In the case Dryandra Investments*, delivered on 9 July 2024, the Supreme Court of Western Australia faced a significant issue: the incapacity of a trust’s guardian and appointor, Isobel May Hardie, due to dementia. This case underscores the critical need for trust deeds to include provisions for scenarios where key officeholders become legally incapacitated.
The Case Overview
Dryandra Investments Pty Ltd sought to replace Mrs Hardie as the guardian and appointor of the Dryandra Trust, as her dementia rendered her unable to fulfill these roles. The court approved the appointment of her enduring attorney, Timothy John Ryan, as the guardian and appointor for the Dryandra Trust, ensuring the trust’s proper administration.
Lessons from the Case
1. Legal and Operational Continuity: Trusts are established to manage assets efficiently and protect beneficiaries’ interests. When key officeholders, such as trustees or guardians, become incapacitated, the trust’s operations can stall, leading to legal and financial complications. Provisions for incapacity ensure a seamless transition and continuous management.
2. Avoiding Judicial Intervention: In the Dryandra case, the court had to exercise its inherent supervisory jurisdiction to replace the incapacitated guardian. While courts can provide solutions, the process can be lengthy and costly. Including incapacity provisions in the trust deed can prevent the need for judicial intervention, saving time and resources.
3. Protecting Beneficiaries’ Interests: Trust beneficiaries depend on the proper execution of the trust. Provisions for incapacity protect their interests by ensuring that the trust remains functional and that their rights and benefits are not jeopardized due to the incapacity of a key officeholder.
4. Flexibility in Management: Trust deeds with incapacity provisions allow for greater flexibility in managing the trust. They can specify procedures for appointing interim or permanent replacements, ensuring that the trust’s objectives are met without disruption.
Practical Steps for Trust Deeds
1. Define Incapacity: Clearly define what constitutes incapacity (e.g., medical conditions, legal declarations) within the trust deed to avoid ambiguity.
2. Appointment Procedures: Outline the process for appointing successors or interim managers, including the qualifications and the authority they will hold.
3. Legal and Medical Protocols: Incorporate protocols for obtaining medical or legal confirmation of incapacity to ensure that the provisions are invoked appropriately and lawfully.
4. Regular Reviews: Periodically review and update the trust deed to address any changes in the trust’s circumstances or in the legal landscape.
5. Communication with Beneficiaries: Keep beneficiaries informed about the provisions in place for handling incapacity, providing them with reassurance and clarity about the management of the trust.
Statutory Will
The Case also involved a separate application for a Codicil to be made to Mrs Hardie’s Will, pursuant to s.40 of the Wills Act 1970 which allows the court to vary or replace an existing Will or create a new Will. With the relief granted to appoint Mr Ryan, as the guardian and appointor for the Dryandra Trust, it was not necessary to vary the Will.
Conclusion
The Dryandra Investments case serves as a vital reminder for those establishing and managing trusts to include comprehensive provisions for the incapacity of key officeholders. Such foresight ensures the trust’s integrity, protects beneficiaries’ interests, and avoids the pitfalls of legal and operational disruptions. By proactively addressing potential incapacity, trust deeds can better fulfill their purpose of managing and safeguarding assets across generations.
Please contact Michael Paterson & Associates for all your trust drafting and management needs. * Dryandra Investments Pty Ltd (ACN 627 096 146) as trustee of the Dryandra Trust -v- Hardie by her guardian ad litem Ian Torrington Blatchford [2024] WASC 248
Here is a link to the full case https://ecourts.justice.wa.gov.au/eCourtsPortal/Decisions/ViewDecision?id=8e4a80b9-6e60-457f-9191-eccd9c7161e2