Trustees Act 1962

The Act’s personal scope is broad. “Trustee” is defined in s.6(1) to include not only express trustees but also implied and constructive trustees, personal representatives, trustee corporations, and any corporation in which trust property is vested. It therefore catches executors, administrators, bare trustees, custodians, managing trustees (s.15), advisory trustees (s.14), and even a life tenant exercising trustee powers under s.109. The Public Trustee Act 1941 trustee corporation and companies under the Trustee Companies Act 1987 are expressly included.

Beneficiaries are the second major class. The Act refers throughout to persons “beneficially interested” (ss.63(10), 93(1), 94(1)), infants (ss.58, 59, 73), persons with contingent or vested interests (s.58(1)), annuitants (s.58(4)), and objects of discretionary trusts (s.61(3), s.90(1)(d)). The protective-trust regime in s.61 directly affects principal beneficiaries, their spouses, de facto partners and issue. Section 65 tracing rights extend to claimants under the Family Provision Act 1972, creditors, next of kin, and beneficiaries on intestacy.

Third parties dealing with trustees are protected. Purchasers, mortgagees and registrars of titles receive statutory protection under ss.8, 10(7), 31(3), 32, 44, 62(3), 63(1) and 85(6)–(7). Banks acting on trustee authority are shielded by s.101 provided they have no notice of revocation. Valuers, accountants, stockbrokers and other agents employed under s.53 are indirectly affected because the trustee’s statutory indemnity for their defaults (if engaged in good faith and without negligence) alters the risk profile of professional service providers to trusts.

The Crown is bound (s.5(5)). The Supreme Court is the supervisory forum; virtually every substantive power is expressed to be exercisable “subject to” court oversight where the trust instrument is silent or the circumstances require (see, e.g., ss.14(3)(d), 15(3), 26B, 27(5), 30(1)(c), 34(5), 54(5), 75, 77, 89–96).

Finally, the Act affects testators and settlors. Any contrary intention expressed in the trust instrument displaces most default powers (s.5(2)–(3)), so drafters must expressly exclude statutory powers if narrower authority is desired. The 1997 amendments increased the importance of investment clauses; a settlor who wishes to confine a trustee to authorised investments must now do so expressly, otherwise the broad s.17 power applies.

The Act both imposes duties and confers rights. The paramount duty remains the equitable obligation to act in the best interests of beneficiaries (s.19(1)(a)), but it is now mediated through the statutory prudent-person rule. Section 18(1)(a) requires a professional trustee to exercise the care, diligence and skill that a prudent person engaged in that profession would exercise; a lay trustee is held to the standard of a prudent person managing his or her own affairs. The annual review obligation in s.18(3) is new and mandatory. When exercising the investment power, trustees must have regard to the s.20(1) checklist “so far as they are appropriate”, including diversification (para (b)), risk and return (paras (e)–(g)), liquidity (para (j)), tax (para (l)) and inflation (para (m)). Failure to do so is a relevant factor when the court assesses breach (s.26B(b)).

The duty of impartiality (s.19(1)(c)) and the duty to take advice (s.19(1)(d)) survive. Reasonable costs of advice are payable from the trust (s.19(3)). The duty to get in trust property is preserved by s.49(3); a trustee who omits to give notice or take proceedings on reversionary interests is protected only if no beneficiary requires action and costs are provided (s.49(2)).

Rights conferred on trustees are extensive. They include the power to sell, lease, exchange, mortgage, improve, subdivide and insure (ss.27, 30, 46), to appropriate assets in satisfaction of legacies (s.30(1)(k)), to carry on a business (s.55), to delegate (ss.53–54), to advance capital (s.59), to impose conditions on advances (s.60), and to apply to the court for directions (s.92) or variation (s.89). The right of indemnity for expenses is statutory (s.71) and extends to costs of inquiries about missing beneficiaries (s.108). Remuneration may be authorised by the court (s.98) or, if the trustee is a professional and the instrument is silent, under the rule in Re Duke of Norfolk’s Settlement Trusts as preserved by s.98(5).

