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EQUITY WK 10/11, Variation and Termination of Trusts, Appointment and…

- - - - exceptions
        
        All the beneficiaries (if of age and capacity) direct otherwise. an illegality would result. Trustee is compelled by a statute or court order. failure to comply sanctioned by the court.
      - these begin on trustee acepting the appointment
        
        trustee duties are always binding on a trustee they are fiduciaries
      - standard of care
        
        Duties and powers must be exercised to the standard of the “ordinary prudent business person. speight v gaunt; in the same manner that an ordinary prudent man of business would conduct his own, and that beyond that there is no liability or obligation on the trustee.
        
        in youyang v minter Ellison= a trustee's most important duty is to obey the terms of the trust.’ it is the duty of the trustee to perform the trust honestly and in good faith' -armtiage v nurse.a trustee does not have the implied power to vary the terms of the trust mercanti versus mercanti
        
        Erzurumlu v kellog= the trustee is required to inform itself properly of the relevant facts, to act on good faith, on a real and genuine consideration of the material before it and for sound reasons.
        
        trustees subject to a higher standard
        
        Professional trustees are held to a higher standard of care: Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1.
        A trustee with special expertise, when acting in that area, will be held to the higher standard of care of an ordinary professional in that field: Jones v AMP Perpetual Trustee Company [1994] 1 NZLR 690.
      - TYPES
        
        Duty to keep accounts
        
        Trustees must keep records of money received and payments made. Records should be made available to the beneficiaries burns V Kendall . Failure to keep records will be construed against the trustee. Also, trust property should generally be kept separate from trustee’s own property. this is a hallmark duty of a trustee Puma V sportsman's (ie cash should be kept in a designated trust bank account) lupton V white.. Where there is one income for a term (ie life) and a remainder, trustee must keep separate accounts for income and capital. Beneficiaries are entitled to view the accounts as part of their right to information (see below).
        
        must allow beneficiaries to inspect trust accounts and documents spellson verse George accounts must be kept up-to-date and accurate strus V wykes.
        
        duty to correctly pay beneficiaries
        
        Beneficiaries are entitled to be paid according to the terms of the trust. For example, may be entitled to a share of the income of the trust. If a beneficiary is overpaid, trustee has an obligation to review overpayment from beneficiary’s share of future entitlements: Downes v Bullock (1858) 25 Beav 54. Traditionally view -- if share is insufficient, trustee cannot recover excess from beneficiary: Merriman v Perpetual Trustee Co. (1896) 17 NR (NSW) Eq 325. Possibility there could be a claim against the beneficiary under unjust enrichment. A beneficiary who has been underpaid can sue for breach of trust. But see TA ss. 58, 60 & 61A, trustee not personally liable where: Trustee acts under power of attorney, acts in good faith unaware that the person who gave the power was dead or avoiding the power. Trustee distributes property, if they made the required inquiries and did not receive notice.
        
        if a beneficiary has been overpaid a trustee must reduce future payments to account for the overpayment merriman v perpetual trustee co. in the past it was said that trustees could not sue an overpaid beneficiarii on grounds of fairness RE Aspinall. however recent developments may support an action for unjust enrichment
        
        duty to not profit
        
        Trustees as fiduciaries must avoid conflicts of interest. This means a trustee may not be paid except as authorized by: The trust instrument (may be express or implied)re j Thorley. . By (clear) agreement between the trustee and beneficiaries (if of age and capacity)mayne v jaques. The court. By statute -- the Public Trustee and trustee companies may be paid. not in nsw
        
        self-dealing/trafficking
        
        the duty not to profit from the trust also prevents trustees from purchasing or taking a beneficial interest in trust property or from borrowing from trust funds. In fenwick, kingi and heke v narea Under the self dealing rule if a trustee sells the property to him or herself the sale is voidable by any beneficiarii ex debito justitiae isn't just confined purchases of trust property can be other forms of commercial transactions such as a lease of trust property. Can include where the purchaser is another company in which the trust has shares in. an exception to this rule is the fairdealing rule that allows a trustee to purhase trust property with the fully informed consent of the beneficiaries Williams V Scott
        
        duty not to purchase trust property
        
        Trustees must not purchase trust property, even at fair market value. A purchase will be voidable by the beneficiary (not void). Exceptions: If allowed by the trust instrument. With the consent of all beneficiaries (being of full age and capacity), if beneficiaries are fully informed, the transaction is at arm’s length, and the price if fair. If authorized by the court under its inherent jurisdiction. This rule also applies to the purchase of the beneficiary’s equitable interest in the trust.
        
