What are the duties of a trustee?
Trustees are responsible for administering the trust and managing its assets in accordance with the trust deed or will, applicable legislation and the duties imposed by law. In Queensland, the Trusts Act 2025 (Qld) generally applies to trusts created both before and after its commencement, subject to exceptions and transitional provisions.
A trustee’s obligations include fiduciary duties of loyalty, as well as duties concerning care, administration and accountability. These obligations overlap, but not every duty owed by a trustee is properly described as a fiduciary duty.
Act honestly, loyally and for proper purposes
Trustees must exercise their powers for the purposes for which those powers were conferred. They should not use their position to advance personal interests at the expense of the trust or its beneficiaries.
The Trusts Act 2025 (Qld) expressly requires trustees to act honestly and in good faith—for the benefit of beneficiaries or, in the case of a charitable trust, to further the trust’s purposes.
Potential conflicts require particular care. For example, a proposed transaction between a trustee personally and the trust should not be treated as an ordinary arm’s-length transaction merely because the trustee considers the price fair. The trust document, the nature of the conflict and any necessary authorisation should be examined before proceeding.
Exercise appropriate care, diligence and skill
Trustees must take appropriate care when administering the trust. This involves making informed decisions, protecting trust property and considering the risks associated with proposed transactions.
The applicable standard can depend on the trustee’s professional position. For example, section 60 of the Trusts Act 2025 (Qld) imposes a standard on professional trustees measured against the care, diligence and skill that a prudent person engaged in the relevant profession, business or employment would exercise when managing other people’s affairs.
In practice, trustees should understand the assets they control, obtain appropriate advice where necessary and retain records supporting significant administrative and investment decisions.
Consider beneficiaries fairly and exercise discretions properly
Trustees should administer the trust impartially, consistently with its terms. However, impartial administration does not necessarily mean that every beneficiary must receive an equal distribution.
A discretionary trust may authorise a trustee to distribute income or capital differently among eligible beneficiaries. The important questions include whether the trustee acted within its powers, for a proper purpose and after genuinely considering whether and how to exercise the discretion.
In Karger v Paul [1984] VR 161, the Supreme Court of Victoria considered a challenge to trustees’ exercise of a broad discretion to transfer trust capital to a beneficiary. The decision illustrates the importance of good faith, proper purposes and real and genuine consideration. Courts do not simply substitute their preferred outcome because a beneficiary considers the trustee’s decision unfair or unwise.
For trustees, the practical lesson is that a broad discretion is not permission to act automatically or without consideration. For beneficiaries, dissatisfaction with the outcome does not, by itself, establish a breach of trust.
Keep proper accounts and address requests for information
Trustees should keep accurate records of trust assets, liabilities, income, expenditure and distributions. The trust document (eg. the trust deed) may also impose specific reporting requirements.
Requests by beneficiaries for financial information or trust documents should be considered carefully. Trustees should not assume that all information can be withheld, or that every requested document must automatically be disclosed. The nature of the document, the beneficiary’s position and the applicable legal requirements need to be considered.
The provision of information is an important aspect of trust administration.
Follow the trust deed or will
Before making a distribution, entering a significant transaction or commencing proceedings, trustees should check the source and scope of their authority.
This requires consideration of the current trust document, including valid amendments, together with applicable legislation. The trust document is important, but it does not necessarily override statutory requirements: section 3 of the Trusts Act 2025 provides that the Act applies despite a contrary intention in a trust instrument, except where the Act provides otherwise.
Can a trustee be removed?
A beneficiary concerned about a trustee’s conduct may seek the trustee’s removal and replacement. However, removal is not simply a punishment for past misconduct. The central concern is the protection of beneficiaries and the proper administration of the trust.
The Supreme Court of Queensland has powers concerning the appointment and removal of trustees under the Trusts Act 2025, including section 166.
The longstanding approach was explained by Dixon J in Miller v Cameron (1936) 54 CLR 572 at 580–581. His Honour identified the interests of beneficiaries, the security of trust property and the efficient and satisfactory execution of the trust as central considerations. The question includes whether:
“the welfare of the beneficiaries is opposed to his continued occupation of the office.”
