Have you been appointed a trustee?

Are you uncertain about taking a particular course of action on behalf of the beneficiaries or unitholders? Then you may wish to seek judicial advice from the Supreme Court of NSW.

Judicial advice generally involves a determination by the Supreme Court that a trustee would be justified in taking a particular course of action. Such advice acts as a trustee’s safeguard from any potential claim for breach of trust if the trustee acts in accordance with the Court’s advice.

Section 63(1) of the Trustee Act 1925 (NSW) provides:

“A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.”

Judicial advice is private advice which all trustees should consider seeking when contemplating a significant (or potentially contentious) decision on behalf of beneficiaries.

In particular, the leading High Court authority on the subject

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand & Anor [2008] HCA 42

suggests that a trustee “should” obtain judicial advice before defending litigation in its capacity as trustee noting that a trustee is obliged to do so or will necessarily lose any right to indemnity if it does not seek the advice before pursuing or defending litigation).

Under section 63(2) of the Trustee Act, the trustee will be taken to have discharged its duty as trustee in the subject matter of the application if it acts in accordance with any judicial advice obtained from the Court, provided that it has not been guilty of any fraud, willful concealment or misrepresentation in obtaining the judicial advice. Thus, it is crucial that a trustee discloses all relevant facts to the Court in its application for judicial advice.

When to seek judicial advice

A trustee will commonly seek judicial advice if:

  • the trustee intends to commence or defend legal proceedings;
  • the trustee is uncertain about the proper interpretation of a provision in the trust instrument;
  • the trustee wishes to vary or amend the trust instrument, however, is unsure whether the variations or amendments are within the trustee’s power; or
  • a course of action or decision which the trustee is contemplating has the potential to give rise to a dispute between the trustee and one or more beneficiaries of the trust.

From a trustee’s perspective, the benefit of judicial advice is the protection which it affords against liability for breach of trust. That said, there is clear authority that the purpose of judicial advice is also to protect the interests of beneficiaries.

Need help?

Please contact our team of lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.

Enquire today and we will get back to you next business day.