Re EM McPherson Settlement
[2024] VSC 744
•4 December 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2023 02874
| IN THE MATTER of a trust created by deed of settlement dated 27 June 1972 (EM McPherson Settlement) | |
| -and- | |
| IN THE MATTER of an application pursuant to sections 63 and 63A of the Trustee Act 1958 (Vic) | |
| APPLICATION BY: | |
| DAVID JOHN BERRY as trustee for the EM McPherson Settlement | |
| Plaintiff | |
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JUDGE: | Harris J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 April, 2 September 2024 | |
DATE OF JUDGMENT: | 4 December 2024 | |
CASE MAY BE CITED AS: | Re EM McPherson Settlement | |
MEDIUM NEUTRAL CITATION: | [2024] VSC 744 | |
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TRUSTS – Application to vary terms of family trust – Approval on behalf of beneficiaries who are unable to consent - Extension of vesting date and introduction of statutory perpetuity period – Enlargement of class of beneficiaries to include corporations and trusts in which existing beneficiaries have an interest – Whether a resettlement of the trust – Amendments to avoid adverse taxation outcomes – Whether open to vary trust to introduce general power of amendment for trustee – Trustee Act1958 (Vic), s 63, s 63A – Perpetuities and Accumulations Act 1958 (Vic), s 5.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr P Bender | Nathan Yii Lawyers |
| Appearing as amicus curiae appointed by the Court | Ms K Chan |
TABLE OF CONTENTS
The Ethel McPherson Settlement Trust, and the Application.................................................. 1
The beneficiaries of the Trust.......................................................................................................... 2
The issues for determination........................................................................................................... 4
The Court’s powers under the Trustee Act.................................................................................... 6
Relevant provisions of the Trustee Act....................................................................................... 6
Principles on the exercise of power under s 63A and s 63 of the Trustee Act....................... 7
Section 63A........................................................................................................................... 7
Section 63.............................................................................................................................. 9
Amendment to extend the vesting date....................................................................................... 10
The current provisions of the Deed and the proposed variation......................................... 10
Whether an extension of the vesting date would be for the benefit of the Relevant Beneficiaries and is a fair and proper arrangement............................................................................. 12
The power to authorise a change in perpetuity period to a fixed number of years.......... 15
The submissions of the Trustee and the Contradictor as to the form of amendment....... 19
Consideration.............................................................................................................................. 23
Instrument ‘by which any disposition is made’............................................................ 24
Instrument which ‘specifie[s]’ the perpetuity period................................................... 25
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)?........................................ 26
Multiple instruments together may be regarded as one instrument for the purposes of s 5(1).................................................................................................. 28
The terms in which the consents of the adult beneficiaries are expressed............... 28
Conclusion – extension of vesting date.................................................................................... 29
Amendment to widen the class of beneficiaries........................................................................ 30
Submissions of the Trustee and the Contradictor.................................................................. 32
Whether the change is for the benefit of Maya or unborn beneficiaries................... 32
The reference to ‘living’ beneficiaries in distribution clause...................................... 34
Submissions as to the intention of settlor, destruction of the substratum of the trust, and resettlement of the trust........................................................................................ 35
Intention of the settlor......................................................................................... 35
Whether the amendment destroys the substratum of the Trust or would constitute a resettlement.......................................................................................... 36
Submissions as to the significance of the reference to beneficiaries ‘living’ from time to time in the Deed.............................................................................................................. 38
Further submissions and evidence as to benefit to Beneficiaries of an amended definition of Beneficiaries, and alternative narrower definitions......................................... 39
Principles relevant to an amendment to broaden the beneficiary class.................... 40
Destruction of the substratum of the trust or resettlement......................................... 42
Relevance of tax advantages or minimisation as an objective.................................... 46
Would the amendment to broaden the beneficiary class be to the benefit of the Relevant Beneficiaries and be a fair and proper one?................................................................... 48
