Trust Issues: Learning to Read the Green, Red (and Beige) Flag

Recent decisions from Australian courts have provided valuable guidance on key aspects of trust law, clarifying the scope of trustee powers, the limits of judicial intervention, and the evidentiary challenges that arise in trust administration. These cases underscore the importance of precise drafting, proactive governance, and diligent record-keeping in managing trusts effectively.

This article examines four judgments that address:

• the extent to which trustees can amend trust deeds to alter control structures;
• the Court’s power to approve variations that benefit future beneficiaries despite express prohibitions;
• the evidentiary burden involved in reconstructing lost trust deeds; and
• the high threshold for judicial intervention in trust disputes, particularly in fixed unit trusts.

Together, these cases highlight that even routine administrative decisions can have significant legal and tax consequences. They reinforce the need for trustees and advisors to carefully review trust instruments, anticipate succession and governance challenges, and seek professional advice when navigating amendments or disputes.

• 1. Staley Case  

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  • 1.1 Background
    • The Hill Family Trust was established in 2002, with Mr Hill as the initial appointor and a corporate trustee, Hill Family Holdings Pty Ltd. The Trust Deed gave the appointor the power to remove and appoint trustees.
    • Upon Mr Hill's death, his daughters - Mrs Staley and Mrs Porter – being executors of his estate, became joint appointors of the trust.
    • Over time, changes in the trustee company’s directorship led to a situation (following Mrs Porter’s death) where Mrs Staley was the sole appointor and Mrs Porter's daughter was the sole director of the trustee.
    • In 2024, the trustee entered into a deed of variation to update the trust deed, in reliance on the ‘variation clause’ under the trust deed, which granted broad powers to the trustee to amend the deed. The deed of variation inserted a new power into the trust deed: the ability to specifically remove Mrs Staley as appointor and nominate a replacement.
    • Exercising this new power, the trustee removed Mrs Staley as appointor and appointed Mr Porter (Mrs Porter’s husband).
    • Mrs Staley, unaware of her removal, later attempted to appoint a new trustee and, upon learning of her removal, challenged the validity of the variation and her removal as appointor of the trust.
  • 1.2 Findings
    • The Queensland Court of Appeal upheld the trustee’s actions, confirming that the broad variation power in the deed permitted the trustee to amend the deed to allow for the removal and replacement of the appointor.
    • The Court's reasoning focused on the construction of the variation clause, noting that unless expressly limited, such powers can extend to fundamental changes in trust control.
    • The decision confirms that Queensland law aligns with the approach in Mercanti v Mercanti[2], and highlights that the appointor’s role, while often described as the 'controller' of a trust, is not immune from amendment if the deed allows it.
    • The Court also noted the importance of succession planning and the risks of unintended shifts in control if amendment and succession provisions are not carefully drafted and reviewed.
  • 1.3 Key Lessons
    • The scope of a trustee’s powers to amend a trust deed depends on the precise wording of the variation clause. Specific attention should be paid to the breadth of variation powers in trust deeds, as these can fundamentally alter control structures, including the appointor role. Note however, that many trust deeds, if they contemplate an appointor, will require the appointor’s consent to a variation.
    • The case highlights the risk of unintended shifts in control if succession and amendment provisions are not carefully drafted and reviewed. For trust reviews, practitioners should map out all powers of amendment and consider whether key roles are adequately protected or insulated from variation.
    • In practice, any proposed amendment to a trust deed should be reviewed for both legal and tax consequences, including potential ‘resettlement’ risks.[3] Regular review of trust deeds is essential to ensure that control mechanisms align with the intentions of those involved.

• 2. WFT Capital Pty Ltd Case  

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  • 2.1 Background
    • This case involved an application by the trustee and appointor of the Windt Family Trust, a ‘direct lineal descendants’ family trust[5] established in 1975, to vary the trust’s ‘vesting date’ (being the day on which the trust’s beneficiaries become absolutely entitled to the property of the trust).
    • The original trust deed set the vesting date as the first to occur of three dates, including 31 December 2032, and expressly prohibited amendment of the vesting date. This meant that the trust was designed to vest after 57 years (as opposed to the typical maximum period of 80 years for the majority of Australian jurisdictions).
    • The trustee sought a court order to extend the vesting date by amending the clause so that the trust would vest on the last of the listed dates, rather than the first. In doing so, the trustee argued that this was in the best interests of both current and future beneficiaries, particularly to avoid adverse tax and duty consequences and to allow the trust to continue providing income for the family.
    • All existing beneficiaries supported the application.
  • 2.2 Findings
    • The Supreme Court of NSW granted the application pursuant to s 86A of the Trustee Act which empowers the Court to approve arrangements varying trusts on behalf of beneficiaries who cannot consent (such as minors or unborn beneficiaries).[6]
    • The Court found that the proposed variation did not alter the fundamental core purpose or “substratum” of the trust, nor did it amount to a resettlement.
    • The extension was consistent with the settlor’s intention to benefit all lineal descendants (including unborn descendants of a named beneficiary), and the Court distinguished this case from others where a variation would fundamentally alter the class of beneficiaries or the nature of the trust.
    • The Court confirmed that certain tax and duty benefits which arose from extending the vesting date were legitimate considerations, but not the sole basis for the decision.
  • 2.3 Key Lessons
    • The Court can approve variations to a trust’s terms (including extending the vesting date) under the Trustee Act in relevant jurisdictions (each Act needs to be separately considered), provided the change is in the interests of beneficiaries and does not fundamentally alter the trust’s substratum.
    • The wishes of all existing beneficiaries and the interests of future/unborn beneficiaries are relevant and may be considered by the Court.
    • Tax and duty consequences are legitimate factors in considering whether a variation is in beneficiaries’ interests, but the Court will also consider the settlor’s intention and the overall structure of the trust.
    • Express prohibitions on amendments in the trust deed can be overcome by Court order under statutory powers, but only where the variation does not amount to a resettlement or fundamental change to the trust.

