LLB270 Lecture Notes - Lecture 11: Citibank, Breach (Security Exploit), Inherent Jurisdiction
LECTURE 11 – DUTIES OF TRUSTEES & RIGHTS OF BENEFICIARIES:
Focus – written trusts, or trusts with some writing
oStatutory law may supplement trusts
APPOINTMENT of Trustees:
oINITIAL Appointment:
Trustee is initially appointed by the ORIGINAL TRUST DOCUMENT
Trustee:
Must be a legal person capable of holding legal interests
May be a corporation, if the company constitution allows – Re Levin & Co
Ltd [1936]
May be a beneficiary – if there are other beneficiaries
Cannot be a minor – appointment will be void (Minors (Property and
Contracts) Act NSW Section 10
NSW Trustee & Guardian may be appointed
oEntitled to charge for services
oPerforms duties on request or out of necessity
If person cannot hold property, cannot be found, is a minor – equity wont allow
the trust to fail – Sinnott v Hockin (1882)
Trust created by will – settlors personal representative (executor or
administrator) will become a trustee until a new appointment is made
Trust made during life – settlor becomes trustee
Appointment may be disclaimed – Robinson v Pett (1734)
oAppointment of NEW TRUSTEES:
Power may be given in the trust document
Trustee Act Section 6 – statutory power to appoint new trustees
Exercised by:
oExisting trustee(s)
oLegal representative of the last surviving/existing trustee
Used when trustee:
oDesires to discharge
oDies or is dissolved (corporation)
oRefuses to act, unfit to act, incapable of acting or a minor
oRemoved
oRemains out of NSW for more than 1 year without having properly
delegated the execution of the trust
oRemains out of NSW for more than 2 years
Court has inherent power to appoint trustees
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oEnacted by Trustee Act Section 70
oExercised where expedeient
oMay consider the benficiary’s wishes, settlors wishes and the trusts
objectives
oREMOVAL of Trustees:
Trust may contain powers to remove trustees:
Procedure will be set out in instrument
Must be exercised in good faith & for the benefit of the trust as a whole –
Duke of Portland v Topham (1864)
Court has inherent power to remove trustees – Trustee Act Section 70
Dominant consideration is the WELFARE OF BENEFICIARIES – Miller v
Cameron (1936)
Potential examples: misconduct, disappeared, serious conflict of interest,
bankruptcy
Conflict between trustee and beneficiaries are INSUFFICIENT IN ITSELF –
Telford v Telford [2003]
DUTIES of Trustees:
Primary duty – to obey terms of trust/settlors intention
Exception:
oAll beneficiaries (of age and capacity) direct otherwise
oAn illegality would result
oTrustee is compelled by statute or court order
oFailure to comply is sanctioned by the court
Fiduciary duty
Case of multiple trustees – must act unanimously
Can be problematic
May require an application to Court
Terms of trust instrument may allow for the trustees to act on a majority
decision
oSTANDARD OF CARE:
Meet the standard of the ‘ordinary prudent business person’
Professional trustees are held to a higher standard – Australian Securities
Commission v AS Nominees Ltd (1995)
Trustee with special expertise, if acting in that area, will be held to a higher
standard of care – Jones v AMP Perpetual Company [1994]
oDELEGATION and AGENTS:
Trustee has a duty to act personally & exercise discretion regarding the best
interests of the beneficiaries
Cannot take direction of any other person
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oMay consult with others
Cannot fetter discretion
oExample – adopting a set of rules/policies preventing the decision of an
individual case
Trustee cannot delegate discretion
Exceptions:
oAs allowed by trust instrument
oAs allowed by statute – Trustee Act Section 64
Only allowed if trustee is absent from the state
oDelegation is a matter of necessity for acts that are administrative and
non-discretionary
Trustee can employ agents – Trustee Act Section 53:
Must select agents competent in the area – Fry v Tapson
Trustee Act Section 53(5) – if a prudent person would not employ the
person in their own business, the trustee cannot do it
oDUTY TO ACCOUNT:
Trustees must keep accounts of money received and payments made
Where there is one income for a specific term, and a remainder – trustee must
keep separate accounts for income and capital
Beneficiaries are entitled to view accounts
Part of their right to information
oDUTY TO CORRECTLY PAY BENEFICIARIES:
UNDERPAID BENEFICIARY – can sue for breach of trust – Trustee Act Section 58,
60 and 61A
Trustee is not liable where –
oTrustee acts under power of attorney, acts in good faith unaware that
the person who gave the power was dead or avoiding the power
oTrustee made the required inquiries and did not receive notice
oCall on shares held by the trustee prior to the distribution of the shares
OVERPAID BENEFICIARY – trustee has an obligation to review overpayment
from beneficiaries share or future entitlements
If share is NOT SUFFICIENT, trustee CANNOT RECOVER FROM BENEFICIARY
– Merriman v Perpetual Trustee Co (1896)
oDUTY TO ACT IMPARTIALLY:
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find more resources at oneclass.com
Document Summary
Lecture 11 duties of trustees & rights of beneficiaries: Focus written trusts, or trusts with some writing: statutory law may supplement trusts. Trustee is initially appointed by the original trust document. Must be a legal person capable of holding legal interests. May be a corporation, if the company constitution allows re levin & co. May be a beneficiary if there are other beneficiaries. Cannot be a minor appointment will be void (minors (property and. Nsw trustee & guardian may be appointed: entitled to charge for services, performs duties on request or out of necessity. If person cannot hold property, cannot be found, is a minor equity wont allow the trust to fail sinnott v hockin (1882) Trust created by will settlors personal representative (executor or administrator) will become a trustee until a new appointment is made. Trust made during life settlor becomes trustee. Appointment may be disclaimed robinson v pett (1734: appointment of new trustees:
