Trustee Act 1898

The Act primarily affects trustees, defined expansively in s.4 to include any person seised or possessed of trust property, whether express, implied, or constructive; persons with a beneficial interest in the trust property; representatives of deceased persons (executors, administrators, curators); trustee companies; and joint trustees. It also covers "representative" in the extended sense of heirs and devisees. Professional trustees (s.7(1)(a)) — solicitors, accountants, and licensed trustee companies — are held to a higher standard than lay trustees.

Beneficiaries are directly affected. The legislation balances their interests by requiring trustees to consider their needs and circumstances (s.8(a)), act impartially between present and future beneficiaries (s.9(1)(b)), and obtain consent before certain advances (s.29(1)(c)). Protective trusts (s.30) shield vulnerable beneficiaries. The dwelling-house power (s.12) is expressly for beneficiaries' residential use. Beneficiaries may apply for accounts (s.28), seek court variation (s.47(3)), or have their interests impounded to indemnify trustees (s.53).

Third parties dealing with trustees receive statutory protection. Purchasers from trustees for sale are shielded from objections based on depreciatory conditions (s.17(3)). Persons dealing with delegates under s.25AA are protected by conclusive statutory declarations and the indoor-management-like rule in s.25AA(10)-(13). Companies must obey vesting orders regarding stock (s.34(4)). Bankers and Australian legal practitioners appointed as agents to receive money are protected by the receipt rule in s.20, provided funds are not left with them longer than reasonably necessary.

The Court (defined in s.4 as the Supreme Court or a judge) is given extensive supervisory jurisdiction. Applications may be made by any person beneficially interested or by trustees (s.42). The Public Trustee and trustee companies are given special status for delegation and plurality purposes.

Testators and settlors are indirectly affected: their instruments can exclude or modify the statutory powers (e.g. s.6, s.13(5), s.16(2)), but the prudent-investor rule and core equitable duties continue to apply unless inconsistent (s.9).

Finally, charities fall within the Act. Section 45 extends vesting-order powers to charitable trustees, and s.47(5) expressly applies the variation power to charitable, religious, and public trusts.

Duties are both statutory and preserved equitable. The paramount duty under the substituted Part II is to exercise the power of investment with the care, diligence, and skill of a prudent professional or business person (s.7(1)). Trustees must review investments annually (s.7(3)), consider the s.8 checklist so far as appropriate, and comply with any consent or direction requirements in the trust instrument (s.7(2)). Equitable duties — best interests of all beneficiaries, impartiality, taking advice, avoidance of speculative investments — continue except where inconsistent with the Act or the instrument (s.9(1)). The duty to take advice carries a right to pay reasonable costs from the trust (s.9(3)).

Trustees must act personally unless delegation is permitted (s.25AA) and are liable only for their own wilful default (s.27(1)). They must not mix trust funds with their own. The Act implies an indemnity for proper expenses (s.27(2)).

Rights and powers are extensive. The general power of investment (s.6) is the centrepiece. Specific powers include:

• Sale on advantageous terms (s.16);
• Insurance up to 75% of value (s.21);
• Renewal of leaseholds and mortgage financing (s.22);
• Receipt giving (s.23);
• Compounding and arbitration (s.24);
• Advances for maintenance or benefit up to half the presumptive share (s.29);
• Purchase or retention of dwelling houses for beneficiaries (s.12);
• Participation in corporate reconstructions (s.10);
• Payment of calls on shares (s.11).

Trustees may retire with co-trustee consent (s.14), appoint successors (s.13), and have property vest automatically by declaration (s.15). They may delegate on temporary or permanent absence from Tasmania (s.25AA). Where the trust instrument is silent, the Court may authorise otherwise unavailable transactions (s.47).

Beneficiaries have the right to accounts (s.28), to follow trust property into the hands of non-purchasers (s.25A(7)), and to apply for judicial relief or variation.

The Court has the right to relieve trustees from liability where they acted honestly and reasonably (s.50), to set off gains and losses (s.12E), to take investment strategy into account when assessing breach (s.12D), and to make vesting and appointment orders in a wide range of circumstances (ss.32-41).

