WFT Capital Pty Ltd v Windt

Legislation Cited: Duties Act 1997 (NSW) ss 8, 11, 146, 148 and 149
Stronger Communities Legislation Amendment (Courts and Civil) Act 2020 (NSW)
Trustee Act 1925 (NSW) ss 81 and 86A
Trustee Act 1958 (Vic) s 63A
Variation of Trusts Act 1958 (UK) s 1

Cases Cited: Arakella Pty Ltd v Paton (2004) 60 NSWLR 334; [2004] NSWSC 13
Barry v Borlas Pty Ltd [2012] NSWSC 831
Campbell v Campbell [2022] NSWSC 554
Chapman v Chapman [1954] AC 429
Cisera v Cisera [2023] NSWSC 1507
Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960
Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286
Cisera v Cisera (No 2) [2023] NSWSC 1531
Commissioner of Taxation v Commercial Nominees of Australia Ltd [2001] HCA 33; (2001) 75 ALJR 1172
Coote v Clark [2007] WASC 97
Federal Commissioner of Taxation v Clark (2011) 190 FCR 206; [2011] FCAFC 5
Goulding v James [1997] 2 All ER 239
Grand View Private Trust Company Ltd v Wong [2022] UKPC 47
Kearns v Hill (1990) 21 NSWLR 107
Lewis v Condon (2013) 85 NSWLR 99; [2013] NSWCA 204
Mercanti v Mercanti [2015] WASC 297
Northgate Park Pty Ltd v Floyd [2022] VSC 783
Perpetual Trustees Victoria Ltd v Barns (2012) 34 VR 387; [2012] VSCA 77
Re Ball’s Settlement Trusts [1968] 1 WLR 899
Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367
Re EM McPherson Settlement [2024] VSC 744
Re Holmden’s Settlement Trusts [1968] AC 685
Re Parenna Nominees Pty Ltd (2022) 66 VR 246; [2022] VSC 193
Re Plator Nominees Pty Ltd [2012] VSC 284
Saunders v Vautier (1841) 4 Beav 115
Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004
Thomas Hare Investments Ltd v Hare (2012) 34 VR 656; [2012] VSC 200

Texts Cited: Explanatory Note to the Stronger Communities Legislation Amendment (Courts and Civil) Bill 2020 (NSW)
JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths)
L Tucker, N le Poidevin and J Brightwell, Lewin on Trusts (20th ed, 2020, Sweet & Maxwell)
New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 16 September 2020

Category: Principal judgment

Parties: WFT Capital Pty Ltd (First Plaintiff)
WFT Appointor Pty Ltd (Second Plaintiff)
Uriel Mordechai Windt (First Defendant)
Ben Tarwin (Second Defendant)
Joshua Tarrant-Windt (Third Defendant)
Greta Estates Pty Ltd (Fourth Defendant)
SUV Investments Pty Ltd (Fifth Defendant)

Representation: Counsel:
A Sullivan KC and D Barlin (Plaintiffs)
Solicitors:
Clayton Utz (Plaintiffs)
Snelgrove Herman (Defendants)

File Number(s): 2024/472627

Publication restriction: Nil

JUDGMENT

1. The Windt Family Trust (the Trust) is a discretionary trust established at the behest of the late Otto Windt for the benefit of his family. The Trust was settled by a deed made on 1 December 1975 between Mr Llewellyn, a solicitor acting as settlor, and Windt Nominees Pty Ltd as trustee (the Deed). The trustee of the Trust is now WFT Capital Pty Ltd (the first plaintiff, or the Trustee) and the appointor is WFT Appointor Pty Ltd (the second plaintiff, or the Appointor).

2. Clause 1(h) of the Deed contains the following definition of ‘vesting date’:

“‘Vesting date’ shall mean the first to occur of the following three dates, viz:-

(i) the 31st day of December 2032

(ii) twenty one years after the date of the death of the last survivor of the lineal descendants born before and living at the date hereof of his late Majesty King George the Fifth, and

(iii) the date (if any) which the trustee shall in its discretion appoint as the distribution date of this settlement.”

3. Given that many of his late Majesty’s descendants who were alive on 1 December 1975 are still alive today, the vesting date will be 31 December 2032 unless it is brought forward by the Trustee.

4. Clause 23(a) of the Deed contains a power of amendment; however the power expressly excludes any power to amend the definition of ‘vesting date’. The Trustee and Appointor now seek an order pursuant to s 86A of the Trustee Act 1925 (NSW) varying the Trust to amend the definition of ‘vesting date’ in the Deed to the following:

“‘Vesting date’ shall mean the last to occur of the following two dates, viz:-

(i) the 31st day of December 2032; and

(ii) twenty one years after the date of the death of the last survivor of the lineal descendants born before and living at the date hereof of his late Majesty King George the Fifth,

unless the trustee shall in its discretion appoint an earlier date as the distribution date of this settlement.”

