Power of Amendment – Analysis

A power is an authority to take a step which affects rights and obligations. The fundamental contract with the trust is obvious: a trust is imperative, while a power is permissive.

A Trust Deed may provide administrative powers such as a power of investment and a Trust Deed may also provide dispositive powers or powers of appointment which are powers the exercise of which affects the beneficial ownership of property.

Young CJ in Global Custodians Ltd v Mesh [2002] NSWSC {Link}. 283 stated at [18]:

“The other matter is with 122. The exercise of a power to amend is a very technical matter. Up until the Conveyancing Act, or up until the Imperial Laws Application Act, the only way one could amend a trust, technically, was if the original deed contained uses in favour of the settlor to revoke and to re-appoint. It is a very technical matter, and is dealt with in Thomas on Powers (Sweet & Maxwell, London, 1998) Chapter 13. As the learned author points out in para 13-11 at p 563, every such power reserved in a deed will be construed strictly. Authority such as Hele v BondEvans v Saunders [1855] EngR 273; (1855) 6 De GM & G 654 at 671; [1855] EngR 273; 43 ER 1387 at 1394 bear this out”

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When a Trust Deed provides a power to amend the terms of the trust, the power may be limited to:

  • (i) adding provisions to the terms of the trust {a power of appointment};
  • (ii) repealing existing provisions of the terms of the trust {a power of revocation};or
  • (iii) providing both (i) and (ii) so that an existing provision may be amended.

  • The question sometimes arises as to whether a power of appointment automatically involves a power of revocation.

    This question was considered in In re Thursby’s Settlement: Grant v Littledale [1910] 2 Ch 181.

    In this case an appointment of a benefit of a type “X” was made to a beneficiary “A” by a Deed made on 23 May 1895.

    A second Deed made on 4 March 1898 appointed a benefit of type “Y” to beneficiary “A” and “B & C & D & E”.

    The trustee of the settlement sought advice and directions from the Court as to whether the second appointment have revoked the first.

    Farwell LJ, who is also the author of “Farwell on Powers” gave the judgement.

    Farwell LJ stated at [186]:

    “The law as to powers of revocation and new appointment has been settled for more than fifty years by Pomfret v Perring 5 D.M. & G. 775. A power of revocation is not a power of appointment, but is a power the exercise of which is a condition precedent to the exercise of the power of appointment in question.

    Farwell LJ ruled that since no power of revocation has been exercised by the second Deed, beneficiary “A” was entitled to retain a benefit under the 1895 Deed as well as a benefit under the 1898 Deed and that the assets included in the 1895 settlement were excluded from the second settlement and so the remainder of the assets where then subject to distribution to the beneficiaries “B & C & D & E” as well as “A”.

    Also refer to Re Wells, 42 Ch. D 646 in Farwell on Powers below at p. 214.

    “An instrument which exercises a power of revocation and new appointment must show, not merely the intention to appoint but an intention to revoke the subsisting appointment.”

    Geraint Thomas in Thomas on Powers notes at [15.09]:

    “Where the appointment under a power is made by Deed, it cannot be revoked unless an an express power of revocation is reserved in the Deed by which the power is executed {Hele v Bond (1717) Prec. Ch 474; 1 Eq Cas Abr 342}”.

    Pension fund Analogy

    If the original Trust Deed establishing a pension fund provided a life pension to male staff members and a latter Deed provided a modest lump sum benefit to both male and female staff members, then the appointment provided by the second Deed does not automatically revoke the appointment made by the original Trust Deed. Clear words would be required in the second Deed to exercise a power of revocation of the first appointment to the male staff members.

    Even of the second Deed did exercise a power of revocation, the new appointment to the male staff members would have to be at least equal in value as the first appointment otherwise the second appointment would be impugned under the doctrine of a “Fraud on a Power” since the second appointment had not been made in the best interests of the male staff members but was used as a means of reducing their vested entitlements.

    If a trustee has any doubt as to how to interpret the terms of the trust the trustee should seek the advice and directions of the Court.This is especially the case if two benefits are provided by different Deeds and the trustee only proposes to pay one benefit.

    A copy of Farwell on Powers can be found here.

    Refer to page 214 Section 38 – “What is a sufficient execution of a power of revocation?

    Volume I of Sugden of Powers and be found here.

    Volume II of Sugden on Powers can be found here.


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    This tab updated on 30 July 2015