Cecil Investments Pty limited

[2021] NSWSC 211

Supreme Court

New South Wales

Medium Neutral Citation:

Cecil Investments Pty limited [2021] NSWSC 211

Hearing dates:

3 February 2021

Date of orders:

17 February 2021

Decision date:

09 March 2021

Jurisdiction:

Equity - Expedition List

Before:

Sackar J

Decision:

See [54]

Catchwords:

EQUITY — Trusts and trustees — Judicial advice — Variation of trusts — Whether trustee can exercise of power to exclude

Legislation Cited:

Conveyancing Act 1919 (NSW)

Duties Act 1997 (NSW)

Income Tax Assessment Act 1969 (Cth)

Land Tax Act 1956 (NSW)

Land Tax Management Act 1956 (NSW)

State Revenue Legislation Further Amendment Act 2020 (NSW)

Trustee Act 1925 (NSW)

Cases Cited:

Application of NSFT Pty Ltd [2010] NSWSC 380

Barry v Borlas Pty Ltd [2012] NSWSC 831

Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286

Commissioner of Taxation v Bamford (2010) 240 CLR 481

Kearns v Hill (1990) 21 NSWLR 107

Macedonian Orthodox Church St Petka Incorporated v His Eminence Petar the Diocese of Australia and New Zealand (2008) 237 CLR 66

Re A.S. Skyes and the Trustee Act (1974) 1 NSWLR 597

Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367

Re Dion Investments Pty Ltd [2020] NSWSC 1661

Soo v Soo [2016] NSWSC 1666

Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004; (2006) 64 ATR 325

Category:

Principal judgment

Parties:

Cecil Investments Pty Limited as trustee of the Voigt Family Trust (plaintiff)

Representation:

Counsel:
M Meek SC, D Barlin

Solicitors:
Thomson Greer

File Number(s):

2020/344263

Judgment

1. Trustees regularly approach the Court for advice under s.63 and or relief under s.81 of the Trustee Act 1925 (NSW) (“Trustee Act”). This is such an application.

2. For the purposes of the s.63 application the questions for advice are to be found in prayers 2 to 4 of the summons.

3. For the purposes of the application under s.81 the relief sought is contained in prayer 5 of the summons.

4. The reason for the application is because of amendments to the Land Tax Act 1956 (NSW) (“Land Tax Act”) and the Duties Act 1997 (NSW) (“Duties Tax Act”) which imposes surcharges to the extent that a “foreign person” may be (not necessarily is) a beneficiary of the trust where the trust holds residential property.

5. I should note that this proceeding was listed before the Court on 17 December last, but it could not be heard due to a conflict on the part of the Court with proceedings that needed urgently to be heard in closed court. The proceedings were adjourned on the Court’s own motion.

6. I heard the matter on 3 February 2021 and subsequently made orders on 17 February, indicating that I would later give reasons. These are they.

The Land Tax Act

7. Sections 5D(1)-(5) of the Land Tax Act are as follows:

(1) The trustee of a discretionary trust is taken to be a foreign person in that capacity for the purposes of section 5A if the trust does not prevent a foreign person from being a beneficiary of the trust.

(2) If a discretionary trust prevents a foreign person from being a beneficiary of the trust, the trustee is not in that capacity a foreign person for the purposes of section 5A.

(3) A discretionary trust is considered to prevent a foreign person from being a beneficiary of the trust if (and only if) both of the following requirements are satisfied—

(a) no potential beneficiary of the trust is a foreign person (the no foreign beneficiary requirement),

(b) the terms of the trust are not capable of amendment in a manner that would result in there being a potential beneficiary of the trust who is a foreign person (the no amendment requirement).

Note—

Under the transitional arrangements for this section in Schedule 2 to the Principal Act, the no amendment requirement does not apply to a trust that satisfies the no foreign beneficiary requirement immediately before the commencement of this section.

(4) A person is a potential beneficiary of a discretionary trust if the exercise or failure to exercise a discretion under the terms of the trust can result in any property of the trust being distributed to or applied for the benefit of the person.

Note—

A potential beneficiary is not limited to persons named in the trust instrument and extends to the members of any class of persons to whom or for whose benefit trust property can be distributed or applied pursuant to the discretions of the trust.