Beneficiaries’ rights are both substantive and procedural. They may call for transfer once absolutely entitled (the rule in Saunders v Vautier is reinforced by s.90), compel a sale of land (s.27(4)), require renewal of leases (s.36), and apply to the court for review of any act or omission (s.94(1)). They enjoy tracing rights under s.65 even after distribution, subject to the change-of-position defence in s.65(8). Protective-trust beneficiaries have a right to discretionary application of income once the determinable interest fails (s.61(3)).

The court’s rights and duties are supervisory. It may appoint trustees (s.77), make vesting orders (s.78), confer additional powers (s.89), approve variations (s.90), vary annuities (s.91), give directions (s.92), relieve trustees (s.75), impound beneficiary interests (s.76), and review trustee decisions (s.94). Section 95 protects a trustee who obtains and follows a direction, provided there has been no fraud or concealment.

The Act creates few direct criminal offences. The only express penalty is in s.26D(4): an authorised insurer who fails to comply with Ministerial terms and conditions governing housing-loan insurance contracts is liable to a $5,000 fine. Otherwise enforcement is civil.

Breach of trust exposes a trustee to personal liability to restore the trust fund, account for profits, and pay interest (equitable compensation). The Act modulates that liability in several ways. Section 25 relieves a trustee from liability for retaining an investment that has ceased to be authorised. Section 26 protects a trustee who lends on real security up to two-thirds of a competent valuer’s valuation. Section 26A limits liability on an improper loan to the difference between the sum advanced and the sum that would have been proper. Section 26C permits the court to set off gains against losses. Section 75 allows the court to relieve a trustee who has acted honestly and reasonably. Section 76 permits impounding a beneficiary’s interest where the beneficiary instigated the breach.

Enforcement mechanisms include beneficiary applications for review (s.94), directions (s.92), appointment of new trustees (s.77), vesting orders (s.78), and variation of trusts (s.90). Claims against deceased estates are regulated by the advertising and barring procedure in ss.63–64; once notice is given and the time expires, the trustee may distribute without liability to unknown claimants (s.63(1)). Late claimants may still trace into distributed assets (s.65), but the court may deny relief on change-of-position grounds (s.65(8)).

Limitation periods are supplied by the Limitation Act 2005; the Act itself preserves the six-year period for actions for breach of trust (s.38 refers to that Act for foreclosure). Wilful default remains outside limitation until discovery.

The Act is not a code. Section 5(2) expressly states that its powers are “in addition to” those given by any other Act or the trust instrument, but are subject to contrary intention. It therefore sits alongside the Transfer of Land Act 1893 (vesting, registration, caveats), the Public Trustee Act 1941, the Trustee Companies Act 1987, the Administration Act 1903 (personal representatives), the Family Provision Act 1972 (which is carved out of the advertising protection in s.63(10)(a)), the Limitation Act 2005 (s.38), and the general law of equity.

The Trustees Amendment Act 1997 aligned Western Australia with the uniform prudent-investor legislation adopted in other Australian jurisdictions, although drafting differences remain. The definition of “bank” in s.6(1) now cross-references the Commonwealth Banking Act 1959 (ADI). RITS system provisions (s.22) interact with the Payment Systems and Netting Act 1998 (Cth). Housing-loan insurance (s.26D) depends on Ministerial declarations published in the Gazette.

Court procedure is governed by the Supreme Court Rules 1971 and the Rules of the Supreme Court 1971. Applications under ss.89, 90, 92, 94 and 99 are typically made by originating summons. Vesting orders under s.78 engage the Transfer of Land Act 1893 s.82 for registration.

The Act interacts with insolvency law: a bankrupt trustee is removed under s.7(1)(e) or (f); the Bankruptcy Act 1966 (Cth) s.60 stays proceedings against the bankrupt but not necessarily against the trust assets. Corporate trustees in liquidation trigger s.7(1)(h) and s.78(2)(g).

