When varying a trust deed it is vital to ensure that the variation is in accordance with the variation power and, critically, whether the particular variation can be made at all. In the case of Re Owies Family Trust [2020] VSC 716 variations to a trust deed of a discretionary trust were found to be defective on the basis that they were outside of the scope of the variation powers. This case follows another defective trust deed decision, Advanced Holdings (discussed here), and shows that arguments about defective variations are increasingly being used in disputes involving trusts.
In the Re Owies decision various siblings fought over the control of a discretionary trust (Trust), that held assets with an estimated value of $23 million, and the entitlement to the Trust’s substantial income over the previous 10 years. The plaintiff siblings sought to challenge the validity of a series of deeds of variation to the Trust’s deed purportedly executed in 2002, 2010 and 2017 (collectively, the Variations). The Variations were important as they sought to change the description of the persons identified in the Trust’s deed as ‘guardian’ and ‘appointor’, ie, the persons who had ultimate control of the Trust.
Each of the Variations purported to be made pursuant to clause 20 of the Trust’s deed. Importantly, clause 20 did not contain a general power of amendment. Rather, it gave the trustee power to ‘add or vary all or any of the trusts hereinbefore limited’, followed by a later reference to the trustee’s power to declare any new or other ‘trusts or powers’.
The court rejected submissions that the trustee’s power to declare new powers was sufficient for the trustee to have made the variations. Rather than declare new powers, each of the variations purported to ‘alter’ or ‘amend’ the relevant provisions in the schedule to the Trust’s deed. On that basis, each of the variations was found to be defective and the change of the appointor and guardian roles were invalid.
To discuss further or for more information please contact:
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
