Trustee Duties (NT)

A trust exists when one person holds an interest in property on behalf of another. Trusts are a very common legal structure which we use in our day to day lives. This page deals with trustee duties in the NT.

Why are trusts set up?

There is a wide range of reasons that a trust may be set up.

Individuals often establish trusts. These may be family trusts set up to hold property on trust until children come of age, or testamentary trusts, established by a person’s will to hold assets on trust for beneficiaries.

A trust can be ‘fixed’, meaning the person for whom property is held on trust (ie the beneficiary) has a fixed interest in that property. A trust can also be ‘discretionary’, meaning the person that holds the property on trust (ie the trustee) has discretion to choose between a certain number of specified people to receive property. A lot of charities are also established in this way.

Trusts are also used as investment vehicles - for example, superannuation funds hold money on trust for their customers.

Source of a trustees’ powers and duties

In the Northern Territory, the Trustee Act sets out the powers and duties of a trustee. The common law also governs the duties of trustees.

Trust instruments themselves may also contain the rights and obligations of the trustee.

The powers and duties of a trustee include actions that must be taken and actions they must refrain from taking.

Duties of a trustee

The common law has developed a series of duties with which a trustee must comply in order to fulfill their role correctly. Failure to perform these duties may be a breach of trust, for which a beneficiary or another third party who has standing such as a co-trustee or a successor trustee, can bring a common law action for financial compensation.

As soon as the trustee role begins, the trustee has a duty to familiarise themselves with the terms of the trust and take the steps necessary to ensure they can take control of the assets of the trust. They must also comply with the terms of the trust, except in situations where compliance would result in something illegal being done. Trustees also have a general duty not to delegate their functions, although there are exceptions to this rule such as where agents need to be employed for a specific purpose.

Perhaps the two most important duties of a trustee are:

• the duty to avoid conflicts of interest between their personal interests and their duties as trustee; and
• the duty not to profit from their role as trustee

A trustee is, however, entitled to receive remuneration if this is provided for in the trust deed or if the beneficiaries agree to allow the trustee to receive remuneration.

Trustees also have many other duties, including a duty of impartiality when there is a dispute between beneficiaries, and a duty to invest trust moneys appropriately.  accordance with a number of other duties, such as the duty not to invest in investments that are hazardous, and the duty to keep the beneficiaries’ best interests in mind.

Powers of a trustee

In addition to the above duties, trustees have a number of powers and rights, which are derived from the common law, from the trust deed, from the Trustee Act, or which can be conferred by a court. For example, under the common law, the trustee has a right to be indemnified from the property of the trust for any debts that are incurred on behalf of the trust.

The Trustee Act has a similar implied indemnity. Trustees may also have a right to sell trust property, but this generally only exists where such a right is express or implied (for example, in the trust deed itself).

The Trustee Act also provides for a number of other powers such as:

• the power to purchase dwelling houses on behalf of beneficiaries, subject to the terms of the trust deed.
• the power to retain investments which are no longer permitted under the trust deed or the common law, without committing a breach of trust on that ground alone.
• the power to appoint legal practitioners as their agents to receive and discharge money receivable by the trust.

If you require legal advice or representation in any legal matter, please contact Go To Court Lawyers.