5. Although formally sought by the Trustee and Appointor, all of the now-existing beneficiaries of the Trust have been joined as defendants and support the making of the order. Of the beneficiaries, three are natural persons, being Uriel Mordechai Windt (Otto’s son) and Uriel’s two sons (Otto’s grandsons), Ben Tarwin and Joshua Tarrant-Windt. Without intending any disrespect, I will adopt the same naming convention used by the parties and will refer to the members of the Windt family by their first names. Uriel, Ben and Joshua are the only lineal descendants of Otto who are now living. The class of beneficiaries formerly included Otto and his wife, Yetty, but both are now deceased.

6. The other two beneficiaries are companies associated with the Windt family which were duly nominated as beneficiaries by the Appointor pursuant to a power contained in the Deed.

The Trust

7. The ‘beneficiaries’ of the Trust are identified in clauses 1(b), (c) and (d). Those clauses are relevantly as follows:

“(b) The ‘primary beneficiaries’ mean the lineal descendants of OTTO WINDT.

(c) The ‘secondary beneficiaries’ mean OTTO WINDT.

(d) The beneficiaries shall mean

(i) The primary beneficiaries

(ii) The secondary beneficiaries

(iii) OTTO WINDT

(iv) [YETTY] WINDT

(v) [URIEL] WINDT

(vi) All the persons who shall at any time be or have been the spouses of any person who is or may be a beneficiary hereunder and all the children and grandchildren of such person

(vii) Such other person persons or corporations as the appointor may from time to time nominate to be a beneficiary hereunder …”

8. The expression ‘lineal descendants’ is defined in clause 1(p) to include ‘a legally adopted child and his or her descendant whether legally adopted or otherwise’.

9. The ‘settled fund’ is defined in clause 1(i) to mean the nominal settlement sum, together with any further or additional property donated to or vested in the Trustee, which is to be held subject to the Trust together with all accretions thereto.

10. Clause 5 of the Deed contains trusts for income. It provides the Trustee with a discretionary power to appoint income to beneficial objects, being the ‘beneficiaries’ as defined, at any time prior to 30 June of each year. It also contains a power to accumulate income, including for infant beneficiaries, and, if and to the extent that any income has not been paid, applied or accumulated prior to 30 June of any year, the Trustee may determine which of the beneficiaries will be presently and absolutely entitled to it. If the Trustee makes no appointment of income in any given year, all of the beneficiaries will become presently and absolutely entitled to the income in equal shares.

11. The introductory words of clause 5 make clear that the trusts for income and the powers to appoint and accumulate income exist only ‘until the vesting date’.

12. Clause 6 specifies the trusts for which the ‘settled fund’ will be held ‘upon the vesting date’. It provides that the fund will on that date be held absolutely on the terms set out in paragraphs (a), (b) and (c). Those paragraphs contain a power to appoint the fund among the beneficiaries (paragraph (a)) and certain gifts over in default (paragraphs (b) and (c)).

13. Clause 6 provides that if the power of appointment in paragraph (a) is not exercised, the ‘first line’ of takers-in-default under paragraph (b) will be the primary beneficiaries. As the definition of primary beneficiaries above shows, this is an open class. However, in the unlikely event that there are no beneficiaries able to take under paragraph (a) or (b), there does not seem to be any person who would be entitled to take in default under paragraph (c). That is because paragraph (c) provides that the ‘second line’ of takers-in-default are the secondary beneficiaries, which seem to be a class of one: Otto, who died in 1993. If I am correct in my understanding of how the clause works, the settled fund will, in the event that there are no beneficiaries who can take in default under paragraph (b), become held on resulting trust for the settlor: Cisera v Cisera [2023] NSWSC 1507 at [14]; JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) at [12-01]-[12-07]. Either way, the prospect of anyone becoming entitled to the settled fund as a taker-in-default under clause 6(c) is remote: cf Barry v Borlas Pty Ltd [2012] NSWSC 831 at [7] (White J).

14. Clause 7 contains powers to pay or apply the whole or any part of the capital of the settled fund for certain purposes. These powers may only be exercised prior to the vesting date.

15. I have already set out the definition of vesting date at paragraph [2] above. The expression ‘distribution date of this settlement’ used in paragraph (iii) of that definition is not defined.

16. Clause 23(a) contains a power of amendment. It reads:

“The appointor may by deed release or revoke any power or powers conferred on the trustee under this Deed and may vary or amend any of the provisions contained in this Deed other than clause 2 or the vesting date PROVIDED HOWEVER that no such release revocation variation or amendment shall be valid if such release revocation variation or amendment would have the effect of infringing any rule against perpetuities or directing or requiring any excessive accumulation of income or would entitle the settlor or the trustee or any person who has been a trustee of the settled fund to receive any of the income or corpus of the settled fund.”