The proposed relationship of beneficiaries to companies and corporate trustees is too broad...................................................................................................... 52
The broadening of the beneficiary class would not destroy the substratum nor resettle the Trust.................................................................................. 54
Taxation advantages as the primary objective of an arrangement............... 56
The variation is to the benefit of the Relevant Beneficiaries and is fair and proper 57
Consequences of reference to ‘living’ beneficiaries in distribution clause............... 57
Conclusion – broadening the class of beneficiaries............................................................... 61
Inclusion of power to create sub-trusts....................................................................................... 61
The sub-trust clause amendment and the submissions of the Trustee and Contradictor 61
Consideration.............................................................................................................................. 62
Inclusion of a power for the Trustee to stream income of the Trust...................................... 63
The streaming clause amendment and submissions of the Trustee and Contradictor.... 63
Consideration – streaming power............................................................................................ 64
Inclusion of a power for the Trustee to choose the method for determining the ‘net income’ and the ‘income’ of the Trust........................................................................................................... 65
The proposed amendment to facilitate defining the income of the Trust, and the submissions.............................................................................................................................................. 65
Consideration – amendment to facilitate defining income................................................... 66
Insertion of power of general amendment................................................................................. 67
Authority on approval of an arrangement involving introduction of a general power of amendment............................................................................................................. 68
Submissions of Trustee and Contradictor as to general power of amendment....... 69
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................. 71
It would not be open to introduce a general power of amendment pursuant to s 63 of the Trustee Act................................................................................................................................................. 75
Conclusion......................................................................................................................................... 75
HER HONOUR:
The Ethel McPherson Settlement Trust, and the Application
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]
[1]Affidavit of David John Berry affirmed 7 June 2023 (Berry Affidavit), [12]; Exhibit DJB, 11.
[2]Then Fellstar Nominees Pty Ltd.
[3]Affidavit of Richard William Hamer affirmed 7 June 2023 (R Hamer Affidavit), [10], [33]-[37]; see also Deed recitals.
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]
[4]R Hamer Affidavit, [8], [10].
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:
[5]Originating Motion dated 30 June 2023, subsequently amended on 16 February 2024.
(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.
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.
[6]Affidavit of Andrew Hamer affirmed 7 June 2023 (A Hamer Affidavit).
The beneficiaries of the Trust
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).
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]R Hamer Affidavit, [23]-[24]; A Hamer Affidavit, [8]-[9].
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]R Hamer Affidavit, [39] and [41]; Exhibit RWH 234-236.
[9]A Hamer [13]-[14].
[10]R Hamer Affidavit, [39]-[42]; Exhibit RWH 227-228; A Hamer Affidavit [13]-[16], [23]; Exhibit AMH, 108 and 118.
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]
[11]R Hamer Affidavit [65]-[68]; Exhibit RWH 356-440 and 406-450; A Hamer Affidavit, [32].
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.
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]
[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).
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]
[14]Affidavit of Nathan Yii affirmed 3 October 2023, [11]-[12].
The issues for determination
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.
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
Section 63A of the Trustee Act provides:
Power of Court to vary trusts
(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)…
‘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; …
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
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]
[15]Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (affd (1841) Cr & Ph 240; 41 ER 483); see also CPT Custodian Pty Ltd v Commissioner for State Revenue (2005) 224 CLR 98, 118 [43] (Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ); Re Dion Investments Pty Ltd (2014) 87 NSWLR 753, [46] (Barrett JA, Beazley P and Gleeson JA agreeing), both citing Mummery LJ in Goulding v James [1997] 2 ALL ER 239, 247.
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]
[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) 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).
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’.
[17](2012) 34 VR 387.
[18](2012) 34 VR 387, 395 (Williams AJA, with whom Buchanan and Bongiorno JJA agreed).
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.
[19](2022) 66 VR 246, 268-269 [83] (McMillan J) (citations omitted).
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]
[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].
Section 63
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.
