Amending the terms of the trust

The doctrine of an “excessive exercise” of the amending power

 In The Laws of Australia {Thompson Reuters) at [15.14.1450] under the section “It is the trustee’s plainest duty to obey the terms of the trust” the following is stated:

“Where the trust instrument confers a power of amendment, the conditions and restrictions imposed on its exercise must themselves be strictly observed.”

In Thomas on Powers , making reference to the doctrine of an “excessive exercise” of a power contained in a Trust Deed, Geraint Thomas at [8.02] states:

“Any exercise of a power which fails to comply with the express terms of the power is clearly excessive.”

At [25.20] under Power of Variation in the trust instrument, in Equity and Trusts in Australia (4th Edition) , GE Dal Pont and DRC Chalmers state:

“There are further general law restrictions on the scope of an even apparent unfettered power to vary, Firstly, a power to vary will not permit a variation removing a restriction of that power, secondly, its exercise cannot affect any vesting that has already taken place…..Thirdly, a power to vary a trust deed arguably does not extend to a variation that would alter the substratum of the trust {Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at 602}

If the Power of Amendment could be used to materially alter the Power of Amendment, then an unauthorised amendment could be accomplished in two steps when it could not be accomplished in one step { Air Jamaica Ltd v Charlton [1999] 1 WLR 1399}.

The following cases are examples where these principles have been applied by the Courts:

NSW Masonic Youth Property Trust v Attorney-General [2009] NSWSC 1301

The Court ruled that a valid express trust was created on 2 March 1923 and that purported amendments in 1927 were not effective because they were no within the power to amend since no such power had been provided when the trust was created on 2 March 1923.

Sovereign Trustees Ltd & Anor v Glover & Ors [2007] EWHC 1750 (Ch)

Purported Accumulation sub-plan not established since the Trust Deed was not amended in accordance with the provisions of the amending power in the Trust Deed to establish the proposed Accumulation sub-plan (“money-purchase scheme”)

Walker Morris Trustees Ltd.v Masterson & Anor [2009] Pens LR 307, [2009] EWHC 1955 (Ch)

Amending power required the Fund Actuary to provide an “Actuarial Certificate” with any amending Deed confirming that the rights of any Members or of the widow or legal personal representative of a deceased Member would not be substantially prejudiced by the proposed amendment. Such a certificate was obtained with respect to the 1986 Amending Deed.

There were six later purported Amending Deeds however no Actuarial Certificate had been obtained and attached to the Deeds and there was no recital in these purported Amending Deeds that such a certificate had been so obtained.

The Court therefore held that the purported Amending Deeds that had failed to comply with the condition imposed by the amending power were therefore invalid.
The terms of the trust remained as they stood before the invalid amending Deeds were executed.

The Court made reference at [49] to what Lewison J had ruled at [20] in in Trustee Solutions v Dubery [2006] 36 P.L.R [2006] EWHC 1426 (Ch):-

“….the need to protect beneficiaries may well be powerful factors in choosing between rival constructions; but once the requirements of a valid means of alteration of the rules has been determined as a matter of construction, either a document satisfies those requirements or it does not”

Trustee Solutions Ltd & Ors v Dubery & Anor [2006] EWHC 1426 (Ch), [2007] 1 All ER 308, [2006] Pens LR 177, [2007] ICR 412, [2006] PLR 177

Rule 38 of the Colour Processing Pension Scheme, contains the power of amendment, as follows:

“… the Trustees may from time to time and at any time with the consent of the Principal Company by way of formal variation of these Rules adopted by any deed or deeds executed by the Trustees and the Principal Company or by any writing effected under hand by the Trustees and the Principal Company alter or modify all or any provisions of the Scheme Provided that no such alteration or modification as aforesaid shall be made which would have the effect of varying or affecting any benefits … applicable to Pensionable Service completed before the alteration or modification …without the consent of any Member affected thereby and Provided further that no such alteration or modification as aforesaid shall be permissible if it would result in any payment refund or transfer to the Employers or any of them.

Notice in writing of any such alteration or modification as aforesaid shall before the same takes effect be given to every Member who will be affected thereby.”

The principle question of construction turns on the requirement that the document amending the rules must be either a deed (which is not suggested in this case) or “writing effected under hand“.

A memorandum had been circulated to staff advising of purported changes to the rules but there was no document signed under hand by the Trustees and representatives of the Principal Company.

The Court at [36] ruled:

“In my judgement, it was a substantive requirement of a document amending the rules that it was signed by the trustees and by or on behalf of the company. Since, in my judgment, the court has no power to authorise a departure from the rules, or to waive one of their requirements, it follows that the rules have never been validly amended.”

As Hammond J stated, in Wong v Burt [2004] NZCA 174, [27]: “The notion of a fraud on a power itself rests on the fundamental juristic principle that any form of authority may only be exercised for the purposes conferred, and in accordance with its terms.”

Lord Northington:

No point is better established than that, a person having a power, must execute it bona fide for the end designed, otherwise it is corrupt and void.”

Aleyn v Belchier (1758) 1 Eden 132, at p. 138; [1758] EngR 208; 28 E.R. 634, at p. 637.
Cited by Dixon J in Mills v Mills  [1938] HCA 4; (1938) 60 CLR 150
Millett J

“It is trite law that a power can be exercised only for the purpose for which it is conferred, and not for any extraneous or ulterior purpose”

Re Courage Group’s Pension Schemes Ryan and others v Imperial Brewing and Leisure Ltd and others [1997] 1 All ER 528 at 537(e) ; [1987] 1 WLR 495 at 505(e).

Gordon Jackson (Glasgow Govan), Subordinate Legislation Committee Official Report #31, October 2006.

Trite law is law that, if you do not know it, you should. It is like saying that two and two is four. For example, there is a presumption of innocence in Scotland. That is trite law—something that everybody knows.”


Henderson J

First, it is trite law that a power conferred on a trustee (or any person other than a beneficial owner) may be exercised only for the purposes for which it was granted, and not for purposes foreign to the power or to secure a collateral benefit”.

Independent Trustee Services Ltd v Hope [2009] EWCH 2810 (Ch) at [93].


Rich J

“It is not the purpose of the provision to enable the destruction of any substantive right to pensions, and an exercise such is apprehended would be not unlike a fraud on a power

Metropolitan Gas Co v FCT [1932] HCA 58; 47 CLR 621 at 635.


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