case had said that, if the variation to introduce a general power of arrangement was not approved, it would propose an arrangement implementing the variations it seeks. His Honour observed that this course was open to the plaintiff and that it would be appropriate either for the minor beneficiaries to be represented by separate counsel, or for counsel instructed on their behalf to provide an opinion as to whether any arrangement was to their benefit.[198]

197 No other authority considering whether a Court may, pursuant to s 63A, approve the variation of a trust deed to introduce a general power of amendment, was identified. In Re Dion Investments the NSW Court of Appeal upheld a determination of a primary judge that s 81(1) of the Trustee Act 1925 (NSW), the equivalent of s 63 of the Trustee Act, did not empower the Court to confer on the trustee the power to amend the trust instrument, including by introducing a general power of amendment.[199]

Submissions of Trustee and Contradictor as to general power of amendment

198 The Trustee acknowledged that the only authority dealing with an application under s 63A for approval of a variation of a trust deed to introduce a general power of amendment was Re the Alan Synman Family Trust, in which the variation was not approved.

[T]he current case should be determined on its own fact and the general power of amendment should be permitted. There have been proposals around for quite some time to change the legislative provisions dealing with the taxation of trusts. It would be beneficial to current and unborn beneficiaries for the Trustee to have a general power of amendment to deal with any future law changes in that respect. Similarly, if the Trustee needs to borrow then it would also be beneficial to those current and unborn beneficiaries for the Trust to be able to meet any financier's requirements in terms of administrative powers or provisions that might need to be included in the Trust Deed. These are not matters that would be detrimental to any potential unborn beneficiaries.

200 When the difficulty of the Court being satisfied that every exercise of a general power of amendment would be for the benefit of Relevant Beneficiaries was raised with counsel for the Trustee it was submitted that it was possible to be so satisfied because in order to exercise the power of amendment:

... the trustee has to act in good faith, exercise the power for proper purposes, it is a fiduciary power. So the trustee cannot, for example, use the power to let's say just benefit one beneficiary, because that would not be a proper exercise of the power.

201 It was submitted that the Trustee was an independent trustee and that any inappropriate exercise of power by the Trustee could be addressed by an application to the Court by the beneficiaries affected.[201] The Deed also contained limitations in cl 10(1) on the persons who could be appointed a trustee, and in particular provided that neither a beneficiary, nor 'any company in which a Beneficiary has a controlling interest, or in respect of which any beneficiaries or two or more have de facto control or power and direction' could be trustee. In submissions filed following the hearing, the Trustee also submitted that the proposed power of amendment could be varied to provide that 'no amendment could be made to clause 10(1) of the Deed, or to otherwise cause or permit such persons as outlined in cl 10(1) of the Deed as a Trustee of the Settlement'.[202]

202 The Contradictor submitted that the Court should not approve the variation to introduce a general power of amendment, based on the rationale identified by Ginnane J in Re Alan Synman Family Trust. She submitted that this Court should follow that decision unless persuaded that the decision was plainly wrong, and that there was nothing put forward to explain why the ratio in that case does not apply.[203]

203 The Contradictor submitted that also considering this aspect of the application on its own facts and circumstances, it was not possible to determine whether the variations which may be made pursuant to a general power would be for the benefit of relevant beneficiaries, nor whether it would be a fair and proper arrangement for those persons. The trustee's fiduciary responsibilities would not be an answer to that question. Finally the Contradictor noted that the proposed general power of amendment only preserves vested rights prior to any amendment, which would not protect any interests of the Relevant Beneficiaries who do not have any vested entitlements.[204]

Consideration - it is not possible to conclude that it would be to the benefit of minor and unborn beneficiaries to approve a general power of amendment

204 I have concluded, for the following reasons, that it is not possible to be satisfied that the introduction and carrying out of a general power of amendment would be to the benefit of Maya and potential unborn beneficiaries. In summary, as it is not possible to anticipate in advance how the power would be exercised; what amendments to the Deed may be effected using the proposed power, and what the effect of any amendments would be, there is no adequate basis on which I could form that state of satisfaction. There is no evidence on that issue other than the observation in the legal advice received by the Trustee that changes are anticipated to taxation laws; that financiers may require amendments to the Deed as a condition of borrowing, and that

As part of Richard and Andrews estate and succession planning, they can decide how control of the Trust is to pass when one or both of them have passed away. Where an express amendment power is included, the Trustee could amend the terms of the Trust by deed, once Richard and Andrew have jointly agreed as to the succession arrangements at a future date without the need to make an application to the court.