17. It follows that no person has a power under the Deed to defer the time at which the Trust property will vest.

The evidence

18. The settled fund includes various investments in residential property in NSW. Some of these are held directly. One was acquired in April 1985, prior to the introduction of capital gains tax. Some of the properties are held by companies, the shares in which are owned by the Trustee.

19. It follows that the Trustee holds dutiable property, being land in NSW (s 11(1)(a) of the Duties Act 1997 (NSW)) and also has interests in private landholders within the meaning of Chapter 4 of the Duties Act 1997.

20. The plaintiffs have led evidence to suggest that when the vesting date occurs and on the assumption that the Duties Act 1997 remains essentially unchanged, there will be a ‘change in beneficial ownership’ in relation to the residential property owned directly by the Trustee and there will therefore be a dutiable transaction: ss 8(1)(b)(ix), (2) and (3) of the Duties Act 1997. In relation to the landholder companies, the evidence suggests that there will be a ‘relevant acquisition’ in a ‘landholder’ on which duty will be charged: ss 146, 148 and 149.

21. The evidence also suggests that there will be CGT consequences for the beneficiaries when the vesting date occurs, again assuming that the CGT provisions applicable in 2032 are essentially as they are now. Apart from anything else, the pre-CGT property will lose that status.

22. In addition to being a primary beneficiary, Uriel is a director of the Trustee. He has been a director since 1993. Ben is also a director, having been appointed in 2017. They are also directors of the fourth and fifth defendants. Uriel and Ben each provided an affidavit in support of the application, both on their own behalf as beneficiaries and on behalf of the Trustee and the fourth and fifth defendants. Joshua provided an affidavit in support of the application on his own behalf as a beneficiary. Thus, all presently-existing beneficiaries support the application.

23. The main affidavit in support of the application is that of Uriel on behalf of the Trustee, sworn on 5 March 2025. Uriel explains that as matters stand, the Trust fund is at a point where the income being produced is sufficient to provide a self-sustaining stream of income for the benefit of the beneficiaries. When the vesting date occurs, it is likely that assets will need to be sold in order to meet the resulting liabilities. If that happens, the income of the Trust will be materially affected. The Trustee will thereafter have no ability to appoint the income of the Trust among the beneficiaries.

24. Uriel has attempted to ascertain the significance of the date of 31 December 2032 but has been unable to identify any. He nonetheless believes that it is in the interests of all the existing and future beneficiaries of the Trust that the vesting date should occur after this date, for the reasons already mentioned in the previous paragraph. Ben and Joshua have expressed similar wishes.

Applicable principles

Section 86A of the Trustee Act

25. Section 86A of the Trustee Act provides as follows:

(1) If property is held in trust under any instrument creating the trust, the Court may, if it thinks fit, by order approve any arrangement to—

(a) vary or revoke all or any of the trust, or

(b) enlarge the powers of the trustees for the purpose of managing or administering any of the property subject to the purpose of the trust.

(2) An order under this section may be made by the Court only on behalf of—

(a) any person under the trust having an interest directly or indirectly, or vested or contingent, who by reason of being a minor or other incapacity is incapable of assenting, or

(b) any person who may become entitled, directly or indirectly, to an interest under the trust, and the entitlement is contingent on a future date or event that has not occurred at the time of application for an order under this section, or

(c) any unborn person, or

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

(3) This section—

(a) extends to a trust created before the commencement of this section, and

(b) does not apply to trusts affecting property created by another Act, and

(c) does not limit the operation of section 81.

(4) In this section—

discretionary interest, in relation to protective trusts, means an interest arising under section 45(6).

principal beneficiary has the same meaning as in section 45.

protective trusts has the same meaning as in section 45.

26. The section was inserted by the Stronger Communities Legislation Amendment (Courts and Civil) Act 2020 (NSW) in order to ‘bring NSW into line with other jurisdictions by allowing the Supreme Court to vary or revoke a trust where that is in the interests of the beneficiaries and fulfils the purpose of the trust’: see paragraph (r) of the Explanatory Note to the Stronger Communities Legislation Amendment (Courts and Civil) Bill 2020 (NSW). The reference to legislation in other jurisdictions was to provisions such as s 63A of the Trustee Act 1958 (Vic) as well as equivalents in various other jurisdictions, all of which have their origin in the Variation of Trusts Act 1958 (UK).

