LSS Trusts Revision Seminar
Jules Marshall
Express Trust:
By Declaration or By Transfer
Private or Public (charitable)
Fixed or Discretionary
Creating a Valid Trust
Requirements:
1. The three certainties:
Certainty of intention (to create the trust by the settlor)
Certainty of subject matter (must be trust property)
Certainty of objects (must be identifiable beneficiaries
or a valid purpose)
2. Statutory formalities
3. No illegality (not covered in this course)
Creating a Valid Trust: Certainty of Intention
Importance of Intention (Mallot v Wilson)
Whether 'in the circumstances of the case and on
the true construction of what was said and written,
a sufficient intention to create a true trust has
been manifested': Megarry VC in Tito v Waddell
(No 2)
Creating a valid trust: Certainty of Intention
Subjective or Objective Intention?
Subjective intention (HC majority in Joliffe)
Isaacs J in dissent: concerned about parol evidence rule.
Joliffe followed countless times (Star v Star)
Not restricted to bank accounts (Hyhonie Holdings)
Creating a valid trust: certainty of intention
Onus of Proof:
Ultimate burden on person asserting the trust
Where trust involves a contractual or bilateral
arrangement an objective test will be applied
(What did both parties think was happening?) (per Shortall v White)
Creating a valid trust - certainty of intention
Intention must be immediate (where no
consideration) per Harpur v Levy
Creating a valid trust – certainty of intention
No particular words needed (Re Armstrong, Paul v Constance)
Factors indicating intention:
Bank accounts in a third parties name – Re Armstrong
Communications of intention with third party – Re Armstrong
Subsequent Conduct: 'It's as much yours as it is mine'; depositing
shared income; etc – Paul v Constance (bearing in mind his
unsophistication)
Clear words declaring trust – Hyhonie, Owens v Lofthouse
Factors against intention:
Conduct – treating property as one's own – Hyhonie
Listing property as income for tax purposes – Hyhonie
Other considerations:
Compare clause to others in the instrument – context of the whole
instrument
Certainty of intention – testamentary trusts
The clause should be constructed having regard to the words
used, the entire document and surrounding circumstances (per
Dixon J in Countess)
Two step process (Dixon J in Countess):
Did the testator intend the donee to be under any obligation to confer a
benefit on a third party?
If so, did they intend a trust obligation or some other form of obligation?
Certainty of intention –
testamentary trusts
Did the testator intend the donee to be under any obligation to confer a
benefit on a third party?
1. Look at words used (strong words or precatory words?)
2. Compare words used in different clauses within the will (Re Williams)
3. Look at outcome (did testatory truly intend that outcome)
4. Look at contextual factors
Conclude – does the clause contain an obligation (ie, more than just an
expression of wishes? If yes, next question)
Certainty of Intention – Testamentary Trusts
If so, did they intend a trust obligation or some other form of obligation?
Possibilities:
1.
Gift subject to a condition (Gill v Gill/Re Gardener)
2.
Gift subject to a charge
3.
A trust (Chang v Tijong)
Creating a Valid Trust: Certainty of Subject Matter
There must be trust property (cannot have a trust
over nothing)
Trust will fail if property is:
future property
uncertain property (unascertainable)
or there has been a failed transfer by the settlor
to the trustee (constitution)
Certainty of Subject Matter:
Problem with Future prop/mere expectancy or inalienable
rights
Mere expectancies - examples: A person named in a will of a person who
has not yet died or an interest in an object of a discretionary trust before a
decision is made to distribute to that person (Kennon v Spry, HowardSmith)
Future property cf. Underlying to future property (revise Equity)
Inalienable rights
Certainty of Subject Matter:
Problem with Ascertainability
It may be argued that the property is not ascertainable as:
1. Amount of the interest held on behalf of each B is unable to be
specified (fixed interest trust)
2. Vague 'Bulk of my estate', 'my favourite books'
3. Instrument allows T to determine the trust property (Musoorie)
Shares cases – Hunter v Moss and Shortall v White
Certainty of Subject matter: Situations
Problem with Constitution
No issues will arise with trusts by declaration
If the trust is a trust by transfer this requirement means that at
minimum the equitable interest in the subject property must be
properly assigned to the trustee. REVISE EQUITY
Consideration?