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]
[23](2014) 87 NSWLR 753, 774 [99]-[100] (Barrett JA, Beazley P and Gleeson JA agreeing).
[24][2006] NSWSC 1004, [28]-[34].
[25](2014) 87 NSWLR 753, 774 [100].
[26](2014) 87 NSWLR 753, 774 [97]-[99], [108].
[27][2014] QSC 244.
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]
[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).
Amendment to extend the vesting date
The current provisions of the Deed and the proposed variation
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.
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’.
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.
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]R Hamer Affidavit, [54].
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.
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 …
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.
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
The Trustee identified the following reasons why an extension of the vesting date would be beneficial for the beneficiaries and potential unborn beneficiaries:[30]
[30]Trustee’s Submissions, [23].
(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.
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]
[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].
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]
[35]Contradictor’s Memorandum of Advice, [12.5] referring to Thomas Hare Investments v Hare (2012) 34 VR 656, 666 [36]-[37] and Re Plator Nominees Pty Ltd [2012] VSC 284, [15].
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]
[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].
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]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.
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]
[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.’
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
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.
The reasons why this issue arises are as follows.
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]
[42]Re Perenna Nominees, [38].
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]
[43]Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375.
The common law principles have been modified by the Perpetuities and Accumulations Act. Section 5 of that Act relevantly provides:
Power to specify perpetuity period
(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.
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;
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.
[44]Re Perenna Nominees, [42].
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]
[45]Re Perenna Nominees Pty Ltd, [71]-[74].
[46]Re Perenna Nominees Pty Ltd, [74], [75].
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.
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.
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.
[47][2009] EWHC 2076.
[48][1969] 1 Ch 100.
[49]Wyndham v Egremont, [17].
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]
[50]Wyndham v Egremont, [20], having referred to Inland Revenue Commissioners v Holmden [1968] AC 685 and Goulding v James [1997] 2 All ER 239, 247.
The reasoning in Re Holt’s Settlement has been applied in this Court in Re Gengoult-Smith Family Trust.[51]
[51][2024] VSC 189 (Moore J).
The submissions of the Trustee and the Contradictor as to the form of amendment
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]
[52]Trustee’s Submissions, [33]. Contradictor’s Memorandum of Advice, [18].
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]
[53][2012] VSC 284 (Davies J). See also Thomas Hare Investments v Hare (2012) 34 VR 656 (Habersberger J).
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]
[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).
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).
[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.
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.
[57]Ex parte Thrasivoulou [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) 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).
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]Contradictor’s Memorandum of Advice, [18].
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]Contradictor’s Further Memorandum, [11].
[61][2023] NSWSC 1507.
[62]Re Holt’s Settlement [1969] 1 Ch 100, [57]-[58].
[63][1968] AC 685.
[64](2012) 34 VR 387, [18], [26]-[27] (Williams AJA, with whom Buchanan and Bongiorno JJA agreed).
[65][2023] NSWSC 1507, [43]-[59] (Parker J).
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]
[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 [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.
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]
[68][2024] VSC 189 (Moore J).
[69]Transcript 2/09/24 T10.08-T14.18, relying on Hill v Zuda (2022) 275 CLR 24, [25]; Undershaft (No 1) Ltd v Commissioner of Taxation (2009) 175 FCR 150; Engebretson v Bartlett, Amorin (2007) 16 VR 417.
[70]Trustee’s Further Post-Hearing Submissions, [2].
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]
[71]Contradictor’s Third Memorandum, [11] (emphasis added).
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.
[72]Transcript 02/09/2024 T9.13-16; T17.17-26.
[73]Transcript 23/04/24 T68.17-28.
[74]Transcript 02/09/24 T18.06-12.
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.
Consideration
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]
[75]Re Perenna Nominees, 265, [75]; Re Plator Nominees, Thomas Hare.
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]
[76]Re Gengoult-Smith Family Trust.
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.
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.
[77]Cf Re Gengoult Family Trust, [20].