205 The application does not address how it is said that any such amendments would be to the benefit of minor or unborn beneficiaries, other than by reference to the avoidance of costs associated with future applications to Court to authorise amendments, and the assertion in the legal advice[205] and by the Trustee by way of submission that it will be to those beneficiaries' benefit.[206]

206 In considering this amendment, it is particularly relevant to bear in mind, as emphasised by Lyons JA in Re The Pickering Family Trusts, that s 63A requires the Court to be satisfied that the carrying out of the arrangement will be for the benefit of the beneficiaries who are unable to consent for themselves.[207] As observed by Ginnane J in Re Alan Synman Family Trust, it is very difficult to reach that state of satisfaction 'when the Court does not have the detail of all the variations that the trustee will make, once given the general power of variation'.[208]

207 Turning to the specific benefits said by the Trustee to arise from the proposed amendment, it was first submitted that 'it would be beneficial to current and unborn beneficiaries for the Trustee to have a general power of amendment to deal with any future law changes' relating to taxation of trusts.[209] It is not apparent why this would necessarily be the case, where the nature of the changes are not identified and it is not possible to assess the potential impact with respect to the minor and unborn beneficiaries. I do not regard it as adequate, in exercising the power under s 63A, simply to rely on a hypothesis that any amendments to the Deed made in response to changes in taxation law and which are likely to be considered primarily by reference to the way in which adult beneficiaries have structured their financial affairs will necessarily have an advantageous flow on effect to all minor and unborn beneficiaries. That involves too significant a degree of speculation on which to base a state of satisfaction that a general power of amendment would be for the benefit of minor and unborn beneficiaries.

208 I am also unable to accept the submission that 'if the Trustee needs to borrow then it would also be beneficial to those current and unborn beneficiaries for the Trust to be able to meet any financier's requirements in terms of administrative powers or provisions that might need to be included in the Deed'.[210] It is far from clear from this submission alone why it would be to the benefit of the Relevant Beneficiaries to facilitate the requirements of an unknown third party financier to make amendments to the Deed of the Trust under which they would be beneficiary. There has been no explanation as to why the Trustee would borrow funds or for what purposes. That is understandable given that the purpose of the amendment is to achieve flexibility as to the future, and there do not appear to be current plans in place. However it has the consequence that although it is conceivable that some future transaction involving borrowing by the Trustee would be financially advantageous to the Relevant Beneficiaries, and that it could potentially be appropriate to effect some change to the Deed to facilitate that borrowing, this is at present entirely hypothetical. It is also conceivable that transactions involving borrowing by the Trustee and amendments to the Deed at the request of a third party would not be to the benefit of Maya and the unborn beneficiaries, or could be disadvantageous to them. This is an unsatisfactory basis on which to form any conclusion that approving a variation to enable a general power of amendment would be for the benefit of beneficiaries who are unable to consent.

209 Finally, the consideration of making appropriate succession plans is an important objective, but it cannot be assumed that succession plans will necessarily operate to the benefit of unborn future beneficiaries.[211] The only evidence as to current succession planning is the Advice which refers to Richard and Andrew making succession plans in the future which may necessitate amendments to the Deed. The Trustee would plainly have to consider independently any such amendment proposals when made, and would have to act honestly and in good faith in doing so. Whether the Trustee is also subject to fiduciary obligations in exercising the variation power (as submitted by counsel for the Trustee) so that it must be exercised in the best interests of all beneficiaries is not free from doubt.[212] In Re Dion Investments Barrett JA (with whom Beazley P and Gleeson JA agreed) recognised the exceptional nature of a power conferred on a trustee of variation of terms of a trust, which was 'not something within the ordinary and natural province of a trustee', but did not comment on whether it was qualified by all fiduciary obligations.[213]

210 Whether a Trustee's power under the terms of a trust instrument to vary the terms of the trust would be regarded being qualified by all fiduciary obligations, or simply by the obligation to exercise the power honestly and in good faith, it is foreseeable that it may be difficult to anticipate and act in the best interests of all beneficiaries when exercising the variation power. The acknowledgement by counsel for the Trustee that an answer to this lies not only in the constraints on the exercise of the power, but in the ability of beneficiaries to come to court in the event of an inappropriate exercise of power,[214] tends to highlight the difficulty that a beneficiary who is a minor or who is unborn will plainly not be in a position to take such action with respect to a variation which is not in their interest or effected without consideration of their position.

