Trustees

The trustee is the archetype of a fiduciary {Hospital Products v United States Surgical Corp (1984) 156 CLR 41 at 68 per Gibbs CJ}..

Trustees, it is said “exist for the benefit of the beneficiaries, and for that alone” {Purcell v Deputy Federal Commissioner of Taxation (1920) 28 CLR 77 at 89 per Issacs J} .

The duties of a Trustee go beyond the personal nature, because in holding trust property a trustee has duties over and attaching to the trust property. They confer upon the beneficiary corresponding rights; an “equivalent to a right in the property itself, but only commensurate with their particular right in personam“, the estate of beneficiaries being ascertained “by their right in personam to compel their trustee to perform the trusts so far as their interest is concerned” {Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 at 503, 504 per Issac J. See also DKLR Holdings Co. (no.2) Pty Ltd V Commissioner of Stamp Duties [1980] 1 NSWLR 510 at 520 per Hope JA; Jacobs [110] (“the obligation attaches to the trustees in personam, but is also annexed to the property so the equitable interest resembles a right in rem)

The Trust Instrument and Statutory Legislation provides Trustees with certain “powers” to administer the trust. The Trust Instrument will also prescribe the “duties” of the Trustees. Duties are those things the Trusts must do whilst Powers are used as necessary.

Sometimes a person may accept trusteeship of an express trust without realising the extent of the duties it entails: equity will not afterwards allow a trustee to attempt to alleviate those duties. As the Earl of Halsbury LC said in Wyman v Paterson [1900] AC 271 (PC) at 278:

People who undertake a duty are bound to know what their duty requires.”

Even if the Trust Instrument gives a Trustee a broad ability to exercise certain powers, a Trustee is still a Trustee and must use the powers in the interest of the beneficiaries and to further the purpose of the trust.

Henderson J stated in Independent Trustee Services Ltd v Hope [2009] EWHC 2819 (Ch) at Paragraph 73:

First, it is trite law that a power conferred on a trustee (or any person other than a beneficial owner) may be exercised only for the purposes for which it was granted, and not for purposes foreign to the power or to secure a collateral benefit.”

The founding Trust Deed of superannuation trusts will generally provide a power to vary the terms of the trust. In the case of employer-sponsored superannuation trusts, the power to vary the terms of the trust may be given to:

  •  the sponsoring Employer
  •  the Trustee or Trustees
  •  the beneficiaries
  •  another party such as a “Board of Management
  •  a combination of the above

A typical example is for the Board of the sponsoring Employer to be provided with the Power of Amendment, subject to the consent in writing by the Trustees.

The power to amend the terms of the trust must be used to promote the purpose of the scheme.

If conditions are imposed by the Power of Amendment clause then these conditions must be satisfied otherwise the purported Deed of Variation (or other instrument) will be void ab initio and the terms of the trust will remain unaltered.

For example if the Power of Amendment clause prescribes that a Deed must be used to vary the terms of the trust, then a Deed must be used (as opposed to an “agreement”). If the Power of Amendment clause prescribes that a majority of the Directors of the sponsoring Employer must attest any Deed of Variation, then a majority of the Directors must attest the Deed. If the Power of Amendment clause requires that a majority of the Trustees must consent to an Deed of Variation in writing, then a majority of the Trustees must give their consent in writing.

Habersberger J in Berger v Lysteron Pty Ltd [2012] VSC 95 stated at Paragraph 78:

“Counsel for the second defendant submitted that, in general terms, there were two constraints on the exercise of powers. They were that powers must be exercised:

(a) in accordance with their terms; and

(b) bona fide for the end designed. {Farwell: “A Concise Treatise on Powers”, Stevens and Sons Ltd, 3rd ed, 1916, p 403, citing Aleyn v Blechier [1758] EngR 208; (1758) 1 Eden 132.}

It was said that the second of these constraints, expressed in more modern language, was a requirement that the exercise not be a fraud on the power. That term does not “denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term, or any conduct which could properly be termed dishonest or immoral”. Rather it means that the power has been exercised “for a purpose, or with the intention, beyond the scope of, or not justified by, the instrument creating the power”. {Farwell pp 458-459. Cited in Santos Ltd v Pettingell (1979) 4 ACLR 110, 113 (Rath J)}.

 

In any discussion of a Trustees’ powers and protections one must never forget that the foundation of the institutional character of the trust is the Court’s supervision. Speaking for the Privy Council {Schmidt v Rosewood Trust Ltd [2003] UKPC; [2003] 2 AC 709 at 724} Lord Walker, citing Australian authority, said:

“it is fundamental to the law of trusts that the court has jurisdiction to supervise and if appropriate intervene in the administration of a trust, including a discretionary trust. As Holland J said in Australian case of Randall v Lubrano 31 October 1975, cited by Kirby P in Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405,416:

“No matter how wide the trustee’s discretion in the administration and application of a discretionary trust fund and even if in all or some respects the discretions are expressed in the deed as equivalent to those of an absolute owner of the trust fund, a trustee is still a trustee.”

 

 

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