The Act itself contains no criminal penalties; enforcement is civil. Breach of trust exposes the trustee to personal liability to restore the trust fund, with interest. However, several protective mechanisms limit exposure. Section 12A protects a trustee who continues an investment that has ceased to be authorised. Section 12B provides a safe harbour for loans on security where an independent valuer's report shows the loan does not exceed two-thirds of value, or where the trustee is insured against borrower default. Section 12C limits liability on over-lending to the excess advanced plus interest. The Court may set off gains against losses (s.12E) and consider the trustee's overall strategy and compliance with s.8 when determining liability (s.12D).

A trustee who pays money into court under s.48 obtains a discharge. Relief under s.50 is available for honest and reasonable breaches. Section 26 exonerates trustees acting under powers of attorney without knowledge of revocation. Distribution after notice under s.25A protects against unknown claims.

Enforcement is by beneficiary action in the Supreme Court for accounts, compensation, removal, or injunction. The Court may order costs against a defaulting trustee personally (s.28(2), s.63). A beneficiary who instigates a breach may have their interest impounded (s.53). Third parties who receive trust property with notice are liable to trace.

The Act is not a code; it expressly preserves rules of law and equity (s.9) and operates cumulatively with the Settled Land Act 1884 (ss.47(4), 54). Vesting orders and appointments apply to Settled Land trustees (s.54). Interaction with the Land Titles Act 1980 is facilitated by s.57, which requires the Recorder of Titles to record court orders affecting Torrens land.

Investment powers intersect with the Corporations Act 2001 (Cth) via the definition of "securities" in s.4, which includes interests in registered schemes. The definition of "spouse" incorporates the Relationships Act 2003 (s.4). Valuation for lending must be by a person qualified under the Land Valuers Act 2001 (s.4). Trustee companies are regulated by the Trustee Companies Act 1953.

The Supreme Court Civil Procedure Act 1932 governs applications for accounts (s.28(2)) and procedural matters. Mental-health provisions reference the Mental Health Act 2013 for vesting orders (ss.36, 49). The Powers of Attorney Act 2000 governs formalities of delegations (s.25AA(8)).

Section 12F provides that references in other Acts or instruments to investments authorised by the Trustee Act are read as references to the new prudent-investor regime. The Act does not override express prohibitions in trust instruments (s.64(2)) but applies to pre-1898 trusts (s.64(1)).

The most significant modernisation occurred in 1997 (No. 64 of 1997, applied 1 April 1998). The entire Part II was substituted to replace the old authorised-list system with a general power of investment (s.6) and the prudent-person rule (s.7). This reform responded to the obsolescence of 19th-century lists in an era of diversified portfolios, inflation, and sophisticated financial products. The new s.8 checklist and preservation of equitable duties (s.9) were modelled on uniform trustee legislation adopted across Australian jurisdictions following the 1990s trust-law reform movement.

Subsequent amendments have been incremental. The definition of "financial institution" was updated in 1999 to refer to authorised deposit-taking institutions under Commonwealth law. The "spouse" definition was expanded in 2003 to include significant relationships under the Relationships Act 2003. The Land Valuers Act 2001 qualification for valuers was inserted in 2001. Section 25AA on delegation was inserted in 1976 to address mobility of trustees and has been fine-tuned to align with powers of attorney legislation.

The 1997 reforms were driven by the recognition that trustees were being forced into low-yield, overly conservative investments while markets offered better risk-adjusted returns. The changes align Tasmanian law with the Trustee Act 1925 (NSW) and similar statutes elsewhere, reducing the need for bespoke investment clauses in trust deeds.

Tasmanian courts have applied the Act in line with interstate jurisprudence on the prudent-investor rule. In considering s.7 and s.8, courts examine the trustee's decision-making process rather than merely the outcome (Australian Securities and Investments Commission v. AS Nominees Ltd (1996) 62 FCR 1 principles have been influential although a Commonwealth decision). Section 12D expressly permits the court to review the investment strategy when assessing breach, preventing hindsight bias.

Controversies have arisen over the breadth of "any form of investment". Early post-1997 cases tested whether speculative ventures or hedge funds satisfied the s.8 factors. The annual review obligation (s.7(3)) has generated litigation where trustees failed to document reviews or rebalanced portfolios.

Protective trusts (s.30) have been construed strictly; the "determining event" must be one that would deprive the beneficiary of the income if it were payable absolutely. The dwelling-house power (s.12) has raised questions of "unfair prejudice" to remaindermen when a valuable asset is retained for one beneficiary's lifetime use.

