When can a Court extend a vesting date?

When a trust is established with a vesting day shorter than the 80 year period permitted by law in most jurisdictions, there will often be a desire to extend that vesting day.

Typically, the trustee of the trust will exercise a power of variation under the trust deed to amend the vesting day definition, replacing it with the longer period.

In some situations though, the power to vary the trust may be narrow and an extension to the vesting day may not be permitted.

In those circumstances, the alternative approach is to apply to the Court for an order varying the trust instrument to extend the vesting day.

Each jurisdiction in Australia has a statutory power for the Court to vary trust instruments, although the tests required to be considered by the Court in each jurisdiction are different.

In particular:

• in the Northern Territory, this power can be exercised where the Court ‘thinks fit’

• in Western Australia and Queensland, the power can be exercised where the Court considers the variation ‘expedient’ or where the transaction is in ‘the best interests of the beneficiaries’

• in all other jurisdictions, only the ‘expedient’ test applies

Some recent cases where the Courts have considered the extent of this power in the context of extending a trust vesting date have achieved mixed results.  The key cases include:

• Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004 – where the NSW Supreme Court agreed to amend the trust instrument to extend a vesting day

• Re Plator Nominees [2012] VSC 284 – where the Victorian Supreme Court agreed to extend the vesting day

• Re Arthur Brady Family Trust; Re Trekmore Trading Trust [2014] QSC 244 – where the Queensland Supreme Court agreed to extend the vesting day of two trusts, even though the only reason provided by the applicants requesting the extension was to avoid the tax and stamp duty costs that would be incurred by a premature vesting

• Re Dion Investments [2014] NSWCA 367 – where the NSW Supreme Court declined to grant an extension to a vesting date and expressed concerns about whether its statutory power to vary was sufficiently broad to allow that type of amendment.

While there have been a number of successful cases, the time and cost involved in making an application to the Court to amend the terms of a trust mean this approach is usually adopted as a last resort.

If you have any queries in relation to vesting days, please contact Patrick Ellwood on 0400 503 111 or patrick@cloverlaw.com.au.