Why Celeste Barber’s Bushfire Donations Have Limited Use
Many charities, individuals, businesses and organisations set up trusts for beneficiaries. A trust is an arrangement where a trustee, being a person or company, holds assets on trust for the benefit of the beneficiaries. A trust deed is a legal document that sets out the rules for establishing, administering and varying a trust fund.
Bushfire crisis donations
In response to recent Australian bushfires, many people showed their support by making charitable donations. Australian comedian, Celeste Barber, was at the forefront of fundraising activities with her bushfire appeal raising around $52 million dollars for the NSW Rural Fire Service & Brigades Donations Fund.
Charitable trusts can only use donated money for the purposes of the trust, which are set out in the trust deed. The terms of the trust deed for the NSW Rural Fire Service & Brigades Donations Fund specify that money donated can only be used for the following purposes: “to meet the costs of purchasing and maintaining fire-equipment”, “training and resources” and for “administrative expenses of the Brigades”. The trust is not allowed to provide donated funds to other charities.
Barber specified that she was raising money for the NSW Rural Fire Service & Brigades Donations Fund in her campaign. However, many donors believed that their money would be used for a wider range of purposes.
The trustee for the NSW Rural Fire Service & Brigades Donations Fund has a very limited power to amend the trust deed. Recently, the Supreme court confirmed that this money cannot be used for many of the causes the comedian originally named including the Australian Red Cross and the animal welfare group WIRES. This raised the interesting question of how the varying of a trust deed can occur.
Varying a Trust Deed
In exceptional circumstances, the court can vary a trust deed. For example. in the management of a trust, some peculiar state of circumstances may arise for which provision is not expressly made by the trust deed. The court has the discretion to make orders to vary a trust deed if it is desirable or essential for the benefit of the trust and the interest of the beneficiaries that the acts should be done by the trustees.
It is usually for a charitable trust deed to include a limited amendment power, but other kinds of trusts should allow for more flexibility. The trust should be able to be amended in accordance with changes in circumstances or legislation which may affect the operation and purpose of the trust. In particular, discretionary trust deeds should have wide amendment powers to deal with changes in taxation legislation.
The drafter of a trust deed should consider the following to ensure that the trust purpose can be given effect:
- Does the deed include the power to vary any provision (or particular provisions) in the deed?
- Who is given the power to amend the trust deed? What procedures must be followed?
- Does the trustee need consent from the beneficiaries to vary the trust deed?
- Are there any restrictions on the variation power?
If a trustee deviates from the strict terms of the trust deed, they may be held liable for a breach of trust. In Re Dion Investments Pty Ltd , the New South Wales Court of Appeal held that if a trust deed does not already include a variation power, a court will not allow for the insertion of addition of a general variation power clause.
Unless there is a specific reason to restrict variation powers related to the purpose of the trust, the trust deed should provide wide amendment and variation powers. The NSW Rural Fire Service & Brigades Donations Fund donations serves as a reminder to carefully consider the purpose of a trust and what powers should be granted to the trustee.
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