Trustees of family or unit trusts have many important duties which have enshrined by case law or Commonwealth or State legislation. One of the most important duties is the duty for a trustee to act personally.
There are many aspects to the duty to act personally, but they all relate to the general rule that trustees must personally exercise their decision-making power and responsibilities, in accordance with the trust deed, without influence or restrictions.
There are however exceptions under the common law and statute that allow trustees discretion in how they exercise their powers.
This article examines some of the aspects of the trustee’s duty to act personally, some of the exceptions or exemptions to each aspect under the common law or statute.
The Duty of non-delegation
The most basic aspect of a trustee’s duty to act personally is the general duty for a trustee not to delegate their decision-making powers to others, unless otherwise permitted by the trust deed.
There are two main exceptions to this general duty provided by the Trustee Act 1958 (Vic). They are as follows:
- Section 30(1) of the Trustee Act 1958 – Power to delegate trusts during absence abroad
This provision allows a trustee who has never resided in Victoria, or is absent from Victoria, or is about to depart from Victoria, the power to delegate to any person by power of attorney (including a trustee company), the execution or exercise while he is out of Victoria, of all or any trusts, powers and discretions vested in him as trustee, either alone or jointly with any other person or persons
- Section 30(1) of the Trustee Act 1958 – Power to appoint agents
This provision allows a trustee to employ and pay an agent, whether a legal practitioner, banker, financial services licensee, regulated principal, or other person, to transact any business or to do any act required to be transacted or done in the execution of the trust, or the administration of the testator’s or intestate’s estate, including the receipt and payment of money.
However, a trustee must select only suitable persons as agents, and must supervise the proper performance of any agent or co-trustee (See Dalrymple v Melville (1932) 32 SR (NSW) 596).
The duty to not act under dictation
This duty requires a trustee not to exercise their powers under the dictation of another party, such as a beneficiary, an accountant or legal advisor, or a lender.
A classic case example of this duty being applied is the case Re Brockbank  1 All ER 287, where the beneficiaries of a trust applied to the Court to force the remaining trustee to appoint someone they nominated as the new trustee. The Court held that it would not interfere in the exercise of a discretion properly exercised by a trustee, and that “the power of nominating a new trustee is a discretionary power, and in my opinion is no longer exercisable, and indeed, can no longer exist if it has become one of which the exercise can be dictated by others”.
The duty not to fetter discretion
This duty requires a trustee to not to fetter the exercise of their discretions by binding themselves in advance to a course of actions. This means that trustees cannot make pre-determined decisions about how they will exercise their decision-making powers.
Leading cases such as Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liquidation)  FCA 1628 and Dagenmont Pty Ltd v Lugton  QSC 272 are authorities on the principle that a trustee who makes a resolution, or enters into a legally binding agreement that forces them to act in a particular way, then any decision made by the trustee pursuant to such a resolution or agreement, would likely constitute a breach of the trustee’s duty to act in an unfettered way. It would then be open to a party, normally a beneficiary of the trust, to challenge the trustee’s action.
Duty to Act Unanimously
If a trust is managed by more than one trustee, all the trustees have a duty to act unanimously unless the trust deed provides otherwise. This means that for trusts which are managed by a group of trustees, a majority of trustees cannot ordinarily rule against the minority, nor can the majority of trustees defer their decision-making powers to a single trustee. If a disagreement or deadlock occurs between the trustees, an application to the Court may often be the only way to break the deadlock.
There are however exceptions to this duty, as the settlor of a trustee deed may include a provision that specifies that, either generally or in specific circumstances, the decision of a majority of the trustees will prevail.
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