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Lecture

9. Trusteeship - Duties & Powers

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Department
Law
Course
JSB171
Professor
All Professors
Semester
Spring

Description
P OWERS OF TRUSTEES • Duty to consider whether to exercise power if held in a fiduciary capacity Statutory Powers Statutory powers cannot be reduced by trust instrument: s31 • Sale of trust property: s32 (1) • Grant lessee an option to purchase land: s32(3)(b) • Lease: s32(1)(e) & (f), s38-39 • Mortgage: s33(1)(i) & s45 • Effect repairs and improvements: s33(1) • Power to Insure s 47 • Carry on a business (s57); convert business into a company: s58 o S57(1) sets out specific periods that business can be carried on for o BUT s21 sets out very wide power to invest o → can carry on a business for any period of time under s21—not under the specific power in s57 • Settle claims: s 44 o not liable if acted in good faith: National Trustees Executors and Agency Company v Dwyer (1940) 63 CLR 1 (The trustees honestly and mistakenly permitted a debtor to pay less interest than they were entitled to ask  good faith → not liable) • Maintenance (out of income) for infant beneficiaries: s 61 • Advancement out of capital: s 62 Powers conferred by court • Court may confer extra powers which— s94 o are “for the expedient management and administration of property vested in the trustee” or o “would be in the best interests of the person or the majority of the persons beneficially interested in the trust” Examples of powers given • power to invest in shares (at the time this was not an authorised investment); Re Baker • power to lease Freeman v A-G • power of sale and investment Perpetual Trustee Co v Godsell • power to set up a proprietary company Re Sykes Power to employ agents Power to employ agents: s54 • Where an ordinary person of business would employ an agent (eg a broker or real estate agent): Speight v Gaunt • Agent must not be employed outside of ordinary scope of their business: Fry v Tapson • Agency (↔ delegation)—for the purpose of implementing decisions on the execution of the trust or the exercise of powers and discretions • Liable if o Lack of care in selecting agent: s22(1) o Failure to continually supervise agent: s22(1) o Does not personally select agent: s56 Andrew Trotter LWB241 Trusts D UTIES OF T RUSTEES Breach of duty → Trustee is in ‘breach of trust’ Making a decision • Must not permit others (eg beneficiaries) to dictate decisions: Re Brockbank [1948] Ch 206 o Appointment of trustees, investments, etc • Trustees decisions must be unanimous o Except for charitable trust → majority Re Billington [1949] (only 1 trustee agreeing to contract  unenforceable) Duty to acquaint with the terms of the trust • On assumption of office • Must— o Familiarise themselves with terms of the trust and trust property o Ensure that title to trust property is vested in the trustees as joint tenants: Hallows v Lloyd o Safeguard documents of title  May deposit with a bank: s 49 Duty not to impeach the validity of the trust • Must not— o claim ownership of the trust property | take any personal advantage from the trust • Must— o act exclusively for the benefit of the beneficiaries o pay and transfer trust property to the right persons o provide the greatest financial benefits possible to the beneficiaries Duty to strictly conform to and carry out the terms of the trust = Must carry out duties in accordance with terms of trust. BUT deviation may be permitted in some circumstances— • By trust instrument • By statutory right of variation • Sanctioned by the court if— o exceptional emergency (narrow operation) ← equity’s inherent jurisdiction; or o Expedient in the management of the trust; or  Test is what would be expedient for the trust as a whole: Riddle v Riddle  Expedient = advantageous, desirable or suitable to the circumstances of the case o In the best interests of the majority of beneficiaries: s94(1) (on application by trustees or beneficiaries) ← In absence of prior permission trustee will be liable unless deviation would have been approved by court if applied: s94(1) • Trustee not liable if adheres to terms of trust instrument but may be varied by court if causes detriment to the trust Courts have significant power to vary trusts— • varying or revoking all or any of the trusts, • enlarging the powers of the trustees: s95 Andrew Trotter LWB241 Trusts Duty to act impartially towards the beneficiaries • Trustee must act impartially towards o Beneficiaries of different classes: s23(2)(c) o Present (income) and future (capital) beneficiaries: s23(2)(a) • Generally— Kelly v Perpetual Trustee o Income to income beneficiary o Increase in net assets to capital beneficiary • Share issues or dividends: Bouch v Sproule o no choice but to take shares → capital o no choice but to take cash dividends → capital o choice given → whatever is taken = income Rule in Howe v Lord Dartmouth • Duty to convert wasting, hazardous and reversionary trust property (Howe v Lord Dartmouth) in order not to disadvantage capital beneficiaries: s23(2)(a) o Applies to personalty not realty o Applies to a remainder interest in a will (but not until life tenant dies) • Within 12 months from death of testator / assuming trust property Rule in Re Chesterfield • For reversionary interests (eg remainder in a will) and debts repayable in the future • Interest that is supposed to have accumulated between the start of the trust and t
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