Powers of Trustees

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Trustees are given powers which allow them to perform their duties. Common powers given to trustees include:

  • Powers of appointment - powers to appoint beneficiaries to whom a distribution will be made. These inluce:
  1. General power - appoint anyone they wish, including themselves.
  2. Special power - appoint anyone from a particular range or class of people, usually to the exclusion of themselves at the least.
  3. Hybrid power - appoint anyone they wish bar a certain group of people, usually barring themselves at the least.
  4. Intermediate power - appoint anyone from a particular range or class of people, and also to any other person that the donee deems as deserving.
  • Power to sell the property - this power is not automatic, but needs be conferred by the trust instrument. It can be conferred either expressly, or impliedly. Scenarios where a power of sale will be implied include:
    • In the case of successive beneficiaries where the trustee is under a duty to convert the property.
    • Once there is a direction to distribute:Altson v Equity Trustees, Executors and Agency.[1]
  • Powers of management - where the trustee has a duty of management, he will also be conferred powers of management. This usually involves the power to maintain, repair and make improvements to the trust property.
    • This power can be given to the trustee on approval of the court: 82.
    • It can be used without approval of the court as long as it is below a amount specified by statute: 82A.
  • Power of maintenance and advancement - allows the trustee to give trust monies to beneficiaries before the end of the trust.
    • Maintenance are periodic payments for everyday needs and permitted by s 43.
    • Advancements are lump sum payments to benefit the beneficiary somehow and are permitted by s 44 as long as they are less than 50% of the trust property.
  • Powers of mortgage - this power is not automatic, but needs be conferred by the trust instrument. Exceptions include:
    • Where a trustee has power to conduct business.[2]
    • A trustee will have a power to mortgage where there are insufficient funds to cover the expenses of the trust: s 38 (1A).

This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012, pp. 603-607 [32.1-32.5]

Introduction

[3] Unlike duties, powers are generally discretionary. However, the trustee is often under a duty to consider the exercise of those powers.

The powers exercisable by a trustee are derived from three sources:

  1. The trust instrument;
  2. Statute; and
  3. Court-conferred powers.[4]

Powers of Appointment

When the trustee has any sort of discretion as to distribution, it is that he has a 'power of appointment' (ie, the power to 'appoint', or choose, the beneficiary). As explained below, some powers of appointment are so wide that it means that there is no longer a real trust, and therefore when discussing powers of appointment, the holder of the power is called the 'donee' of the power (the settlor is called the 'donor').

Powers of appointment include:

  1. General power - this allows the donee to appoint anyone they wish, including themselves.
    • A general power of appointment is basically the same as ownership, since the donee can do whatever they like without restrictions, including appointing themselves and thus keeping the property.
    • Thus, where there is a general power of appointment, there is no trust.
  2. Special power - this allows the donee to appoint anyone from a particular range or class of people as defined by the donor of the power. He is usually not included in that range.
  3. Hybrid power - this allows the donee to appoint anyone they wish bar a certain group of people. The donee is usually barred.
  4. Intermediate power - this allows the donee to appoint anyone from a particular range or class of people, and also to any other person that the donee deems as deserving.


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Powers of Sale

[5] The trustee does not have power to sell any trust property unless permitted to do so by the three sources mentioned above. However, there are times when a power of sale will be implied in the following scenarios:

  • In the case of successive beneficiaries (such as a life tennacy) where the trustee is under a duty to convert the property (see the rule in Howe v Lord Dartmouth under Duty to Act Impartially).
  • Once there is a direction to distribute, the trustee will be conferred a power of sale.[6]

There is no statutory power of sale, but there is a statutory power to postpone sale.[7]

Powers of Management

[8] Where trusts are used as vehicles to conduct business, the trustee is given powers of management. An active duty of management of the trust thereby automatically confers the powers necessary to the management of the trust. The main power of managements if the power to make repairs (and sometimes even improvements) to the trust property.

  • 82 specifies that this power can be given to a trustee with approval of the court.
  • 82A confers this power on a trustee without approval of the court as long as it is below a specified amount (please see the section for particulars).

Powers of Maintenance and Advancement

[9] Trustees are often given powers to make payments to beneficiaries even prior to the beneficiary obtaining an absolute right to their interest. These payments are called 'maintenance' and 'advancements'.

  • Maintenance are periodic payments for everyday expenses. The trustee is conferred with the power to make maintenance payments out of the trust by s 43.
  • Advancement is lump sum payments made to help the beneficiary with something which is beyond mere 'maintenance' (eg, paying for law school or an apprenticeship etc). The trustee is conferred with the power to make maintenance payments out of the trust by s 44.
    • An advancement cannot exceed half of the trust property.

These statutory powers are subject to any contrary intention in the trust document.

Power to Mortgage

[10] Unless expressly authorised by the trust instrument or statute,[11] trustees have no power to mortgage the trust property. There are some exceptions:

  • Where a trustee has power to conduct business, they will also have power to carry on that business in the same manner as the testator, usually including a power to mortgage.[12]
  • s 38 (1A) allows a trustee to raise money by mortgaging trust property where there are insufficient funds to cover the expenses of the trust.

Trustees given a mortgage can, in lieu of foreclosure, purchase the equity of redemption[13] in the land.[14]


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End

This is the end of this topic. Click here to go back to the main subject page for Property, Equity and Trusts 1.

References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. (1912) 14 CLR 341; Pagels v MacDonald (1936) 54 CLR 519.
  2. Southwell v Martin (1901) 1 SR (NSW) Eq 32.
  3. Equity Textbook, p. 603 [32.1].
  4. Court-conferred powers were first recognised in Re New [1901] 2 Ch 534.
  5. Equity Textbook, pp. 603-4 [32.2].
  6. Altson v Equity Trustees, Executors and Agency (1912) 14 CLR 341; Pagels v MacDonald (1936) 54 CLR 519.
  7. Trustee Act 1925 (NSW), s 27B.
  8. Equity Textbook, pp. 60-54 [32.3].
  9. Equity Textbook, p. 605 [32.4].
  10. Equity Textbook, pp. 605-7 [32.5].
  11. Trustee Act 1925 (NSW), s 32A.
  12. Southwell v Martin (1901) 1 SR (NSW) Eq 32.
  13. The right of a mortgagor in law to redeem his property once the liability secured by the mortgage has been discharged.
  14. Trustee Act 1925 (NSW), s 32A.
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