Tuesday, August 10, 2021

2 (+2 =5)** step deeds of variation

A common theme of posts over time has been the critical need for trustees (and their advisers) to read the provisions of any trust deed.

One issue that arises regularly under trust deeds is a variation power that may only be used in relation to certain clauses in the trust deed.

Where a trustee wishes to amend clauses that are protected from variation, one strategy that is often considered involves preparing:
  1. an initial deed of variation, which amends the power to vary under the trust deed to remove the prohibitions; and
  2. a second deed of variation implementing the desired changes.
Obviously, this approach is only available where the variation power itself is not one of the clauses that the prohibition on variation applies to.

Even where the approach, is on the face of the trust deed available, there are cases that would suggest this 2-step process is void for being a fraud on the power to amend.

The leading case in this area is Jamaica Ltd vs. Charlton [1999] W.L.R. 1399.

In particular, the decision confirms that the trustee cannot look to achieve by two steps, what was unable to be achieved by one step.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the Radiohead song ‘2+2=5’. View hear (sic):