Re Plator Nominees Pty Ltd [2012] VSC 284 (27 June 2012)

Supreme Court of Victoria|2012-06-27|Before: DAVIES J

TRUSTS - Application for judicial advice - Whether trust governed by an amendment deed - Application to extend vesting date - Court's jurisdiction - Trustee Act 1958 (Vic), ss 5, 63A - Supreme Court (General Civil Procedure) Rules 2005 (Vic), O 54.02 - Perpetuities and Accumulations Act 1968 (Vic), s 5

1 The plaintiff ("the Trustee") is the trustee of a trust settled by deed on 20 June 1972 ("1972 deed"), known as the Weinstein Family Trust ("Trust"). The Trustee has applied under Order 54.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ("the Rules") for judicial advice on whether the terms of the Trust were amended by a deed of variation dated 10 September 1980 ("the 1980 deed") . The Trustee also seeks an order under s 63A of the Trustee Act 1958 (Vic) ("the Act") varying the Trust by extending the vesting date from 30 June 2012 to a date not later than twenty-one years after the death of the last living relative of Josephine Weinstein ("Mrs Weinstein") born on or before 20 June 1972.

2 The Trust was settled by Mrs Weinstein's brother at the request of Mrs Weinstein and her late husband, Michael Weinstein ("Mr Weinstein"). Under the terms of the 1972 deed, the beneficiaries of the Trust were Mr and Mrs Weinstein, their children and their spouses and their grandchildren and their spouses. The 1980 deed widened the class of beneficiaries to include extended family members and companies and trusts in which those persons have an interest or a contingent interest. The Trustee has since administered the Trust, and made distributions of trust income to a company that falls within the extended class of beneficiaries, on the basis that the 1980 deed is effective.

3 The original 1980 deed cannot be located. There is a copy of the deed but not in its executed form. The copy is held on the files of the Trustee's accountant, Martin Jurblum, and is marked with the word "signed" above the signatories' names to indicate that the original deed was executed. It also has a 50 cent self-cancelled stamp affixed, indicating that the original deed was duly stamped. The 1980 deed provided for the execution clauses to be executed under power of attorney given by a Mr Cater and a Mr Kemp. The powers of attorney have not been located but the accountant's file contains a signed letter from the solicitor who prepared the deed enclosing the powers of attorney for execution and a copy of the accountant's letter to the solicitor returning the executed documents to him.

4 I am satisfied on the evidence that the 1980 deed was executed and that the copy of that 1980 deed in the possession of the accountant is a true copy of the original executed 1980 deed. In the circumstances, I find that the 1972 deed was amended by the 1980 deed.

5 Since bringing these proceedings, the Trustee has executed a further deed by which it exercised its powers of variation to remove as a beneficiary of the Trust any "uncle, aunt, nephew, niece and cousin" and also adding the great grandchildren of Mr and Mrs Weinstein as beneficiaries of the Trust (though at present there are none). The effect of these amendments has been to reduce the natural person, sui juris beneficiaries to eight living persons: Mrs Weinstein, Cynthia and Dianne (Mr and Mrs Weinstein's two children), their husbands and Cynthia's three adult children. The other living natural person beneficiaries of the Trust are Dianne's two children who are minors.

6 Under the 1972 deed, the Trust continues until the "Distribution Date" which is defined to be 30 June 2012. If the Trustee does not so appoint, the Trust fund, as from the Distribution Day, is held for Cynthia and Dianne as takers in default.

7 The Trustee does not have the power under the terms of the Trust deed to vary the Distribution Date and the Trustee applies for relief under s 63A of the Act to remove the reference to 30 June 2012 as the Distribution Date and to replace it with twenty- one years after the death of the last living relative of Mrs Weinstein born on or before 20 June 1972, being the maximum allowable period under the rule against perpetuities. The rule against perpetuities states that:

[no] interest is good unless it must vest, if at all, not later than twenty one years after some life in being at the creation of the interest.[1]

8 The rule has been modified in Victoria by s 5 of the Perpetuities and Accumulations Act 1968 (Vic) ('the Perpetuities and Accumulations Act"). Section 5(1) relevantly provides:

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.

The Trustee thinks it prudent, out of an abundance of caution, to have a perpetuity period defined by the common law rule against perpetuities, rather than a term of years, in case s 5(1) of the Perpetuities and Accumulations Act does not apply to an order of the Court under s 63A of the Act.

(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.

