Rights, powers & duties of trustees

Rights

Trustees have certain rights that protect them when discharging their duties in a proper manner. The principal right of trustees is their entitlement to reimbursement from the trust fund for debts properly incurred in the course of the conduct of the trust by the trustee personally.

A trustee may, in appropriate circumstances, also have a right of reimbursement from a beneficiary.

In most jurisdictions, the right of reimbursement can be excluded so that it is not available to a liquidator who may become subrogated to the rights of a trustee. However, great care should be taken or the directors of a trustee company could become personally liable: s 197, Corporations Act 2001 (Cth).

Powers

Unless the powers of a trustee can be said to be conferred by the court under its inherent jurisdiction or found in legislation (principally the Trustee Acts of the states and territories), all powers must be sourced in the declaration of trust.

Important powers that are found to a greater or lesser extent in the various state and territory acts include:

• • a power of sale;
• • power to postpone sale;
• • power to manage;
• • power of maintenance and advancement;
• • power to mortgage;
• • power to lease; and
• • power to insure insurable trust property in Western Australia.

Duties

Duties of a trustee are imposed by the trust instrument, statute and general equitable principles. Departure by a trustee from the terms of the trust can result in the trustee being personally liable for any losses.

General principles governing such duties include:

• • to adhere to and carry out the terms of the trust;
• • to get in the trust property;
• • not to impeach the validity of the trust instrument or the title of the beneficiary;
• • to act impartially amongst the beneficiaries;
• • to properly invest the trust funds;
• • to keep and render proper accounts;
• • to exercise reasonable care;
• • not to delegate duties or powers (subject, in Western Australia, to certain narrow statutory exceptions where a trustee may, under s 54 of the Trustees Act (WA), delegate duties of powers temporarily during his or her period of absence from Western Australia or physical infirmity and other than in South Australia where s 17 of the Trustee Act 1936 (SA) provides for a general power of delegation);
• • to act gratuitously (modified by statute): s 77 of the Trustee Act 1958 (Vic); s 58 of the Trustee Act 1898 (Tas); s 59B of the Trustee Act 1936 (SA) and s 70(1) of the Administration and Probate Act 1919 (SA); and
• • not to deal with trust property for personal benefit or otherwise profit by the trust.

See Rights, powers, and duties of trustees.