Power to Vary the Terms of the Trust

The Trust Deed of the Fund will generally include a clause or clauses prescribing the method whereby the terms of the trust can be varied or amended.

The Power to vary the terms of the Trust may be given:

  • to the Employer-Sponsor (by a majority of the Directors),or
  • to the Trustee(s) (by majority or by all Trustees),or
  • to the Employer-Sponsor conditional on the assent of the Trustee(s), or
  • to the Trustee(s) conditional on the assent f the Employer-Sponsor,or

Furthermore the assent of a majority of the Members by be required by the trust instrument or by statute {eg Section 35B of the Trustee Act 1936 (SA)}.

A trustee exercising a power of variation contained in the trust instrument must form an opinion based upon the correct understanding and construction of the matter to be considered {Wilson v Metro-Goldwyn-Mayer [1980] NSWLR 730 at 735-6; Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at 609-10; Re Cavill Hotels Pty Ltd [1998] 1 Qd R 396 at 398}, and must exercise that power honestly and in good faith {Gra-Ham Australia Pty Ltd v Perpectual Trustes WA Ltd (1989) 1 WAR 65 at 84;Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at 609; Imperial Group Pensions Trust Ltd v Imperial Tobacco Ltd [ 1991] 2 All ER 597 at 607}, and for the benefit of the beneficiaries as a whole.

A power of amendment my not be used to manifestly alter or defeat the main purpose(s) ie the “substratum”} of the trust {Re Courage Group’s Pension Scheme; Ryan v Imperial Brewing and Leisure Ltd [1987] 1 All ER 529 at 541-2; [1987] 1 WLR 495; Re UEB Industries Ltd Pension Plan [1992] 1 NZLR 294 at 302}

In  Wilson v Metro-Goldwyn-Mayer [1980] NSWLR 730 Kearney J held that the power of amendment in the trust instrument was such that fiduciary obligations prevented the Company from using the power so as to benefit itself {Metropolitan Gas Co v Federal Commissioner of Taxation [1932] HCA 58; (1932) 47 CLR 621, considered}.

The High Court of Australia stated:

“The trustees are, of course, in a fiduciary position under the trust instrument, and must exercise their powers honestly and reasonably in the interest of the contributors. Otherwise, we apprehend, they would be controlled by a Court of competent jurisdiction”.

 

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