211 The state of available information about the use of a general amendment power to facilitate succession planning is currently so limited as to make the benefit of carrying out such a variation theoretical, illusory[215] or simply too speculative to enable me to be satisfied that there would be a benefit to the relevant beneficiaries in carrying out the arrangement.

212 Finally, it should be acknowledged that if further amendments are ultimately desired in order to adapt to changes in taxation laws or potential borrowing requirements, this would necessitate an application to the Court, with the accompanying time and expense to the Trust that will entail. I take that potential advantage into account. However, given the difficulty of making any meaningful assessment of the impact on minor and unborn beneficiaries of any future amendments to the Deed, and potential disadvantages to them, even taking into account the elimination of the potential need for a future Court application it is not possible to regard the proposed variation as presenting an overall benefit to the non sui juris beneficiaries.

213 It is not open, therefore, for the Court to approve under s 63A the arrangement insofar as it extends to the amendment of the Deed to include a general amendment power.

It would not be open to introduce a general power of amendment pursuant to s 63 of the Trustee Act

214 Authorities establish that the power in s 63 of the Trustee Act does not extend to the authorisation of an amendment to a trust instrument to enable the trustee to vary the terms of the trust.[216] The component of the application relating to approval of a general power of amendment must, therefore, be dismissed.

215 For the reasons above, the Court will approve the proposed arrangement insofar as it seeks amendments to the Deed to extend the vesting date and provide a perpetuity period of 80 years; to introduce the amendments relating to streaming powers of the Trustee to streaming of income, holding property on sub-trust, and defining income and net income. Subject to the qualifications I have identified above at [167] I will approve amendment of the definition of 'beneficiary'.

216 I will hear the parties on the appropriate procedures for obtaining the necessary consents to the approved amendments from the adult beneficiaries, as discussed at [82]-[84] above, and as to the appropriate orders to give effect to these reasons.

[1] Affidavit of David John Berry affirmed 7 June 2023 (Berry Affidavit), [12]; Exhibit DJB, 11.

[3] Affidavit of Richard William Hamer affirmed 7 June 2023 (R Hamer Affidavit), [10], [33]-[37]; see also Deed recitals.

[5] Originating Motion dated 30 June 2023, subsequently amended on 16 February 2024.

[6] Affidavit of Andrew Hamer affirmed 7 June 2023 (A Hamer Affidavit).

[7] R Hamer Affidavit, [23]-[24]; A Hamer Affidavit, [8]-[9].

[8] R Hamer Affidavit, [39] and [41]; Exhibit RWH 234-236.

[10] R Hamer Affidavit, [39]-[42]; Exhibit RWH 227-228; A Hamer Affidavit [13]-[16], [23]; Exhibit AMH, 108 and 118.

[11] R Hamer Affidavit [65]-[68]; Exhibit RWH 356-440 and 406-450; A Hamer Affidavit, [32].

[12] R Hamer Affidavit [68]; A Hamer Affidavit [33], [35].

[13] See generally Re Gengoult-Smith Family Trust [2024] VSC 189, [27]-[35] (Moore J).

[14] Affidavit of Nathan Yii affirmed 3 October 2023, [11]-[12].

[15] Saunders v Vautier [1841] EngR 629; (1841) 4 Beav 115; 49 ER 282 (affd [1841] EngR 765; (1841) Cr & Ph 240; 41 ER 483); see also CPT Custodian Pty Ltd v Commissioner for State Revenue [2005] HCA 53; (2005) 224 CLR 98, 118 [43] (Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ); Re Dion Investments Pty Ltd [2014] NSWCA 367; (2014) 87 NSWLR 753, [46] (Barrett JA, Beazley P and Gleeson JA agreeing), both citing Mummery LJ in Goulding v James [1996] EWCA Civ 1156; [1997] 2 ALL ER 239, 247.

[16] Re Steed's Will Trusts [1960] 1 Ch 407, 420-421 (Lord Evershed MR, with whom Willmer and Upjohn LJJ agreed); Perpetual Trustees Victoria Ltd v Barns [2012] VSCA 77; (2012) 34 VR 387, 392-393, [25] (Williams AJA, with whom Buchanan and Bongiorno JJA agreed); Re Keysborough Blue Danube Soccer Club [2003] VSC 119, [34] (Ashley J); McNee v Lachlan McNee Family Maintenance Pty Ltd [2020] VSC 273, [105] (Moore J).

[17] [2012] VSCA 77; (2012) 34 VR 387.

[18] [2012] VSCA 77; (2012) 34 VR 387, 395 (Williams AJA, with whom Buchanan and Bongiorno JJA agreed).

