This is an extract of our Rights Of Trustees document, which we sell as part of our Trusts Notes collection written by the top tier of Monash University students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Trusts Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Rights of Trustees Indemnity: A trustee needs the right of indemnity because they incur all the debt of the trust personally. That is why they get the ROI, "The price paid by (the beneficiary) for the gratuitous and onerous services of trustees".
1. Right of Indemnity - Out of the trust fund
? S 36(2) A trustee may reimburse himself from the trust assets for expenses properly incurred in the administration of the trust. o The trustee may pay directly out of the trust assets (right of exoneration) or pay personally then reimburse himself (right of reimbursement) o Trust instrument can also give expanded rights of indemnity, eg indemnification out of another fund
? What power or duty does the expense related to? (refer to improper exercise) o Power: dictated by trust fund o Duty: equitable/statutory duties
? Is it a properly incurred expense?
o Properly incurred expenses:
? Expenses that are incurred by a trustee when acting
? Within power
? In good faith
? With the requisite standard of prudence
? This will depend on the nature of the expense. IDENTIFY:
? ?? ? Legal costs o Costs to defend negligence of a third party that leads to loss to the trust is still property if the Ts have not been reckless or improper Re Raybould o Legal costs (including legal costs of defending an action for breach of trust brought about by B unless they acted unreasonably in pursuing litigation) Hayman v Equity Trustees
? Until an order for costs has been made, the trust cannot be wound up Hayman
? Even if the defence exhausts the trust funds, it is still properly incurred Macedonian Church
? ?? ? Management expenses o Costs associated with running the trust that are not in breach of trust e.g. postage, preparation of accounts, bank fees, rates on property, taxation, solicitor's fees Nolan
? Damages (tortious or breach of contract) o Expenses incurred by damages claimed against trustee (Re Raybould) o Breach of statue/breach of contract (common occurrences of financial life -Gatsios) however argue that this only applies to damages Nolan o Not every breach of legal duty counts as an improper course of conduct, even if a tort was committed it might be possible for the trustee to seek indemnity Re Raybould
? ?? ? Other o Improperly incurred expenses (onus on the beneficiary to prove)
? Victorian case (binding) Nolan - strict
? Breaches of duties which require strict compliance (reasonableness is irrelevant) and associated costs are improperly incurred o Duty to keep and render accounts o Fiduciary duties
Buy the full version of these notes or essay plans and more in our Trusts Notes.