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Selwyn Black, Esq. and Nicholas Huang, Esq.
Carroll & O’Dea Lawyers
Sydney, Australia

The recent decision of Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960 reaffirms that the Court is not permitted under section 81 of the Trustee Act 1925 (NSW) (Act) to empower a trustee to amend a trust instrument or the terms of the trust in which the trustee holds trust property.

The Key Facts

  1. Section 81 of the Act states:

81 Advantageous dealings

(1)   Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court:

(a)   may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and

…

  1. The Cisera Family Trust (Trust) was established by deed dated 1974 (Trust Deed).
  2. The assets of the Trust mainly comprised commercial property, valued at about $16 million.
  3. The Trust Deed effectively provided that the vesting date of the Trust would be 1 January 2024 or an earlier date declared by the trustee of the Trust.
  4. Beneficiaries of the Trust wanted to extend the vesting date because:
    • they were concerned the trust property could vest family members who would still be minors on 1 January 2024; and
    • they wanted to delay the payment of CGT, which would be triggered on a vesting of the trust.
  5. Orders were sought under section 81 of the Act for the trustee to effectively treat the vesting date of the Trust Deed as having been extended.

The Precedent Decision

  1. Re Dion Investments Pty Ltd [2014] NSWCA 367 is an earlier case which involved a trustee similarly seeking the power to amend the trusts, terms and conditions of a trust deed under section 81 of the Act.
  2. The Court held that it was not empowered under section 81 of the Act to grant a trustee the power to amend the trust deed or the terms of trust. This was because the power to amend a trust deed is not a “transaction” within the scope of section 81.
  3. The key issue was whether the principles in Dion Investments also applied to this case.

The Court

  1. The Court followed the decision in Dion Investments and held that:
    • the power to treat the vesting date in the Trust Deed as having been amended was being sought;
    • if the court were to grant such a power, it would effectively be empowering the trustee to amend the Trust Deed.
  2. The orders sought were prohibited by Dion Investments.

Conclusion

This case demonstrates that when setting up a trust, the parties need to consider having provisions which allow the trust deed to be amended. The ability to amend the trust deed gives greater flexibility for a trust to deal with issues which arise in the future, and in this case may have delayed the payment of CGT by many years.