[19] (2022) 66 VR 246, 268-269 [83] (McMillan J) (citations omitted).

[20] George v Kollias [2007] VSC 46, [44] (Hansen J).

[21] Re The Pickering Family Trusts [2024] VSC 5, [21] (Lyons JA).

[22] Pickering Family Trusts, [7]-[8].

[23] [2014] NSWCA 367; (2014) 87 NSWLR 753, 774 [99]-[100] (Barrett JA, Beazley P and Gleeson JA agreeing).

[24] [2006] NSWSC 1004, [28]-[34].

[25] [2014] NSWCA 367; (2014) 87 NSWLR 753, 774 [100].

[26] [2014] NSWCA 367; (2014) 87 NSWLR 753, 774 [97]-[99], [108].

[27] [2014] QSC 244.

[28] [2016] VSC 71, [92]-[99]. This aspect of her Honour's decision was not challenged on appeal: [2016] VSCA 273. See also Re Estate of Barns [2011] VSC 314, [46]-[48] (Robson J).

[31] Contradictor's Memorandum of Advice dated 22 November 2023, [12.1].

[32] Contradictor's Further Memorandum of Advice dated 22 March 2024, [8].

[33] Contradictor's Memorandum of Advice, [12.4].

[34] Contradictor's Memorandum of Advice, [13].

[35] Contradictor's Memorandum of Advice, [12.5] referring to Thomas Hare Investments v Hare [2012] VSC 200; (2012) 34 VR 656, 666 [36]-[37] and Re Plator Nominees Pty Ltd [2012] VSC 284, [15].

[36] Re Gengoult-Smith Family Trusts [2024] VSC 189, [36]-[37]; Thomas Hare, 666 [39] (Habersberger J).

[37] Owies v JJE Nominees Pty Ltd [2022] VSCA 142, [84]-[98]; Re Gengoult-Smith Family Trusts, [41].

[38] R Hamer Affidavit [65]-[68]; Exhibit RWH 356-400, 406-450.

[39] R Hamer Affidavit, [40]; A Hamer Affidavit, [14]; Affidavit of William Hamer affirmed on 16 August 2024, [6]-[9]; Affidavit of David Hamer affirmed on 17 August 2024, [7]-[11]; Affidavit of Caroline Hamer affirmed on 19 August 2024, [5]-[9].

[40] Nathan Yii Lawyers Advice, R Hamer Affidavit, [39]-[42], Exhibit RWH 227-228.

[41] See discussion below at [127]-[129]. Thomas Hare [36]-[37]; Re Plator Nominees Pty Ltd [2012] VSC 284, [15]; Arthur Brady Family Trust [2014] QSC 244, [46]; Ridgewell v Ridgewell [2007] EWHC 2666 (Ch), [17] where the Court held that the benefit which may be relevant under the variation of trusts power in s 1(1) of the Variation of Trusts Act 1958 (UK) can be a financial benefit in the form of 'mitigation of tax liabilities which would otherwise fall on the trust fund. In general it is no objection to an application under the 1958 Act that its purpose or primary purpose is the avoidance or mitigation of tax.'

[43] Congregational Union of New South Wales v Thistlethwayte [1952] HCA 48; (1952) 87 CLR 375.

[45] Re Perenna Nominees Pty Ltd, [71]-[74].

[46] Re Perenna Nominees Pty Ltd, [74], [75].

[47] [2009] EWHC 2076.

[48] [1969] 1 Ch 100.

[50] Wyndham v Egremont, [20], having referred to Inland Revenue Commissioners v Holmden [1967] UKHL 7; [1968] AC 685 and Goulding v James [1996] EWCA Civ 1156; [1997] 2 All ER 239, 247.

[51] [2024] VSC 189 (Moore J).

[52] Trustee's Submissions, [33]. Contradictor's Memorandum of Advice, [18].

[53] [2012] VSC 284 (Davies J). See also Thomas Hare Investments v Hare [2012] VSC 200; (2012) 34 VR 656 (Habersberger J).

[54] Re Holt's Settlement [1969] 1 Ch 100; Wyndham v Egremont & Ors [2009] EWHC 2076 (Ch); Allfrey v Allfrey & Ors [2015] EWHC 1717 (Ch).

[55] Trustee's Submissions in Reply to Contradictor's Further Advice, 12 April 2024, [8]-[10].

[56] Trustee's Submissions in Reply to Contradictor's Further Advice, 12 April 2024, [10]. See also Transcript 23/04/24 T70.07-18, T126.21-29.

[57] Ex parte Thrasivoulou [1978] VicRp 38; [1978] VR 369, as to the natural meaning of the word 'instrument', arising in a different statutory context; Sun Alliance Insurance Ltd v Inland Revenue Commissioners [1972] 1 Ch 133, 147-148 and Greaves v Smith [1986] Tas R 120, 135.

[58] Azevedo v Secretary to the Department of Primary Industries and Energy [1992] FCA 84; (1992) 106 ALR 683, 699 (French J) (in relation to whether a 'plan of management' could be said to be an 'instrument' for the purposes of the Acts Interpretation Act).

[59] Contradictor's Memorandum of Advice, [18].

[60] Contradictor's Further Memorandum, [11].

[61] [2023] NSWSC 1507.

[62] Re Holt's Settlement [1969] 1 Ch 100, [57]-[58].

[63] [1967] UKHL 7; [1968] AC 685.

[64] [2012] VSCA 77; (2012) 34 VR 387, [18], [26]-[27] (Williams AJA, with whom Buchanan and Bongiorno JJA agreed).

[65] [2023] NSWSC 1507, [43]-[59] (Parker J).

[66] Trustee's Submissions in Reply to Contradictor's Further Advice, 12 April 2024, [3]-[6], referring to Re Perenna Nominees at [81]; Goulding v James [1996] EWCA Civ 1156; [1997] 2 All ER 239 and Tay v Chief Commissioner of State Revenue [2017] NSWSC 338, [32].

[67] Transcript 23/04/24 T80.01-05, T80.30-T81.28.

[68] [2024] VSC 189 (Moore J).

[69] Transcript 2/09/24 T10.08-T14.18, relying on Hill v Zuda [2022] HCA 21; (2022) 275 CLR 24, [25]; Undershaft (No 1) Ltd v Commissioner of Taxation [2009] FCA 41; (2009) 175 FCR 150; Engebretson v Bartlett, Amorin [2007] VSC 163; (2007) 16 VR 417.

[70] Trustee's Further Post-Hearing Submissions, [2].

[71] Contradictor's Third Memorandum, [11] (emphasis added).

[72] Transcript 02/09/2024 T9.13-16; T17.17-26.

[75] Re Perenna Nominees, 265, [75]; Re Plator Nominees, Thomas Hare.

[77] Cf Re Gengoult Family Trust, [20].

[78] Perpetuities and Accumulations Act, s 2.

[79] Cf Ord Forrest Pty Ltd v Federal Commissioner of Taxation [1974] HCA 57; (1974) 130 CLR 124, considering the statutory definition of 'disposition of property' in the Gift Duty Assessment Act, which provided ''disposition of property' means any conveyance, transfer, assignment, settlement, delivery, payment or other alienation of property' and provided for certain categories of transaction to be included. Stephen J at first instance and the Court on appeal endorsed 'alienation' of property as the natural meaning of disposition: 127, 128 (Stephen J), 143 (Barwick CJ), 144 (McTiernan J agreeing with Barwick CJ), 148 (Gibbs J).

[80] [1967] UKHL 7; [1968] AC 685.

[81] Holmden, 701 (Lord Reid), 710-711 (Lord Guest), 713 (Lord Wilberforce).

[82] [1996] EWCA Civ 1156; [1997] 2 All ER 239, 247 (Mummery LJ, Sir Ralph Gibson and Butler-Sloss LJ agreeing).

[83] Or s 1(1) of the Variation of Trusts Act 1958 (UK), the UK equivalent used in Re Holt's Settlements.

[84] Re Dion Investments Pty Ltd [2014] NSWCA 367; (2014) 87 NSWLR 753, [46] (Barrett JA).

[85] Transcript 23/04/24, T97.07-14, T135.11-24; Transcript 02/09/24 T26.23-28, T68.19-22.

[86] See cl 2.2(a)(iv) of Deeds of Amendment Variations 1, 2, 3 and 4.

[87] Trustee's Submissions, 6 October 2023, [34], referring to the Nathan Yii Lawyers Advice, R Hamer Affidavit, Exhibit RWH 227-228.

[90] A Hamer Affidavit, [22]; R Hamer Affidavit [48].

[91] A Hamer Affidavit [22(a)]; R Hamer Affidavit [48(a)].

[92] Trustee's Submissions, 6 October 2023, [36].

[93] [2012] VSC 200; (2012) 34 VR 656.

[94] Trustee's Submissions in Reply, 13 December 2023, [14]-[17].

[95] Transcript 02/09/24 T6.01-09, and T6.26-29.