Legal property – transfer rules – Corin v Patton (Mason CJ &
McHugh J cf. Deane J)
Equitable property (or partial chose) – Manifest an intention to
immediately and irrevocable pass the interest
NB: Ttrust may still fail due to the operation of S 53 PLA
Certainty of Object
A trust must have certainty of object by being in favour of one
or more identifiable beneficiaries or for a valid purpose (such
as a Charitable purpose) (per Morice v Bishop of Durham, Re
Shaw)
Why do we need certainty of object?
Certainty of Object: Determining trust structure
Tests for certainty of object are different depending on what trust
structure was intended by the settlor
Two step test to determine trust structure:
1. Obligation to distribute the trust fund?
Compare clauses
Strong language – similar to law under 'certainty of
intention'
Time limit to appoint (not conclusive) (Re Hay's)
Gift over in default – indicates a mere power (Re Hay's)
Absence of gift over (not conclusive)
If no obligation – mere power
If obligation – then fixed interest trust or discretionary
trust
Certainty of Object: Determining Trust Structure
2. If obligation – Is there any discretion as to who
to distribute to?
If yes – discretionary trust
If no – fixed interest trust
Certainty of Object: Fixed Interest Trust
List Certainty
Trustee must be able to make a list of all the
beneficiaries and their entitlements
If no specification as to proportions – assume they
take in equal shares (Paul v Constance)
Certainty of Object: Powers of appointment
A power to appoint property
Used in discretionary trust
Mere Power v Trust Power
A mere power (bare power, power collateral) is power withough an
obligation whereas a trust power (power coupled with a duty) gives
the donee a power with an obligation
Classes of Powers of Appointment:
General
Hybrid
Special
Certainty of Object: Discretionary Trusts & Mere
Powers
Criterion Certainty – Re Gulbenkian
1. Semantic/Linguistic certainty
2. Evidential certainty
Certainty of Object: Semantic Certainty
Uncertain:
Any class that is inherently subjective – ie, the best news reporter
Future employees – Broadyway Cottages
To improve quality of life – Re Blyth (Qld) per Thomas J
Deserving members – unless do indicates how to distinguish deserving
My old friends (unless instructions) – Lord Upjohn in Re Gulbenkian
Any person engaged in – to what extent must you be engaged?
Certain:
Anything that can be objectively determined
Relatives – McPhail; Near relatives – Griffiths (LJ Stamp means nearest blood
relations – Aus positioN)
Employers – Gulbenkian
Employee, officer, former employee or officer – Gulbenkian
Working to alleviate war – Re Blythe
Dependents – McPhail
Inhabitants of an area – District Auditor
Residents - Gulbenkian
Certainty of Object: Evidential Certainty
Evidential Certainty:
Evidential certainty can be resolved by seeking a
court order.
Certainty of Object: Additional requirements
Discretionary Trusts & Administrative workability
McPhail v Doulton, Lord Wilberforce - new requirement
Rationale – if not administratively workable then court could not
establish who had standing and the donee could not undertake an
adquate survey of the class.
Applied in R v District Auditor – administratively unworkable.