        duty to act impartially
        
        Trustee cannot favour one class of beneficiaries over another re chomley , not a fiduciary duty (wilden) Duty to be impartial is a positive duty arising from the terms of the trust. Problems may arise where one person or class has a life interest in the trust, and the other holds the remainder. Usually the person with the life interest is entitled to the income from the trust, and the remainder person is entitled to the capital. Ie for land, the land itself is the capital, but the income would be the rents received from leasing the land. For shares, the shares would be the capital, but the dividends paid on the shares would be income. May depend on the type of asset and how it is used – ie money invested to produce income but not grow capital will disadvantage the persons who holds the remainder. Trustee may need to sell trust property and purchase other property that will preserve capital and generate income.
        
        The duty to act impartially has two major incidents the first is;
        
        The Rule in Howe v Dartmouth: If assets in the trust are of a “wasting” nature, can be converted into appropriate investments so that the person holding the remainder is not disadvantaged. Example – copyrights (which will expire), leaseholds. Can be sold and shares purchased. Assets are then apportioned into income and capital. Ie – dividends on shares = income, proceeds from the sale of shares = capital.
        
        2nd is apportionment;the process by which a trustee determines how to divide the profits and losses of the trust between life tenants and remained persons.
        
        duty to invest
        
        Trustees have a duty to invest the trust property. necessary to determine the purpose of the trust itself and the benefits which the beneficiaries are intended to receive Merchant Navy ratings V Stena line.
        Applies even when the trust document is silent: Adamson v Reid (1880) 6 VLR (E) 164. Examples: money should be deposited for interest or used to buy shares, land should be leased: Byrnes v Kendle (2011) 243 CLR 253. Historically, there was a statutory list of authorized investments other than as allowed in trust instrument. Now repealed, trustee can invest in any investment: TA s. 14, unless trust instrument directs to the contrary. Trust instrument may specify investments. Trustees cannot speculate: Fouche v Superannuation Fund Board (1952) 88 CLR 699. Must act in the beneficiaries’ best financial interests: Cowan v Scargill All ER 760. Trustees views on morality of certain investments irrelevant.
        
        standard of care
        
        All investments subject to standard of ordinary prudent business person. Trustee Act s. 14A: (2) A trustee must, in exercising a power of investment: (a) if the trustee’s profession, business or employment is or includes acting as a trustee or investing money on behalf of other persons, exercise the care, diligence and skill that a prudent person engaged in that profession, business or employment would exercise in managing the affairs of other persons, or (b) if the trustee is not engaged in such a profession, business or employment, exercise the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons.
        
        duty to act personally
        
        The trustee has a duty to act personally and exercise their discretion re the best interests of the beneficiaries. Cannot take direction from any other person (including settlor after trust is created, and including beneficiaries). If there are multiple trustees, one trustee cannot leave administration of the trust to the other trustee(s). If multiple trustees, must act unanimously. Cannot fetter discretion. Fettering = adopting rules rather than making decisions based on the circumstances of each situation.unanime rule does not apply to charitable trust where majority is over is required re whitley.
        
        The trustee cannot delegate their decision-making authority. Exceptions:cAs allowed by the trust instrument. As allowed by statute: TA s. 64 (trustee to be absent from NSW). Delegation a matter of necessity, acts are administrative and non-discretionary. Trustee is under a duty to consider re the exercise of their discretionary powers – means they must turn their mind to the issue & inform themselves.
        
