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As the ubiquitously stated trust mantra confirms, it is critical to ‘read the deed’, particularly where an intended variation involves a key role such as a principal or appointor.
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Court decision offers clarity on varying trust deeds to remove an appointor
23 August 2024
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The decision in Staley v Hill Family Holdings Pty Ltd [2024] QSC 176 provides perhaps a definitive example in this regard.
In a factual matrix centred around a purported change to the avatar of the appointor, via a deed of variation, the court relevantly confirmed:
1. A trustee does not have an implied power to vary a trust deed, but it is accepted that many 'modern trust deeds' contain an express power which enables the trusts and the provisions of the trust deed to be varied (see Mercanti v Mercanti (2016) 50 WAR 495).
2. The extent and form of any permitted variation depends on the language used and the apparent purpose of the variation clause in the context of the trust deed as whole (see Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541).
3. While there will be situations where a trust deed does not permit an intended variation, any such prohibition must be clear from the language in the relevant trust deed and generally would need to derogate from the fundamental purpose for which the power to amend was created (see Jenkins v Ellett [2007] QSC 154).
4. Where clauses in a trust deed have headings, and there is no provision to the effect that headings are a mere aid to interpretation and are not to be taken into account when interpreting a provision of the deed, then any heading is relevant in the reading of a clause (see Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350).
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5. This said, any heading cannot override the clear meaning of the clause in the overall context of the document, or create ambiguity where it does not otherwise exist (see Cott UK ltd v FE Barber Ltd [1997] 3 All ER 540).
6. In the context of the variation clause here (extracted at the end of this article), it was held that no comma needed to be read into the heading but rather the word 'and' should be read conjunctively - that is, the heading signalled that the clause was concerned with amendment and variation of beneficiaries.
7. Thus, the variation power was construed as having broad application and in particular:
(a) consistent with the natural and ordinary meaning of the language of the clause, ensuring the trustee had the express power to “... add to... or vary... the... powers or provisions declared or included in this Deed...”.
(b) the term “provisions” was clearly capable of referring to any clause of the trust deed (see Kearns v Hill (1990) 21 NSWLR 107), with the use of the same term throughout the deed supporting the interpretation;
(c) the clause relating to the "Exercise of Power by Appointor" did not support a narrow reading of the variation clause as it plainly dealt with the natural succession of the office of Appointor. It was consistent with there also being a power to vary the Trust Deed in a way that added a further power, to remove a person from the position of Appointor;
(d) the construction of the variation clause was an objectively reasonable one. Absent the ability to use the variation power to change an Appointor, the Appointors provided for by the Trust Deed would have been effectively entrenched for the duration of the Trust. There was no express provision to this effect, and there was no basis in the text and context of the Trust Deed for an implication to this effect. Further, given the constraints of clause 22 (which provided for the replacement of the Appointor in a limited way) it was also objectively reasonable that the variation power could be used to deal with the office of Appointor. If the power to change the Appointor was restricted only to that contained in clause 22, once those initially appointed could not act, there would have been no provision for any other Appointors to take their place - an unlikely intention given the Trust Deed was drafted to exist for a period of 79 years;
(e) there was also nothing in the Trust Deed to suggest that the role of Appointor was so fundamental that the Appointor was intended to be entrenched - if this was in fact intended then there would have been, for example, a permission provision in the clause (that is a requirement that the consent of the Appointor was required in order to make a variation, or a guardian role);
(f) the definition of Appointor under the Trust Deed was “the person named in Part 4 of the Second Schedule and any other persons authorised to exercise the powers of the Appointor in accordance with this Deed.” This meant that the definition of “Appointor” was not specifically tied or limited to the people described in clause 22 and therefore the substratum of the trust could not be ascertained by reference only to the people identified in clause 22.
8. The fact that the variation clause did not mention the schedule specifically did not mean there was insufficient power to amend the schedule, given:
(a) the Deed of Variation did not purport to amend or vary the schedule - rather it inserted a new provision allowing the Trustee to remove and replace the Appointor;
(b) the Schedules were plainly incorporated and formed part of the provisions of the Trust Deed; they were cross referenced in the operative interpretation section of the Trust Deed; and the execution section of the Trust Deed appeared at the end of the schedules.
9. Nothing suggested that the variation undermined the 'substratum' of the Trust which seemed to be broadly established for the benefit of the family unit; thus cases such as Jenkins v Ellett [2007] QSC 154 (where similar purported changes were held to be void) were not relevant given:
(a) the variation power in Jenkins was only for varying the “Trusts declared” and was also “subject to the powers and provisions contained in this Trust” (which included the power of the Principal to remove the Trustee) - here clause 14 was far broader as it expressly extended to the “powers or provisions” of the trust deed;
(b) in Jenkins, the Principal’s ability to remove and replace a Trustee was held to be a fundamental feature of the structure of the Deed - which was not the case with the deed here.
10. Finally, the suggestion that the trustee had caused a fraud on the power and or any deliberate breach of duty by implementing the deed of variation was rejected for a range of reasons, including:
(a) the application was brought on and heard urgently on the basis that it was a straightforward construction issue to be resolved and that there was no factual dispute. The inferences the court was being asked to draw to conclude a fraud on the power involved serious allegations against the trustee; requiring a resolution of disputed factual matters; and therefore it was held should not be determined without pleadings or points of claim and defence;
(b) this was not a case where the incoming Trustee was looking to stay in power – to the contrary, the evidence was that the Trustee intended to vest the Trust;
(c) there was no evidence that the prior Appointor took any interest in the Trust for a period of at least 8 years;
(d) there was nothing in the trust deed to suggest that the Trustee was capable of being held to account by the Appointor;
(e) on a proper construction of the variation clause, the Deed of Variation was effective.
Relevant trust deed clauses
“14 AMENDMENT AND VARIATION OF BENEFICIARIES
14.01 The Trustee may revoke, add to, release, delete, or vary all or any of the trusts, powers or provisions declared or included in this Deed or any trusts, powers or provisions declared by or included in any revocation, addition, release, deletion or variation made to this Deed and may at the same time declare or include any new or other trusts, powers or provisions concerning the Fund PROVIDED THAT the Trustee must not exercise its powers under this clause so as to confer upon the Settlor any beneficial interests in any part of the Fund nor in the income from the Fund or in any way which infringes the law against perpetuities.
14.02 The powers of variation under clause 14.01 may be exercised by Deed, written memorandum or any other method permitted under this Deed.
14.03 The powers of the Trustee under clause 14.01 include the power to appoint or remove beneficiaries.
... Subject to clause 27.01, but otherwise despite anything to the contrary in the Deed, the Appointor may at any time prior to the perpetuity date appoint additional beneficiaries by notice in writing to the Trustee.”
“22 EXERCISE OF POWER BY APPOINTOR
22.01 Except to the extent otherwise provided in this Deed, any power, discretion or authority exercisable by the Appointor must, where more than one person is Appointor, be exercised by those persons jointly and by the survivor or survivors on the death of any of them and, upon the death of the survivor of all persons nominated as Appointors pursuant to the terms of this Deed, by the legal personal representatives of the last to die. Where a corporation is the Appointor, the corporation may exercise or concur in exercising any of the powers or discretions of the Appointor by resolution of its Board of Directors or other governing body or may delegate the right and power to exercise or concur in exercising any powers of discretions to one or more members of the Board of the corporation.
22.02 An Appointor may resign as Appointor. The Appointor may appoint an individual replacement Appointor on such terms as the Appointor thinks fit, provided that the Appointor cannot appoint the Settlor or the legal personal representatives of the Settlor.
By Matthew Burgess, director, View Legal
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