• 3. Aun v Vitim Case  

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  • 3.1 Background
    • A dispute arose over a lost trust deed and ambiguous testamentary references to the trust’s existence and terms. The plaintiff’s mother had passed away and in her will left assets to certain trusts. However, the trust deeds could not be located.
    • The parties disagreed on the validity and applicable terms of the relevant trusts, leading to litigation over succession and control.
    • The case required the Court to reconstruct the trust’s terms from secondary evidence, including copies of the deed and testamentary documents.
  • 3.2 Findings
    • The Victorian Supreme Court accepted secondary evidence to reconstruct the trust’s terms, but emphasised the high evidentiary threshold.
    • The Court warned that simply executing a replacement deed risks resettlement and duty liabilities.
    • The case highlights the importance of robust document management and the risks associated with poor record-keeping, particularly for succession and tax planning.
  • 3.3 Key Lessons
    • Original trust deeds must be securely stored and copies made readily accessible. Loss of the deed can paralyse trust administration and expose parties to significant legal and tax risk.
    • In the event of a lost deed, practitioners must gather all available secondary evidence (drafts, correspondence, minutes) to reconstruct the trust’s terms, but outcomes are inherently uncertain.
    • Reconstituting a trust by executing a new deed may be treated as a resettlement, with adverse CGT and stamp duty consequences. Professional advice is essential before taking remedial action.
    • For succession planning, robust document management is as important as the legal drafting itself.

• 4. David & Ros Carr v Ritossa Case  

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  • 4.1 Background
    • The Carr and Ritossa families established a fixed unit trust[9] for farmland investment, with equal unit holdings and board representation.
    • The trust deed included clauses providing that the unit holders were ‘presently entitled’ to the income and capital of the trust, which were intended to ensure that the trust would be classified as a ‘fixed trust’ under New South Wales legislation.[10]
    • Disagreements over management led the Carrs to seek winding up of the trust, arguing that the deed allowed unilateral termination and that the management deadlock justified judicial intervention under the Corporations Act.
    • The dispute raised questions about the threshold for judicial intervention in trust disputes and the distinction between deadlock and dysfunction.
  • 4.2 Findings
    • The NSW Court of Appeal dismissed the application, holding that although the trust deed provided that unit holders were ‘presently entitled’ to the trust’s capital, this did not entitle a unit holder to unilaterally wind up the trust.
    • Further the Court found that management disagreements short of deadlock did not justify winding up or oppression remedies.
    • The Court distinguished the 'just and equitable' ground for winding up companies from the more limited grounds available for trusts, and emphasised that judicial intervention is reserved for irretrievable breakdowns, not mere management disagreements
  • 4.3 Key Lessons
    • The trust deed’s wording is critical - unit holders cannot assume a right to unilaterally terminate a trust unless expressly provided. Where the plural is used, a careful analysis of the deed will always be required to properly determine each individual unit holder’s rights.
    • Dispute resolution mechanisms should be clearly set out in the deed.
    • Courts are reluctant to wind up trusts absent clear evidence of deadlock or dysfunction. The threshold for intervention is higher than for corporations.
    • Accountants and lawyers should advise clients to resolve disputes internally where possible, as judicial remedies are reserved for irretrievable breakdowns and not mere management disagreements.
    • For trading and investment trusts, robust governance and clear exit mechanisms are essential to avoid protracted litigation.

More information from Maddocks

For more information please contact Maddocks in Melbourne (03 9288 0555) and ask for a member of the Commercial Team.

More Cleardocs information on related topics

• Discretionary Trust Deeds for Family Trusts - Aren't they all the same?
• Bend it like Bendel: How should trustees navigate the ATO’s interim decision impact statement?
• Deeds of Variation and Deeds of Rectification: what is the difference and which should I use?
• What is the appropriate governing law jurisdiction for my Trust Deed
• Be careful when varying a trust deed for a trust that holds property! A change in ‘beneficial ownership’ may result in transfer duty
• Family Trusts and end-of-year distributions - Revisiting the benefits of the 'Bucket Company' structure

Order Cleardocs discretionary trust packages

• Discretionary (Family) Trust
• Discretionary Trust – Direct Lineal Relatives
• Discretionary Trust - deed of variation (excluding foreign persons)
• Change of Trustee Discretionary Trust
• Discretionary (Family) Trust Minutes & Resolutions
• Unit Trust – Fixed

[1] Staley v Hill Family Holdings Pty Ltd [2025] QCA 95.

[2] [2015] WASC 297.

[3] For more information on resettlement issues, refer to our previous ClearLaw article here: Why do you need to be careful when adding or removing a beneficiary in your discretionary trust?

[4] WFT Capital Pty Ltd v Windt [2025] NSWSC 819.

[5] For more information on this type of trust, refer to the product information for Cleardocs’ direct lineal relatives trusts here: Discretionary Trust – Direct Lineal Relatives

[6] Trustee Act 1925 (NSW) (Trustee Act) s 86A.

[7] Aun v Vitim Pty Ltd & Ors [2025] VSC 265.

[8] David & Ros Carr Holdings Pty Ltd v Ritossa [2025] NSWCA 108.

[9] For more information on this type of trust, refer to the product information for Cleardocs’ fixed unit trust here: Unit Trust - Fixed.

[10] Land Tax Management Act 1956 (NSW) s 3A(3B).