Relying on Counsel’s Opinion

There is a well accepted rule that it is not a defence to an action for breach of trust that the trustee has acted on counsel’s opinion {Re Knights Trusts (1859) 27 Beav. 45; 54 E.R. 18}, as it is if the trustee has acted in accordance with the advice, opinion or directions of the court properly obtained { Harrison Jones and Devlin Ltd v Union Bank of Australia Ltd (1909) 10 S.R. (N.S.W.) 266 at 280}.

Also see National Trustees v General Finance [1905] AC 373

Trustees who submit to the court for direction should observe the advice and directions given by the court. In Re Londonderry’s Settlement [1965] Ch 918 at 930 it was said that for a trustee to appeal against advice given by the court was an “irregularity“.

In Victoria a Trustee can seek directions from the Supreme Court of Victoria by way of an originating motion under Order 54.02 of the Supreme Court (Civil Procedure Rules) 2005. Beneficiaries also have recourse to Order 54.02.

Under Order 54.02 the court has a broad jurisdiction and power to advise and direct trustees in relation to the performance of their trusts and, where appropriate, to approve their entering into and performance of any transaction {Re Atkinson (dec’d) [1971] VR 612 per Gillard J}.

Order 54 is used by trustees who seek specific directions from the court about how they should execute a trust or about the construction of a trust instrument {Gapes v Haeberle [2003] VSC 461; Hornsby v Playoust (no.2) [2005] VSC 125; Reid v Brett [2005] VSC 18; Tindon Pty Ltd v Adams [2006] VSC 172}.

A Trustee has a right under the general principles of equity to approach the court for directions {Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 at 548; Re Dallaway (dec’d) [1982] 3 All ER 118; [1982] 1 WLR 756 at 758 and Macedonian Orthodox Community Church St Petka Inc V His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66;249 ALR 250; [2008] HCA 42 at [49]


Knox CJ stated in Templeton v Leviathan Pty Ltd [1921] HCA 55; 30 CLR 34:

“Now, it is clearly laid down that the Court cannot authorize a trustee to do that which the trustee could not do himself. In re Hazeldine’s Trusts (1908) 1 Ch., at pp. 40-41. Farwell L.J. cites with approval these words of Law L.C. of Ireland (1882) 11 L.R. Ir., at pp. 44-45.:—”In the exercise of its jurisdiction for the administration of trusts this Court, I apprehend, has no power to make or authorize any leases or other dispositions of trust property which the trustee could not have made himself. The Court, in such a case, whether it assumes the place of the trustee, or guides him in the discharge of his duties, is still confined within the limits of the trust as constituted by its author, and has no authority to go beyond those limits. Its business is to execute the trusts, not to alter them.” The Court has jurisdiction to execute the trusts or to guide the trustee in the execution; but it has no jurisdiction to transgress the trusts or to authorize the trustee to transgress them”.

Generally where a trustee sues or is sued the trustee has a right to be indemnified for the trustee’s costs out of the trust fund on a solicitor and client basis {Re Beddoe; Downes v Cottan [1983] 1 Ch 547 at 558; Renfrew v Birminghamd [1937] VLR 180 at 190}.

Order 54.03 of the Supreme Court (Civil Procedure Rules) 2005.

In proceedings under Order 54.02 all persons who have a beneficial interest in of claim against the Trust Fund need not be parties and the plaintiff may make such of those persons parties as the plaintiff thinks fit.

Order 54.05 of the Supreme Court (Civil Procedure Rules) 2005.

The jurisdiction of the Supreme Court of Victoria in an administration proceeding or proceeding within Order 54.02 is broader than the Trustee legislation in other states {eg Section 63 of the Trustee Act 1925 (NSW)}. In such proceedings, the basic facts upon which the Court acts are not proved or tested, so the jurisdiction does not encompass disputes between trustees, nor questions of interpretation of a trust document if it involves a question of breach of trust {Refer to Halsbury’s Laws of Australia, Rosalind F Atherton et al. at 01.06.10 citing Harrison v Mills [1976] 1 NSWLR 42 at 45}.

Trustees should seek directions under Order 54.02 in relation to whether the Trustee should take legal proceedings. Gillard J in Re Atkinson (dec’d) [1971] VR 612 at 615 stated:

“Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to it should do. If in doubt as to whether or not it should take legal proceedings, then it is entitled to apply to the court for directions on the matter; see Halbury’s Laws of England 3rd ed. vol 38 pp946 and 1023-1024; in Re Brogden (1883) 38 Ch D 546, at p 556;[1886-90] All ER Rep 927; Chettair v Chettiar (No. 2) [1962] 2 All ER 238 at p 245. If the executor or the trustee then followed the directions of the court, it would be protected from any claim by a beneficiary or creditor arising from its action or inaction in accordance with the court’s direction; see Underwood v Hatton (1842) 5 Beav 36; 49 ER 490; Smith v Smith (1861) 1 Dr and Sm 384; 62 ER 426. In cases of real doubt, the proper course for a personal representative or trustee to adopt is to seek the court’s decision as to whether or not action should be brought, otherwise the representative of trustee might find itself paying the costs for any proceedings which a court might subsequently say were not “properly incurred“: see Re Beddoe; Downes v Cottam [1893] 1 Ch 547, at pp558 and 562. On an originating summons seeking such direction, however, a court is not bound to investigate the evidence in order to make a finding that on the material before it the proposed proceedings will or will not be successful. If merely has to determine whether or not the proceedings should be taken; Fitzgerald v Smith (1889) 15 VLR 467 at p 473; Re Kay’s Settlement [1939] Ch 329, at p339; [1939] 1 All ER 245. On the other hand the matter should be sufficiently investigated to determine whether or not proceedings would be fruitless. See also Re Brogden (1888) 38 Ch D 546; [1886-90] All ER Rep 927″

 

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