Certainty of Object: Administrative Workability
& Classes of Powers
A general trust power or a hybrd trust power is invalid as fails the
administrative workability requirement of criterion certainty. The
reason it fails this requirement is that the class is so hopelessly wide
that the court could not determine who had standing and the trustee
could not undertake an adequate survey of the class (the whole
world/the whole world bar one person/one group) in order to
properly exercise the power (McPhail v Doulton per Lord
Wilberforce and R v District Auditor)
Therefore, a discretionary trust power can only be a SPECIAL trust
power
Certainty of Object: Additional Requirements
Mere power & Capriciousness
Administrative unworkability does not invalidate a mere power
(Re Hay's)
Re Manisty and capriciousness
Creating a Valid Trust: Statutory Formalities
S 53 (1) PLA
Situations & Solutions
1. CREATION of interest IN LAND (legal or
equitable NOT by trust => s 53(1)(a) – creation of
the interest must be in writing by the transferor or
agent
2. DISPOSITION of LEGAL interest in LAND eg
legal mortgage/lease =>
s53(1)(a)
Creating a Valid Trust – Statutory Formalities
3. DISPOSITION of SUBSISTING EQUITABLE
INTEREST IN LAND
a) by assignment or by final direction (HowardSmith) => must comply with s 53(1)(a) AND (c) but
they have the same requirements
Final Direction cf. Revocable mandate (Dixon J in
Howard Smith)
Creating a Valid Trust – Statutory Formalities
3. DISPOSITION of SUBSISTING EQUITABLE
INTEREST IN LAND
b) by declaration of sub-trust
Two possible approaches as to which subsection will apply
Conduit v Active sub-trustee
Creating a Valid Trust: Statutory Formalities
4. DECLARATION OF A TRUST OVER LAND
- Lee J in DSS v James interpreted ss(b) as an exception
to the general rule in ss (a) – followed in Hagan v
Waterhouse
Consequences – trust is unenforceable until manifested
and proved in writing by some person able to declare
such a trust (ie, formalities in ss(b) only evidentiary
function)
No provision for agent
Trustee in argument against T and B (Hagan)
Statutory Formalities
5. NOT LAND
SS (a) and (b) won't apply
Is it subsisting equitable interest? If yes => s
53(1)(c)
NOTE: CONSIDERATION
Quistclose Trusts
Specifc purpose/obligation
Usually imposed on debtor creditor relationship

Factors towards specific purpose:
- Conditions in K such as 'exclusively' or 'only' per Gummow J
in AETT cf. Precatory words
- Paid into a seperate account – Quistclose, Salvo cf. AETT
- X would not have transferred if they knew it would be
applied for a different purpose (cf. AETT)
QC: Express or Resulting Trust?
Express Trust or Resulting Trust
Intent – Dal Pont
Quistclose and Salvo per Spigelman CJ & Young J- Two limbed
express trust
Gummow in AETT – unremarkable express trust – intention
Twinsectra v Yardley – Lord Millet – resulting trust
Salvo v New Tel – majority – two limbed express trust but on facts
neither classification would result in different outcome
No HC decision -
Quistclose – Third Party
THIRD PARTY HOLDING PROPERTY:
Although the lendor appears to have a beneficial
interest in [property] due to the operation of the
QC trust, they will only be able to enforce that
interest against [third party] if the [third party] can
be shown to have taken the [property] with notice
of the lendors interest (per Lord Wilberforce in
Quistclose).
Charitable Trusts
A trust for a valid charitable purpose is one of the exceptions to the
rule that a trust for a purpose rather than a person will fail (Latimer
v Inland Revenue)
AG will have standing to enforce charitable trusts
Certainty of Intention & Certainty of Subject Matter/Constitution –
still require but Certainty of Object does not apply – charitable trust
will depend on the purpose of the trust and whether or not it is for
public benefit
Charitable Trusts
Requirements:
1. Valid Charitable Purpose
2. Public Benefit
- Public Benefit
- Section of the Public
Note: Not covering trusts for political purposes or
Aid watch case in this seminar
Charitable Trusts: Valid Charitable Purpose
Valid Charitable Purpose:
- 'spirit and intendment' of the preamble to the
Statute of Elizabeth
- Pemsel's case
1. Relief of Povery
2. Advancement of Education
3. Advancement of Religion
4. Other purposes beneficial to the community
Charitable Trusts: Public Benefit
1. Public Benefit
Assumed for trusts for relief of poverty (Dingle)
Presumed (able to be rebutted) for advancement
of education and religion:
- Education see Re Shaw and Re Pinion
- Religion – Benefit presumed to be positive
influence on human conduct
Must be positively demonstrated for fourth head
Charitable Trusts: Public Benefit
2. Section of the public
Question of fact (must be reasonable section of public)
Poverty – an exception unless Saunders rule applies
membership/bars
The people who will benefit from the trust cannot be connected to one or
a few named
people (Re Compton) - The point of distinction between
those who will benefit and those who won't cannot be their
relationship (nexus) to a particular individual or company even if
large no. (11,000) Oppenheim
Charitable Trusts: Severance
At equity, if one purpose was invalid the whole trust
would fail despite there being other valid charitable
purposes (McGovern)
S 7M of the Charities Act operates to save some trusts
Three different ways it operates per Leahy
Charitable Trusts: Cy Pres
Trust fails initially: S 2 Charities Act - charitable
intention (Re Lysaght)
Trust failes after a period of time because purpose
no longer exists/illegal etc (Re Anzac Cottages)
Duties relating to mere powers
Holder of a mere power has no obligation to exercise the power
at all - court will not intervene to force exercise
Non Fiduciary Donee: No obligation to consider exercise of
discretion. If there is exercise then appointment must be within
limits, in good faith and for proper purpose (Megarry VC in Re
Hay's)
Fiduciary Donee: Broader range of responsibilities than nonfiduciary – cannot simply ignore
Object of mere power – request court intervention to require T
to consider exercise (Re Hay's)
Court will require (per Megarry VC in Re Hay's) that the T:
1. consider periodically whether or not to exercise the power
(Turner v Turner)
2. consider range of objects
3. consider appropriateness of particular appointments
Duties relating to trust powers
The trustee is under a duty to exercise their discretion and must
appoint the property to a person
WHERE THERE HAS BEEN EXERCISE
The power to review the exercise of discretion is limited to
examining whether or not it was exercised in good faith, on real and
genuine consideration and in accordance with the purpose for which the
discretion was conferred except where the trustee has given
reasons for the exercise of their discretion. (Karger v Paul, per
McGarvie J)
Duties relating to trust powers
WHERE THE FIDUCIARY HAS NOT YET
EXERCISED POWER
Objects of a trust power have standing to force the
consideration of exercise (McPhail) however they
have no proprietary right to the property (Kennon).
Trustees Duties
Trustees under valid express trusts and charitable
trusts have same duties
There are three sources of trust duties:
The terms and conditions of the trust instrument itself
Equitable principles
Statute
Supremacy of Trust Deed
Is there a trust deed?
Can alter equitable and statutory duties
S 2 (3) Trustee Act
Must be familiar with terms of trust deed
General Summary of Duties per Green v
Wilden
1. Adhere to the terms of the trust deed
2. Act fairly by beneficiaries and keep proper
accounts
3. Exercise prudence in conducting affairs of the
trust
4. Adhere to the profits and conflicts rules
5. Disclose information to the beneficiaries.
Valid Departures from Trust Deed
Where Trustee is permitted or required (by Statute or by
order of the Court) to depart from the trust deed:
Court may require/permit departure where:
- Circumstances require a departure in B's interests
- Terms of deed unable to be carried out
- Under s 63 of Trustee Act (power to authorise dealings
with trust property)
All sui juris beneficiaries were absolutely entitled to the fund
and agreed unanimously to ratify a departure
Duties
1. Duty to 'GET IN' the trust property:
Consider who has title and control of property??
Not just an initial duty (Caffrey)
Recovery from previous trustee? Duty to inquire
as to breaches (Permanent v Perpetual)
2. Duty to PROTECT Trust Assets
Power under s 23 of the Act to insure the property
No obligation
Common sense
Trust Management: Investment Duties
A trustee may only invest trust property in investments
authorised by the trust deed, legislation or the Court.
S 5 of the Act (inserted in 1995) allows the trustee to invest in
anything unless expressly prohibited by the Actor the trust
deed
Is there a restriction on investment power contained in the trust
deed? If yes – must adhere to that restriction as part of duty to
adhere to trust deed.
