Duty on Acceptance of Office

The terms of a superannuation trust (fund) will contain Powers of Appointment as to who is able to appoint and remove Trustees from Office.

The following may have a Power of Appointment to appoint one or more trustees:

  • The Employer-Sponsor
  • The Members
  • The Beneficiaries (eg Pensioners)

If the fund is a Government Regulated Superannuation Fund then if the Fund provides pensions the Trustees can be natural person trustees.

If the fund is a Government Regulated Superannuation Fund then if the Fund does not provides pensions the Trustee must be a corporate Trustee.

This is an outcome of Subsection (xxiii) and Subsection (xx)  of the Commonwealth of Australia Constitution Act .

Since 1993 it has been a requirement under Sections 86-93A of the Superannuation Industry (Supervision) Act 1993 for there to be an equal number of Member- elected natural person Trustees (or Member-elected Directors of a corporate Trustee) as there are Employer-nominated natural person Trustees (or Employer-elected Directors of a corporate Trustee. There may also be one or more “independent” natural-person Trustees or Directors of a corporate Trustee.

Once a natural person Trustee or a Director Trustee accepts the office of trustee that person is bound by all of the obligations in the trust instrument (as well as statutory law and the general law of trusts) {Clough v Bond (1838) 3 My & Cr 490}.

The Trustee may not consider that he or she is imbued with powers which are more extensive than those set out in the trust instrument or statutory law and the general laws of trusts.

The general responsibilities of a trustee upon the acceptance of office are:

–          Familiarise him or herself with the terms of the trust

–          The nature of the trust property

–          The range of objects within the contemplation of the trust {Hallows v Lloyd (1888) 39 Ch D 686, 691}.

–          The identity of other trustees {Nestle v National Westminister Bank plc [1993] 1 WLR 1260}

–          To consult all documentation connected to the trust {Tiger v Barclays Bank Ltd [1952] 1 All ER 85} including:

  • The Trust  Deed and any Deeds of Variation
  • Documents relating to any Powers of Appointment
  • The trust accounts
  • The Scope of investments made by the trust
  • Policy documents and guidelines issued by the Prudential Regulator – APRA

–          An to familiarise him or herself with any other information pertinent to the management of the trust which is not recorded in a documentary manner {Mond v Hyde [1999] QB 1097}

In familiarising him or herself with the terms of the trust a trustee may seek legal assistance and the costs and expenses of conducting this process of familiarising may be recovered from the trust: Re Pumfrey (1882) 22  Ch D 255; De Vigier v IRC [1964] 2 All ER 907.

If necessary the trustee is required to take legal advice as to the efficacy or legality taken by former or co-trustees in relation to the trust as well as to the trustees own decisions and actions.

Each Trustee is bound by all the obligations of the trust instrument {Clough v Bond (1838) 3 My & Cr 490}. Failure to obey the terms of the trust will constitute a breach of trust.

A Trustee cannot “turn a blind eye” to the Trustee’s obligations. A Trustee will be liable for matters of which the Trustee could be expected to have knowledge  {Re Hurst (1892) 67 LT 96; Young v Cloud (1874) LR 18 Eq 634; Mond v Hyde [1999] QB 1097}.

One of the first specific responsibilities of a new trustee is to ensure that the Trust Property is vested in the Trustee or Trustees {Underwood v Stephens (1816) 1 Mer 712; Lewis v Nobbs (1878) 8 Ch D 591}.

Superannuation Funds will generally engaged a “Custodian Trustee” to hold the legal title of the assets of the Fund, especially in the case of natural person trustees, since the title documents then do not need to be amended every time there is a change to one of the natural person trustees.

Trustees should familiar themselves with their liabilities under the trust instrument as well as the state Trustee Acts and the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Natural person Trustees should acquaint themselves with Section 56 of the SIS Act and Director Trustees with Section 57 of the SIS Act that prescribes that a provision in the governing rules of a fund is void if it provides for the indemnification of trustees out of trust assets if:

  • A trustee fails to act honestly, or
  • A trustee intentionally or recklessly fails to exercise to appropriate degree of care and diligence in the affairs of the fund

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