The inquiry is therefore broader than whether a particular breach can be established. A court considers the circumstances as a whole and whether continued administration by the trustee is consistent with the beneficiaries’ welfare. Equally, removal does not follow automatically whenever a beneficiary alleges wrongdoing or disagrees with a decision.
The Queensland decisions Cowley v Macwood Pty Ltd & Ors [2015] QSC 343 and White Rook Pty Ltd v White Horizon Pty Ltd [2025] QSC 262 also refer to the principles discussed in Miller.
Can a trustee be personally liable for a breach of trust?
A trustee may face personal liability if it breaches its obligations. However, liability and the appropriate remedy depend on the nature of the breach and the circumstances; compensation is not an automatic consequence of every disputed decision.
The trust document must also be examined carefully. It may contain provisions concerning indemnity or exclusions of liability, but those provisions need to be considered alongside the applicable statutory requirements. It is unsafe to assume that an indemnity clause gives unrestricted access to trust assets whenever a claim is made against a trustee.
The distinction between properly incurred trust expenses and a trustee’s personal exposure is particularly important when litigation is contemplated. The legislation recognises indemnity rights for liabilities incurred in the proper administration of a trust.
Who pays a trustee’s legal costs?
Trustees should not assume that every legal expense can be paid from trust assets. A significant question is whether the expense has been properly incurred in administering the trust.
This distinction matters where proceedings involve allegations against a trustee personally, conflict between co-trustees or a dispute in which the trustee also has a substantial personal interest.
Before commencing or defending proceedings, trustees should obtain advice about:
- Whether the proposed steps are authorised and serve the trust’s interests.
- The prospects of success and likely costs.
- Whether the likely benefit justifies the expense and risk.
- Whether judicial advice should be sought about the proposed course and recourse to trust assets.
The proportionality of litigation costs and the interests of the trust are important considerations in applications concerning litigation funding.
What is a Beddoe order?
A Beddoe order takes its name from Re Beddoe [1893] 1 Ch 547. Broadly, it involves a trustee seeking the court’s approval concerning proposed litigation and the use of trust assets to meet the associated costs.
The purpose is not to guarantee that the trustee will win the underlying proceedings. Rather, judicial advice can resolve uncertainty about whether taking or defending the proceedings is a proper course in administering the trust. The protection depends on the advice or orders actually obtained and the circumstances disclosed to the court.
A relevant High Court decision on judicial advice
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar 2008 HCA 42; (2008) 237 CLR 66, a church association sought judicial advice about whether it was justified in defending proceedings and could use certain property to meet its legal costs.
The High Court restored orders permitting that course. It rejected the proposition that the New South Wales judicial-advice provision was confined to non-adversarial matters. The decision explains how judicial advice can protect the trust’s interests by resolving doubt about whether a trustee should incur litigation costs.
Although the case concerned New South Wales legislation, it provides important guidance on the function of judicial advice. Trustees should consider the issue before substantial costs are incurred, rather than assume that reimbursement from the trust will necessarily follow.
Our experience
Our Litigation Director Lachlan Rieck acted for the successful respondent in Reggi v Reggi Investments Pty Ltd [2025] QSC 343.
The matter concerned a trustee’s application for judicial advice and protection concerning proposed proceedings against a co-trustee. The Court declined to approve the proposed course. The decision highlights that litigation involving trustees is not necessarily litigation that should be funded by the trust.
Applications of this kind require careful attention to the purpose of the proposed proceedings, the interests being advanced and whether the expense is justified from the trust’s perspective.
When should trustees and beneficiaries obtain legal advice?
Early advice is particularly important where there is uncertainty about a trustee’s powers, a proposed conflict transaction, a disputed distribution or the use of trust money for legal proceedings.
Trustees should obtain advice before committing the trust to a significant disputed course of action. Beneficiaries considering a challenge should also seek advice about the evidence required, the remedies available and the potential costs.
If you have received a claim and statement of claim, an originating application or other court documents concerning a trust, obtain advice promptly about the required response.
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