Amending the Power of Amendment

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}.

Geraint Thomas in Thomas on Powers {1st Edition} states in Chapter 14 – Power of Amendment at {14-13]:

“Where the power of amendment is subject to express restrictions, those restrictions must be complied with and cannot themselves be amended, removed or annulled by means of an exercise of the power.”

Whether a constraint on the exercise of a power of amendment may be removed by exercise of the amendment power will depend on the proper construction of the instrument. There is a general principle that it is not permissible to do indirectly what is prohibited directly (expressed in the maxim quando aliquid prohibetur, prohibetur et omne per quod devenitur ad illud “When anything is prohibited, everything related to it is also prohibited”), but this applies where there is a prohibition, not where there is merely an absence of power. Whether the constraint amounts to a prohibition, so that the mode of exercise is entrenched, or is itself open to amendment, is to be determined having regard to the language of the clause and of the instrument as a whole.

The High Court of Australia referred to this principle in Caltex Oil (Aust) Pty Ltd v Best [1990] HCA 53 at [7]:

“The principle that it is not permissible to do indirectly what is prohibited directly, which is expressed in the maxim quando aliquid prohibetur, prohibetur et omne per quod devenitur ad illud, is a more traditional general statement of the same proposition.”

This principle was also upheld by the Privy Council in Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 which held that 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.

A transcript of Air Jamaica Ltd v Charlton can be found here.

Douglas J in Jenkins v. Ellett [2007] QSC 154 stated at [15]:

[15] The scope of powers of amendment of a trust deed is discussed in an illuminating fashion in Thomas on Powers (1st ed., 1998) at pp. 585-586, paras 14-31 to 14-32 in these terms:

“In all cases, the scope of the relevant power is determined by the construction of the words in which it is couched, in accordance with the surrounding context and also of such extrinsic evidence (if any) as may be properly admissible. A power of amendment or variation in a trust instrument ought not to be construed in a narrow or unreal way. It will have been created in order to provide flexibility, whether in relation to specific matters or more generally. Such a power ought, therefore, to be construed liberally so as to permit any amendment which is not prohibited by an express direction to the contrary or by some necessary implication, provided always that any such amendment does not derogate from the fundamental purposes for which the power was created. Thus, a power of amendment will undoubtedly be capable of making amendments which are essentially ancillary to, and for the better execution of, such fundamental purposes, e.g. so as to substitute an easier form of communication or service for the one originally stipulated, or so as to make other powers exercisable in writing rather than by deed, or, indeed, introduce other amendments which are not simply administrative or managerial in nature. It does not follow, of course, that the power of amendment itself can be amended in this way. Indeed, it is probably the case that there is an implied (albeit rebuttable) presumption, in the absence of an express direction to that effect, that a power of amendment (like any other kind of power) cannot be used to extend its own scope or amend its own terms. Moreover, a power of amendment is not likely to be held to extend to varying the trust in a way which would destroy its ‘substratum’. The underlying purpose for the furtherance of which the power was initially created or conferred will obviously be paramount.

Note: If an a proposed amendment that is otherwise prevented by fetters imposed by the Power of Amendment is to the benefit of the beneficiaries an Act of Parliament can be used to amend the terms of the trust. Such was the case when the terms of trust known as The Provident Fund were amended by the Elder Smith and Co Limited Provident Funds Act 1963 (SA)

facebooktwittergoogle_plusredditpinterestlinkedinmailby feather