Equitable Right to Compel the Proper Administration of the Trust

Persons with a “beneficial interest” in a trust have the equitable right to compel the proper administration of the trust.

The creation of an express private trust gives every person who is an object of the trust a personal equitable right of due administration of the trust. That is a right to force the trustee to perform the trust, to have a non-performing  trustee removed and to have a new trustee appointed where a trustee has been removed .

The High Court of Australia in Kennon v Spry [2008] HCA 56; 251 ALR 257 at 276 stated:

The rights to due consideration and to due administration are in the nature of equitable choses in action”.

The beneficiary’s right to have access to the “trust documents” enables the beneficiary or beneficiaries to compel the proper administration of the trust.

The Western Australia Court of Appeal in Schreuder v Murray [No. 2] 41 WAR 169; 260 ALR 139 ;[2009] WASCA 145 stated:

“A trustee is the trustee of property for the benefit of the beneficiaries of the trust.The trustee and beneficiaries have a correlative duty and interest in the proper administration of the trust. The duty of the trustee includes a duty to properly perform the trust by adhering to and carrying out the terms of the trust. The beneficiaries have an interest and, indeed, a right to compel proper administration of the trust. The trustee and the beneficiaries are in a ‘formal legal relationship‘ and if the trustee obtains legal advice concerning the proper administration of the trust, then any legal professional privilege attaching to the advice obtained is the joint privilege of both the trustee and the beneficiaries. As such, the trustee and the beneficiaries, being entitled to joint privilege, may not maintain the privilege against each other”

Powell J in Spellson v George (1987)11 NSWLR 300:316 stated:

“It seems to me, a fundamental right of the cestuis que trust or the cestui que trust is to enforce the trustee’s obligation to account. It is not correct to say that its enforcement is dependent upon the cestuis que trust or the cestui que trust in question first raising an allegation, or establishing a prima facie case, of fraud or some other like breach of trust. On the contrary, so it seems to me, where the court’s assistance in enforcing the trustee’s obligation to account is invoked, the court should be concerned with only two questions, they being, wether the plaintiffs are, or the plaintiff is one of the, cestuis que trust, and second whether the defendant and trustee has failed to observe his obligation to account”.

 

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