Discretionary trusts in Australia are drafted to give trustees maximum flexibility in the exercise of their discretions, which are variously described as “uncontrolled”, “absolute” and even “irresponsible”. Since the 19th century the Courts have declined to examine the exercise (or non exercise) of these discretions, except in very special circumstances. The Courts have supposed that it is the settlor’s express desire that just as they could give away their own property as they see fit, where reasonably or not, so can they permit their trustee to do so for any beneficiary or beneficiaries, without risk of any justiciable complaint by a disappointed beneficiary (except in the case of actual fraud.)
In 2023, the Victorian Court of Appeal put into question this settled law. Until then, and even where a trustee voluntarily gives reasons for its decision, that discretion could only be challenged where the trustee had acted in bad faith and failed to give “real and genuine consideration” to exercising it. In Wareham v Marsella and Owies v JJE Nominees, the Victorian Court of Appeal endorsed the contrary position: bad faith is not required to impugn the exercise of an absolute discretion, and failure to give “real and genuine consideration” to the manner and sufficiency of its exercise is.
In this seminar these competing positions were analysed. Mr Robertson KC suggested that these decisions ought not be followed in Queensland. He suggested the correct view is that a person acting in good faith may do as they like with their property, however unfair, unreasonable, or unwise, and can authorise a trustee to do likewise. The court can inquire into whether the absolute discretion was exercised upon the trustee in good faith having given “real and genuine consideration” to doing so, but cannot be concerned with how.
This seminar heared about :
- The established law
- The recent Victorian decisions and the circumstances when a disappointed beneficiary can litigate or a trustee can reverse its decision
- Mr Robertson’s views as to where the Victorian Courts went wrong and why they should not be followed in Queensland
- What can be done in drafting to carry into effect the settlor’s wishes
The seminar is available as a video recording or podcast here.