27. In his second reading speech (New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 16 September 2020 at 3436), the then-Attorney General, Mr Mark Speakman, said:

“The Court of Appeal has held that section 81 does not authorise the court to make orders for the variation of trusts, which will be beneficial to the interests of the beneficiaries or to the fulfilment of the trust purpose but which are not concerned with the management or administration of the trust assets. This amendment will ensure that the court can approve arrangements to vary or revoke trusts in these circumstances. There are legitimate reasons for which a trustee may seek to modify the terms of a trust in order to discharge their duty to a beneficiary. Set laws often create trusts without consideration to future circumstances and there may be a need to amend the trust to accommodate those circumstances in a way that is consistent with the intention of the settler. This would bring New South Wales law into line with the law in the United Kingdom and in other Australian States.”

28. The Attorney General was referring to the decisions of the Court of Appeal in Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367 (‘Re Dion’) and Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286.

29. As an aside, it may help the reader to know that in the course of these reasons I will refer to four decisions involving the Cisera family trust. The first in time was a decision of Parker J: Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960 (‘Cisera I’). The second in time was the unsuccessful appeal from that decision (‘Cisera II’), being the decision referred to in the previous paragraph. The third decision, being that to which I referred at paragraph [13] above, was a decision of Parker J in 2023 (‘Cisera III’). The fourth was a further decision of Parker J in those same proceedings: Cisera v Cisera (No 2) [2023] NSWSC 1531 (‘Cisera I**V’). All of these decisions were in substance concerned with attempts to modernise the Cisera family trust in ways that included an extension of the vesting date. Cisera I and Cisera II concerned applications under s 81 of the Trustee Act. They were unsuccessful for the reasons explained by the Court of Appeal in Cisera II. Cisera III and Cisera IV concerned applications under the newly introduced s 86A. They were unsuccessful for the reasons explained by Parker J in those decisions.

30. In Re Dion, it was held that the power to approve ‘advantageous dealings’ in s 81 of the Trustee Act did not supply the Court with a power to vary the terms of a trust, including by the introduction of a general power of amendment. In Cisera II, the Court of Appeal upheld a decision of Parker J in which his Honour explained that the effect of Re Dion was that s 81 also did not authorise the Court to approve an arrangement whereby the trustees would be permitted to treat the trust deed as having been amended in a way that extended the vesting date. In doing so, the Court rejected a submission that Re Dion had been wrongly decided.

31. The decision in Re Dion brought an end to the NSW practice of making orders pursuant to s 81 of the Trustee Act varying trusts to extend the vesting date, among other things: see, for example, Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004. As Barrett JA explained in Re Dion at [45]-[47] (Beazley P and Gleeson JA agreeing), the terms of a trust may only be varied pursuant to: a power reserved in the trust instrument itself; the consent principle contained in Saunders v Vautier (1841) 4 Beav 115; legislation of the kind that was not then but is now contained in s 86A which is said to build on the consent principle; and the ‘very limited power of the Court (of uncertain provenance) to sanction departure from the terms of the trust where some circumstance of emergency in the course of administration needs to be resolved in the interests of preserving the trust property’.

32. Section 86A is remedial legislation. At its core, it overcomes the limitation identified by the House of Lords in Chapman v Chapman [1954] AC 429, namely that the Court otherwise has no power to approve a beneficial alteration to the terms of a trust on behalf of beneficiaries who are incapable of giving such approval: see the discussion of this issue by Austin J in Arakella Pty Ltd v Paton (2004) 60 NSWLR 334; [2004] NSWSC 13 at [97]-[100]. When the power is exercised, the Court effectively supplies the capacity which the incapable beneficiary lacks: Re Holmden’s Settlement Trust**s [1968] AC 685 at 710H-711A. It has been held that s 86A, being remedial in nature, should not be given an unduly narrow construction: Campbell v Campbell [2022] NSWSC 554 at [206] (Slattery J); Cisera III at [68].

33. Section 63A of the Trustee Act 1958 (Vic) has been the subject of numerous first-instance decisions and at least one decision of the Victorian Court of Appeal, being Perpetual Trustees Victoria Ltd v Barns (2012) 34 VR 387; [2012] VSCA 77 (‘Perpetual Trustees’). In Perpetual Trustees, Williams AJA (Buchanan and Bongiorno JJA agreeing) said at [36]:

“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 Ms Barns’ benefit and a fair and proper one overall: Re Remnant’s Settlement Trusts [1970] Ch 560 per Pennycuick J; George v Kollias [2007] VSC 46 per Hansen J. It must take into account the purpose of the trusts and the intention of the testator: Re Burney’s Settlement Trusts [1961] 1 WLR 545 per Lord Wilberforce; see Re Keysborough Blue Danube Soccer Club [2003] VSC 119 per Ashley J. 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’: Re Van Gruisen’s Will Trusts [1964] 1 WLR 449 per Ungoed-Thomas J.” (footnotes included as in-line references)

34. That general approach to the application of the Victorian provision accords with the way the analogous provision has been applied in the UK: see for example Goulding v James [1997] 2 All ER 239 at 249 and generally the proviso in s 1(1) of the Variation of Trusts Act 1958 (UK). Although not an exhaustive statement of matters to be taken into account in applying the provision and subject to the comments I make below concerning Cisera III and IV, I will proceed on the basis that the task of determining whether to exercise the power in s 86A of the NSW legislation should generally be approached in much the same way as stated by the Victorian Court of Appeal in Perpetual Trustees.