        AGENTS
        
        Can employ agents such as accountants, real estate agents (TA s 53). In the case of a large/complex trust agents will be essential. Must select agents competent in the area of appointment: Fry v Tapson (1884) 28 Ch D 268. TA 53(5): Nothing in this section shall authorise a trustee to employ an agent in any case where a person acting with prudence would not employ the agent to transact the business or do the act, if the business or act was required to be transacted or done in such person's own affairs. Appointing agents does not violate the duty to act personally so long as the agents act under the direction of the trustee and do not exercise discretionary powers.
        
        FRAUD ON A POWER
        
        relates to situations where a trustee is exercising discretionary power for unauthorised or improper purpose vatcher v paul. Not necessarily dishonest or immoral behaviour can be an intention to achieve and ulterior purpose re crawshay. In relation to being properly informed and reaching a decision a trustees duty does not extend it doing the impossible alcoa v frost.
        
        CONSULTING WITH BENEI IN EXERCISING A POWER
        
        trustees do not need to consult with or seek the opinions and views of beneficiaries under the trust. trustees are also on no obligation to give reasons for their decision re Londonderrys settlement.
        
        Duty to consider the exercise of trust power
        
        fiduciary duty to consider
        
        trustees are obliged to properly consider the exercise of their powers re gestener settlement. Bound by fiduciary duties to give from time to time real and genuine consideration to the issue by examining the options and determining which one was an appropriate course of action. A trustee who seeks professional advice an follows that advice will often be excused even if the advice is wrong ashrafinia v ashrafinia. if trustees relying on professional advice act honestly and reasonably they will be excused from any breach of trust that they may have committed investa v Westpac.
        
        duty to sell trust property
        
        Trust for sale, expressed or implied from intention of the creator or expressed in the trust document. requires trustee to sell the property for a fair price as soon as possible. Not obliged to sell at one so any precise definite or particular time; They are entitled to use reasonable discretion. Cox V Archer.
        
        Duty to inquire
        
        duty to inquire initially involved becoming familiar with the terms of the trust hallows v Lloyd, they must inform beneficiaries of their rights and entitlements when they reach the age of majority and become entitled to their interests- Hawkesley v may. they must examine trust property and relevant documentation to ensure their title two and control over trust property low v Bouverie. subject to any provision in the trust deed or statute a trustee is obliged to get the trust property in protected and vindicate the rights attached to it CGU insurance v one.tel
        
        duty to give info to beneficiares
    - - must be exercised in good faith per fiduciary duites
        
        a power will be implied but it is necessary to give affect the terms of the trust such as where there is a direction to distribute the trust property among beneficiaries and the property is not divisible in its present sale. Alston V equity trustees, executers an agency limited 1912.
      - the exercise of trust powers are discretionary
        
        Discretion: is a decision-making process where the outcome is not mandated. The trustee can chose from multiple acceptable outcomes. More complex concept of discretion, it is the ability to set standards for how the decision is made. Discretionary powers need to be exercised in accordance with the purpose they were granted for: : Roncarelli v Duplessis [1959] SCR 121.
      - types
        
        powers of sale
        
        No general power of sale. Trustee’s primary duty is to preserve property. Selling trust property requires authority. However, this authority may be found in: The trust instrument (may be express or implied). Can be implied if necessary to give effect to the terms of the trust. Statute – ie TA s. 38 (where trustee authorized to use capital money, may raise it by sale) or Court order.
        
        general powers to sell a power will be implied but it is necessary to give affect the terms of the trust such as where there is a direction to distribute the trust property among beneficiaries and the property is not divisible in its present sale. Alston V equity trustees, executers an agency limited 1912.trust property are granted in Queensland and Western Australia.
        
        There are more particular powers in other states.
        
