This week we will explore the legal mechanics of fixed trusts, as interpreted in the recent decision of David & Ros Carr Holdings Pty Ltd v Ritossa [2025] NSWCA 108.
Case Summary (Relevant Points Only)
Two couples co-invested in a unit trust and later disagreed over winding it up. The Carrs claimed that clause 2 of the trust deed gave them a unilateral right to require the trustee to wind up the trust. That clause mirrored s 3A(3B) of the Land Tax Management Act and stated that the unitholders were “presently entitled” to both income and capital and could “require the trustee to wind up the trust.”
The Court held:
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Clause 2 did not confer a unilateral power to wind up the trust.
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It was included for land tax purposes to support the classification of the trust as a fixed trust.
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It should be construed not in isolation but in light of the broader trust deed and legislative context.
Discussion Focus
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What makes a trust a fixed trust under s 3A(3B) of the Land Tax Management Act 1956 (NSW)?
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The drafting technique of incorporating legislative wording into trust deeds – when does it create substantive rights versus declaratory compliance?
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The distinction between tax status (e.g. fixed trust status) and legal rights under trust law.
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The meaning and limits of present entitlement in tax law and trust law.
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The proprietary nature of a beneficiary’s interest in a unit trust, and how that interest is defined and constrained by the trust deed.
Our focus is limited to the construction of clause 2 of the trust deed and how it interacts with the definition of a “fixed trust” under the Land Tax Management Act 1956 (NSW). We will examine how present entitlement is established, the nature of a beneficiary’s proprietary interest under a unit trust, and the limits of what tax-oriented drafting can substantively achieve in trust deeds.
* Please Note: You do not need to prepare for or read the parts of the decision dealing with:
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Alleged oppression under s 232 of the Corporations Act;
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The appointment of a receiver or any discussion of equitable termination of the trust;
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General breakdowns in trustee/shareholder relationships.
Please see below link to case materials which is assumed reading in order to participate in the discussion:
David & Ros Carr Holdings Pty Ltd v Ritossa [2025] NSWCA 108 (23 May 2025)
Discussion led by Adrian Cartland.