[96] Trustee's Submissions in Reply, [18]-[20].

[97] Contradictor's Memorandum of Advice, [20].

[98] Contradictor's Memorandum of Advice, [21].

[99] Transcript 23/04/2024 T112.31-T113.09.

[100] [2024] VSC 5. See Transcript 23/04/2024 T113.05-24.

[101] [2024] VSC 5, [63]-[64].

[102] [2024] VSC 5, [80], [88], [92]-[93].

[103] The clause also contains sub paragraph (iii), which provides for the Trustee to set aside amounts for any Beneficiary who is not sui juris to be held on trust for that beneficiary for 'his or her own use and benefit', and providing for the Trustee on the beneficiary becoming sui juris to pay and transfer to that beneficiary his or her separate trust fund for his or her own use and benefit absolutely.

[104] Trustee's Further Post-Hearing Submissions, 17 May 2024.

[105] Contradictor's Third Memorandum of Advice dated 31 May 2024.

[106] Trustee's Further Post-Hearing Submissions, 17 May 2024, [29], referring to CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98, [43].

[107] Trustee's Further Post-Hearing Submissions, 17 May 2024, [32], referring to Re McDonald Family Trust No 1 [2010] VSC 324, [13] (Judd J).

[108] Contradictor's Third Memorandum, [16], referring to Re Roth [2022] VSC 511, [29] (McMillan J).

[109] [1968] 1 WLR 899, 905, citing Martin J in In Re Dyer [1935] VicLawRp 26; [1935] VLR 273.

[110] Re McGowan & Valentini Trusts (2021) 63 VR 449, 488-493 [124]-[139].

[111] (2021) 63 VR 449, 488 [129]-[131].

[112] Contradictor's Third Memorandum, [24], citing Re McGowan and Valentini Trusts, [130].

[113] Transcript 02/09/24 T38.15-30; citing Wyndham v Egremont, [21]-[24].

[114] (1990) 21 NSWLR 107.

[115] [2011] FCAFC 5; (2011) 190 FCR 206, referred to in Taxation Determination 2012/21.

[116] Transcript 02/09/24 T40.23-26 referring to Variation of Trusts, Presentation to the Trusts Intensive of The Tax Institute, 6-7 June 2024, Dr P Bender.

[119] Trustee's Further Post Hearing Submissions, 17 May 2024, [19].

[121] [2005] VSC 247; (2005) 60 ATR 135, [70], [72].

[122] Trustee's Further Post Hearing Submissions, 17 May 2024, [8], [9], referring to the Macquarie Dictionary definitions of 'living' and 'live'.

[123] Trustee's Further Post-Hearing Submissions, 17 May 2024, [8]-[10], [16].

[124] Re Estate of the Late K and Re the Administration and Probate Act 1935: Ex parte the Public Trustee [1996] TASSC 24; Elliott v Joicey [1935] UKHL 3; [1935] AC 209, 234; Hamilton v Fife Health Board [1993] ScotCS CSIH 4, referred to in Trustee's Further Post Hearing Submissions, 17 May 2024, at [11]-[13].

[125] Trustee's Further Post-Hearing Submissions, 17 May 2024, [17]-[18].

[126] Freeman v CT Warne Pty Ltd [1947] ArgusLawRp 327; Crichton v Victorian Dairies Ltd [1965] VicRp 6; [1965] VR 49.

[127] Trustee's Further Post-Hearing Submissions, 17 May 2024, [27]-[28].

[128] Contradictor's Third Memorandum, [17].

[129] Contradictor's Third Memorandum, [3.1].

[130] Affidavit of Caroline Hamer, [6]-[7]; Affidavit of William Hamer, [4]-[7]; Affidavit of David Hamer, [5]-[10].

[131] Trustee's Further Post-Hearing Submissions, 17 May 2024, [36]-[38]. The proposed text of the two alternative definitions was provided in this submission.

[135] [2010] VSC 324, [4], [7].

[136] (2021) 63 VR 449.

[137] (2021) 63 VR 449, [118]-[120].

[138] (1990) 21 NSWLR 107.

[139] [1935] VicLawRp 26; [1935] VLR 273 (Martin J).

[140] [1935] VicLawRp 26; [1935] VLR 273, 290-291 (emphasis added).

[141] [1968] 1 WLR 899, 905, citing Martin J in In Re Dyer [1935] VicLawRp 26; [1935] VLR 273.

[143] Kearns v Hill, 111 (Meagher JA); Re McGowan, [124]-[127] (Macaulay J).

