10.7Where a trust has minor, incapacitated or unborn beneficiaries, the rule in Saunders v Vautier cannot be used and the trust can only be revoked, varied or resettled by the court unless specific provisions addressing this situation have been included in the trust deed.
10.10We recommend replacing section 64A with a new provision that addresses these issues (see clauses 55 and 56 of the indicative draft below).
10.11In relation to the issue concerning the range of varying arrangements the courts should be able to approve on behalf of beneficiaries (issue (a) above), we recommend that the court have the power to approve any revocation, variation or resettlement of a trust or any change to the scope or nature of the powers of the trustees to manage or administer trusts. This clarifies that the court in its protective role is able to approve any variation or resettlement that a competent adult could approve. In our view it is logical that the court should be able to agree to any variation that an adult beneficiary might agree to under the extended rule in Saunders v Vautier because the purpose of the provision is for the court to make a protective decision for those beneficiaries who are not adults of full capacity, and are unable to reach their own view on proposed changes to the trust.
10.12Some submitters were concerned that this approach would allow far-reaching revisions of trusts, extending beyond what the settlor would have wished. While we acknowledge their concern, we consider that it is preferable to leave it to the court to determine whether it should in all the circumstances approve an arrangement that extends beyond or differs from what the settlor may have wished. As discussed further below, the intention of the settlor and the primary purpose of the trust must be considered by the court as one of a number of relevant matters that the court weighs up when deciding whether to approve a revision of the trust.
10.13On the issue of the classes of beneficiaries for whom the court should be able to approve varying arrangements (issue (b) above), we recommend broadening the current classes because we consider that the classes of person for whom the court can currently approve an arrangement under section 64A are too limited.
10.14We also recommend giving the court discretion, subject to some important safeguards, to waive the requirement for the consent of any other person. This is to prevent desirable variations being thwarted in situations where one or more ascertainable beneficiaries cannot be traced or contacted despite reasonable efforts, or to deal with situations where there are numerous beneficiaries with a remote or negligible interest in a trust. In such situations it is impractical and costly to require the personal consent of each of them. We consider that it is unreasonable to allow people with interests of a remote or negligible nature to have power of veto over variations that are desired by beneficiaries with far more significant interests.
10.15However, it is equally important to protect the position of a recalcitrant adult beneficiary with a fixed or indefeasible interest where he or she refuses to consent to a variation. Overriding the views of a beneficiary in this situation would not be consistent with the underlying principle in Saunders v Vautier. Those with the right of enjoyment in the property should be able to dictate the manner of enjoyment. Where a beneficiary with a fixed or indefeasible interest refuses to agree to a variation, overriding his or her refusal in a manner that removes or reduces that interest arguably amounts to an expropriation of property.
10.16Our recommended approach addresses this issue by requiring that the court, when considering whether to waive the requirement for the consent of any beneficiary, take into account the nature of the interests of everyone affected by the proposed arrangement, and the benefits or detriments to those affected if the court approved that arrangement or if the court declined to approve the arrangement. In addition, the provision should include the important protection that the court must not use its discretionary power to reduce or remove any vested or indefeasible interest held by a beneficiary.
10.17On the issue of whether the current detriment test should be retained (issue (c)), we recommend changing to a broader test under which the court must consider the nature of the person’s interests and the effect the proposed variation will have on that interest, as well as the benefits or detriments that approving or not approving the change will have on all those beneficiaries who would be affected by the proposed arrangement. In addition, we recommend that the intentions of the settlor, to the extent that these can be ascertained, should also be considered by the court when determining whether to approve a variation.
10.18We think that the intention of the settlor and the primary purpose of the trust should be considered as one of a number of relevant matters that the court weighs up when deciding whether approval should be given. We favour this approach because it strikes a balance between the competing interests. It does not limit the court’s ability to approve varying arrangements that conflict with the settlor’s primary intention or the trust’s substratum where other relevant factors argue compellingly for such change. Equally, this approach does not allow the court or others to simply ignore the settlor’s intention or wishes either.