One aspect of the issue that is however very clear is that unless there is a power to vary included in the terms of a testamentary trust, the only way in which to change its terms is by way of a court application.
In all Australian states, there is legislation that empowers the court to vary the terms of a trust. One example of a case in this regard is Robert Thomas Grant as trustee of the Grant Family Testamentary Trust [2013] NSWSC 1603
In this case, a testamentary trust had been setup by the trustee’s late father.
Some years after its establishment, the trustee wanted to obtain finance to make improvements to one of the real properties owned via the trust.
Financiers refused to lend any funds on the basis that the powers of the trustee set out under the testamentary trust did not include a raft of provisions normally expected to be seen in a trust instrument, including the power to lend, the power to open and operate accounts with financial institutions, the power to delegate, the power to borrow and a right of indemnity.
Using a discretion granted to the court in New South Wales to vary a trust instrument where it deems it ‘expedient for the management of the trust’, all the deficiencies identified by financiers were remedied by the court approved variation.
Interestingly, part of the application included a specific power to allow the trustee to unilaterally make future amendments to the terms of the trust. While other cases have refused to include such a power, here the court was comfortable to allow it, on the basis that any amendment would require the consent of all potential beneficiaries. This prohibition was seen as ensuring that the trustee could not do anything to alter the ‘substratum’ of the trust.
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** For the trainspotters, the title of today's post is riffed from the At the drive in song 'Non-zero possibility’.
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