        In the absence of a power of sale in the trust instrument or pursuant to statute, a court order may grant a power of sale, in the exercise of a statutory jurisdiction to vary the terms of a trust.\
        
        powers of management
        
        Depending on the terms of the trust and the nature of the trust property, trustees may need to manage property. Powers of management may be found in the trust instrument. Trustee Act provides broad powers of management: TA s 82/3: power to repair and improve.. TA s 41: power to insure. TA s 49: power to settle claims against the trust. If a power to carry on a business not granted in trust instrument, may be ordered by court.
        
        burns V Kendall the High Court held that a trustee of vacant residential property had a duty to make it productive by leasing it even if there was no express power in the trust instrument to do so. It is the duty of the trustee to invest the trust property subject to the limits permitted by the legislation enforced under the proper law of the trust and subjects to any limits stated in the trust document. They must lay it out for the benefit of the estate rockE V hART 1805
        
        legislation has been introduced to grant trustees wide powers of management, powers to effect repairs an improvement of property trustee act 1925 NSW ss 82, 82 a., power to ensure the property S 41, power to carry on a business, power to settle claims made against the trust S 49
        
        Powers of maintenance and Advancement
        
        Trustees may have powers to make payments to beneficiaries outside the normal operation of the trust: ie where a beneficiary’s entitlement is continent on their reaching 21, there may be a power to make payments before that time. Maintenance – payments for food, clothing, etc. Advancement – payments to establish beneficiary in life (ie tuituion). May be in trust instrument, or if the trust instrument is silent, under TA s. 44. Statutory power is subject to contrary intention in the trust instrument.
        
        in Fisher v nemeske the High Court held that in a discretionary trust in which the trustees had the power to pay or to apply the trusts capital income for the maintenance education advancement in life or benefit of certain beneficiaries this could be done by means of creating a debt in favour of the specified beneficiaries and that there was no need for funds to be actually transferred out of the trust and to the specified beneficiaries
        
        section 43 powers of maintenance and advancement- power to make payments to beneficiaries prior to the beneficiary obtaining an absolute right to his or her interest.
    - - Discreitonary decisions
        
        Beneficiaries do not usually have the right to be consulted before trustees exercise discretion. The trust instrument may require consultation. Consultation is permissible so long as it does not amount to a direction/surrender of discretionary authority. Trustees do not have to give beneficiaries reasons for their decisions. In Queensland and Western Australia, the statutes provide beneficiaries with a right to apply to the court for review: Trusts Act 1973 (Qld) s. 8, Trustees Act 1962 (WA) s. 94 No equivalent section in NSW at present
      - breach of trust
        
        Beneficiaries’ fundamental right is to compel performance of the trust, with aid of the court if required: Bartlett v Bartlett. The rights of beneficiaries are against the trustees, not generally against third parties. Beneficiaries can seek an injunction to prevent breaches of trust that have not yet occurred: Howden v Yorkshire Miners Association [1905] AC 256. (Note, remedies for breaches which have already occurred will be covered in week twelve).
      - to pursure 3rd parties
        
        General rule -- beneficiaries have no cause of action against third parties. Their right is to have the trustee take action on behalf of the trust. There may be a right to pursue third parties in exceptional circumstances where the third party has damaged the trust and the trustees fail in their duty to protect the beneficiaries interests/protect the trust property: Hayim v Citibank NA [1987] AC 730.
      - right to info about the trust
        
        Trustee has a duty to provide/beneficiaries have a right to receive info re the trust. Includes: A right to trust documents, A right to the accounts for the trust. Right is not absolute A right to information about the trust does not mean that all documents should be handed over Wentworth v de Montfort. needs to be measured alongside all the rights and obligations created by the trust instrument rouse v IOOF. Read londonderry's settlement; peat v walsh -- Potential issues: entitlements of discretionary v fixed beneficiaries, presence of personal/commercial confidential information in trust documents. Wishes of settlor that information be kept confidential will be considered, but is not determinative. Right to information is not a right to all documentation
        
        what is a 'trust document'
        
        Re Londonderry’s Settlement; Peat v Walsh [1965] Ch 918: Discretionary trust for settlor’s family with a power to distributed all remaining trust property. Trustees’ decision to do so was a discretionary decision, no obligation to give reasons. Beneficiary requested and received original appointments made and trust accounts. But also requested: (a) Minutes of the trustees' meetings; (c) Correspondence between the trustees and appointers and beneficiaries; (e) Correspondence between [the settlor] and the trustees and appointers
        
        Original appointments and trust accounts provided. Trustees asked court for direction re their obligations. Found that right is not to inspect all documents relating to the trust – no right of access to the requested documents. Salmon J suggested, inter alia, that “trust documents” are documents in the hands of the trustee with information the beneficiaries are entitled to.
        
