Can you or can't you (explain)** if you can amend a power to amend

Posts over recent weeks have considered various aspects of the extent of authority created for a trustee by a general power of variation under a trust deed.

Another useful case in this area is the decision in University of Adelaide v Attorney-General (SA) [2018] SASC 82.

Relevantly, the court confirmed that:

1. Where a power of amendment has been included in a trust deed, there must be compliance with any procedural or substantive restrictions on its exercise.
2. As a general principle of construction of trust deeds, a 'trustee cannot utilise its power of amendment of the trust deed to remove restrictions on its power of amendment' (see Retail Employees Superannuation Pty Ltd v Pain [2016] SASC 121).
3. Even in the absence of express restrictions, it would seem implicit that a power of amendment cannot be exercised to amend itself (see a case featured in a number of previous posts, namely Jenkins v Ellett [2007] QSC 154).

Despite the above conclusions, the decision in the case of Re McGowan & Valentini Trusts [2021] VSC 154 (as also featured in other View posts) essentially distinguished the above summary.

This was on the basis that where there is an extremely wide power of amendment in a trust deed it should be read and interpreted according to its natural meaning, notwithstanding what might otherwise be a general principle of construction.

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

** For the trainspotters, the title of today's post riffed from The Who and the song 'I Can't Explain'.

View here:

Can(‘t) explain Family Constitutions?**

Today’s post considers the above-mentioned topic in a ‘vidcast’.

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below.

In relation to the classic form of family constitution, there is no legal enforceability of the terms of the document.

One clear advantage of this is that there are therefore definitely no transaction cost issues with entering into a family constitution.

This is because the document is simply a memorandum of understanding, a statement of intent, a handshake agreement, a best wishes or best endeavours arrangement, but nothing else.

In other words, there is no change in legal ownership of any assets.

Thus, there is no stamp duty triggered.

Similarly, there is no tax event triggered.

It is simply a non-binding arrangement that doesn’t actually have any other legal impact.

Some families therefore rightly ask – “Why is there any need for approaches such as umbrella trusts, trust splitting, trust cloning, and related ideas? Let’s just keep it simple with a family constitution. We may not even get any professional involved in drafting it up because we can download one off the Internet. Let’s just make it up as we go along, and really, as long as the communication levels are there, we don’t need anything else.”

This said, our experience is that for many families, even when they are confident that the informal approach will succeed, they have a mantra of ‘in times of peace, prepare for war’.

In other words, if the family is robust enough to be able to have the critical discussions and get a non-binding family constitution in place, that’s the exact type of family that should build on the positive platform, go to the next level, and get legally binding arrangements in place as well.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, the title here is riffed from the Who song ‘Can’t explain’.