Right to Due Administration of the Trust

A fundamental right of any beneficiary of a trust is the right to the due administration of a trust and a right to enforce the trust according to its terms.

“A “beneficiary”, in ordinary language, is a person for whose benefit a trust is to be administered and who is entitled to enforce the trust according to its terms.”

Kafataris v The Deputy Commissioner of Taxation1

French J stated in Australian Securities and Investments Commission In the Matter of Richstar Enterprises Pty Ltd:2

“I accept that there are some rights enjoyed, even by the beneficiaries of a non-exhaustive discretionary trust with an open class of beneficiaries. They include the right to inspect the trust documents 3 and the right to require the trustee to provide information about management of the trust fund. 4 There is also a right to enforce the proper management of the trust by the trustee.5

 

The High Court of Australia in Kennon v Spry6 confirmed the right of a beneficiary to the due administration of a trust citing the judgement of French J above. The High Court described the right to the due administration of a trust as an “equitable chose in action” at [75].


(1) Kafataris v The Deputy Commissioner of Taxation [2008] FCA 1454 at [42] {Link}

(2) In the Matter of Richstar Enterprises Pty Ltd(ACN 099 071 968) v Carey (No 6) [2006] FCA 814 at [30] {Link}

(3) Re Londonderry’s Settlement [1965] Ch 918

(4) Spellson v George (1987) 11 NSWLR 300; Hartigan Nominees Pty Ltd v Rydge(1992) 29 NSWLR 405.

(5)  Commissioner of Stamp Duties (Qld) v Livingston[1964] UKPC 2[1965] AC 694; Re Atkinson[1971] VR 613.

(6) Kennon v Spry [2008] HCA 56 at [125] {Link}

 

Beneficiaries have standing to approach the Court for the purpose of seeking a “true construction” of the terms of the trust in which they have a beneficial interest./

Young J in McLean v Burns Philp Trustee Co Pty Ltd (1985) NSWLR 623 covered the history of the right of a beneficiary to have the court execute a trust if so required.

At pp633F Young J states:

“Because a trust is of this nature, in any trust, no matter what the commercial circumstances, it is always open for a beneficiary to come to this Court and say” “This trust has not been properly administered. Please make sure that the legal owner of the property who has assumed these obligations carries them out”

At pp635E Young J states:

“The reforms of the 19th century mean that today there are a series of quite relatively simple procedures which the beneficiary can take to protect his rights in the trust fund. These are often listed in test books on trusts headed “The Rights of Beneficiaries”.

Young J continues at pp636C:

A beneficiary, if he complains to the court about the administration of a trust, is as a matter of course, entitled to the appropriate order, either to answer his question as to the construction of a trust instrument, or to settle a dispute as to the administration of the trust in whole or in part under the authority of the court, unless the court is satisfied that there is no question which requires its decision.Suspicion of irregularities on very scanty material with respect to mal-administration may be sufficient because the sanction is if, on the court’s further inquiry, its initial order is made wrongly, then it will be discharged and the plaintiff must pay the costs of the inquiry. A fortiori, if the affairs of the trust are in great confusion or there have been significant breaches of trust.”


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