        There are control clauses in the trust instrument which gives certainty to the scope and nature of the beneficiaries right to receive trust information. In assessing whether a document is trust document is to look at the intention of the creator of the trust if they intend it to be confidential or not haritigan nominees v ryde
        
        Legal advice given to trustees for the purpose of litigation may not necessarily be trust information – talbot v Marshfield. on the other hand if this advice is paid for by trust funds there is authority to suggest that the advice will be a trust document brown V oakshott.
        
        nature of the right
        
        In Schmidt v Rosewood Trust Ltd. [2003] 2 AC 709, the Privy Council found that the right to information was in the court’s discretion, balancing competing interests. Australian courts are divided on whether Schmidt will be followed here. Even where beneficiaries’ have a right to information, what they are entitled to is sufficient information to ensure accountability of trustees: Foreman v Kingstone [2004] 1 NZLR 841. May not be entitled to all trust information. Trust instruments may limit beneficiaries’ right to information: Hartigan Nominees v Rydge (1992) 29 NSWLR 405.
        
        In light of controversy in Erceg v Erceg the New Zealand Supreme Court commented as follows that matters needing to be evaluated in relation to an application for disclosure of trust documents include;
        
        the documents that are sought. the context for the request and the objective of the beneficiarii in making the request. the nature of the interest held by the beneficiarii seeking access. whether there are issues of personal or commercial confidentiality. whether there is any practical difficulty in providing the information. whether the documents sought disclose the trustees reasons for decisions made by the trust. the likely impact on the trustee and the other beneficiaries if disclosure is made. the likely impact on the settler and third parties if disclosure is made. whether disclosure can be made while still protecting confidentiality. whether safeguards can be imposed on the use of the trust documentation. this was confirmed in right V Stevens
        
        the duty to provide information also require trustees to contact beneficiaries and inform them of their possible rights
        
        The duty of any particular trustee depends on what is bold involved in faithfully carrying out the office of being trustee of that particular trust
- - - - Interest must be vested. A trust created for grandchildren who take interest when they turn 45 does not vest before then: Arnott v Kiss [2014] NSWSC 1385. A bequest contingent on testator’s son surviving him for ten years (with a gift-over if he did not) was not vested: Perpetual Trustee Co. (Canberra) v Rasker (1986), 84 FLR. Beneficiary must have legal capacity. If there are multiple beneficiaries, they must all be vested, of capacity, and together, must be absolutely entitled to the entire interest in the property. A trust with a life interest and a remainder person could be terminated under the rule if both agreed – together they hold the entire interest. May be used even if: Termination prohibited in the trust instrument. Termination means the terms of the trust may be defeated.
      - Discretionary Trusts & Charitable Trusts
        
