Australia: Advice to trustees about commercial or business decisions outside realm of court

Last Updated: 3 October 2012
Article by Bernadette Carey

In brief – Court will not advise on commercial investment matters

Trustees making use of section 63 of the Trustee Act 1925 (NSW) to seek judicial advice must only do so when they have genuine doubt about the administration of the trust or the interpretation of the trust deed, rather than to seek advice about proposed commercial transactions.

Trustees cannot abdicate responsibility for commercial or business decisions

The Supreme Court of New South Wales has recently analysed the practice of professional trustees making applications to the court for judicial advice as to their functions and duties.

In Application by Perpetual Trust Services Limited as responsible entity for the Momentum AllWeather (A$) Absolute Return Fund [2012] NSWSC 758, the court confirmed that, while this practice is sanctioned by legislation, it is not a method by which trustees can abdicate responsibility for making their own commercial or business decisions in respect of trust property.

In practice, trustees should therefore take care to ensure that applications to the court for judicial advice are properly limited to cases in which the trustee has genuine doubts as to the operation of the trust deed or the proper administration of the trust.

Trustee not obliged to expose itself to litigation

As the role of a trustee is fiduciary in nature, it carries with it a number of important powers and duties which must always be exercised in the best interests of the beneficiaries of the trust.

However, in exercising those powers or discharging those duties, the trustee is not obliged to take any risks and expose itself to litigation by the beneficiaries who might question the propriety of the trustee's exercise of a power or discretion by a trustee at a later date.

Trustees protected from litigation if following direction of the court

Enter section 63 of the Trustees Act 1925 (NSW), which has on some occasions been touted by some as akin to a "get out of jail free card" for trustees. It provides for trustees to approach the Supreme Court for its opinion, advice or direction on any question concerning the management or administration of the trust property or the interpretation of the relevant trust deed. The costs incurred by the trustee in doing so are usually met in full from the trust fund.

If the trustee acts in accordance with the opinion, advice or direction of the court, the trustee's actions will be protected from attack. Of course, if it transpires that the trustee has been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion, advice or direction, protection will be lost.

Perpetual Trust Services required to realise the assets of Momentum Trust

In the Perpetual case, the plaintiff, Perpetual, was the responsible entity for the Momentum AllWeather (A$) Absolute Return Fund (Momentum Trust). One of the assets of the Momentum Trust was an interest in another fund known as the All Weather Absolute Return Fund. Through its investment in the fund, Perpetual held for the trust shares in DR Funds Limited.

Perpetual had terminated the Momentum Trust some years earlier and was in the process of winding it up. In the course of doing so, and as required by the trust deed, Perpetual was required to gather in and realise the assets of the trust. However, Perpetual began to doubt the extent of its duties in this regard, particularly in respect of the shares in DR Funds.

Perpetual applies to Supreme Court for advice on sale of shares

Relying on section 63 of the Act, Perpetual applied to the court for judicial advice in relation to the following questions:

  • Whether the trust's indirect interest in DR Funds was an asset of the trust, such that Perpetual was obliged to realise that asset
  • If the answer was yes, whether Perpetual had the power to postpone the sale of the asset if it thought it desirable to do so in the interests of the unit holders

Court not bound to give advice on commercial matters and usually inappropriate to do so

In considering Perpetual's application, the court formed the view that Perpetual's "doubt" in fact related to a commercial matter: namely, what decision Perpetual should make as to the investment in DR Funds.

Essentially, Perpetual had to make a commercial decision as to whether, and if so at what time, it should exit the DR Fund. The evidence was that an early sale would result in the relevant asset being sold into a secondary market for cash, and at a substantial discount.

Court declines to advise on commercial investment matter

The court found that, rather than being asked for advice as to the proper construction of the trust deed or the administration of trust property, it was really being asked to opine on a purely commercial investment matter peculiarly within the remit of Perpetual as trustee. The court said that it was ill-equipped to form any view about the matter and declined to answer Perpetual's questions.

In doing so, the court confirmed that it is not bound by section 63 to give advice, and that it would normally be inappropriate to give advice as to whether or not a trustee should enter into a commercial transaction.

In this case, the court considered that, despite its conclusions, the trustee had not engaged in misconduct in bringing the application and it was entitled to be paid its costs out of the Momentum Trust. However, trustees should be aware that if their conduct in bringing applications such as these is found by the court to be unreasonable, unnecessary, or to expose the trust fund to excessive expenses, such an indemnity may not be granted.

Section 63: a helpful tool, not an easy excuse

Section 63 is something of an exception to the court's ordinary function of deciding disputes between competing litigants. In practice it can operate as an extremely helpful facility pursuant to which trustees can obtain private advice.

However, it is clear that the court will not entertain a request by a trustee which it considers to be a thinly-veiled attempt to have the court conduct the business of the trust.

Trustees are therefore on notice that section 63 is not a method by which a trustee can abdicate responsibility for the proper administration of the trust. Requests for judicial advice should be limited to real issues concerning the administration of trust property or the interpretation of the trust deed.

Bernadette Carey
Trusts and estates
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Bernadette Carey
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.