Term
| What are the two ways the powers of a trustee may be varied? |
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Definition
1. By the trustee exercising an express power in trust instrument (often conferred on the trustee); or
2. By the SC |
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Term
| Two ways a variation power must be exercised. |
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Definition
1. bona fide, and
2. for the benefit of the beneficiaries as a whole (not the individual beneficiaries, b/c they may have conflicting interests) |
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Term
| What happened in Kearns v Hill? |
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Definition
| attempt to add a new class of potential beneficiaries to a discretionary trust. Attempting to add the next generation to the beneficiaries. This was permissible- consistent w/ the intention of the settlor. Fell w/in the scope of the benefit that the settlor intended to confer. |
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Term
| What was the principle finding from Wilson v Metro Godwyn Mayer? |
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Definition
| If the trustee acts on an incorrect interpretation of the clause, the exercise of power would be invalid. ‘any benefit’ would be any benefit that a member would get by being a member of the fund, which would include the benefit that members get upon the winding up of the fund. Therefore, variation was prejudicial and invalid. |
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Term
| What sections provide for variation under a court under (SC)? |
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Definition
- S 94(1): The SC can make orders that enlarge the powers of a trustee if it is expedient in the management of the trust estate, or it is in the benefit of the beneficiaries.
• S 94(3): Application could be made by any trustee or beneficiary |
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Term
| What does a s94 order do essentially? |
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Definition
It enlarges the trustees powers to the extent of the order.
eg If certain categories of investment are prohibited in the instrument, but it would be appropriate or expedient to make the investment on the particular occasion, the trustee can get authority from the SC to do so. |
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Term
| What are right to directions and where are they set out in statute? |
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Definition
statutory form of the inherent power of a court of equity to give directions to a trustee (s96).
and s97(1) and (2) |
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Term
| What do s97(1) and (2) stipulate? |
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Definition
(1) if the trustee acts in accordance w/ the directions, the trustee is deemed to have acted in accordance w/ their duties, even if the directions are subsequently invalidated, overruled, set aside or otherwise rendered of no effect, or varied.
(2) trustee must state the facts honestly to the court. |
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Term
| Why is the right to indemnity important for trustees? |
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Definition
| Trustees incur out of pocket expenses and debts in the course of the administration of the trust. Eg. legal/professional fees, electricity or rates bills. |
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Term
| What are the two options for recovering indemnity costs? |
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Definition
1) From trusts estate (s72 TA)
2) Indemnity from the beneficiaries (solely arising from case law) |
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Term
| What rights does s72 TA give the trustee? |
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Definition
| The trustee may reimburse himself or herself or meet liabilities out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers. (Worrall v Harford) |
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Term
| How does s72 lineup with the trust instrument? |
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Definition
| s 65: applies whether or not there is a contrary intention expressed in the trust instrument; right trustee has to the trust property irrespective of the content of the instrument. |
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Term
| How is 'reasonably incurred' determined? |
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Definition
| at a minimum, the expenditure must not be in breach of trust. Was it reasonable in nature? Was it reasonable in amount? (Was it extravagant, bearing in mind the needs and circumstances of the trust estate?) |
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Term
| What happens if the trust estate includes a business ? |
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Definition
| The expenses in operating that business will be expenses reasonably incurred. Civil liability would be included as part of these business expenses, provided the business is overall being conducted in a reasonable way. |
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Term
| Trustees have a charge/lien of the trust assets in respect of expenses reasonably incurred. What case confirms this? |
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Definition
| Vacuum Oil Co v Wiltshire |
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Term
| In what order should trustees claim indemnities, regarding from the trust and from beneficiaries? |
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Definition
| As a matter of practice, the trustee should exhaust their rights against the trust estate prior to claiming an indemnity from the beneficiaries. |
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Term
| When is a beneficiary liable to indemnify a trustee? |
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Definition
| If the liability to meet the expense arises form the mere fact of ownership – e.g. local authority rates on land - the trustee does not have to show the beneficiary requested him to incur the liability. The beneficiary is liable to indemnify the trustee, so long as the beneficiary is ‘sui juris’. |
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Term
| What about if liability relates to something outside the scope of the trust? |
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Definition
| i.e. an expense that did not have to be incurred - the trustee will not have a right to be indemnified by the beneficiary, unless the beneficiary is ‘sui juris’ and has authorized or ratified the expenditure. |
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Term
| What does 'sui juris' mean? |
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Definition
| The capacity to manage one's own affairs. |
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Term
| What happens if there is more than one beneficiary? Can he just claim indemnity from one of them? |
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Definition
No. Trustee only has right to indemnity if ALL beneficiaries are sui juris and authorize the expenditure.
JW Broomhead (Vic) v JW Broomhead |
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Term
Is there the same right to indemnity in discretionary trusts?
What case was this in? |
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Definition
Trustee only entitled to indemnity from beneficiaries who are absolutely entitled to property.
Hardoon v Belilios: trustee’s right to indemnity was based upon the fact that the beneficiary received the benefit of the expenditure. |
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