Duties on acceptance of office

Once a trustee accepts the office of trustee, that trustee is bound by all of the obligations in the trust instrument1. In the case of a superannuation trust the trustee is bound by all the obligations to be found in the “governing rules” of the fund, which are a set of documents that include:

  • The original Trust Deed that established the trust,
  • Any instrument that purports to amend the terms of the original trust Deed,
  • Any Court Order related to the trust,
  • Any Act of Parliament specifically related to the trust,
  • Relevant State legislation, such as the State Trustee Act, and
  • Relevant Commonwealth legislation.  

    The trustee may not consider that the trustee is imbued with powers which are more extensive than those set out in the trust instrument2, except to the extent that the trust instrument is silent about some power which is granted to the trustee by either State or Commonwealth legislation.

    The general responsibilities are for the trustee(s) to familiarise him or herself with the terms of the trust (Regulations of the Fund)3, and in the case of a corporate trustee this is a responsibility for each of the Directors of the corporate trustee.4.

    The general responsibilities also include familiarisation with the nature of the trust property involved, the range of objects in within the contemplation of the trust 5, the identity of other trustees 6, to consult all the documentation connected with the trust 7 (including the Deeds of the trust, any document relating to the exercise of a discretionary power or power of appointment, trust accounts, the scope of investments made by the trust 8, statements of investment criteria and so forth) and familiarisation with any other information pertaining to the management of the trust which is not recorded in documentary fashion9.

    If necessary the trustee is required to take legal advice as to the efficacy or legality of any action taken by former trustees in relation to the trust 10. What a trustee – whether a new trustee of an existing trust or a trustee of a new trust – cannot do is sit supinely by without investigating the nature and extent of his or her obligations as trustee.

    In general terms it is of some comfort to a trustee to know that any individual trustee will only be liable, in principle, for any matters of which he or she had or could have had been expected to have had knowledge 11. Nevertheless, it is important to bear in mid that a trustee will be liable for matters of which she could be expected to have knowledge; that is, as mentioned before, the trustee is obliged to find out information about his or her trusteeship and not simply fail to investigate matters over which he or she is expected to exert control12

    Notes:

    (#1) Clough v Bond (1838) 3 My & Cr 490

    (#2) Ibid

    (#3) The costs and expenses of conducting this process of familiarisation may be recovered from the trust: Re Pumfrey (1882) 22 Ch D 255; De Vigier v IRC [1964] 2 All ER 907.

    (#4) Arakella Pty Ltd v Paton (No.2) (2004) 49 ACSR 706; [2004] NSWSC 605.

    (#5) Hallows V Lloyd (1888) 39 CH D 686,691 per Kekewich J.(#6) Nestle v National Westminster Bank plc [1993] 1 WLR 1260, 1265.

    (#7) Tiger v Barclays Bank Ltd [1952] 1 All ER 85.

    (#8) Nestle v National Westminster Bank plc [1993] 1 WLR 1260.

    (#9) Mond v Hyde [1990] QB 1097.

    (#10) Equity & Trusts by Alastair Hudson (5th Ed) 8.3.1

    (#11) Re Hurst (1892) 67 LT 96; Young v Cloud (1874) LR Eq 634)

    (#12) See Ibid, and Mond v Hyde [1999] QB 1097

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    This tab updated on 15 February 2016