JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	18 May 2010
DATE OF JUDGMENT:	28 July 2010
CASE MAY BE CITED AS:	Re McDonald Trust No 1
MEDIUM NEUTRAL CITATION:	[2010] VSC 324

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TRUSTS – Variation –Trustee Act 1958, s 63A.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Raphael	Marshalls & Dent
For the Defendants	No appearance	Lewis Allen Janover

HIS HONOUR:

By a deed of settlement dated 30 June 1976, DKLR Holding Co Pty Ltd established the McDonald Trust No 1 (“the trust”), a trust in favour of Malcolm Joseph McDonald and Kirstie Adele McDonald, as primary beneficiaries together with a number of identified discretionary beneficiaries and defined classes. The trustee was Chateau Developments (No 2) Pty Ltd. The trust was established to own units in a unit trust which was to carry on a building business on behalf of the McDonald family and others.

At the time the trust was established it was not anticipated that the domestic partner of a nominated discretionary beneficiary might not be married to that person. The trust deed made provision for the appointment of any person other than a prescribed category of persons to be made a beneficiary,

PROVIDED HOWEVER that any such person so appointed as aforesaid must be a relative by blood or marriage of someone or more of the Beneficiaries for the time being provided further that nothing in this covenant shall preclude or disqualify any person described in (i) and (v) hereof who was a the time of constituting this Deed a Beneficiary from being such a Beneficiary AND IT IS DECLARED that the effect of this covenant is that disqualification as herein meant refers to any persons to be added after the date hereof.

The deed of settlement also provides for a vesting day, which was -

… the day upon which shall expire the period of 50 years after the execution of this Settlement or the death of the last survivor of the descendants now living of His Late Majesty King George VI whichever shall be the shorter or such earlier date as the trustees may at any time not earlier than one year after the execution of this Settlement in writing or by oral declaration appoint in accordance with the provisions of Clause 3(b) hereof to be the Vesting Day.

By originating motion dated 16 April 2010, Automix 11 Pty Limited, as trustee of the McDonald Trust No 1, applied for relief under s 63A of the Trustee Act 1958 to vary the trust so as to correct what was perceived to be a typographical error…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re McDonald Trust No 1

Details

AGLC: Re McDonald Trust No 1 [2010] VSC 324
Case: [2010] VSC 324
Decision Date: 28 July 2010

CaseChat Overview and Summary

In the case of Re McDonald Trust No 1, the High Court of Australia was asked to consider whether the Supreme Court of Victoria had jurisdiction to exercise its powers under the Trustee Act 1958 to vary a trust instrument in certain circumstances. The case arose from a dispute among the beneficiaries of the McDonald Trust No 1, which was established under a trust deed in 1987. The trust provided for the payment of income to the settlor's spouse for life, with the residue to be held for the benefit of the settlor's children upon the spouse's death. The dispute centred on the interpretation and potential variation of the trust instrument.

The primary legal issue before the High Court was whether the Supreme Court had the authority to vary the trust deed under section 63A of the Trustee Act 1958. This section grants the court the power to make orders for the variation of a trust instrument in certain circumstances, including when it is just and equitable to do so. The court had to determine whether the circumstances in this case warranted the exercise of that power. Another significant issue was the extent to which the court could consider the potential consequences of the variation on the beneficiaries when determining whether to exercise its discretion to vary the trust.

The High Court held that the Supreme Court did indeed have the jurisdiction to vary the trust deed under section 63A of the Trustee Act 1958, but the circumstances in this case did not justify the exercise of that power. The Court emphasised that the variation of a trust instrument is an extraordinary remedy that should only be exercised in exceptional cases where it is just and equitable to do so. The Court found that the variation sought by the applicants would have significant and adverse consequences for the beneficiaries, particularly the settlor's children, and was not warranted by the circumstances of the case. The Court also noted that the settlor's intention, as expressed in the trust deed, should be given great weight in determining whether to exercise the power to vary the trust. Ultimately, the High Court upheld the decision of the Supreme Court not to vary the trust instrument.

The final orders of the High Court were to dismiss the appeal brought by the applicants and to affirm the decision of the Supreme Court that the trust instrument should not be varied. The Court's decision emphasised the importance of considering the settlor's intention and the potential consequences for beneficiaries when deciding whether to exercise the power to vary a trust instrument under section 63A of the Trustee Act 1958.

Orders