Contents

Chapter 10
Revocation and variation

Extension of trustees’ powers by the court

RECOMMENDATION

R31 The new Trusts Act should provide that:
(1) The court may make amendments to the non-distributive administrative provisions of the terms of any trust where it considers this necessary to enable the trustees to efficiently manage trust property.
(2) Under (1) the court may amend the terms of a trust to enlarge or extend the scope of the powers available to the trustees for administering or managing trust property.
(3) The court may not make amendments to the terms of a trust that alter or otherwise change the beneficial interests under the trust under this recommendation.

Section 64 of the Trustee Act

10.19Section 64 of the Trustee Act is essentially administrative in nature. It empowers the court to sanction specific transactions that would be in the best interests of beneficiaries but would otherwise be difficult to effect. Before any transaction can be approved under section 64 the court must be satisfied that it would be inexpedient, difficult or impractical for the trustees to undertake the transaction without the court’s assistance. The court must also be satisfied that the transaction in question is expedient for the trust as a whole, rather than just expedient for one or more of its beneficiaries. The provision does not permit the court to make changes to the beneficial interests under the trust. Beneficial interests can only be varied under section 64A.

10.20Our review identified two main issues with section 64:251
(a) The provision makes an unnecessary and confusing distinction between the court making an order conferring on the trustees the necessary powers to undertake a class of transactions and an order that simply amends the administrative provisions of the trust deed; and
(b) The threshold for court intervention is currently set too high. The court must be satisfied that it would be inexpedient, difficult or impractical to effect the transaction in question without the court’s assistance.

Recommended reformTop

10.21Traditionally, section 64 has mainly been applied to authorise dealings with trust assets in a way that was not contemplated (or authorised) by the trust deed. As noted already, section 64 can be distinguished from the type of intervention undertaken under section 64A (which allows more substantive amendments to trusts including changes to provisions about beneficiaries). We recommend retaining this type of distinction and recommend a new provision to replace the current section 64.

10.22We recommend that the scope of the current provision be broadened to permit the court to make orders amending the non-distributive administrative provisions of the trust deed where this is necessary to enable the trustees to efficiently manage trust property. We also recommend modifying the criteria for court intervention. Trustees should simply be required to show that the change is necessary for the efficient management of the trust assets.

10.23Submitters generally favoured this type of approach. However, some submitters expressed a clear desire to restrict a new provision (replacing section 64) to amendments that are for the administration and management of the trust assets rather than more substantive changes. Submitters were concerned that the law should not lightly override a settlor’s decisions as to what restriction should be placed on trustees’ powers by allowing carte blanche modification of the terms of the trust.

10.24The counter-argument, which other submitters also raised, is that over time the circumstances and business practices surrounding trusts change. It is sensible, if not essential, to provide some avenue for trustees to apply to the court for amendments to ensure the non-distributive administrative provisions of a trust are adequate to enable them to efficiently manage trust property when circumstances change in this way.

10.25We consider that our recommended approach strikes an appropriate balance between the competing concerns of administrative expediency and respecting the settlor’s wishes. Clause 57 of the indicative draft illustrates the recommendation.

251These are discussed more fully in Preferred Approach Paper, above n 243, at [9.46]–[9.61].