        A discretionary trust may be extinguished if the class of beneficiaries are closed, all beneficiaries are known, and all of them agree: Sir Moses Montefiore Jewish Home v Howell (No 7) [1984] 2 NSWLR 406. Charitable trusts may be extinguished under the rule if trust is for the benefit of an organization entitled to the income.
- - - - May be used when a trustee: Wants to be discharged, Dies or is dissolved (if a corporate trustee), Refuses to act, or is unfit to act, or is incapable of acting, or is a minor, Is removed, Remains out of New South Wales: for more than one year without having properly delegated the execution of the trust, orfor more than two years.
      - contains a statutory power to appointment new trustees: s. 6. Can be exercised by, The person empowered to nominate new trustees under the trust instrument. Existing trustee(s) or Legal representatives of the last surviving/continuing trustee.
  - - - Welfare of the beneficiaries is dominant consideration letterstedt v broers. Statutory power can be exercised even where there is an appointer who is willing and able to appoint pope v DRP nominees. ultimate consideration in deciding whether to remove a trustee is the Jew and proper administration of the trust porteous v Rinehart.
  - - - if the trustee is dissolved the court can appoint a new trustee king of hanover v bank of england. In Danich re cenco holidngs A company that was registereed after a period of deregestration was revested with the trust property after registration
      - a promise or covenant that a trustee will retire in certain situations does not bring about an automatic retirement when those situations arise whitton v CAN
  - - - Express power to remove trustees and appoint a new one is described as a fiduciary power pope V DRP nominees. The power to be exercised in good faith and for the benefit of the trust as a whole- duke of Portland v topham.
    - - conflict of duty and interest will not necessarily lead to removal of the trust depends on the facts with K factor being what is best for the welfare of the trust estate as a whole hunter v hunter; wales v wales. in case of negligent, trustee will be removed if it endangers the trust property or showed a lack of honesty capacity or fidelity letterstedt v broers. inconsequential mistakes are not sufficient grounds for removal powell v powell.
      - A tardy trustee may not necessarily be removed- re grief. but if the effective administration of the trust has broken down it may be necessary to replace the trustee Smith V Smith. disagreement is not sufficient ground for removal; letterstedt v broers, benson v Dolarine. Unless this destroys the trustee's capacity to carry on their duties titterton v oates. oh renders them no longer suitable to carry on the purpose of the trust bishop Irinej dobrijevic v free Serbian orthodox church. There's not necessary to establish bad faith misconduct or breach of trust before a trustee is removed elovalis v elovalis
      - Act in a ways inimical to the trust officer v haynes. Fundamentally misunderstand their duties and responsibilities Mansour v Mansour. Are hopelessly conflicted hill v fry. Have misappropriated trust funds wilis v willis. Or have dissapeareed and become uncontactable kennedy v kennedy. Become bankrupt miller v Cameron.
- - - - Trustee is personally liable for expenses incurred while administering the trust. (Muir v city) Can be based in contract or tort. Can claim indemnity and reimbursement from the trust assets: Based in equity – has been said to be an inherent part of the trustee’s office and inseparable from it. Statutory authorization per TA s. 59(4): “A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee's trusts or powers.”
        The right of indemnity is an incident of the trustees office and is to be said the inseparable from it- kemtron v commissioner of stampt duties. The right is recognised in equity and statute.
        
        right to indemnity relates to present past or future work with amount not needed to be precisely known or quantified- re application of Sutherland. retriment or removal does not prejudice those rights- harpur v levy. Beneficiarii are not entitled to a distribution of trust assets until the trustees indemnity has been satisfied Lemery v reliance financial services.
      - REASPNABLE EXPENSES: For the trustee to be entitled to indemnity and reimbursement, the expenses must be properly incurred (executors v barnes), not improperly incurred nolan v collie) Trust is not responsible for expense improperly incurred. Must be in the course of administering the trust and no incurred in breach of trust. What is proper or improper is to be answered by reference to the duty with which the trustee was required to comply or the power that rusty was intending to exercise. standard of care is that which might be expected of a trustee as objectively but not over zealously enforced Nolan v collie. it says he heard outside terms of the trust no right to indeminity- holli v Australian securities commissioner.
        
        BUT trustee can claim for expenses incurred as a result of a mistake that is a “slip”/mere error in judgement. Divided authority on what is a ‘properly incurred’ expense – see Radan 26.39-47 and discussion in the seminars.
      - CLAIMS AGAINST BENEFICIARIES
        
        The trustee’s claim is an equitable interest in the trust property which has priority over the interests of beneficiaries: Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226. If trust assets are insufficient, a trustee can claim against a beneficiary: Hardoon v Belilious [1901] AC 118. Beneficiary must be of full age and capacity. The trust must be fixed, not discretionary. Rational is that it would be unjust if beneficiary gains benefit of trust without risks.
      - The clear accounts rule any claim for indemnity will be set off against last any light caused by the trustees breach Australian securities and investments V letten.
    - - At common law, in case of breach, each trustee liable for entire amount incurred in a breach of trust (cockburn v gio finance). Includes passive trustees who did not take part in the breach. Trustees, may subsequently claim contribution from each other. A trustee not personally responsible for the breach, who has acted reasonably, may be entitled to indemnity from their fellow trustees: Selkirk v McIntyre. where two defendant trustees have committed a breach of trust each is bound to pay compensation to the beneficiarii measured by amount of the loss attributable to their breach.trustees who have acted reasonably may be entitled to an indemnity, Goodwin v duggan.
        
