Trustee – Their Duties, Powers and Rights

The control of all superannuation funds is placed in the hands of Trustees.

Trustees in the eyes of the law have special obligations as “Fiduciaries” as well as other obligations imposed on them by the trust instrument and statutory law.

A Fiduciary (Trustee) is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The Principal (ie member or beneficiary) is entitled to the single-minded loyalty of his fiduciary (ie the Trustee). The core liability has several facets. A fiduciary must act in good faith; he most not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of the principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.

–          Bristol & West Building Society v Mothew [1998] Ch 1 at 18 per Millet LJ

Broadly then, a fiduciary is one who owes legal duties of loyalty and utmost good faith in relation to another person.

With nearly $1 Trillion in the hands of these Trustees, it is important that any Member or a Beneficiary of a Government Regulated Superannuation Fund to have an understanding of the Duties and Powers of the Trust or Trustee of their Superannuation Fund as well as the legal rights of the fund Member or Beneficiary.

The terms of the trust (ie the Trust Deed and Rules as properly amended from time to time) as well as statutory and case law stipulate the Duties and Powers of the Trustees.

Duties” are those thing a Trustee “must” do, whilst “Powers” are those things a Trustee is able to do, but does not necessarily have to do depending on the circumstances facing the Trustee.

Some of the “Duties” of Trustees are:

  • Fiduciary Duties
  • Duties on acceptance of office
  • Duty to obey the terms of the trust
  • Duty to safeguard trust property
  • Duty to administer the trust personally
  • Duty to act impartially between a class of beneficiaries
  • Duty to exercise reasonable care
  • Duty to invest the trust property
  • Duty to distribute the trust property correctly
  • Duty to account and provide information
  • Duty of retiring trustees to hand over “trust documents” to incoming trustees

Fiduciary Duties include:

  • Duty to act honestly and in good faith
  • Duty to avoid conflicts of interests
  • Duty not to profit from the trust

Powers are usually conferred on the trust by the trust instrument (or statutory law if the trust instrument is silent). The powers conferred in the trust instrument will reflect the nature and duration of the trust created. In the case of superannuation Funds which are anticipated to last for decades the powers will need to cater for the long term needs of the trust which will not necessarily be obvious when the trust was created.

The trust instrument may as a protective device, make certain powers exercisable only with the consent of a designated person or persons whether a “legal person” or natural persons.

For example the Power of Amendment provided in the Trust Instrument may require the approval of both the Employer-Sponsor and the Members of the Fund to amend or add to or delete any of the Governing Rules of the Fund.

In some jurisdictions there may be a statutory requirement that applies unless specifically excluded by the terms of the trust. For example for Employer-Sponsored superannuation trusts created in South Australia Section 35B of the Trustee Act 1936(SA) requires the approval of at least 75% of the Membership for any amendment to be made to the Governing Rules of the trust (fund).

State Trustee Legislation

Victoria and Western Australia: The Trustee legislation specifically states that, unless the statute provides otherwise, powers conferred on the trustee by statute apply “so far only as a contrary intention is not expressed in the instrument” {Section 2(3) of the Trustee Act 1958 (Vic); Section 5(2) natural person trustee and Section 5(3) corporate Trustee Trustees Act 1962 (WA).

NSW, SA, ACT and NT: The individual sections that confer a power commonly contain a provision that the power is subject to the trust instrument. In these jurisdictions the absence of such a provision dictates that the statutory power overrides anything in the trust instrument {Trustee Act 1925 (NSW); Trustee Act 1936 (SA); Trustee Act 1925 (ACT); Trustee Act (NT) }.

Queensland: Section 4(4) of the Trusts Act 1973 (Qld) states that, except where it provides otherwise, powers conferred on the trustee by statute are subject to the provisions of the trust instrument. However at the commencement of each part, it is generally provided that the powers contained therein are applicable whether or not a contrary intention is expressed in the instrument creating the trust { Sections 7A, 10, 31(1), 60, 65, 79, 107 (with exceptions of Sections 20-28)}

Tasmania: Section 64 of the Trustee Act 1898 (Tas) provides that nothing in it authorises a trustee to do anything he or she is in express terms forbidden to do, or omit to do anything he or she is directed to do , by the trust instrument.

Commonwealth Legislation

Section 52 of the Superannuation Industry (Supervision) Act 1993 includes covenants that override certain duties and powers that might be contained in the trust instruments of Government Regulated Superannuation Funds.

State Trustee legislation is not excluded by Section 350 of the Superannuation Industry (Supervision) Act 1993 for Government Regulated Superannuation Funds.

 

Some of the “Powers” of Trustees include:

  • Power to appoint a “Custodian Trustee
  • Power to appoint agents
  • Power to amend the terms of the trust (this will generally be a conditional power shared with the Employer-Sponsor and/or the Members)
  • Powers of Investment
  • Power to deal with any Fund Surplus on the wind-up of the Fund or otherwise

Powers of  Other Parties to the Trust

Other parties to the trust (fund) may also have powers under the Trust Instrument or other Instruments (eg the Constitution of a corporate Trustee).

Members may have a Power of Appointment to appoint and remove one or more natural person Trustees (or one or more Directors of a corporate Trustee).

Beneficiaries (eg Pensioners) may have a Power of Appointment to appoint and remove one or more natural person Trustees (or one or more Directors of a corporate Trustee).

The Employer-Sponsor will also generally have a Power of Appointment to appoint and remove one or more natural person Trustees (or one or more Directors of a corporate Trustee).

The Principal Employer and any Participating Employer generally have a Power of Appointment to appoint employees to the Membership of a nominated fund or sub-fund administered by the Trustees, once certain qualifying conditions have been met. {IMPORTANT: The Principal Employer does not have a power to terminate a Member’s Membership of the Fund. The terms of the trust will include Conditions of Release events {eg attaining the Normal Retirement Age and no longer being in the service of the Employer-Sponsor} which when satisfied will empower the Trustee to release a benefit to that particular Member and to then terminate the Fund Membership of that Member}.

The Rights of Trustees

Some of the Rights of Trustees include:

  • Right to indemnity and recoupment
  • Right to contribution from co-trustees
  • Right to seek advice and directions from the court

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>