[146] Transcript 02/09/24 T40.28-T44.27.

[147] See, for example, the Royal Court in Jersey in Representation of Rysaffe Fiduciaries Sarl [2021] JRC 230; and cases in Bermuda and the Cayman Islands: Grand View v Wong (Civil Appeal No 5A of 2019) and In the matter of the Poulton Family Trust (unreported, 18 February 2022).

[148] See for example Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495, 595 [244] (Buss P).

[149] [2000] FCA 161; (2000) 170 ALR 65, [68]; cited with approval by Buss P in Mercanti v Mercanti at 521, [101].

[150] Transcript 02/09/24 T41.25-31, T43.15-18.

[152] Mercanti v Mercanti (2016) 50 WAR 496, 520-521, [96]-[101].

[153] Re McGowan (2021) 63 VR 449, 489-490, [129]; Federal Commissioner of Taxation v Clark [2011] FCAFC 5; (2011) 190 FCR 206, 217-8 [34], [36] (Dowsett J), [77]-[80] (Edmonds and Gordon JJ).

[154] See Thomas Hare, [36]-[37] (Habersberger J); The Pickering Family Trusts, [66], [98] (Lyons JA); Re Plator Nominees, [15] (Davies J); Re Perenna Nominees, [101] (McMillan J); Faye v Faye [1973] WAR 66, 71 (Lavan J).

[155] Contrast s 59C(3)(a) of the Trustee Act 1936 (SA), which provides that the Court must be satisfied that, among other matters, an application to vary a trust 'is not substantially motivated by a desire to avoid, or reduce the incidence of tax'.

[156] (2015) 2 Qd R 172, 182 [44]-[46].

[157] [1974] 1 NSWLR 597.

[158] [2003] SASC 227; (2003) 86 SASR 449, 460 [45].

[159] [2006] NSWSC 1004; (2006) 64 ATR 325, [61].

[160] Jacobs' Law of Trusts in Australia, (7th ed), 2006, JD Heydon and MJ Leeming (eds), [1706].

[161] [1969] 1 Ch 223, 246.

[162] [2007] EWHC 2666 (Ch).

[163] [2007] EWHC 2666 (Ch), [17] (Behrens J).

[164] Transcript 23/04/24 T119.11-T120.12.

[165] [2024] VSC 5.

[166] [2024] VSC 5, [16] (emphasis added).

[167] Trustee's Submissions in Reply, 13 December 2023, [15], [21].

[168] Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366, 393-394 [74]-[76], 407-408 [125].

[169] Letter of Advice from Nathan Yii dated 6 October 2021, [17] R Hamer Affidavit Exhibit RWH 227.

[170] Letter of Advice from Nathan Yii dated 6 October 2021, [17(a)] R Hamer Affidavit Exhibit RWH 227. See also [18(c)] relating to the advantages of being able to distribute to 'Richard and/ or Andrew or their families'.

[171] Re Gengoult-Smith Family Trust [2024] VSC 189, [41].

[172] See Owies v JJE Nominees Pty Ltd [2022] VSCA 142, [82]-[90].

[173] Contradictor's Memorandum of Advice, [20].

[174] Transcript 23/4/2024, T48.29-T49.07.

[175] Trustee's Further Post-Hearing Submissions, 17 May 2024, [38].

[176] Section 45A(1) provides 'A proprietary company is a company that is registered as, or converts to, a proprietary company under this Act'. Pursuant to s 113 of the Corporations Act, a company must have no more than 50 non-employee shareholders to be registered as a proprietary company.

[177] See [126] above; Re McGowan (2021) 63 VR 449, 489-490, [129]; Federal Commissioner of Taxation v Clark [2011] FCAFC 5; (2011) 190 FCR 206, 217-8 [34], [36] (Dowsett J), [77]-[80] (Edmonds and Gordon JJ).

[178] [2024] VSC 5, [67], [98].

[179] Affidavit of Nathan Yii affirmed 3 October 2023, [3]-[12]; Exhibit NLY pp 5-31.

[180] Goulding v James [1996] EWCA Civ 1156; [1997] 2 All ER 239, cited by McMillan J in W E Pickering Nominees Pty Ltd v Pickering [2016] VSC 71, [46], fn 25.

[181] Trustee's Further Post-Hearing Submissions, 17 May 2024, [17].

[182] [2021] FWCA 4, [65]-[68].

[183] Trustee's Further Post-Hearing Submissions, 17 May 2024, [28].