35. As far as I can tell, the Court has only considered two applications to extend vesting dates brought under s 86A of the NSW legislation, being Cisera III and Cisera IV. Both applications were unsuccessful. In other jurisdictions, provisions like s 86A have been applied on numerous occasions to approve arrangements to extend vesting dates: for example see Re Plator Nominees Pty Ltd [2012] VSC 284; Coote v Clark [2007] WASC 97; Thomas Hare Investments Ltd v Hare (2012) 34 VR 656; [2012] VSC 200; Re Parenna Nominees Pty Ltd (2022) 66 VR 246; [2022] VSC 193; Re EM McPherson Settlement [2024] VSC 744.

36. To explain why the NSW applications were unsuccessful, it is necessary to say more about the Cisera family trust and the applications with which Parker J was required to deal in Cisera III and Cisera IV.

The Cisera family trust cases

37. The plaintiffs in the various Cisera cases were beneficiaries of the Cisera family trust. The trust had been established in August 1974 for the benefit of Clelia Cisera (nee Barp) and members of her family.

38. The terms on which the trust was held were described by Parker J at paragraphs [6] to [13] of Cisera I. Clause 3 of the deed of settlement was in the following terms (as to which, see Cisera I at [8]):

“Subject to clauses 4 and 5 hereof the Trustee shall hold the Trust Fund for all or such one or more of them the members of the Beneficial Class living at the Terminal Date for such interests and in such proportions as the Trustee as at the Terminal Date in its absolute discretion by memorandum in writing under the Common Seal of the Company declares not earlier than one year prior to the Terminal Date PROVIDED ALWAYS that failing any declaration by the Trustee as aforesaid or to the extent that any such declaration as aforesaid shall not extend or shall result in invalidity the Trustee shall hold the Trust Fund upon the Terminal Date upon the trusts set out in the 5th part of the schedule hereto.”

39. The ‘Terminal Date’ was in very similar terms to the vesting date in this case. Unless brought forward by the trustee, it was to be the earlier of a date worked out under a royal lives clause and 1 January 2024. It could therefore not have been later than 1 January 2024, which was less than fifty years from the time of settlement. In fact, the date was almost certain to be 1 January 2024 (unless brought forward by the trustee) because there was no realistic prospect that the line of descendants of his Majesty King George V alive as at August 1974 would have entirely died out by 1 January 2024, which it would need to do for the Terminal Date to be affected by the royal lives clause.

40. The ‘Beneficial Class’ was defined to be (a) Clelia and her son, John, (b) any spouse to whom Clelia had been married prior to the Terminal Date, (c) every spouse of any of Clelia’s children to whom they had been married prior to the Terminal Date, and (d) if any child of Clelia died before the Terminal Date and was survived by a child, then that child.

41. Clause 3 contained a gift over of the corpus on the Terminal Date, as follows:

“Upon trust absolutely for the members of the Beneficial Class living on the Terminal Date and if more than one in equal shares

PROVIDED THAT if the Beneficial Class includes any surviving child or children of a deceased child of the said CLELIA CISERA then such surviving child or children shall take and if more than one in equal shares between them that share to which his or her or their parent would have been entitled if he or she were living on the Terminal Date, and

PROVIDED FURTHER THAT if on the Terminal Date there shall be no person living who is entitled under the preceding portion of this provision then UPON TRUST for such of GISELDA SANDRIN [Clelia’s sister], her spouse and her child or children and the spouse (if any) of each such child or children as shall be living on that day and if more than one in equal shares absolutely

PROVIDED THAT if any such child or children shall have died before the Terminal Date leaving a child or children surviving him or her then any such surviving child or children living on the Terminal Date shall take and if more than one in equal shares the share to which his or her or their parent would have been entitled if he or she were living on that day.”

42. The effect of these arrangements was, as Parker J said at paragraph [80] of Cisera I, that the trust was one that benefitted the first and second generation of Clelia’s family but ‘did not provide in the same way for the third generation’. John’s children could only become beneficiaries if he died before the Terminal Date. As Parker J put it at [80]:

“The definition of the Beneficial Class in the Trust Deed included a first generation (Clelia, [her husband, Mario] and any other spouse Clelia might have) and a second generation (John and any spouse he might have) who were, as between themselves, to share equally unless the Trustee exercised its discretion to the contrary. But it did not provide in the same way for the third generation. John’s children would only become members of the Beneficial Class on his death. There was no provision for the third generation to participate alongside the second generation as there was between the second and first generations, and there was no provision for any spouses of John’s children. Nor was there any provision at all for John’s grandchildren or remoter descendants.”

