While an appointor is often considered the “true controller” with authority to remove and replace trustees, the recent Queensland Court of Appeal decision in Staley v Hill Family Holdings Pty Ltd raises a crucial question: can the trustee turn the tables and remove the appointor?
This significant case highlights how a broadly expressed variation power may upend traditional trust control mechanisms.
Need to know
|
Most family discretionary trusts have an appointor (often called a principal, guardian or protector) who has the power of removing a trustee and appointing a replacement. It is often said that the appointor is the “true controller” of the trust, because while the trustee has the day-to-day control of the trust, the appointor can ultimately replace the trustee with someone else if the appointor is unhappy with how the trust has been conducted.
Not all trusts have an appointor. An appointor role will only exist if the trust deed provides for it, and the scope of the appointor’s power and any succession mechanisms are solely a product of the trust deed.
If the trust has an appointor, the trust deed will also usually provide for the succession of the appointor role, with the appointor commonly being able to appoint a replacement or substitute.
An interesting question is whether the trustee can seek to ‘turn the tables’ on the appointor – amending the trust deed to either change the manner in which an appointor is replaced, or to replace the identity of the appointor directly.
In its recent decision in Staley v Hill Family Holdings Pty Ltd [2025] QCA 95 (Staley), the Queensland Court of Appeal confirmed that a variation to a trust which changes the identity of an appointor can be valid where the variation power is broad enough. The decision is significant in clarifying important trust control issues which frequently arise in practice – especially when family relationships are frayed.
Staley confirms that Queensland’s position is aligned with the Western Australian position stated in Mercanti v Mercanti (2016) 50 WAR 495 (Mercanti), and that the earlier Queensland decision in Jenkins v Ellett [2007] QSC 154 (Jenkins) is largely confined to its facts.
The Hill Family Trust
Staley involved the Hill Family Trust, which was established by the family patriarch, Mr Hill. A corporate trustee was appointed, with Mr Hill and his wife as directors and shareholders. Mr Hill was the primary beneficiary, with various family members (including Mrs Hill and their children) included in the discretionary class of beneficiaries.
Mr Hill was named in the trust deed as the appointor of the Hill Family Trust. According to the deed, the appointor:
- had the power to remove a trustee and appoint any person or corporation as a trustee;
- could resign, and “may” appoint an “additional replacement appointor”; and
- would cease to act as appointor in the event of a loss of mental capacity or bankruptcy.
The trust deed also provided that, on the death of the last surviving appointor, the legal personal representative of that person would become the appointor.
The trust deed also included a power of variation, which stated:
“The Trustee may revoke, add to, release, delete, or vary all or any of the trusts, powers or provisions declared or included in this Deed or any trusts, powers or provisions declared by or included in any revocation, addition, release, deletion or variation made to this Deed and may at the same time declare or include any new or other trusts, powers or provisions concerning the Fund …”
This is very common drafting for a variation power in a trust deed in practice.
Background circumstances
Mr Hill died in 2009 without apparently nominating a substitute appointor. His daughters, Paula and Kerin, were executors of his will, and accordingly became the appointors of the Hill Family Trust. Mrs Hill became the sole director and shareholder of the corporate trustee, and so continued the daily management of the trust. Some time later:
- the trustee removed Kerin and her family as beneficiaries of the trust;
- Paula was made a director of the corporate trustee with Mrs Hill;
- the trustee purported to remove Kerin as appointor, and to appoint Mrs Hill as an appointor (without doing so by way of a formal variation to the trust deed);
- later, Paula’s daughter (the granddaughter of Mr and Mrs Hill) was made a director of the corporate trustee;
- Paula and Mrs Hill subsequently passed away; and
- the corporate trustee, now managed solely by the daughter of Paula, varied the trust to remove Kerin as appointor and appoint Paula’s daughter in her place.
The early attempt to remove Kerin as appointor was accepted by the parties to be invalid, as the trustee did not have power to replace the appointor without varying the trust. Accordingly, at the time of the later variation of the trust, Kerin was the appointor, and if the variation was not valid, Kerin would still be the appointor and would have the power to replace the trustee at her leisure.
Analysis
The primary judge found that the variation to the trust deed by the corporate trustee was valid in removing and replacing the appointor. This was upheld by the Court of Appeal.
In particular, the Court considered arguments that the use of power by the trustee to vary the trust deed to remove an appointor is either beyond the scope of the power, or destroys the substratum of the trust. The Court rejected these arguments, consistently with the decision in Mercanti, and found that the use of the variation power in this way was valid.
The Court emphasised that the power of variation was in this case very broadly drafted. In this sense, the Court distinguished the earlier Queensland decision in Jenkins, where because the variation power was limited to amending the ‘trusts’, but not the ‘powers’ or ‘provisions’ of the trusts, the attempt to replace an appointor was considered to be outside the scope of that specific variation power. However, Jenkins did not purport to determine that the replacement of an appointor would fall outside the scope of a more widely-drafted variation power (of the kind under the Hill Family Trust in Staley).
The argument was also made in Staley that because the trust deed provided a mechanism for the replacement of the appointor (in the judgment referred to as a “comprehensive regime”), it could not be overridden by the variation power (either as part of the substratum of the trust, or due to an implied exclusion from variation). In Jenkins, it was held that the ability to remove and replace a trustee was “one of the fundamental features of the structure of this deed, one setting up a family discretionary trust”.
However, this argument was also not accepted in Staley. Given the breadth of the variation clause, as well as there being no clear indication from the terms of the specific trust deed at hand that the mechanisms for the replacement of the appointor were excluded from its ambit, the appointor could be validly replaced.
Lessons
Staley highlights the importance of understanding the particular terms of a trust deed. The Court emphasised that questions of the construction of trust deeds will turn on the facts and the individual terms of the deed in question.
Further, the case demonstrates the importance of the succession of controlling roles. After an apparent fracture, the two factions of the family found themselves in the competing roles of trustee and appointor, and relying on the powers in the trust deed to retain control.
In Staley, the trustee managed to take control of the trust and oust the appointor. However, this outcome depended on the specific terms of the trust deed. Had proper planning occurred before the death of the original appointor, Mr Hill, there may have been greater clarity and no grounds for a dispute at all.
Staley does not stand for the proposition that a variation power will always be capable of being used to oust an appointor. The terms of the trust deed may:
- provide that the variation power is limited, as in Jenkins. If the trust deed does not permit certain clauses to be amended, then any attempted variations would be invalid;
- require the consent of the appointor, or some other person, in the case of any variation; and/or
- contain an express limitation on the power of variation being used for that purpose, or without the consent of an active appointor.
However, it does appear from Staley and Mercanti (both being appellate decisions) that a broadly drafted variation clause will generally be construed as having the power to amend the manner in which an appointor is replaced, or the identity of the actual current appointor, unless the trust deed specifically provides otherwise. This will often run counter to the strategy of having an independent trustee, with the appointor role as a safeguard against misconduct.
Accordingly, trustees and advisers should carefully review their trust deeds in the context of succession planning and in anticipation of disputes to ensure that:
- the limits and bounds of variation powers, and the roles of appointors and other officeholders, are clearly articulated; and
- succession to those roles is proactively considered and provided for.
Our dedicated team of experts at Hamilton Locke Private has extensive experience in all estate planning and succession matters, and we regularly advise on complex trust arrangements in both litigious and non-litigious scenarios. Please get in touch if you would like us to assist you in reviewing your existing trust arrangement and in your broader estate planning.
If you would like to discuss any of these issues in further detail, please get in touch with Brett Heading, Fran Becker, Jamie Blair, Jack Conway or Penelope Nicholls.