Trust Management: Investment Duties
S 5 of the Act – qualified by ss 6 – 8 (further restrictions)
DUTY OF PRUDENCE (S 6)
Statutory standard of prudence to be exercised when
investing
- Bifurcated standard: professionals held to higher
standard of care than non-professionals
Professional Trustee s 6(1)(a):
Does the trustee's profession, business or employment
include acting as trustee or investing on behalf of others
Standard: Care, diligence and skill a prudent person
engaged in that profession would exercise in managing
the affairs of others
Trust Management: Investment Duties
Non-Professional Trustee s 6(1)(b):
Standard: care, diligence and skill that a prudent
person would exercise in managing the affairs of
others (cf. Morally obliged prudent business
person req. in Bartlett)
Trust Management: Investment Duties
Modern Portfolio Theory:
Line by Line Assessment v MPT
Before Act – Line by Line
- each investment individually assessed for prudence
- trusts were conservative, highly risk averse – low rate of
return and opportunity for decline in real value of the fund
(Nestle v Nat West)
MPT – max growth/min risk – through diversification –
range of investment to reflect market
Does Act reflect adoption of theory? Several sections
suggest yes - S 8, s 6(3), s 12C and 12D
Case: HLB v Trust Co Ltd
Debeljak article
Trust Management: Investment Duties
Factors to Consider in Assessing Breach of
Investment Duties:
1. ANNUAL REVIEW per s 6(3)
individually and as a whole
Minimum standard
Also when new investment is made per 8(1)(o)
2. SPECULATIVE INVESTMENTS per s 7(2)
Might be too speculative even considering MPT
Bartlett
Trust Management: Investment Duties
3. DUTY TO TAKE ADVICE per s 7(2)
Supported by ss 7(4) and (8)(2) – can recover
costs of advice
4. SECTION 8 MATTERS
Make a list
5. Other enumerated duties in s 7(2): Duty to act
in best interests of B's and Duty to act impartially
between B's/classes of B's (discussed later)
Trust Management: Investment Duties Defences
- not strictly defences
S 12 C: Court can relieve T of liability (partially or
in full)
Court must consider 4 factors
1. T invested according to an investment strategy
(sound strategy)
2. Whether they had regard to ths s 8 factors
3. Whether they considered the nature & purpose
of the trust
4. Whether they acted on independent advice
(was it needed?)
Trust Management: Investment Duties Defences
Set Off
Under s 12D the court has discretion to allow set off of
liability in relation to profit made through investment.
There must be some correlation with the gains and
losses (ie, part of an investment strategy eg Bartlett).
Trust Management: Equitable Duties
S 7 of the Act preserves all the equitable duties
that existed before the Act (except to extent they
are inconsistent with Act/trust instrument)
Standard of prudence: The statutory standard only
applies to investment – must use equitable
standard for duties NOT related to investment
Trust Management: Equitable Duties
Equitable Standard of Prudence:
Bifurcated
Professional:
T will be held to the higher standard of care than a nonprofessional trustee as they are holding themselves out as
havng more skills than an ordinary trustee and are usually paid
for their services (Bartlett; ASC v AS Nominees)
Non-Professional:
T, in relation to management of trust, will be held to the
standard of care that an ordinary prudent businessman would
use in conducing his own affairs (per Speight v Gaunt)
Trust Management: Equitable Duties
Trustee – fiduciary – subject to conflicts and profits rules
Conflicts
Duty v Duty (per Farrington)
Duty v Interest (per Boardman)
- Particular applications
1. Self Dealing Rule – applies where there is sale of trust
property to trustee himself – sale automatically void
(Clay v Clay) Note: also applies to loans
2. Fair Dealing Rule – B's might want to deal with
beneficial interest – want to sell to trustee – sale not
automatically void – voidable unless trustee shows no
advantage taken and full disclosure and fair and honest
Trust Management: Equitable Duties
3. Duty not to mix assets (must keep trust assets
separate) (ASC v AS Nominees)
- important for avoiding risk of fraud and allowing proper
accounting
Profits Rule:
Duty to Act Gratuitously – unless provision made in trust
instrument
Has there been profit? Williams v Barton
Was there authorisation?
- trust instrument (contra proferentum)
- Trustee Act – recovery of out of pocket expenses
- Application to court under s 77
Trust Management: Equitable Duties
DUTY TO ACT PERSONALLY
Issues:
Agents – Delegation – Following Advice – Co-T's
General Rule: Trustee must act personally, and
cannot delegate powers/discretions without
express authority in trust instrument.