        If a trustee is a solicitor and other trustees reasonably relied on their advice. If a trustee received a personal benefit from the breach. If a trustee acted fraudulently and the other trustee did not. If a trustee is a beneficiary and benefits from the breach, amount deducted from amount trustees must compensate trust for.
      - Defences to claims for contribution
        
        Common law rules amended by statute -- Trustee Act s. 59(2): A trustee shall be answerable and accountable only for the trustee's own acts, receipts, neglects, or defaults, and not for those of any other trustee … unless the same happens through the trustee's own wilful neglect or default.
        
        Dalrymple v Melville, (1932) 32 SR (NSW) 596: A trustee acted honestly and without knowledge of any wrongdoing. Allowed fellow trustee, a solicitor, to sell trust assets. Proceeds were misappropriated.The honest trustee was not protected under s. 59(2) – duty was to safeguard the trust, trustee had failed to take simple precautions.
      - A claim can be brought against a beneficiary who gives consent, advice, or assistance to a breach of trust. (Flether v collis) Trustee Act s. 86(1): “Where a trustee commits a breach of trust at the instigation or request or with the written consent of a beneficiary, the Court may, if it thinks fit, make such order as to the Court seems just for impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee or person claiming through the trustee.”
    - - Trustee has the right to seek directions from the court re permanent trusteed australia. Trustee Act s. 63(1): “A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument”. Whether the court will give directions is in the court’s discretion. If following direction of court (and no fraud/misrepresentation) trustee has discharged their duty.
      - Court’s Power to Excuse Breaches of Trust
        
        The court can excuse a breach of trust “either wholly or partly” from personal liability for breaches: Trustee Act s. 85(1). Per Trustee Act s. 85(2): “The relief may not be given unless it appears to the Supreme Court that the trustee has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the direction of the court in the matter in which he or she committed the breach” In making this assessment, the court will consider if the trustee has acted reasonably in the interests of the trust, and will consider the standard of care – professional trustees will be held to the higher standard.
      - The trust instrument may contain provisions excusing the trustee from liability for conduct that would otherwise be a breach or restricting their liability. This is called an exclusion clause (or sometimes an exemption or a limitation clause). If an exclusion clause is too broadly drafted, what is created may not be considered a trust. If it is clear there is intention to create a trust, the obligation to act in honestly/in good faith and in the best interests of the beneficiaries cannot be excluded: Armitage v Nurse [1998] Ch 241. Liability for actual fraud (intentional conduct contrary to the interests of the beneficiaries) cannot be excluded.
        
        the power to give advice is disretionary and court may refuse to give advice when they see the advice as inappropriate or futile. Re Atlantic holdings. advice may not be sought in relation to commercial decisions at a trustee may still have to make- re camperdown prime.
    - - a trust instrument may exclude a trustee from liability but there are limits to extent to which liability can be excluded (Armitage v nurse). Held that liability for negligence including gross negligence would be excluded by an appropriately worded clause Armitage v nurse. a trustee could not rely on an exclusion clause if the belief was so unreasonable that by any objective standard no reasonable solicitor trustee could aheve thought that what he did or agreed to get do was for the benefit of the beneficiaries.
        
        Actual fraud in this context means dishonesty or bad faith and that bad faith connotes conscious wrongdoing that is knowingly or recklessly inconsistent with the interests of the beneficiaries – wilden v green. A strict approach is taken by the courts in construing exclusion clauses. Mclean v burns.