Judicial Statements – Trusts in General

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The Rights of Beneficiaries

Lord Browne-Wilkinson stated in Target Holdings and Redferns [1995] UKHL 10:

“The basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law.”

“The basic equitable principle applicable to breach of trust is that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach.”

The Role of the Court

Lord Simonds L.C. stated in Chapman v Chapman [1954] UKHL 1; [1954] AC 429 :

“It is the function of the court to execute the trust, to see that the trustees do their duty and to protect them if they do it, to direct them if they are in doubt, and if they do wrong, to penalize them.

Evershed MR stated in Re Downshire Settled Estates [1953] Ch 218:

“One thing is, we think clear: just as the court has always insisted on the due and proper observance by trustees of the terms of their trusts, so also will its own orders depart as little as possible from the strict letter of the trust instrument.”

The Role of Beneficiaries

Lord Parker stated in Bowman v Secular Society Ltd [1917] AC 406,  441.

“It is a necessary part of any trust that there is a beneficiary capable of enforcing the trustees’ performance of their duties under the trust.”


The Role of Trustees

Lord Blackburn stated in Letterstedt v Broers (1884) 9 App Cas 371, 387.

“It must always be borne in mind that trustees exit for the benefit of those to whom the creator of the trust has given the trust estate.”


Formal Legal Relationship – Trustees and Beneficiaries

The Western Australia Court of Appeal stated in Schreuder v Murray [No. 2] 41 WAR 169; 260 ALR 139 ;[2009] WASCA 145:

“A trustee is the trustee of property for the benefit of the beneficiaries of the trust. The trustee and beneficiaries have a correlative duty and interest in the proper administration of the trust. The duty of the trustee includes a duty to properly perform the trust by adhering to and carrying out the terms of the trust. The beneficiaries have an interest and, indeed, a right to compel proper administration of the trust. The trustee and the beneficiaries are in a formal legal relationship and if the trustee obtains legal advice concerning the proper administration of the trust, then any legal professional privilege attaching to the advice obtained is the joint privilege of both the trustee and the beneficiaries. As such, the trustee and the beneficiaries, being entitled to joint privilege, may not maintain the privilege against each other.”

Amending the Terms of the Trust

Neuberger J stated in Bestrustees v Stuart [2001] PLR 283, [2001] Pens LR 283, [2001] EWHC 549 (Ch), [2001] OPLR 341:

“I bear in mind that a pension scheme is likely to continue for a substantial period of time and that those most affected by them and entitled to protection from the trustees, the employer and indeed the Court, will be people who are comparatively poor, who will not have easy access to expert legal advice, and who will not know what has been going on in relation to the management of the Scheme. In those circumstances, it seems to me that protection of the beneficiaries requires the Court to be very careful before it permits a departure from the plain wording and plain requirements of the trust deed.”


Conduct of Trustees

Drummond J stated in ASIC v QLS Superannuation Pty Ltd [2003] FCA 262 in making reference to a corporate Trustee stated:

Employer-contributors and Fund members as potential beneficiaries are thus especially dependent on the integrity and competence of their Fund’s trustee and those persons who control the activities of the trustee.

Young J in the Supreme Court of New South Wales in Maciejewski v Teltra Super Pty Ltd [1998] NSWSC 376 observed:

“Although the Court will not interfere with the proper discretion of trustees, the Court will also not allow people who are using their powers under a trust deed to deny beneficiary rights by incompetence or inaction..those who are given a job of acting fairly under superannuation schemes must be scrupulously professional, careful and assisting. If they are not, then this Court will need to step in….

It is true that this Court does not usurp the position of trustees. This Court does not reach the view that trustees ought to have reached. The role of the Court is to ensure that trustees behave fairly and properly and treat beneficiaries as human beings….”

…those who are given the job of acting fairly under superannuation schemes must be scrupulously professional, careful and assisting. If they are not this Court will need to step in.”

In the Federal Court in Jazazieveska v Secretary, Department of Family and Community Services [2002] FCA 1484, [410] Cooper J concluded:

“A person does not act in good faith where the person turns a blind eye to circumstances which raise doubts as to the entitlement of the person to receive and retain the payments (of a benefit) or refuses to make reasonable inquiries where doubt exists.”

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This tab updated on 20 March 2015