The NSW Masonic Youth Property Trust Case

Legal Principles

  • If no amending power has been provided in the Deed that establishes a trust then the terms of the trust cannot be amended by a later purported Deed of Variation.
  • A person purported to have been appointed to the office of trustee, but who has not been appointed in accordance with the terms of the Trust as properly construed is known as a Trustee de son tort and has not lawfully replaced the previous Trustee that held office.
 

The Case

An example of the implications of a lack of a Power of Amendment arose in: 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.

A number of purported amendments to the constitution of the Fund occurred over time. The first of the purported amendments occurred on 20 December 1926 and the last on 8 December 1997.

On or about 20 December 1926, a Special General Meeting of the Welfare Fund was held in Sydney. Despite the absence of a power to amend, the meeting resolved that further clauses be added to the Constitution. These were to the effect that the monies and property of the Fund (other than monies used for current expenses) be vested in five trustees to be elected by the members. Additionally, certain powers were conferred on those trustees, including the power to “expend the monies entrusted to them in such manner as may be deemed by the Executive”. A Deed was subsequently signed on 14 January 1927.

Hall J stated at [124-125]

124 It is a fundamental principle that, once a charity has been founded and its trusts have been declared, those Trusts cannot be revoked, varied or added to by the founder of founders unless a valid power of appointment or revocation was reserved at the time the Trusts were declared. 125 Similarly, the rule which prohibits any variation or addition to Trusts binds the trustee as well as the founder or founders: The Law and Practice relating to Charities, 3rd ed, H Picarda, Butterworths (1999), Chapter 19, p.265.124

Reference was made to Attorney General for New South Wales v Fred Fulham & Ors [2002] NSWSC 629, where Bryson J observed:

“That it was not open to the members of the unincorporated association to alter the terms of any charitable trust to which the trust property had become subject if the document which records the objects does not contain a power of amendment. If there was a power of amendment, his Honour held at [53] it must extend to amending the objects of the charitable trust, citing the decision in Free Church of Scotland v Overtoun; MacAlister v Young [1904] AC 515 as a “… powerful illustration of the inability of a majority, short of unanimity, to alter the Trusts upon which the property of a voluntary association is held, unless there is power which extends to altering the Trusts: see Attorney General (NSW); Ex rel MacLeod v Grant [1976] HCA 38; (1976) 135 CLR 587 at 603 at 605 (Gibbs J) …”.

  On the evidence and analysis to which to Which Hall J referred, Hall J  concluded at [ 161] as follows:-

(1) A valid express trust was created on 28 March 1923, the constitution of which was set out in the minutes of the General Meeting held on that date.

(2) The purported amendments to the 1923 Trust, in accordance with the law of trusts, were legally ineffective and, accordingly, did not vary the terms of the 1923 Trust operated by the Fund.

(3) The purported appointments of five “new” trustees under the Deed of 14 January 1927 were not valid appointments.

(4) The purported appointment of the plaintiffs as trustees on 21 November 1972 proceeded upon an incorrect legal premise, namely, that the Deed executed on 14 January 1927 had been a legally effective instrument in supporting the appointment when, on the analysis to which I have referred, that Deed did not, in law, have that effect.

(5) The trustees of the Welfare Fund since 1923 were the members from time to time of the Executive of the Fund.

(6) The plaintiffs, accordingly, are trustees de son tort and have acted as such since their appointment in 1972.

(7) The money and property settled upon the Fund in and after 1923 was impressed with the trust created in 1923, the trust in that respect, as I have stated, not having been validly amended.