Equity & Trusts
7. Trust Disputes and Remedies
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 24 Jul 2015
- Many complex issues arise in the context of trusts including:
- whether a trust has been properly created;
- disputes over the management of the trusts including the appointment, removal and remuneration of trustees;
- income division including access to income and the splitting of income between family members and business operators;
- taxation problems;
- interpretation of ambiguous trust deeds; and
- breaches of duty by trustees
- Because of the complex nature of trust disputes it is advisable to consult a lawyer who can help you understand the issues and pursue an appropriate solution.
- Some trust disputes result in litigation. Whether you are seeking to defend your actions as trustee or obtain a remedy in the event of a breach of duty there are lawyers who can assist. You can use our free Find a Lawyer directory to contact a lawyer near you.
- Most remedies aim to ensure a fair and just outcome for beneficiaries especially where there has been a defect or technical mistake when setting up the trust or where a trustee has committed a wrong. The most appropriate remedy will depend on the nature of problem you are facing.
- If a trustee is not adequately performing their duties or has committed a breach you can seek to have them removed. Each state and territory has laws that stipulate when a beneficiary can ask the court to remove and substitute a trustee.
- The trust deed is the best starting point. It may specify the method of removing a trustee and in what circumstances this can be done. Where the trust deed does not provide this information removing a trustee may be difficult and require litigation.
- Depending on the situation you will need to prove that a breach has been committed or there is another reason why the trustee is not fit to act. You will have to prove that:
- removing the trustee is required in order to protect the trust assets and the interests of the beneficiaries;
- the trustee is not abiding by the terms of the trust deed; or
- the trustee is not fulfilling their duties in the best interests of the beneficiaries.
- You can nominate an appointor in the trust instrument to minimise the risk of having to go through the courts to substitute a trustee.
- Generally discretionary trusts will have an appointor or multiple appointors who have the power to remove a trustee and appoint a new trustee. This person has the power to remove a trustee because of:
- a breach; or
- when the trustee has made unsatisfactory allocations of income or property.
- Beneficiaries can ask for the trustee to render an account to them at any time. If the trustee fails to do so a court may order the trustee to provide an account of the position of the trust. Where a breach of trust is found this can provide the basis for an order that the trustee account for their actions.
- The types of remedies that exist for the resolution of trust disputes include:
- an order for equitable compensation where a breach by the trustee has resulted in the beneficiaries suffering an economic loss;
- an order for an account of profits where a trustee has made a profit from their position as trustee in breach of their duty not to do so without consent of the beneficiaries;
- an injunction to restrain the trustee from dealing with trust assets in a way that would breach their duties as trustee such as:
- selling the property under value;
- using the assets for their own profits; or
- transferring them to an ineligible person.
- If a trustee refuses to perform their duties under the trust a court may direct them to do so. Such an order will be specific and will stipulate the actions that the trustee must perform. However the court will not compel a trustee of a discretionary trust to distribute the assets in a certain way but simply to make a distribution.
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