Get in the Trust Assets

On accepting a trust, new trustees should see that they have been properly appointed in accordance with the terms of the trust. {Harvey v Olliver (1887) 57 LT 239}.

Trustees must acquaint themselves with the terms of trust and get in the trust assets {Hallows v Lloyd (1888) 39 Ch D 686 per Kekewich J at 691.

The duties of Trustees upon appointment are covered in the following documents.

Duty of Trustee upon Appointment

In The Trustees of the Christian Brothers in Western Australia (Inc) v Attorney-General (WA) [2006] WASC 191 Templeman J said at [37]:

“One of the important duties of newly trustee is to get in trust property. Where appropriate, this includes a duty to investigate past breaches of trust and, if necessary, to take action to obtain redress. A failure to do so may itself amount to a breach of trust”.

New trustees should investigate the conduct of the trust prior to their appointment and examine the trust documents, which they they are entitled to do since they belong to them jointly with the continuing trustees: Tiger v Barclays Bank [1951] 2 KB 556 at 559, aff’d [1952] 1 All ER 85.

A trustee who retires must produce all trust documents and accounts relating to the trust estate to the new trustees without a right of release: Tiger v Barclays Bank [1951] 2 KB 556 at 561.

New trustees have both the standing and the duty to sue former trustees and co-trustees for any breaches of trust committed by them: Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 96 FCR 217; 169 ALR 419; 34 ACSR 371; [1999] FCA 1820 at [51].

When a new Trustee takes office the new Trustee has a legal obligation to take proceedings against former Trustees who have committed a Breach of Trust. The new Trustee may be liable for Breach of Trust if the new Trustee fails to undertake due diligence and then fails to take proceedings against a former or co-Trustee known to have committed a Breach of Trust.

A Trustee who discovers a breach of duty must rectify it {Harvey v Oliver (1887) 57 LT 239; Millar’s Trustees v Polson (1897) 34 SLR 798}.

If a new Trustee discovers that Breaches of Trust have been committed by a previous Trustee, he must obtain satisfaction for the breaches from the old Trustee, just in the same way as an original Trustee must get in any part of the trust estate that is outstanding {Re Forest of Dean Coal Mining Co. (1878) 10 Ch.D. 450 at 451,452}

The authorities are fully covered in Young v Murphy [1996] 1 VR 279;(1994); 13 ACSR 722; 12 ACLC 558.

Normally Trustees will be liable to compensate the trust for any loss caused by their breach of trust, regardless of whether they derive any benefit from the breach. As Vinelott J said in Re Bell’s Indenture [1980] 3 All ER 425,441:

“In my judgement no valid distinction can be drawn between the position of a trustee who has misappropriated for his own benefit and a trustee who has deliberately misappropriated trust moneys for the benefit of someone else. It would to my mind be absurd to impose a lesser liability to a trustee who has deliberately misappropriated trust moneys by paying them to, for instance, his wife or children.”

A leading case of the duty of an incoming trustee to take proceedings against a former trustee who has committed a Breach of Trust is Young v Murphy.

Also refer to a Trustee’s duty to account and “surcharging the accounts” here.

[1996] 1 VR 279

[1996] 1 VR 279 p 280

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This tab updated on 15 March 2015