[184] Advice from Nathan Yii Lawyers, [28]-[29] (R Hamer Affidavit, Exhibit RWH 229; A Hamer Affidavit Exhibit AMH 113).

[185] See now Taxation Determination 2022/11 which continues to recognise a concession based on sub-trusts.

[186] Trustee's Submissions, 6 October 2023, [48].

[187] Contradictor's Memorandum of Advice, [22]-[25], referring to Re Weston's Settlement at 246; Thomas Hare at [36]-[37]; Plator Nominees at [15]; Faye v Faye.

[188] Advice from Nathan Yii Lawyers, [24]-[27] (R Hamer Affidavit, Exhibit RWH 229), A Hamer Affidavit, 113.

[189] Sections 102-15 and 960-20(3).

[190] Income Tax Assessment Act 1997 (Cth), Subdivision 115-C and Subdivision 207-B.

[191] Trustee Submissions, 6 October 2023, [39].

[192] Re Dion Investments, [112]; [114]

[193] (201) 240 CLR 481.

[194] Re Dion Investments, [21]-[22] explaining the rationale for the amendment having regard to the differing way in which net income of a trust may be calculated under taxation legislation, as compared to calculation of trust income according to ordinary accounting principles, and the reference in [110] to the relevant amendment as a power to 'distinguish income from corpus on the footing that receipts or gains of such a nature as to be within assessable income for the purposes of the taxation legislation are of an income nature regardless of their character at general law'.

[196] Letter of Advice of Nathan Yii Lawyers, [35]; Trustee's Submissions, 6 October 2023, [50].

[197] [2013] VSC 264 [26].

[198] [2013] VSC 264, [27]-[28]. Re the Alan Synman Trust was considered with apparent approval by McMillan J in W E Pickering. In that case, her Honour considered the discussion of the proposed general amendment power in Re the Alan Synman Trust and observed at [60] 'There is no authority for the proposition that s 63A confers on the court the ability to grant a general power to amend or power to appoint an appointor.'

[199] [2014] NSWCA 367; (2014) 87 NSWLR 753, [97], [100] (Barrett JA, with whom Beazley P and Gleeson JA agreed).

[200] Trustee's Submissions, 6 October 2023, [52].

[201] Transcript 23/04/24 T91.31-T92.12.

[202] Trustee's Further Post-Hearing Submissions, 17/05/24, [39].

[203] Contradictor's Memorandum of Advice, [26]-[28]; Transcript 23/04/24 T115.16-T116.23.

[205] Letter Nathan Yii Lawyers, 6 October 2021, [36] (R Hamer Affidavit, Exhibit RWH 231).

[206] Trustee's Submissions, 6 October 2023, [52].

[207] Re The Pickering Family Trusts, [10] (Lyons J).

[208] Re Alan Synman Family Trust, [26] (Ginnane J).

[209] Trustee's Submissions, 6 October 2023, [52].

[210] Trustee's Submissions, 6 October 2023, [52].

[211] See for example Re the Pickering Family Trusts, [62]-[64] where Lyons J declined to approve an initial proposal for amendments relating to a succession plan.

[212] See Re the Alan Synman Family Trust, [20] Ginnane J citing the discussion of powers of variation in Emmett and Armitage (ed), Trusts Law Australia: Principles and Practice [12,025].

[213] Barrett JA, with whom the Court agreed, observed at [94]:

'Variation of the terms of a trust (including by way of conferral of some new power on the trustee) is not something within the ordinary and natural province of a trustee. It is not something that it is "expedient" that a trustee should do; nor, fundamentally, is it something that is done "in the management or administration of" trust property. A trustee's function is to take the trusts as it finds them and to administer them as they stand. The trustee is not concerned to question the terms of the trust or seek to improve them. I venture to say that, even where the trust instrument itself gives the trustee a power of variation, exercise of that power is not something that occurs "in the management or administration of" trust property. It occurs in order that the scheme of fiduciary administration of the property may somehow be reshaped.'

[215] In the same sense as identified by Lyons JA in considering the original proposed amendments in Re The Pickering Family Trusts, [16], [63].

[216] Re Dion Investments [97]-[99] (Barrett JA, with whom Beazley P and Gleeson JA agreed); WE Pickering [77]-[99] (McMillan J); Royal Melbourne Hospital v Equity Trustees Ltd [2007] VSCA 162; (2007) 18 VR 469, 527 [304] (Bell AJA); Re Estate of Barns [2011] VSC 314, [46] (Robson J); Hancock v Rinehart [2015] NSWSC 646 [186]-[193] (Brereton J).