The recent
decision of Mercanti v. Mercanti [2015] WASC 297 again reinforces the
mantra ‘read the deed’, which is a theme that has featured regularly in
previous posts (see for example - http://blog.viewlegal.com.au/2014/03/death-benefit-nominations-read-deed.html,
http://blog.viewlegal.com.au/2013/08/a-further-reminder-read-deed.html,
http://blog.viewlegal.com.au/2012/07/ato-reminder-read-deed.html).
As usual, a
full copy of the decision is available via the following link – http://www.austlii.edu.au/au/cases/wa/WASC/2015/297.html
Broadly the
background was as follows –
- As part of a family succession plan, two family discretionary
trusts were amended by deleting the original definition of ‘appointor’ for
each trust.
- This resulted in the father being replaced by his son as appointor
of the two trusts.
- The appointor power under each trust gave the person nominated the
power to unilaterally change the trustee of each trust.
- A later family dispute saw the son purport to exercise the
appointor powers under each trust deed (as amended) to replace the
trustees with a company he controlled.
- The father attempted to resist the changes, in part on the basis
that the earlier deeds of variation were not in accordance with the
variation power in the trust deeds and therefore invalid.
In deciding
that the change of appointor was valid under one trust deed, and invalid under
the other, the court highlighted the overriding importance of reading the
relevant trust instrument. In particular –
(a) One deed had a variation power that
relevantly provided the ability to ‘vary all or any of the trusts, terms and
conditions’. The scope of this provision was sufficiently wide to allow the
original change of appointor and therefore the son was able to use his power to
change the trustee.
(b) The power under the second deed
however only provided the ability to ‘vary all or any of the trusts’. In
other words, there was no express power to amend the terms and conditions of
the trust deed.
(c) The concept of ‘trusts’ does not
ordinarily, and did not here, extend to the appointor clauses, meaning the
purported variation of appointor was invalid and in turn the son’s attempted
change of trusteeship ineffective.
In many
respects the decision here is simply the application of principles explained in
detail in the case of Jenkins v Ellett [2007] QSC 154, which will be the
subject of next week’s post.
Until next
week.
Image credit: Anders Bachmann cc