(5) For the removal of doubt, a person is not a potential beneficiary of a discretionary trust if the terms of the trust prevent any property of the trust from being distributed to or applied for the benefit of the person.

8. The term “foreign person” for the purposes of the Land Tax Act is defined in section s.104J of the Duties Act as “…A person who is a foreign person within the meaning of the Foreign Acquisition and Takeovers Act 1975 of the Commonwealth, as modified by this section …”

9. Importantly, surcharge land tax is not charged if no beneficiary (including a potential beneficiary) is (or can potentially be) a “foreign person”.

10. The Summons in prayers 2 to 4 pose the following questions for advice pursuant to s.63 of the Trustee Act:

1. Whether the Trustee is not justified in exercising the power to vary contained in clause 11 of the Trust Deed so as to exclude any beneficiary (including any taker-in-default of appointment pursuant to clause 4 of the Trust Deed) from benefitting under the Trust whilst that beneficiary is a “foreign person” as that term is defined in the Land Tax Act and the Duties Act? (“Question 1”)

2. Whether the Trustee is not justified in disclaiming and / or surrendering its powers to appoint and / or capital to any beneficiary of the Trust Estate whilst the beneficiary is a “foreign person” as that term is defined for the purposes of the Land Tax Act and the Duties Act 1997? (“Question 2”)

3. Whether the Trustee is justified in managing and administering the Trust Estate as if the document entitled “Deed of Exclusion – Voigt Family Trust” and executed by the Trustee on 29 June 2018 is of no effect? (“Question 3”)

11. The power of the court to give advice pursuant to s.63 of the Trustee Act has been definitively examined in Macedonian Orthodox Church St Petka Incorporated v His Eminence Petar the Diocese of Australia and New Zealand (2008) 237 CLR 66:

[56] There are no express words in s 63, and no implications from the express words which are used in s 63, that automatically preclude the court from giving the advice which the Association sought. There is nothing in s 63 which limits its application to “non-adversarial” proceedings, or proceedings other than those in which the trustee is being sued for breach of trust, or proceedings other than those in which one remedy sought is the removal of a trustee from office.

[57] This conclusion follows the principle referred to in the previous paragraph: from the unqualified words of s 63(1), particularly the words “respecting the interpretation of the trust instrument”; from the contemplation of s 63(4) that affidavit or other evidence may be used and that notice may be given; from the contemplation of s 63(8)-(10) that advice may be given not only where there are controversies among beneficiaries, but where beneficiaries are in dispute with trustees about those controversies; and from the contemplation of s 63(11) that there may be an appeal from the opinion, advice or direction (77).

[58] Only one jurisdictional bar to s 63 relief exists: the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument. The Court of Appeal did not deny that both kinds of question existed in the present case. Hence, as the Court of Appeal recognised and as the plaintiffs accept, the dispute in this appeal relates only to the question whether Palmer J erred in the exercise of his discretion.

…

[64]: s 63 operates as “an exception to the Court’s ordinary function of deciding disputes between competing litigants”; it affords a facility for giving “private advice” (82). It is private advice because its function is to give personal protection to the trustee.

[65] Section 63(2) precludes any trustee, who acts in accordance with the private advice, from being held liable for breach of trust in the event that in conventional proceedings it is later held that the legal position does not correspond with the advice given, so long as the proviso to s 63(2) is satisfied. The possibility that the rights of beneficiaries under private trusts could be affected by judicial advice led the New South Wales Parliament in 1925 to introduce the protections given by s 63(8)-(11) and in that sense to strike a compromise. However, those protections did not alter the primary function of s 63 as creating a procedure for private advice to trustees. Even if notice of the application for private advice is given to other persons (by reason of rules of court, or a court direction under s 63(4), or by reason of s 63(8)), those persons are not strictly speaking “parties” to “proceedings” by reason of the closing words of s 63(11), although they are able to participate in the proceedings to some extent. Section 63 reflects a compromise between a procedure for affording private advice to trustees and the need for affected persons to be given a hearing in some cases.

