The recent case of Batmor Mortgages Pty Ltd v Arcuri  acts as a reminder of the considerations which need to be properly addressed when changing the trustee of your unit trust. These considerations equally apply to any change to other types of trust, such a discretionary trust, hybrid trust or even a self-managed superannuation fund (including a change to the terms, powers or trustees).Kate Latta, Maddocks Lawyers
A change to a trust will only be valid where that change is effected in accordance with the trust deed's requirements. When effecting a change to a trust, the parties must review those requirements carefully. They will be different from deed to deed, and may be different within a deed depending on the nature of the change.
While the procedures for varying a trust, or making a change to the trustee of the trust, will often be reasonably clear, it is important to always check the trust deed to ensure the correct procedure is followed. For example, where you propose to vary a term or power under the trust deed, you need to check the provisions of the deed to ascertain:
A failure to comply with procedural requirements may result in a purported variation being ineffective.
A trust instrument (including a deed of variation) will generally be executed in the form of a deed. Historically, a deed could only be amended by deed, however the power of amendment in a trust deed now is more commonly drafted broadly so that a written or oral amendment may be effective.
As another example, pursuant to the Cleardocs Unit Trust Deed, the removal of a trustee and appointment of a replacement trustee must be effected first by way of a special resolution of the unit holders then by an applicable deed. Alternatively, the Cleardocs Discretionary Trust Deed provides that the appointor, or where there is no appointor the trustee may, appoint an additional or replacement trustee at any time by a written statement to that effect.
While changing a deed by resolution or written statement is permitted under a deed, and at law, effecting a change by way of deed will eliminate various issues and ambiguities which may otherwise arise.
For example, if a change is to be effected solely by persons in a meeting, this introduces all the potential complications which surround meetings (such as properly convening the meeting, obtaining a quorum, conducting votes, eligibility to vote and the effectiveness of resolutions). Preparing a deed ensures that all parties have formally turned their mind to the relevant change and that, by validly executing it as a deed, each party has properly consented to it.
Having a written deed as evidence of a change to a trust also offers clarity and ease of reference to third parties such as lenders, stamp duties office or other regulatory bodies.
In Batmor Mortgages Pty Ltd v Arcuri the Court had to consider successive changes to the trustee of a trust. The complex structure of the unit holdings of the trust, the solvency of the relevant persons and the validity of the resolution (and as such the validity of the removal) were all matters which were necessary to be determined by the Court.
Should the parties have completed the change to the trust by way of deed, as was the case in another instance in this matter, it may have eliminated the need for litigation arising from ambiguities in relation to the variation.
Cleardocs provides deed packages for various trust changes, which can be used depending on the type of trust and the factual circumstances driving the change. In some more complex circumstances it may be more appropriate to seek independent legal advice.
For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Commercial team.
You can read earlier ClearLaw articles on a range of trust topics.
  NSWSC 84.
Kate is a lawyer in Maddocks General Commercial Team. Kate joined the firm in 2010 as a paralegal and was admitted to practice in December 2012.
Kate has been involved in acting for a range of commercial, government and professional industry clients.
Her areas of expertise include:
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.