Trust Management:
Equitable
Duties
Delegation v Agency
1. Is there express authority to delegate in trust
deed? If no,
2. Was T absent from state – s 30 of the Act? If
no, then cannot delegate
3. Was it delegation or
a) appointing an agent under s 28 of the Act;
or
b) taking advice under s 7(2)(d) of the Act
If AGENT – was appropriate level of care in
selection of agent taken? If yes, not liable for
default of agent (note: Speigh v Gaunt Standard)
Trust Management: Equitable Duties
If ADVICE was appropriate standard of care exercised
(Speigh v Gaunt)?
For both AGENT and ADVICE – consider did the acts
occur as a result of T's own wilful default (s 36(1))
Was T ACTING UNDER DICTATION or FETTERING his
discretion?
- Not personally exercising own discretion (Turner)
- Includes B telling T what to do (Brockbank)
- Includes Co-T telling T what to do (Mulligan)
- Co-T must actu unanimously (Cowan)
Trust Management: Equitable Duties
Duty to act in best interests of the B's:
T must act solely in best interests of B's
S 7 modification – 'future and present B's
Best Interests? Best Financial interests subject to prudence
(Cowan) Other considerations may be relevant if all B's shared
those views and thought pursuit of them was in best interests of
B's (Cowan)
Trust Management: Equitable Duties
Duty to Act Impartially
1. Not acting impartially between individual B's
(Mortacye v Mortacye) OR
2. Not acting fairly between different classes of B's (Re
Mulligan)
- Life tenant/remainderman
- Nestle v Nat West
Requirements of a fair decision – VBN v ARPA
Trust Management: Equitable Duties
Duty to keep accounts/inform B's:
Must account for trust property and have accounts
prepared at time they are called for – otherwise
preparation costs from own pocket
Further discussed under Right of B's to Trust Docs
Duties upon Termination:
- Discharge ROI
- Pay Creditors
- Distribute to B's
- May request release
- Re Lost B's: seek direction from court/lost B's insurance
Defences: Breach of Trust
Breach of trust made out? T's jointly and
severably liable
Does a limitation clause in trust instrument or
statutory or equitable defence apply to reduce
liability?
Defences: Exclusion clause in Trust
Instrument
Note: Was there loss/damage or profit??
Did breaches fall within the exclusion clause?
Irreducible core of trustees duties (Millet LJ in Armitage)
Clause construed contra preferentum/ T bears burden of proof
(Hasluck J in Green)
Actual Fraud
Fraudulence
What do these terms cover?
Statutory Defences
Re Investments (disussed earlier)
S 67 – Court has discretion to relieve T of liability
where:
- T has acted honestly and reasonably and
- ought fairly to be excused for the breach AND for
omitting to obtain directions of the Court
HC in Macedonian – trustee is meant to seek
directions from court FIRST
Applies only to trustees
Defences: Equitable Defences
Usual equitable defences (revise Equity)
Consent: obtained before the breach
Acquiescence: beneficiary going along with the breach
Ratification: more formal step which occurs after a breach
Beneficiaries must be sui juris.
Beneficiaries must be fully informed as to the facts of the matter
and legal consequences of consent/release/acquiescence etc.
Beneficiary need not benefit from giving consent.
Consent may not be a complete defence – only a prima facie defence per
Sepllson v George.
RIGHTS OF TRUSTEES
Right to contribution from co-trustees
Right of Indemnity (ROI):
Equity
S 36(2)
Has the ROI been excluded on the facts?
In Vic – ROI can be altered by trust deed due to operation of s 2(3) per
Brooking J in RWG (cf. NSW position – Jonco)
Exclusion – requires clear language (Lindley J in Hardoon)
What will T attempt to claim?
Rights of Trustees
ROI cont...
ROI extends only to properly incurred expenses
Onus on B to show expenses were not properly
incurred (Nolan v Ollie)
The court will assess whether or not the expense was properly incurred
by reference to the duty that the trustee was attempting to exercise
(Ormiston J in Nolan v Collie) CF. NSWCA approach under which any
expense incurred in carrying out trust may be properly incurred as long as
it is not fraudulently incurred (ie, very little risk of losing ROI) per
Gatsios NSWCA.
