The Queensland Supreme Court found that amending the vesting date of two family discretionary trusts (to a date 80 years from the settlement dates) was consistent with the 'spirit' of settlor's intention that the trust operate as a tax planning vehicle.
Re Arthur Brady Family Trust; Re Trekmore Trading Trust[2014] QSC 244
The trustees of two discretionary trusts applied to the Supreme Court of Queensland to amend the vesting date of two discretionary trusts by extending the time for vesting. The trusts had considerable real property assets and the vesting of the trusts would trigger CGT events and liability to stamp duty: [18]. There were substantial unpaid present entitlements which would become payable on the vesting date: [18].
Section 94(1) of theTrusts Act 1973(Qld) provided that the Supreme Court could by order authorise 'any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure orother transaction' (emphasis added) expedient in the management or administration of any property vested in a trustee', consistent with the best interests of the trust's beneficiaries and other interested persons, and where the transaction could not be achieved under the trust instrument.
A question of construction arose. Did s 94(1) authorise the Court to enable alterations to the terms of the trust itself, or only dealings in the property comprising the trust estate? Specifically, was the alteration of the vesting date a ‘transaction’ within the meaning of s 94(1)? Having regard to the tax context, the very purpose of the relief sought was to avoid the need to deal with the trust property on the vesting date: [28].
There was authority that an alteration to a trust deed was a ‘transaction’:Stein v Sybmore Holdings[2006] NSWSC 1004;Re Philips New Zealand Ltd[1997] 1 NZLR 93;Bowmil Nominees Pty Ltd[2004] NSWSC 161;James N Kirby Foundation v Attorney General (NSW)(2004) 213 ALR 366.
But the contrary view had also recently been expressed:Re Dion Investments Pty Ltd[2013] NSWSC 1941. InDion Investments, Young AJ followed a line of English authorities which found the power to authorise transactions was limited to transactions involving trust property and did not extend to the creation or alteration of equitable interests in trust property (eg, through alterations to the trust).
The Court concluded the amendment of the vesting date could fairly be characterised as a ‘transaction’.
The issue may be an arid one for Victorian readers. The equivalent Victorian provision, section 63(1) of theTrustee Act 1958(Vic) is in substantially similar language to s 94(1) of theTrusts Act 1973(Qld). But section 63A gives the Supreme Court of Victoria an additional power, to be exercised on behalf of certain categories of beneficiary, to vary a trust or enlarge the powers of its trustees.
What is most interesting is the Court's conclusion that it would be appropriate to amend the trust's vesting date despite the choice of vesting date implicit in the date specified in the trust instrument, because it was able to discern that the settlor would have wanted the trust objects to continue to enjoy the taxation advantages offered by the family discretionary trust.
The Court observed that there was a tension between the order being sought and the apparent intention of the settlor to fix a certain vesting date: [43]. But the Court adopted a view that it was permissible to discern whether a particular dealing would depart from the ‘spirit of the settlor’s intention’ from ‘the terms of the trust deed and the sort of context of social institutions and laws within which it was made’: at [43], citingStein[2006] NSWSC 1004 at [53]. The type of trust might determine whether such a departure was permissible. Trusts such as family discretionary trusts were made in a
well-understood context of law (often tax law) which the trusts are clearly intended to take advantage of- it is often not difficult to conclude that keeping advantages of that type is within the spirit of the settlor’s intentions, or if that context of law were to change, it might be possible to conclude that it was within the spirit of the settlor’s intention the trust should accommodate itself to whatever the new law was.
The Court authorised the applicants to amend the trust deeds to establish a vesting date 80 years from the settlement date.
