Contents

Summary of recommendations

Chapter 9 – Custodian and advisory trustees

Custodian trustees

R27 The new Trusts Act should re-enact section 50 of the Trustee Act 1956 in modernised form with the following clarifications, additions and reforms:
(a) continue to provide for the appointment of a corporation as a custodian trustee;
(b) provide that, subject to the terms of the trust:
(i) the role of the custodian trustee is to hold the trust property, invest funds and dispose of the assets as the managing trustee directs in writing;
(ii) the trust property vests in the custodian trustee as if the custodian trustee were the sole trustee;  
(iii) the management of the trust property and exercise of all powers and discretions exercisable by the trustee under the trust remain vested in the managing trustees as if there were no custodian trustee;  
(iv) the custodian trustee has all the administrative powers of a trustee but none of the discretionary powers;  
(v) the custodian trustee has the power to execute any documents or perform any administrative action directed by the managing trustee; and
(vi) the custodian trustee may be appointed over part of the trust fund.
(c) provide that the custodian trustee must act on the instructions of the managing trustee and is liable for loss caused by:
(i) failing to execute the instructions of the managing trustee; or  
(ii) acting without the authority of the managing trustee;
(d) provide that the custodian trustee is not liable for executing instructions of the managing trustee where the managing trustee is in breach of trust;
(e) provide that the custodian trustee may apply to the court for directions if it receives instructions from the managing trustee that it suspects are in breach of trust, but shall not be liable for a failure to do so;  
(f) provide that, in addition to any remuneration or commission payable to the custodian trustee, the custodian trustee has the benefit of the right of indemnity in respect of costs incurred by the custodian trustee; and
(g) provide that the appointment of a custodian trustee must be in writing.

Advisory trustees (special trust advisers)Top

R28 The new Trusts Act should re-enact section 49 of the Trustee Act 1956 in modernised form with the “advisory trustee” renamed the “special trust adviser” and with the following clarifications and reforms:
(a) a special trust adviser may advise the trustee on any matter relating to the trust;
(b) a special trust adviser is not a trustee, and does not have the powers and duties of a trustee;
(c) the trustee is not liable for anything done or omitted by the trustee by reason of following the special trust adviser’s advice unless the trustee is acting dishonestly, in wilful breach of trust or grossly negligent in following the advice (replacing proviso (c) to section 49(3) of the Trustee Act 1956); and
(d) the trustee is not liable for a breach of trust merely because the trustee elects not to follow the special trust adviser’s advice.