Thinking

Exercise of discretion is a fundamental aspect of the role of trustees of discretionary trusts. However, in the context of a family trust that can span multiple generations, the correct approach to the exercise of discretion can be challenging. The decision by the Supreme Court of Victoria Court of Appeal in Owies v JJE Nominees Pty Limited relates to challenges to exercise of discretion in the context of family disharmony where substantial income distributions were made on a regular basis pursuant to a pattern that changed only once in the relevant period to distribute all of the income to a single elderly beneficiary who had no financial need.

Significant consideration is given to the exercise of discretion in a challenging family dynamic in Owies v JJE Nominees Pty Limited. In this case it is noted at [82] that:

Further at [96] reference is made to Re Hay’s Settlement Trusts where Megarry VC said:

The fundamental take home message is that trustees must look at decision making with a clear and unfettered mind and must make a decision. This is a simple proposition. However, when one of the settlors or trustees is a client this can be somewhat less straight-forward meaning that trustee advisers need to be extremely clear as to who their client is.

References:

• Owies v JJE Nominees Pty Limited [2022] VSCA 142
• Owies v JJE Nominees Pty Limited [2020] VSC 716
• Re Hay’s Settlement Trusts [1981] 3 All ER