Vesting-order litigation under ss.32-41 frequently concerns missing or incapacitated trustees. The conclusive-evidence provision in s.46 has prevented collateral attacks on orders made on allegations of incapacity or absence. Section 50 relief applications require trustees to demonstrate both honesty and reasonableness; mere ignorance of the law is rarely sufficient.

No major constitutional challenges have arisen, but the interaction between Commonwealth corporations law and State trustee investment powers has been noted in cases involving managed investment schemes.

Most practitioners do not realise that the general power of investment in s.6 is not a licence to be reckless. The s.7 duty and s.8 checklist are mandatory considerations; failure to document compliance is almost fatal in breach actions. The "prudent person of business" standard for lay trustees is higher than many family trustees appreciate — it is not the standard they would apply to their own money.

Section 12A is narrower than it appears: it protects against breach for continuing an unauthorised investment but does not excuse the initial decision to acquire it. Trustees who inherit speculative assets from a testator must still review them annually.

The delegation power (s.25AA) contains a trap: a permanently absent trustee cannot delegate to the sole remaining co-trustee unless that co-trustee is the Public Trustee or a trustee company. Many deeds drafted before 1976 do not contemplate this power, yet s.25AA(1) allows delegation despite any rule of law or equity to the contrary.

Protective trusts (s.30) cease on any "determining event" including an advance under an express power; careful drafting is required to preserve the protective shield. The one-half limit on advances (s.29(1)(a)) is calculated on the presumptive share before bringing advances into account, but the bringing-into-account rule (s.29(1)(b)) can create hotchpot disputes among siblings.

Section 25A notice procedures are technical. The time periods differ according to the jurisdiction of residence of potential claimants; failure to obtain a court direction for overseas claimants can leave the trustee exposed. The "conclusive evidence" effect of statutory declarations under s.25AA(12) only protects third parties without actual notice — actual knowledge of irregularity defeats the protection.

Finally, many trustees assume that because the Act applies to pre-1898 trusts they can ignore restrictive clauses in old wills. Section 64(2) and the "unless expressly forbidden" qualifiers mean that a carefully drafted exclusion in the trust instrument still binds.

Compliance begins with a thorough reading of the trust instrument to identify any express exclusions or directions that override the statutory powers. Professional trustees should adopt a written investment policy statement that expressly addresses each s.8 factor, is reviewed annually (s.7(3)), and is supported by file notes or minutes demonstrating consideration of the checklist, diversification, risk tolerance, and beneficiary circumstances.

Obtain independent financial or legal advice where the trust is large, complex, or the trustee lacks expertise; s.8(2) and s.9(3) expressly authorise payment of reasonable costs from the trust. For lending on real security, always instruct an independent qualified valuer (s.4 definition, s.12B) and ensure the advance does not exceed two-thirds of the reported value, or maintain appropriate insurance.

Document everything. Annual investment reviews should be minuted. Decisions to advance capital (s.29), purchase a dwelling house (s.12), or delegate (s.25AA) must record the reasons and any consents obtained. When distributing after notice (s.25A), strictly adhere to the Gazette and newspaper publication requirements, calculate the claim date correctly according to the claimant's location, and use the disputed-claim procedure if necessary.

For corporate securities, ensure any concurrence in reconstructions is minuted as an exercise of the investment power (s.10(4)). Trustee companies must remember they are treated as multiple trustees for plurality requirements (s.31).

If in doubt about powers or facing a difficult decision, apply to the Court under s.47 for authorisation or s.50 for prospective relief. Pay contentious funds into court under s.48 to obtain a statutory discharge. Keep trust money separate, render accounts promptly upon written request (s.28), and never mix personal and trust affairs.

Appoint new trustees or retire using the statutory machinery in ss.13-15, ensuring the vesting declaration is included to avoid separate conveyances. When acting as agent under s.20, do not leave funds in the agent's control longer than reasonably necessary.

Regular training on the prudent-investor standard, annual portfolio rebalancing where appropriate, and engagement of specialist advisers for complex trusts are the hallmarks of compliance. In all cases, the guiding principle is to act as a prudent person would in managing another's affairs, with transparent documentation that can withstand later scrutiny.