In a recent decision the Supreme Court of Queensland amended the vesting day of two discretionary trusts when there was no power contained in the trust deeds for such an amendment to be made.
The trustees made application to the Supreme Court seeking to postpone the vesting date for the maximum period of 80 years.
The trusts held substantial real estate holdings valued at more than $15,000,000. The vesting day expressed in the trust deeds was February 2017.
There was no provision in the trust deeds which allowed the vesting date to be deferred.
There would have been capital gains tax of more than $1,000,000 payable on the vesting of the trusts and it was also estimated that stamp duty of more than $700,000 would be payable as a result of the vestings.
The trusts did not have the funds to pay these amounts. Funds would have to be borrowed or assets sold to pay these amounts.
The Court application was made pursuant to a section of the Queensland Trusts Act which is identical with s89 of the Trustees Act in Western Australia. The section provides that:
"Where in the opinion of the court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is expedient in the management and administration of any property vested in a trustee or would be in the best interests of all of the persons, or a majority of persons, beneficially interested under the trust but it is inexpedient or difficult or impractical to effect the disposition or transaction without the assistance of the court, or it or they cannot be effected by reason of the absence of any power for the purpose vested in the trustee by the trust instrument or by law the court may by order confer upon the trustee the necessary power ..."
All of the persons or companies to whom the income of the trusts could be paid or who could share in the capital on the vesting of the trusts supported the application to the Court.
The Court held the work "transaction" should be given the widest possible meaning and could include a unilateral amendment which did not involve any of the parties.
The Court said the aim of the legislation was not to permit the substantial alteration of the trusts or their termination but to give the trustees power to administer the trusts in a more satisfactory and efficient manner.
The Court held that the amendment to the trust deeds to change the vesting day could be fairly characterised as a transaction which would be in the best interests of all of the members of the class of potential beneficiaries.
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