Trusts
NSW Trustee and Guardian can be appointed to act as trustee of funds, such as where a common law court, whether it be the District Court of NSW or Supreme Court of NSW, orders an award resulting from a personal injury claim. The trustee administers the trust pursuant to general trust law subject to any specific terms of the court order.
What is a trust?
A trust may be defined as an obligation enforceable in equity that rests on a person (the trustee) as the owner of some specific property (the trust property) to deal with that property for the benefit of a a certain person (the beneficiary) or persons, or the advancement of certain purposes: Registrar of the Accidents Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 175.
In addition, a trustee is bound by fiduciary duties, which emphasise the duty to deal with specific property for the benefit of another person, which is also characteristic of a trust.
In the context of compensation awards for personal injury claims, the court may order the award funds to be held in trust. The trust funds will vest in the trustee, who is the legal owner of the funds but who must administer the trust for the benefit of the recipient of the award (referred to as the beneficiary of the trust).
Trusts can be created in a variety of ways including:
- an order of the court – e.g. Supreme Court of NSW, District Court of NSW
- in a testamentary instrument such as a Will, or
- a trust deed.
Trustee duties
The trustee is bound by the terms of the instrument creating the trust. Where the trust instrument is silent on how the trust funds are to be applied, the general law of trusts or relevant legislation generally provides that trust funds can be applied at the trustee's discretion for the beneficiary’s maintenance, education, advancement, and benefit in life.
These words all have specific legal meaning:
- Maintenance: Denotes a periodical payment such as payment for weekly food bills, payment of utilities, clothing, and medical bills.
- Education: This may include school, university or educational needs.
- Advancement: Denotes a definite unique outlay for a specific purpose.
- Benefit: This is very broad and may be applied to cover expenditures that do not strictly fall within the other categories.
In addition to the general trust law, there are several statutory provisions dealing with a trustee’s powers and duties. Relevantly:
- NSW Trustee and Guardian Act 2009 (NSW), s17(2)
- Trustee Act 1925 (NSW), including s42A, s43, s43A and s44
- Civil Procedure Act 2005 (NSW), including s78
- Workers Compensation Act 1987 (NSW) s85, 86 and s87
Investment of trust funds
A trustee also has a duty to invest trust funds and may lawfully do so in the manner authorised by:
- the trust instrument
- the Trustee Act 1925 (NSW)
- any other statute giving trustees authority to invest trust funds, or
- the court, where the power to authorise is given to the court by statute.
Where the trust instrument is silent about the powers of investment, then the statutory powers apply.
Under the general law, there is no express obligation on trustees to seek the views of beneficiaries concerning the investment of the trust funds. A trustee may consult where appropriate and sensible, but the trustee is not bound to do so and should maintain control of investment decisions.
It’s important to note that decisions made by a trustee regarding the administration of a trust are not subject to administrative review pursuant to the Administrative Decisions Review Act 1997 (NSW).