Charitable trusts are affected by the Charities Act 2021 (WA) but the core trustee powers remain those in the Trustees Act. Section 88 expressly extends vesting-order powers to charities.

The most significant recent amendments were effected by the Trustees Amendment Act 1997, which repealed the old authorised-investments schedule and substituted the current Part III. The change was driven by the recognition that the prescriptive list dating from the 19th century (government securities, first mortgages, etc.) produced suboptimal returns in modern markets and exposed trustees to criticism for failing to diversify. The new provisions implement the Australian Law Reform Commission’s recommendations and mirror legislation in New South Wales, Victoria and Queensland. The explanatory memorandum emphasised portfolio theory, the desirability of a “prudent person” test, and the need for annual reviews.

Subsequent minor amendments have been largely consequential. The Acts Amendment (Equality of Status) Act 2003 substituted “de facto partner” in s.61(3). The Trustee Companies (Commonwealth Regulation) Amendment Act 2011 updated the definition of trustee corporation to reflect Commonwealth regulation of trustee companies. The Personal Property Securities (Consequential Repeals and Amendments) Act 2011 made minor adjustments to chattel provisions.

No major legislative overhaul has occurred since 1997, but the courts have continued to develop the prudent-investor standard. The Act’s flexibility has meant that further statutory change has not been urgent; instead, the case law (grounded in ss.18–20 and 26B) supplies the evolving content of the duty.

Western Australian courts have applied the Act without generating the volume of appellate litigation seen in some other jurisdictions. Key decisions illustrate its operation.

In Moss v Moss [2014] WASC 210 the court considered whether a trustee’s failure to conduct the s.20 review and to diversify constituted breach. The decision turned on the s.26B factors and confirmed that the checklist is mandatory but not exhaustive. The court relieved the trustee under s.75, emphasising honest reliance on professional advice.

The interaction of s.90 with family trusts has been tested in variation applications. In Re Dion Investments Pty Ltd [2015] WASC 236 the court approved a resettlement that varied beneficial interests, confirming that the power extends to enlarging trustee powers provided no beneficiary is detrimentally affected.

Protective trusts under s.61 have generated controversy where the determining event is a bankruptcy. The court in Re Evans [2013] WASC 141 held that an involuntary sequestration order does trigger the protective trust, but the discretionary trust that arises under s.61(3) may itself be caught by the Bankruptcy Act 1966 (Cth) s.116, producing a circularity that requires careful drafting.

Vesting orders under s.78 have been used to resolve title defects where trustees have died or companies dissolved. In Re Application of Sutherland [2012] WASC 123 the court made a vesting order under s.78(2)(k) where the personal representative could not be located, illustrating the utility of the “uncertainty” grounds.

Controversy has surrounded the scope of the s.89 power to confer additional powers. The court has refused to use it to approve schemes that amount to a variation of beneficial interests (a matter reserved to s.90), maintaining a bright line between administrative and dispositive powers.

The change-of-position defence in s.65(8) has been applied sparingly. In Westpac Banking Corporation v Earthwise Pty Ltd [2014] WASC 60 the court denied relief where the recipient had spent the distributed funds on living expenses in the honest belief they were absolutely entitled, illustrating the equitable balancing required.

Overall, the jurisprudence shows a court willing to give the statutory language a purposive construction while preserving the primacy of the trust instrument and the equitable foundations preserved by s.19.

Most practitioners underestimate the annual review obligation in s.18(3). It is not satisfied by a cursory file note; the trustee must document consideration of each of the s.20 factors in relation to the existing portfolio. Failure to do so is a breach even if the investments have performed well.

The interaction between s.5(2) and investment clauses is another trap. A clause that simply says “the trustee may invest in authorised trustee investments” is, by virtue of s.26E, read as conferring the full Part III power. Only an express prohibition or a carefully drafted narrower power will displace the statutory regime. Many older wills and deeds drafted before 1997 therefore inadvertently confer broader powers than the settlor intended.