10 The Court is to exercise its power under s 63A only "if it thinks fit."[2] In Perpetual Trustees Victoria Ltd v Barns & Anor[3] the Court of Appeal stated that the Court must consider the benefits and disadvantages of the proposed variation overall, taking into account the purpose of the trust and the settlor's intention in establishing the trust.[4] I am satisfied on the evidence before me that an order extending the vesting date should be made for the following reasons.

11 First, the Trust was established as a property investment vehicle for Mr and Mrs Weinstein, who intended for the Trust to continue after their deaths for the benefit of their children, under their children's control. The vesting of the Trust would not give effect to that intention, whereas the extension of the vesting date would advance the purpose of setting up the Trust.

12 Secondly, all the sui juris beneficiaries want the Trust to continue. Mrs Weinstein has deposed to her desire to continue the Trust. Mrs Weinstein's daughters, Cynthia and Dianne, have both made affidavits in support of the Trustee's application, in which they have both deposed to a preference that the Trust continue, notwithstanding that they stand to benefit if the Trust vests. Both Cynthia's and Dianne's husbands support the Trustee's application, as do Cynthia's children. Furthermore, the contradictor appointed to represent the interests of the other beneficiaries under the Trust, including the beneficiaries who are not sui juris, is of the view that the extension of the vesting date is in their best interests and supports the order.

13 Thirdly, there appears to be no specific reason why the 1972 deed specified

30 June 2012 as the Vesting Date nor why the Trustee's otherwise extensive powers of variation specifically excluded the ability to vary the Trust by extending the vesting date. If there was any specific reason, that reason has no present relevance.[5]

14 Fourthly, the Trust has significant investments in property. Mr Jurblum has given evidence that all but two properties were acquired after the introduction of capital gains tax on 19 September 1985 and that if the Trust was to vest on 30 June 2012 the Trustee would be required either to sell them prior to that date or to distribute them in specie. Regardless, a significant capital gain would be realised. No capital gains tax will be incurred on the pre-capital gains tax properties but by their disposal upon the ending of the Trust, if they were transferred in specie to a beneficiary, the benefit of the exemption would be lost and any future gains on them would be subject to capital gains tax.

15 There is authority that the Court should not hesitate to approve the extension of the vesting date merely because one of the purposes is to defer the crystallation of a tax liability. In Thomson v Thomson & Whitmee[6] Davies J considered an application for a variation of a settlement where it was frankly pointed out that one of the objects of the proposed variation was to reduce the amount of tax that would otherwise be payable on the income of the settlement. His Honour said:

Is this court to hesitate to exercise the power by reason of the fact that one of the incidents of the exercise of the power will be a reduction in the amount of tax which would otherwise be payable to the Crown...? It seems to me that it would be absolutely wrong that this court, if it has power to resettle these funds, should be deterred from exercising that power on some ground of public policy of this kind. The proposed variation will preserve for the benefit of the beneficiaries some of the funds which would otherwise be paid away in tax; and I cannot that the express power given to the court...ought to be abandoned for that consideration.[7]

In Thomas Hare Investments Limited v Hare & Ors[8] Habersberger J cited that passage with approval and made an order extending the vesting date for the Hare Family Trust, notwithstanding that the extension of the vesting date achieved the effect of deferring the payment of any capital gains tax that may otherwise arise. His Honour reasoned that extension of the vesting date for the Trust could only benefit the unascertained class of potential beneficiaries because there would then be a longer period of time by which they could become a beneficiary and that the deferral of capital gains tax liabilities could cause no detriment to them.[9]

16 Counsel for the plaintiff properly raised that an extension of the vesting date could potentially give rise to adverse taxation consequences for the Trust which the Court should also consider in forming a view as to whether an order under s 63A of the Act should be made, although counsel submitted for cogent reasons that those adverse taxation consequences were unlikely. It is both unnecessary and undesirable for the Court, in the context of this case, to express a view on the potential taxation implications other then to note the possibility of other taxation consequences applying. That possibility is not a reason for the Court in this case to refuse to make an order extending the vesting date.

[1] J C Gray, The Rule against Perpetuities (4th ed, 1942); H A J Ford and W A Lee, Principles of the Law of Trusts (loose leaf edition) at [7.12710].

[2] Thomas Hare Investments Limited v Hare & Ors [2012] VSC 200 at [32].

[4] [2012] VSCA 77 at [36], [40]; see also Re McDonald Family Trust No. 1 [2010] VSC 324 and Thomas Hare Investments Limited v Hare & Ors [2012] VSC 200.

[5] Re McDonald Family Trust No. 1 [2010] VSC 324.

[7] (1954) P. 384, 393-394.

[9] See also Stein v Sybmore Holdings [2006] NSWSC 1004.