12. Before coming to the questions posed it is necessary briefly to set out some facts.

13. The relevant Deed of trust with which the Court is here concerned is in the form of a discretionary family trust. The Deed arises in the Voigt family. The settlor was Boris Semionov, the father of Xenia who then married Hans Voigt. Sylvia and Julia have children of their own, Mr Semionov had another child Alex who lives in Queensland. He has three children James, David and Tamara.

14. Clause 1(d) of the Deed defines beneficiaries. Clause 2 deals with the distribution of income, and clause 3 makes irrevocable any decision of the Trustee under clause 2 in respect of income. Clause 4 deals with the distribution of capital and income of the Trust on the vesting day. Clause 5 deals with investments, 6 sets out the various powers of the Trustee and importantly clause 11 deals with the power to vary the trust and clause 20 provides that the Trustee may release or revoke any power or powers conferred on him or them and upon the exercise of any release and revocation pursuant to that clause the powers so released and revoked should be absolutely and irrevocably determined.

15. The term income is not defined, but clause 2 permits income to be distributed at the Trustee’s discretion referable to a fiscal year. That term, I agreed with the submission made, should be given its trust law meaning such that capital would not prima facie form part of income: See Commissioner of Taxation v Bamford (2010) 240 CLR 481 at 505.

16. There is no provision for default beneficiaries of income. That has the consequence that even though the Trustee has a discretion to distribute income referrable in one fiscal year at a later point of time because there is no default beneficiary as to income it would, I accept, be taxed in the hands of the Trustee at the highest marginal rate as a result of ss.99 and 99A Income Tax Assessment Act 1969 (Cth).

17. In addition, it seems as if it has been submitted that the undistributed income would simply continue to accumulate. It would be by reason of clause 2 that it does not become part of the capital of the trust. I accept the submission that the trustee could not under the deed re characterise capital as income.

18. Clause 11 of the Deed provides a power to vary the terms of the Deed. Although this clause purports to give the Trustee “absolute and unfettered” discretion to vary the trust there are important provisos.

19. Three months’ notice of a proposed variation has to be given and certain powers are exempted from variation, (clause 1(c), 2, 3 and 4). Certain amendments have already been made in 2006 and 2018. By the 2018 amendment an additional clause 22 was added that permitted the Trustee to exclude from the class of beneficiary anyone who may benefit under the Deed whatever class of beneficiary they might be. And clause 22 is irrevocable.

20. I accept that the power to vary the Deed would be interpreted liberally but subject to the provisos, importantly the amendment made in 2018 about adding or removing beneficiaries.

The Questions

Question 1

21. Notwithstanding the power to exclude under clauses 4 and 22 I agree with the submissions that those clauses deal with the release and revocation of powers and not trusts.

22. It does seem to me that the power to vary in clause 11 is limited. That is there may be a taker in default of appointment pursuant to clause 4 that may be a “foreign person” who cannot be excluded from benefitting under clause 11. I agree that clause 11 cannot be used to totally extinguish the entitlements of the takers in default referred to in clause 4 who may in the future be defined as foreign persons for the purposes of the Land Tax Act/or Duties Act.

Question 2

23. This question asks whether the Trustee is justified in disclaiming and or surrendering its powers to appoint income and or capital to any beneficiary of the trust estate whilst the beneficiary is a “foreign person” as defined in the Land Tax and Duties Act.

24. As already made clear clauses 11 and 22 of the Deed gives the trustee power to revoke powers but limitations with respect to altering trusts. For certain purposes s.28 of the Conveyancing Act 1919 (NSW) (“Conveyancing Act”) to release or contract not to exercise a power, by deed disclaim a power, unless the instrument by which the power is given unless a contrary intention is contained in that instrument. As clause 20 of the Deed grants the Trustee the power to revoke other powers s.28 does not apply.

25. However, in any event both clause 20 and s.28 refers to powers and not trusts therefore even if a person is a “foreign person” as defined a release of the powers does not mean the trusts could be released. It follows that the Trustee cannot disclaim the trusts pursuant to clause 20 of the deed.

26. Prayer 4 of the summons raises the question whether the 2018 deed is valid.

Question 3

27. Prayer 4 of the Summons poses the question as to whether the 2018 Deed is valid. Indeed as the argument was ultimately developed the question of validity concerns two Deeds made in 2018. A separate question also arises as to the status of a 2006 Deed.

