Trustees’ duties and powers 368

Abstract

Introduction Trustees are empowered specifically to administer the trusts entrusted to them. They must obey the terms of the trust instrument, if there is one, to give effect to the trust. At the same time they must conduct themselves in conformity with a range of qualities, such as care, diligence, impartiality and loyalty, which protect the interests of beneficiaries of the trusts. Failure to observe either the express terms of the trust instrument or the qualitative duties may constitute a breach of trust. Questions for consideration: 1. How do the duties imposed on trustees safeguard the interests of beneficiaries of a trust? 2. How do the various statutory provisions and general law rules interact in practice? 3. How do the circumstances surrounding the trust affect the substantive content of the duties owed by the trustees of that trust? Sources of the trustee's duties and powers The equitable duties outlined below provide additional overlay to the terms of the trust which the trustees must enforce. Often they provide default rules where the trust deed is silent. They also regulate the way in which the trustee undertakes its role by imposing certain qualities of conduct (including care, diligence, loyalty and impartiality) on trustees. Importantly, though, with only a few exceptions (such as where the provisions are contrary to law or public policy, or unduly encroach upon an ‘irreducible core’ of trustee obligations: Armitage v Nurse [1998] Ch 241), those rules have scope to operate only within the terms of the trust specified in the trust deed. The situation with statutory duties is a little more complex. Some statutory rules act in concert with provisions in the trust deed but others override or modify the trust deed. This is particularly common where the trust in question is of a type that accepts money from the public, such as a managed investment scheme or a superannuation fund. Trustees' duties The duties imposed by equity on trustees are capable of being expressed in a variety of forms. Moreover, the equitable duties imposed by the courts can and do overlap. Therefore, unlike their statutory analogues, there is no definitive set of equitable ‘duties’. Courts and commentators have sought to divide the landscape in different ways according to the demands of the case or the purpose of analysis.