Instrument ‘by which any disposition is made’
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.
[78]Perpetuities and Accumulations Act, s 2.
[79]Cf Ord Forrest Pty Ltd v Federal Commissioner of Taxation (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).
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
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)?
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.
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.
[80][1968] AC 685.
[81]Holmden, 701 (Lord Reid), 710-711 (Lord Guest), 713 (Lord Wilberforce).
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) 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.
[82][1997] 2 All ER 239, 247 (Mummery LJ, Sir Ralph Gibson and Butler-Sloss LJ agreeing).
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).
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).
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)
[83]Or s 1(1) of the Variation of Trusts Act 1958 (UK), the UK equivalent used in Re Holt’s Settlements.
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.
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.
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.
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
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…
[84]Re Dion Investments Pty Ltd (2014) 87 NSWLR 753, [46] (Barrett JA).
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.
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.
[85]Transcript 23/04/24, T97.07-14, T135.11-24; Transcript 02/09/24 T26.23-28, T68.19-22.
Conclusion – extension of vesting date
For the above reasons, I have concluded that:
(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.
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.
Amendment to widen the class of beneficiaries
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…
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.
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) …
[86]See cl 2.2(a)(iv) of Deeds of Amendment Variations 1, 2, 3 and 4.
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]
[87]Trustee’s Submissions, 6 October 2023, [34], referring to the Nathan Yii Lawyers Advice, R Hamer Affidavit, Exhibit RWH 227-228.
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]
[88]R Hamer Affidavit, [43]-[49].
[89]A Hamer Affidavit, [19]-[22].
[90]A Hamer Affidavit, [22]; R Hamer Affidavit [48].
[91]A Hamer Affidavit [22(a)]; R Hamer Affidavit [48(a)].
Submissions of the Trustee and the Contradictor
Whether the change is for the benefit of Maya or unborn beneficiaries
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]
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]
[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’.
[195]Re Dion Investments, [113].
I am satisfied that the variation will be to the benefit of the Relevant Beneficiaries and is a fair and proper arrangement.
Insertion of power of general amendment
The original Deed does not include any power for the Trustee to amend the Deed, nor any mechanism by which amendments can be effected.
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.
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]
[196]Letter of Advice of Nathan Yii Lawyers, [35]; Trustee’s Submissions, 6 October 2023, [50].
Authority on approval of an arrangement involving introduction of a general power of amendment
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.
[197][2013] VSC 264 [26].
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]
[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.’
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]
[199](2014) 87 NSWLR 753, [97], [100] (Barrett JA, with whom Beazley P and Gleeson JA agreed).
Submissions of Trustee and Contradictor as to general power of amendment
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.
The Trustee submitted:[200]
[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]Trustee’s Submissions, 6 October 2023, [52].
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.
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]
[201]Transcript 23/04/24 T91.31-T92.12.
[202]Trustee’s Further Post-Hearing Submissions, 17/05/24, [39].
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]Contradictor’s Memorandum of Advice, [26]-[28]; Transcript 23/04/24 T115.16-T116.23.
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]Transcript 23/04/24 T01-15.
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.
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]
[205]Letter Nathan Yii Lawyers, 6 October 2021, [36] (R Hamer Affidavit, Exhibit RWH 231).
[206]Trustee’s Submissions, 6 October 2023, [52].
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]Re The Pickering Family Trusts, [10] (Lyons J).
[208]Re Alan Synman Family Trust, [26] (Ginnane J).
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.
[209]Trustee’s Submissions, 6 October 2023, [52].
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.
[210]Trustee’s Submissions, 6 October 2023, [52].
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]
[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.’
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.
[214]Transcript 23/04/24 T92.08-12.
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.
[215]In the same sense as identified by Lyons JA in considering the original proposed amendments in Re The Pickering Family Trusts, [16], [63].
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.
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
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.
[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) 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).
Conclusion
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’.
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.
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