28. In short it has been submitted the two Deeds both executed on 29 June 2018 are of no effect. The first is the Deed of Amendment for the Voigt Family Trust and the second is the Deed of Exclusion, Voigt Family Trust.

29. It is submitted that both Deeds which are interrelated (the Deed of Exclusion is predicated upon the Deed of Amendment being effective) breach the limitation of the power of variation in clause 11 of the Trust Deed being that any variation cannot affect clause 4 of the Trust Deed. The takers-in-default of appointment cannot be affected via any amendment, either of which could theoretically occur pursuant to the Deed of Amendment and therefore the Deed of Exclusion.

30. Clause 1.1 of the Deed of Amendment sought to insert a new clause 22 of the Trust Deed, being an irrevocable power to exclude beneficiaries, and in particular, provides as follows:

The Trustee has the power to exclude from being a beneficiary anyone who may benefit under this Trust Deed whether they are being described as beneficiaries, income beneficiaries, corpus beneficiaries, or otherwise. Any exclusion of such persons from being beneficiaries will take effect at such time as the Trustee determines even if this time is before the time of the determination made by the Trustee. The Trustee may revoke any exclusion unless the exclusion is expressed to be irrevocable. This clause 22 is irrevocable.

31. Clause 2 of the Deed of Exclusion then purports by reason of the new clause 22 to provide that certain people (being “foreign persons”) cannot be beneficiaries, cl.2.1(a).

32. However, there might be that some people who might meet the criteria to be excluded as beneficiaries as provided for in the Deed of Exclusion but who may also be default beneficiaries of entitlements under clause 4 of the Trust Deed. That is by reason of clause 11 which expressly excludes clause 4 from the variation power. There may also be a conflict between the power to exclude in clause 22 which was introduced by the Deed of Amendment and the entitlements under clause 4 of the Trust Deed.

33. It is therefore submitted that by reason of the above, the Deed of Amendment and consequently the Deed of Exclusion may offend the terms of clause 11 of the Trust Deed. It would follow that neither Deed should be held to be of any effect. I consider those submissions to be correct.

Section 81

34. Pursuant to prayer 5 of the Summons the trustee seeks an order under s.81 of the Trustee Act permitting the Trustee to release all of the trusts and powers (referable to the trust estate) such that any beneficiary of the trust estate that is a “foreign person” as defined in the land Tax or Duties Acts is not a beneficiary whilst they are a “foreign person”.

35. As a result of amendments to the Duties Act, Land Tax Act, and the Land Tax Management Act 1956 (NSW) by reason of the State Revenue Legislation Further Amendment Act 2020 (NSW) which provides for exemptions from refunds of surcharge purchase and surcharge land tax payable in respect of residential land by the trustee of a discretionary trust, if the trust prevents a foreign person from being a beneficiary of the trust. In the present case that liability imposed if the “amendments” are not made will annually be 2% of the taxable value of the land (which is residential property) held subject to the Trust estate.

36. Section 81(1) of the Trustee Act provides as follows:

37. Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court—

38. (a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and

39. (b) may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income. [emphasis added]

40. Relevantly, for current purposes, s.81(1) of the Trustee Act provides as follows:

1. Where in the management and administration of any property vested in the trustee;

2. Any surrender, release or transaction;

3. Is in the opinion of the Court expedient;

4. The surrender, release or transaction cannot be effected by reason of absence of any power vested in the trustee by either:

1. the instrument creating the trustees; or

2. by law, then

3. the Court may by order confer on a trustee the necessary power for the purpose (on such terms and subject to any provisions and conditions), and that there may be an adjustment of the respective rights of the beneficiaries.