43. This observation supported the point which his Honour made in paragraph [81] that ‘this is entirely consistent with the selection of 1 January 2024 as the latest vesting date for the Trust’. His Honour noted that, by 2024, John might reasonably be expected to have had children and grandchildren. Thus, as his Honour said:

“If it had been contemplated that the Trust would extend beyond [1 January 2024], one would expect to see provision made in the Trust Deed for [John’s children and grandchildren] to participate as beneficiaries alongside John.”

44. See also his Honour’s statement to like effect in Cisera III at [12].

45. The form of orders sought in Cisera I was discussed at paragraphs [43] to [46] of those reasons. As originally sought, they were:

“a. the defendant [Trustee] is empowered and authorised to manage and administer the Trust Property on the basis that the Trust Deed is amended so that the word ‘latest’ is substituted for ‘first’ in the final line of the definition in the said Schedule of the ‘Terminal Date’ and either the third alternative in that definition is deleted or, in the alternative, is not deleted; and

b. the respective rights of ‘The Beneficial Class’ as defined in the said Schedule are adjusted in conformity with a.”

46. Orders in that form would not only have extended the vesting date; they would also have altered the composition of the Beneficial Class by including additional generations of the Cisera family, contrary to what appeared to be a design limitation in the original trust.

47. The later application under s 86A was in a similar vein. The plaintiffs sought the Court’s approval of an arrangement that would first extend the fixed component in the definition of the Terminal Date to 23 August 2054, being 80 years from the date of settlement. Second, it would expand the definition of the Beneficial Class ‘to give John’s children, grandchildren and remoter issue immediate and direct membership’: Cisera III at [41]. As his Honour said, the new definition of Beneficial Class would replace ‘the existing contingent membership which is limited to John’s children and arises only upon John’s death.’

48. Section 86A(1)(a), like its analogues in other jurisdictions, contains a power to approve an arrangement to ‘vary or revoke all or any of the trust’. As Parker J noted at [68] and [69], that language has been said not to supply power to approve ‘a complete resettlement’ of the trust: L Tucker, N le Poidevin and J Brightwell, Lewin on Trusts (20th ed, 2020, Sweet & Maxwell) at [53-033]; Jacobs’ Law of Trusts at [17-07].

49. This limitation on the scope of the power under s 86A had relevance for the application brought in relation to the Cisera family trust because, as Parker J noted and as I have emphasised, the plaintiffs sought to alter the trusts in a way that was obviously not within the contemplation of the settlor. They sought to extend the Beneficial Class to members of subsequent generations of the family in circumstances where the trust had originally and quite deliberately been limited to two generations.

50. At paragraphs [108] and following of Cisera III, his Honour said that there were two factors of particular importance in the application before him. The first concerned timing. His Honour pointed out that the application was brought ‘at a point where the trust is at the end of its 50-year design life’. His Honour noted that the timing was motivated by the hope of ‘avoiding the adverse taxation consequences’ of the trust vesting. The second concerned the nature of the changes, being the expansion of the Beneficial Class to include further generations. His Honour said at [111] that ‘it is precisely the inability of the third generation to benefit alongside the second which has led to the proposed changes to the definition’. Furthermore, this could not happen unless the Terminal Date were extended.

51. His Honour saw the matter as giving rise to a question as to ‘whether changes made to the terms of a trust cross the boundary between variation and resettlement’: [117]. His Honour approached the resolution of this question largely through the prism of the ‘substratum’ test propounded by Megarry J in Re Ball’s Settlement Trusts [1968] 1 WLR 899. After reviewing the authorities, his Honour said at [104] and [105]:

“I think that the authorities to which I have referred establish the following propositions. First, the limitation is one that goes to jurisdiction in the sense that if the changes in question amount to more than a ‘variation’ of the subject trust then the Court lacks power to approve the arrangement, no matter what its merits might be. Second, it is a matter of degree. The question is whether the changes are so extensive that the trust in its changed form no longer answers the description of a variation of the existing trust. Third, it is a matter of substance not form.

To these propositions I would add a fourth: to say that the changes amount to a resettlement may be a useful aid to analysis, but it is not itself the test. Section 86A does not contain an express exclusion of a variation which amounts to a ‘resettlement’. The question is one of implicit statutory limitation on the term ’variation’.”

52. In the proceedings before me, the plaintiff challenged the proposition that s 86A was to be applied by reference to the question of whether the proposed variation altered the so-called substratum of the trust. The plaintiff submitted that it had long been recognised in NSW and elsewhere that a power of variation in a trust deed may authorise what could be considered quite fundamental changes in the structure of a trust. In Kearns v Hill (1990) 21 NSWLR 107, Mahoney JA said at 108:

“In earlier times, the view was taken in some cases that … the intention of the settler was that the alterations to be made should not alter the main structure of the trust or the beneficial entitlements under it. I doubt that that would be seen as the intention of such a clause at the present time. As the precedent books show, discretionary trusts have in more recent times been used to provide to the settler or the person having the benefit of the power of variation the power to make fundamental changes in the structure of the trust document and the entitlements under it.”