Rights of Trustees
CORPORATE TRUSTEE:
S 197(1) of Corps Act might be applied to allow
the company to recover from the director if the
trustee company has not and cannot discarge it's
liability to its creditors (ss (a)) and the trustee
company has no ROI due to either
(b)(i) breach of trust by the company
(b)(ii) the company acted outside the scope of its
powers as trustee
(b)(iii) a term of the trust denies/limits the trustee
company's ROI
Rights of Trustees
ROI qualified by breach of T? Brooking J in RWG
Rights of Trustees
ROI operates as charge over assets – preference
over B's interests
Charge can pass to T's trustee in bankruptcy
Trust creditor – right to subrogation unclear
whether this applies to general creditor (Re Enhill
(Vic) cf Byrne NSW)
Rights of Trustees
ROI < Trust Fund: T can recover directly from
fund
ROI > Trust Fund: Recover directly from fund and
pursue rights gurther against the B's personally for
remaining amount (Hardoon; JW Broomhead)
B's must be sui juris and absolutely entitled to the
fund (Hardoon)
Rights of Trustees
Right to Approach the Court
Order 54 of Supreme Court Rules
Cannot be limited by trust instrument
Beneficiaries' Rights Generally
Beneficiaries can enforce all duties owed by the
trustee.
Right to possession of trust property
Right to compel performance of the trust
To restrain a breach of trust
To approach the court
To extinguish the trust
Right to Inspect Trust Documents
Held to be Trust documents:
Documents touching on legal status or trust - Re Londonderry, Rouse
Documents containing terms of trust deed (cf. Memo of wishes but note
Kirby J in Hartigan)
Documents showing past distibution to B's (cf. Future) – Re
Londonderry per LJ Harmon
Held not to be trust documents:
Internal deliberative documents (per LJ Harmon in Londonderry)
Documents which are held by the trustee not as a trustee but for their own
purposes (per LJ Salmon in Londonderry) Cf LJ Harmon's decision which
reflects the view that trust documents are documents that go towards the
establishment of the trust and not documents that are only relevant to the
ongoing decision making of the trust.
Importance of confidentiality (Hartigan Nominees)
Memo of wishes normally attracts confidentiality w/o the need for express
words (cf. Kirby in Hartigan)
Right to Inspect Trust Docs
Different approaches/interpretations to right to inspect:
1. Right to inspect lined to proprietary interest CO in Londonderry
& Mahoney J in Hartigan
2. Two judges (Kirby J & Sheller JA) of the COA in Hartigan noted that
the proprietary analysis applies easily to fixed interest trusts but issues
arise when applying the rationale to objects of a mere power/discretionary
trust. Noted certain LIMITATIONS which appear to have been adopted
by Doyle CJ in Rouse who suggested test should be whether or not an old
trustee would be required to pass on documents on to a new trustee if
replaced and also explained that the right to inspect trust documents is a
qualified right. Trustee may be able to refuse inspection of trust
documents (per Dolye CJ in Rouse) if:
it is necessary to maintain confidentiality of the reasons for exercise of a
discretion where B's have no right to access the reasons
if the documents were received in confidentiality
if it is not in the interests of the beneficiaries as a whole
Right to inspect trust docs
3. The UK – different approach in Schmidt and in Breakspear – B's
do not have a right to inspect but court may use their inherent
jurisdiction to supervise administration of a trust to allow
inspection. In deciding this, considerations in Rouse and Hartigan
to be given attention
Position unclear
HC Dicta
Attitude in Macedonian
Rights of B's
Rights to seek property and wind up trust:
Rule in Saunders & Vautier – must be sui juris and
have asbolute, vested and indefeasible title
Limitations:
- Outstanding ROI
- Trust created by court order
Settlor can avoid rule – see methods in Laycock v
Ingram
One B entitled – others are not?
Rights of B's
To seek removal of the trustee:
- provision in trust instrument?
- trustee is dead, out of state or wants to be
discharged or is unfit to act per s 41 then
continuing trustee can appoint new trustee
- it is expedient to appoint new trustee in terms of
administration of the trust – s 48
- exercise of court's inherent jurisdiction
Discretionary power
Remedies
Revise Equity
Situations:
Where there has been a profit
Where there has been loss to trust fund
- misappropriation/misapplication by T
- Conflict of interest/negligence/breach of
investment provisions
Where there has been loss and profit
Proprietary remedies – tracing rules