41. Section 81(2) of the Trustee Act provides as follows:

The provisions of subsection (1) shall be deemed to empower the Court, where it is satisfied that an alteration whether by extension or otherwise of the trusts or powers conferred on the trustees by the trust instrument, if any, creating the trust, or by law is expedient, to authorise the trustees to do or abstain from doing any act or thing which if done or omitted by them without the authorisation of the Court or the consent of the beneficiaries would be a breach of trust, and in particular the Court may authorise the trustees—

(a)  to sell trust property, notwithstanding that the terms or consideration for the sale may not be within any statutory powers of the trustees, or within the terms of the instrument, if any, creating the trust, or may be forbidden by that instrument,

(b)  to postpone the sale of trust property,

(c)  to carry on any business forming part of the trust property during any period for which a sale may be postponed,

(d)  to employ capital money subject to the trust in any business which the trustees are authorised by the instrument, if any, creating the trust or by law to carry on. [emphasis added]

42. That is, s.81(2) of the Trustee Act provides (and amongst other things) that the power conferred on the Court (pursuant to s.81(1) of the Trustee Act):

1. deems to empower the Court to authorise a trustee to do or abstain from doing an act which otherwise be a breach of trust; and

2. such act (or abstention) to which the Court empowers the trustee may be an alteration (whether by extension or otherwise) of the trusts or powers conferred on the trustees by the trust instrument or by law.

43. There are two decisions of the Court of Appeal which comprehensively deal with s.81 of which I am bound, Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367 (“Re Dion (2014)”) and Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286 (“Cisera”).

44. It is important to observe that the Court of Appeal in Cisera reconsidered Re Dion (2014) and approved Barrett JA’s analysis. I should also note I looked at a very similar issue myself in Re Dion Investments Pty Ltd [2020] NSWSC 1661 (“Re Dion (2020)”).

45. It is salutary to re-state the various propositions articulated by Barrett JA in Re Dion (2014):

[92] Although “transaction” is a very wide expression, power for a trustee to effect a particular “transaction” may be supplied by the court only if, in the management or administration of any property vested in the trustee, the “transaction” is, in the court’s opinion, “expedient” — that is, according to Dixon J in Riddle v Riddle (at 214), expedient “in the interests of the beneficiaries” or, according to Williams J (at 222), “advantageous”, “desirable” or “suitable to the circumstances of the case” but, in every case, with expediency tied to management or administration of trust property. A wider criterion of the Queensland kind, based solely on what is in the best interests of the beneficiaries, does not play any part under the New South Wales legislation.

[93] I return to the so-called “mere throwaway line” and the cases in which it has been regarded as supporting the view that, for the purposes of s 81(1), variation of the terms of the trust is, of itself, a “transaction” undertaken by the trustee.

[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.

…

[97] Conferral of specific new powers pursuant to s 81(1) should not be by way of purported grant of authority to amend the trust instrument so that it provides for the new powers. Rather, the court’s order should directly confer (and be the sole and direct source of) the powers which then supplement and, as necessary, override the content of the trust instrument. And, of course, the only specific powers that can be conferred in that direct way are those that fall within the s 81(1) description concerned with management and administration of trust property.

…

[99] If, under the guise of giving the trustee a power to undertake a “transaction” of amending the trust deed by adding a comprehensive and virtually unrestrained amendment provision, an order is made that purports to put the trustee into a position from which it can make all and any alterations to the terms of the trust it thinks desirable, the court takes the impermissible course of both appropriating to itself and giving to the trustee a “general power to depart from the precise directions … that a settlor thought proper to declare” (In re Downshire Settled Estates at 247). Because there is no “proposed transaction … which is specifically related to the management or administration by trustees of trust property, quoad property” (at 252), the matter is not within the scope of the section.

[100] For these reasons, I share the opinion of the primary judge that the post 1997 decisions that have proceeded on the basis that variation of the terms of a trust is, of itself, a “transaction” within the contemplation of s 81(1) rest on an unsound foundation. The court is not empowered by the section to grant power to the trustee to amend the trust instrument or the terms of the trust. It may only grant specific powers related to the management and administration of the trust property, being powers that coexist with (and, to the extent of any inconsistency, override) those conferred by the trust instrument or by law

46. Accordingly before an order can be made pursuant to s.81 three criteria must be satisfied. As I noted in Re Dion (2020) at [35], ‘there needs to be a “proposed dealing”, being a “sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction”. The dealing must be in the Court’s opinion “expedient”. And the dealing must be incapable of being effected because of an absence of power’.

47. As I have already observed here there is a power in the Deed for the release of powers but that provision does not allow for a release of trusts.