53. This passage has been quoted with approval on numerous occasions (see, for example Lewis v Condon (2013) 85 NSWLR 99; [2013] NSWCA 204 at [89]; Mercanti v Mercanti [2015] WASC 297 at [75]; Northgate Park Pty Ltd v Floyd [2022] VSC 783 at [54]), and most recently by the Privy Council in Grand View Private Trust Company Ltd v Wong [2022] UKPC 47 at [109].

54. The plaintiff further submitted that the substratum test could not be justified on the basis that it serves as a proxy for the question of whether the changes caused a resettlement of the trust: cf Cisera III at [117]. In fairness to Parker J, his Honour did not accept that it could be. His Honour said at [105] that ‘to say that the changes amount to a resettlement may be a useful aid to analysis, but it is not itself the test’.

55. It is relevant to note that in Australia, the question of whether a variation of a trust amounts to a resettlement is not answered by reference to whether the variations are ‘essential or inessential, fundamental or immaterial’: Commissioner of Taxation v Commercial Nominees of Australia Ltd [2001] HCA 33; (2001) 75 ALJR 1172 at [35]. Rather, it is to be answered by reference to whether there is continuity across three indicia, being (a) the regime of trust obligations, that is, its so-called constitution, (b) the trust property, and (c) membership of the trust: at [36]; see also Federal Commissioner of Taxation v Clark (2011) 190 FCR 206; [2011] FCAFC 5 at [36]. Where there is continuity of these matters, there will be no resettlement no matter how fundamental or essential the changes might otherwise be seen to be.

56. Notwithstanding the persuasive submissions on this issue made by Mr Sullivan KC, who appeared with Mr Barlin for the plaintiff, I do not find it necessary to reach any conclusion as to the relevance of the substratum test in the context of s 86A for the purposes of this application. I am comfortably satisfied that the proposed variation to the vesting date involves a variation of the Trust within the meaning of the provision. On no view does it alter the substratum of the Trust even if that be the relevant test. Nor does it involve a resettlement of the Trust. This is not a case like Cisera III in which the proposed arrangement would cause the trust to apply in new and different ways to generations of a family who had intentionally been left out of the original Beneficial Class. Nor does it involve a change to a vesting date that was set deliberately to marry up with the limitation in the original Beneficial Class to which I have just referred.

57. In the present case, the Trust was intended to benefit any and all lineal descendants of Otto until the vesting date. The class of primary beneficiaries is not presently closed, either by the language of the Deed or by any practical considerations. It is true that the proposed extension of the vesting date means that future generations might, in fact, benefit from the Trust. But the settlor intended that members of any and all generations of his descendants should benefit until the vesting date. The expansion of the members of the class of beneficiaries in this way is to be contrasted with the expansion of the members of the Beneficial Class in Cisera III, where such an expansion – even within the original vesting period – was not contemplated by the original settlement.

58. Finally, it is relevant to note that the conclusions expressed by Parker J in Cisera III were not final. As his Honour explained, he was not prepared to make final orders without the appointment of a contradictor (see paragraphs [161] to [167]) and because his Honour was not satisfied that the proposed arrangement was in the best interests of John’s children, who were minors. Following the delivery of reasons in Cisera III, the plaintiff pressed his application but did not take up his Honour’s invitation to appoint a contradictor. In those circumstances, his Honour was quite understandably (if I may respectfully say so) ‘not prepared to dispose of the proceedings on their merits’: Cisera IV at [9]. His Honour said, ‘Given the impasse, I could see no alternative but to strike the proceedings out.’

59. The final order in the proceedings was that ‘the proceedings be struck out’. They were never determined on their merits. I do not however see that as a reason generally to deprecate his Honour’s reasoning in Cisera III. The most that can be said is that his Honour did not consider that what he had said in Cisera III represented his final conclusions on the merits of the case.

Should relief be granted?

60. In my view, it is appropriate to grant the relief sought, subject to the question of the precise form of relief which I discuss below. I have reached that view for the following reasons.

61. First, there is ample evidence that the beneficiaries consider it to be in their best interests for the vesting date to be extended. The principal benefit that they will obtain by the extension is that they will continue to enjoy the status quo, which sees them receive a share of the income of the Trust at the discretion of the Trustee.

