Fiduciary Powers

The concept of a “fiduciary power” was discussed by Austin J in Lgss v Egan [2002] NSWSC 1171 at [107] {Link}.

“When a power is vested in a fiduciary such as a trustee, the limitation is more extensive than in a case where the holder of the power is not otherwise in a fiduciary position. In such cases the power is sometimes referred to as a “fiduciary power”. The fiduciary is under a duty to consider from time to time whether to exercise the power: Re Baden’s Deed Trusts [1970] UKHL 1; [1971] AC 424,449 per Lord Wilberforce; Lutheran Church of Australia v Farmers’ Co-operative Executors & Trustees Ltd [1970] HCA 12; (1970) 121 CLR 628, 652 per Windeyer J. The exercise of such a power is open to review if it is in bad faith (Karger v Paul [1984] VicRp 13; [1984] VR 161), or not on a real and genuine consideration (Re Beloved Wilkes’ Charity [1851] EngR 375; (1851) 3 Mac & G 440 [42 ER 330]), or not for proper purposes (Cowan v Scargill [1985] 1 Ch 270), or for expressed reasons that are bad (Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896). The doctrine of fraud on a power, where it applies to the exercise of a power by a non-fiduciary, authorises intervention where the power is exercised for bad faith or for purposes foreign to the power, but not on the other grounds just stated.”

Austin J stated at [106]:

The equitable doctrine of fraud on a power imposes a limit on certain kinds of powers, even when they are expressed in general terms. There is a discussion of the scope of the equitable doctrine in Commonwealth v The Colonial Combing, Spinning and Weaving Company Ltd [1922] HCA 62; (1922) 31 CLR 421, at 470-475 per Higgins J. His Honour points out (at 471, citing Vatcher v Paull [1915] AC 372, at 378 per Lord Parker) that the term “fraud” does not necessarily denote, in this context, conduct amounting to fraud in the common law sense, but merely means that the power has been exercised for a purpose, or with an intention, beyond the scope or not justified by the instrument creating the power.

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This tab updated on 31 July 2015