48. Here I am satisfied that the relevant dealing is a “surrender” and or “release” as is understood in the legislation.

49. The relief involves the Trustee seeking a “direct” abstention of doing an act, being the alteration of the trusts and powers such that a “foreign person” will not be able to benefit from the Trust Estate. An abstention from doing an act is specifically provided for in s.81(2) of the Trustee Act. I am also of the view that the “release” or “surrender” are contemplated by s.81(1) in that what is sought is a “direct” contemplated by s.81(1) in that what is sought is a “direct” surrender/release of the trusts and powers being dealings specifically provided in s.81(1).

50. The whole point of the application is to enable a conferral of a release or surrender of any powers and trusts which may benefit a “foreign person” and thereby cause the Trustee to be subject to land tax or purchase duty.

51. As Barrett JA pointed out in Re Dion (2014), powers can only be conferred by the Court upon a Trustee in order to undertake a particular dealing or a dealing of a particular kind and done as though the power has been inserted into the trust instrument as an overriding power. The conferral of a specific new power is by order of the Court and not by way of an amendment of the trust instrument.

52. If the Court is satisfied that there is an absence of power and subject to the need for expediency (s.81(1)) the order of the Court should not be refused because it affects the interests of beneficiaries that is because the Court is concerned primarily with whether the order is expedient in the “management and administration of any property vested in trustees”. Adjustment of beneficiaries is specifically contemplated as a possible and direct consequence of an order under s.81 and thus varying beneficial rights.

53. There is no doubt s.81 should not be the subject to implied limitations and should be widely construed.

54. The evidence indicates that the “proposed transaction” will have the benefits of reducing the annual land tax charge on the Trustee with respect to residential property held subject to the Trust Estate; see Hunt affidavit at [47].

55. There have been a number of cases where it is has been held tax savings or advantages form a basis of expediency in the management and administration of trust property. For example:

1. In Re A.S. Skyes and the Trustee Act (1974) 1 NSWLR 597 at 602, Helsham J (as his Honour then was) observed that “…the powers conferred on the Court by s.81 should not be withheld merely because their exercise is sought to enable the avoidance of a revenue impost…”

2. Campbell J in Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004; (2006) 64 ATR 325 (“Stein v Sybmore”) at [55]: “As well, the minimisation of the capital gains tax and stamp duty on the trust property provides a separate basis upon which the conferring of the power is expedient.”

3. Biscoe AJ in Application of NSFT Pty Ltd [2010] NSWSC 380 at [20], considered that “modernisation of the trust deed [pursuant to s.94 of the Trusts Act 1973 (Qld)]…with consequential tax benefits, is expedient in the management or administration of the property vested in the trustee…”

4. White J (as his Honour then was) in Barry v Borlas Pty Ltd [2012] NSWSC 831 at [22] – [23] agreed with Campbell J in Stein v Sybmore, that the scope of s.81 of the Trustee Act includes preserving trust property and making it financially productive “…which included planning to minimise the impact of tax and duty on the trust property…”

5. Stevenson J in Soo v Soo [2016] NSWSC 1666 at [6] observed that:

…there are numerous decisions of this Court to the effect that the tax effective administration of a trust is a matter to which regard may properly be had in considering whether or not to exercise discretion under s.81(1) of the Act: for example Re Skyes (deceased)…; Stein v Sybmore Holdings Pty Ltd…and Barry v Borlas Pty Ltd…

6. The above observations are consistent with the Court of Appeal’s observations in Kearns v Hill (1990) 21 NSWLR 107, when considering the context of family discretionary trusts.

7. In Re Dion (2014), the Distribution Powers were held to be expedient in the management or administration of the property vested in the trustee (Re Dion (2014) at 777 [114]), particularly given the evidence of the potential taxation savings based on advice of KPMG ([19] to [25] in Re Dion (2014)).

56. In this case the tax advantages arise upon the surrender or release being approved by the Court. I am satisfied the relief sought in the application is expedient in the relevant sense given the tax savings. The express purpose of permitting the orders sought is so as to allow the surrender and or release of the trusts and powers contained in the terms of the Trust Estate so as to ensure that no beneficiary that is a “foreign person” can benefit under the terms of that Trust Estate.

57. I would grant the relief sought in prayers 4 and 5 of the Summons.

******

Decision last updated: 12 March 2021