In the matter of the Kien Trust (No 1)

1. [1]

   This matter concerns the request for judicial advice in relation to interpretation of the trust deed which relates to the trust known as the Kien Trust (No 1) (the trust). The terms of the trust are evidence in a Deed made on 18 March 1975 as between the trustee and Frederic Josef Kien (the settlor) (deed) and as varied by a deed of variation dated 18 October 2017 (amending deed).

2. [2]

   The plaintiff in this matter, Perivil Pty Ltd is the trustee.

3. [3]

   Broadly, speaking the proceedings relate to the definition of the term ‘distribution date’ in paragraph 19(b) of the deed, with the earliest date to be 1 January 2020. The trustee is ultimately seeking that the trust extend beyond 1 January 2020.

4. [4]

   By summons filed 11 October 2019, the trustee seeks judicial advice pursuant to s 63 of the Trustee Act as to the scope of the power to vary the deed contained in cl 16 of the Trust deed. In particular whether the power to vary can be used to extend the ‘distribution date’.

5. [5]

   The trustee also seeks advice as to whether, in the event that there is no person who has the power to ‘appoint’ trustees pursuant to cl 15 of the deed, (as amended by the amending deed in 2017), whether the power to vary contained in cl 16 can still be exercised. This is because the power to vary requires consent of such persons.

6. [6]

   Counsel for the trustee stated that they considered the power to vary in cl 16 of the deed can be used to make the alterations to extend the distribution date as sought.

7. [7]

   The matter was heard on 5 November 2019. After brief submissions from Counsel for the trustee and having carefully considered the written submissions and the other materials, I made Orders giving advice such that the power to vary in cl 16 could be used to extend the distribution date.

8. [8]

   I indicated I would in due course publish my reasons in full, these are they.

Background facts

1. [9]

   The settlor it appears on the evidence, decided in 1975, to establish a trust estate primarily for the benefit of his wife, Else and two daughters Doris and Jennifer. The deed was originally between the settlor and a company called Raw Material Trading Pty Ltd. In 2004 the trustee became trustee of the estate by the deed of variation.

2. [10]

   Clause 16 provides the process by which variations to the trust deed may be made:

3. [11]

   Clause 15, that is the preceding clause, provides who can give consent to vary the deed under cl 16. Clause 15 was amended by deed in 2017, it now provides:

4. [12]

   Clause 19(b) provides that the distribution date shall mean:

5. [13]

   Clause 19(d) and (e) define the first and second corpus beneficiary to be the wife and daughters of the settlor.

6. [14]

   The settlor passed away in August 1998 and Else Kien died in June 2002. Both Jennifer and Doris are still alive.

Legal principles

1. [15]

   As a preliminary question the Court must determine the proper law as applying to the trust in question. The proper law will then determine who has jurisdiction to hear the matter and further what relevant laws apply to the trust.

2. [16]

   In this case there is no particular applicable law identified by the deed. In such circumstances it is a question of fact as to determining the proper law of the trust, factors such as where the trust is administrated and the location of the trustee will be relevant as will the objects and purpose of the trust (Re Dion Investments Pty Ltd [2013] NSWSC 1941 at [7]-[31]).

3. [17]

   It is further clear however, that this Court can have jurisdiction to hear a case notwithstanding the proper law of the trust in question, on other bases. For example if a trustee has commenced proceedings in the NSW Supreme Court (see e.g. Dawson v Perpetual Trustee Co (Ltd) (1953) 89 CLR 138 at 151) or because the trust has been administered in NSW (see eg Re BTA Institutional Services [2009] NSWSC 1294 at [5]).

4. [18]

   As to judicial advice, s 63 of the Trustee Act 1925 (NSW) provides:

5. [19]

   The plurality of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, at [59]-[60] described s 63 as a discretionary power that is confined only by the “subject matter, scope and purpose” of the Act. At [55], their Honours also explained that no implications should be read into s 63 and that the section must only be taken for its express words. The only “jurisdictional bar” to be satisfied is that the applicant must point to a “question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument” (at [56]-[58]).

6. [20]

   The plurality also noted that, where a trustee seeks judicial advice as to the conduct of litigation, the stage that the litigation has reached may be a relevant consideration. Their Honours remarked at [106]:

7. [21]

   In Macedonian Orthodox at [69], Gummow ACJ, Kirby, Hayne and Heydon JJ noted a purpose of s 63 is to enable trustees “to take advice before embarking on any course which might carry a risk of incurring costs that might be outside the indemnity”. Their Honours continued at [71] and [74]:

8. [22]

   When amending the distribution date of a trust and changing when the trust will potentially vest it is essential to consider how the rule against perpetuities may apply. This trust predates the commencement of the Perpetuities Act 1984 (NSW), and therefore the general rule against perpetuities applies to the trust estate. The rule against perpetuities as stated in Cadell v Palmer (1833) 6 ER 956 is that any disposition is void for remoteness of vesting even if it is merely possible, when the matter is viewed from the time of the disposition or the property purportedly disposed of to vest in the intended disponee beyond the period of a human life or lives in being plus twenty-one years, such life or lives in being to include any actual period(s) of gestation.

Issues

1. [23]

   Before giving judicial advice, based on the authorities as outlined above, the Court must be satisfied of certain matters. First, as made clear in the Macedonian Church Case, whether the jurisdictional hurdle had been met and second, whether the Court should exercise its discretion to give such advice.

2. [24]

   Further in considering the content of the advice, the Court had to consider the proper law of the Trust to determine; first whether this Court had jurisdiction to grant the relief sought and second to determine the relevant rule against remoteness of vesting as applicable to the Trust.

Consideration

1. [25]

   As is clear from the High Court in Macedonian Orthodox, the Court may hear and give advice under s 63 only where there is a real question to be answered concerning the management or administration of the trust property or the proper interpretation of the trust instrument.

2. [26]

   I am of the view that there is clearly a real question to be answered with respect to the operation of the trust instrument.

3. [27]

   I am of the view that cl 16 does allow for changes to be made to the distribution provided that the provisos are met. In my view, it is clear in these circumstances that all the provisos have been met and therefore the trustee can and does have consent to make such amendments as it sees fit for the benefit of the trust. In particular, it is apparent that the changes to the distribution date will not in fact give a benefit to the settlor nor will it change the interest of a beneficiary in income in which they have become absolutely entitled. It is further quite obvious, that by removing the words “….or the first day of January in the year two thousand and twenty whichever first occurs…” will not extend the distribution date beyond the latest contemplated date. The distribution date will still be the later of 21 years from the last surviving descendant of King George VI at the date of the deed or 21 years of the last survivor of the first or second corpus beneficiaries living at the date of the deed.

4. [28]

   I note that the power to vary is subject to the consent of the person with the power to appoint a new trust. There is of course the possibility that either one or both may die and be unable to give consent. In my view, this means that ‘consent’ is not required and would not be applicable in that case, not that the power to vary can never be exercised now that there is no longer a person left to consent. I am of the view that only one person must give consent under cl 16.

5. [29]

   I note further that it is clear that the proper law is that of NSW given that the settlor, most of the beneficiaries and trustee are or were domiciled in the state. I further note that the Perpetuities Act does not apply to the trust and therefore the general law relating to perpetuities applies. It is clear to me, that the amendments as sought would not make disposition so remote as to make the clause void.