62. Secondly, the extension of the vesting date will mean that the as-yet unborn children and grandchildren of the primary beneficiaries, who would themselves be primary beneficiaries as defined, will be entitled to benefit from the Trust, just as the existing primary beneficiaries have been. It is in effect the consent of these unborn beneficiaries to the alteration of the Trust that the Court supplies by making an order under s 86A in this case. So far as they are concerned, the extension of the vesting date is undoubtedly in their interests.

63. Thirdly, the extension of the vesting date defers the time at which the pre-CGT assets will cease to be treated as such. It also defers the time at which any duty becomes payable upon the Trust vesting, which will occur whenever the vesting date happens to be. The benefit associated with delaying these imposts is in my view just one aspect of the other benefits that I have already mentioned, namely the continuation of the status quo for the benefit of the beneficiaries as well as any as-yet unborn descendants of Otto Windt. It cannot however be said that these timing benefits are co-extensive with the other benefits, particularly when considered from the point of view of the as-yet unborn lineal descendants of Otto Windt who will become beneficiaries if the vesting date is extended.

64. I do not necessarily agree that the tax and duty consequences of vesting in 2032 will be precisely as described in the plaintiffs’ evidence. What matters for present purposes is that there is a risk that the consequences will be as suggested. There is a benefit to the beneficiaries in avoiding that risk.

65. Fourthly, I am unable to infer that the settlor attached any particular significance to 31 December 2032 in the definition of ‘vesting date’: cf Cisera III. The Deed otherwise offers no clue as to why the settlor may have attached significance to that date, or to any date close to it. I note that the Deed is otherwise quite incoherent in respects that another settlor (or draftsperson) might well have considered to be important, such as in making Otto, who was 52 years old when the Trust was created, the second line taker-in-default of capital on the vesting date. That gift could only take effect if Otto were still alive on the vesting date – he would have been about 110 years old at that point – and if all of his descendants had predeceased him. At the same time, that gift is expressed to be contingent on Otto reaching the age of 21 years, a milestone he had achieved 30 years before the Deed was executed.

66. In reaching my conclusion, I have not found it necessary to require submissions from a contradictor: cf Cisera III at [161] to [167]. I am satisfied that the benefits to the beneficiaries, both present and future, are as stated above.

The appropriate form of orders

67. The orders sought by the Trustee are as follows:

“Order pursuant to section 86A of the Trustee Act 1925 (NSW) with respect to the Trust Estate, the terms of which are contained in the Trust Deed, as amended, so as to vary the trusts and enlarge the powers by modifying the definition of 'vesting date' contained in subclause 1(h) of the Trust Deed by:

(a) deleting the following:

‘Vesting date’ shall mean the first to occur of the following three dates, viz:-

(i) the 31st day of December 2032

(ii) twenty one years after the date of the death of the last survivor of the lineal descendants born before and living at the date hereof of his late Majesty King George the Fifth, and

(iii) the date (if any) which the trustee shall in its discretion appoint as the distribution date of this settlement.

(b) inserting the following:

‘Vesting date’ shall mean the last to occur of the following two dates, viz:-

(i) the 31st day of December 2032; and

(ii) twenty one years after the date of the death of the last survivor of the lineal descendants born before and living at the date hereof of his late Majesty King George the Fifth,

unless the trustee shall in its discretion appoint an earlier date as the distribution date of this settlement.”

68. In Cisera III, Parker J pointed out that the Court’s power under s 86A is not one to vary the terms of a trust deed, rather it is to approve arrangements that vary trusts: [58]-[61]. As such, his Honour suggested that an application under s 86A should be in the form of one to approve, on behalf of the beneficiaries who could not give their consent, an arrangement effecting the relevant variations to the trust: [61]. I agree. This is consistent with what was said by Barrett JA in Re Dion concerning the important distinction between the trust itself and the deed or other document by which it is constituted: see [39]-[48]. As such, it would not ordinarily be appropriate for the Court to make orders in the precise form proposed in the summons.

69. However, even accepting that the power is one to vary the trust, as opposed to the trust deed, it may sometimes be appropriate for the Court to express its approval under s 86A by reference to a proposed change to the language of the deed. Whether or not an order in those terms is appropriate will depend on the terms of the trust, the nature of the variation in issue and the nature of any relevant power to vary which the relevant party seeks the approval of the Court to exercise. To do so is not to lose sight of the important distinction explained by Barrett JA in Re Dion. After all, such an order would first and foremost approve a variation of the trust itself.

70. In this case, an appropriate arrangement may be for the Appointor to execute a deed varying the Trust by the deletion of the existing definition of ‘vesting date’ in the Deed and replacing it with the proposed definition. This would be consistent with the procedure otherwise laid down in the Deed for the Trust to be varied. However, the plaintiffs have not yet had an opportunity to address me on the precise form of relief.

71. I will therefore direct the plaintiffs to bring in short minutes of order to give effect to my conclusions, together with any additional submissions, on or before 8 August 2025.

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