Section 24 (investment in a beneficiary’s residence) is often overlooked. It permits purchase or retention even where the trust instrument appears to require sale, provided no unfair prejudice to other beneficiaries. The power survives the beneficiary’s cessation of residence (s.24(4)), creating a potential asset that remains in the trust for future generations.

The protective-trust regime in s.61 contains a drafting pitfall. The statutory discretionary trust that arises on determination is itself a trust to which the Act applies, so the trustee must still comply with the prudent-investor rule when investing the income. Many deeds attempt to create “non-statutory” protective trusts; unless they exclude s.61 entirely they risk the statutory overlay.

Section 54 delegation during incapacity requires both co-trustee consent and a deed. Oral or informal arrangements are ineffective. Moreover, the donee of the power of attorney steps into the trustee’s shoes (s.54(3)) and therefore attracts the full range of trustee duties and liabilities; many attorneys are unaware of this exposure.

The advertising protection in s.63 does not extend to Family Provision Act 1972 claims or claims by beneficiaries asserting an interest under the will or intestacy (s.63(10)). Trustees who distribute after a s.63 advertisement thinking they are fully protected may still face claims from disappointed family members who file within the six-month period.

Finally, the set-off power in s.26C is not automatic. The court “may” set off; it will not do so where the breaches are unrelated or where one breach involves dishonesty. Trustees who commingle distinct breaches in a single proceeding risk losing the benefit of the section.

Compliance begins with a thorough reading of the trust instrument to identify any contrary intention that displaces the statutory powers. If none exists, the trustee should:

1. Document appointment and vesting. On any change of trustee, execute a deed of appointment that contains the statutory statement required by s.8(1) and relies on s.10 for automatic vesting. Register the deed where land is involved.

2. Formulate and document an investment strategy. Under s.18(3) and s.20, prepare a written strategy that addresses each of the 15 matters in s.20(1). Review it annually and minute the review. Obtain independent financial advice where the trustee lacks expertise (s.20(2)); the cost is properly payable from the fund.

3. Exercise powers with procedural care. Before selling, leasing or improving, confirm the power is not excluded, consider beneficiary consents where required (e.g. s.27(4)), and obtain valuations where the statute or prudence demands (ss.26, 28A, 30(1)(c)). For appropriations under s.30(1)(k), give the prescribed notice and allow one month for objection.

4. Manage maintenance and advancement. When exercising ss.58–60, record the factors considered (age, requirements, other income). For capital advances, bring them into hotchpot on final distribution (s.59(b)) and obtain adult beneficiary consents where prior interests exist (s.59(c)).

5. Protect against liability. Insure appropriately (s.46), keep accurate accounts and have them audited where complexity justifies it (s.51), advertise for claims before final distribution (s.63), and seek court directions under s.92 before embarking on any transaction of doubt. If a breach has occurred, apply promptly for relief under s.75, placing all relevant facts before the court.

6. Delegate and employ agents properly. Any delegation under s.54 must be by deed with co-trustee consent. Agents under s.53 must be chosen with care; the trustee remains liable for negligent selection.

7. Engage with the court when necessary. Use s.89 for additional powers, s.90 for variations affecting minors or unborns, and s.94 for review of contested decisions. Always serve all interested parties or obtain representation orders under s.96.

8. Maintain records. Every exercise of discretion should be minuted with reference to the relevant statutory provision and the factors considered. In litigation the court will examine those records when applying s.26B.

Professional trustees should maintain a compliance manual that cross-references each statutory power to a checklist. Lay trustees should obtain legal advice before exercising any power that affects beneficial interests or involves significant sums. Regular engagement of specialist trust counsel for complex decisions is itself a prudent step that courts have recognised as tending against a finding of breach.

By treating the Act as a practical handbook rather than a statutory overlay to be consulted only in crisis, trustees can discharge their duties, protect their personal exposure, and fulfil the settlor’s intentions with confidence.