Trusts Bill 2024: How will the Trusts Bill affect trustees and people who deal with trusts?

Key takeaways

• While trustees are given greater non-excludable powers under the Trusts Bill, there are also higher duties on them, making it more important than ever for trustees to familiarise themselves with the new provisions and obtain advice when dealing with trust property.
• The circumstances surrounding where a trustee may be held personally liable will change significantly from the Act.
• The circumstances in which trustees may be removed or disqualified will be broader, including because in relation to removal of a trustee, it does not matter whether a circumstance happened or started to apply, in relation to the trustee, before or after the commencement of the Trusts Bill.⁴
• It is possible to apply to the Court for an order approving the appointment of more than four trustees or to remove or disqualify a trustee. Those applications are complex, and advice should be sought if a trustee or a beneficiary is considering making such application.
• The circumstances in which purposes of a charitable trust may be changed to allow the trust property to be applied cy pres are complicated, and if a trustee is considering making such an application to the Attorney-General (in circumstances where the value of the trust property does not exceed the District Court’s monetary limit), advice on that process should also be sought.

Trustee and investors

If passed, the Trusts Bill will make the following fundamental changes to the Act for trustees:⁵

Trustees’ duties

• Trustees will have more onerous (and non-excludable) general duties to exercise care, diligence and skill in administering trusts. Currently, the Act does not provide any general statutory duty of care on the exercise of a trustee’s power, leaving the matter to be regulated by the general law of trusts.⁶
• Professional trustees will have a higher duty in administering trusts and are required to exercise the care, diligence and skill that a prudent person engaged in the trustee’s profession, business or employment would exercise in managing the affairs of other persons.⁷
• Non-professional trustees who have or hold themselves out as having special knowledge or experience relevant to administering trusts, or those of a particular type, will have a duty to exercise the care, diligence and skill that a prudent person having that special knowledge or experience would exercise in managing the affairs of other persons when administering the trust.⁸
• There will be codification of the general law duties for trustees to act honestly and in good faith and keep accounts and other records.⁹

Trustees’ powers

• In relation to trust property, a trustee will have all the powers of an absolute owner of the property.¹⁰  This includes a power to lease trust property without restrictions as to the lease term, and to renew, extend, or vary a lease. Under the current Act, the general powers of trustees in relation to trust property amount to less than the powers of absolute ownership, and operate as a minimal “safety net” to fill gaps in trust instruments.¹¹
• The following specific powers will not be able to be excluded or modified by anything in the trust instrument. These include the power to:¹²
  • sell the trust property;
  • lease the trust property or to renew, extend or vary a lease of the trust property;
  • mortgage the trust property or to renew, extend or vary a mortgage of the trust property;
  • deal with the securities (for trust property that is securities of a corporation);
  • settle a debt or claim in relation to the trust property; and
  • insure the trust property against the loss of or damage to the trust property or any risk or liability relating to the trust property.
• This is a major development and will remedy the current problem for insolvency officials of a trustee that is ejected from office for insolvency not having powers of sale and dealing (since they become bare trustees).
• The new general powers conferred on a trustee in relation to trust property (including in relation to the sale of property or leases) will apply to all trust property held by the trustee (and all leases of trust property in existence) immediately before the commencement.¹³

Trustees’ liability

• Various provisions expand upon trustee liability. A trustee’s liability for any loss that is incurred in respect of income or capital that is paid or applied to a beneficiary will be limited to where the loss arises for its failures in relation to conditions and/or security.¹⁴  This is more limited than the Act where a trustee is protected from any loss.
• Despite these provisions, a trustee’s right to be indemnified out of trust property in relation to liabilities incurred in the proper administration of the trust is preserved.¹⁵

For those who deal with trusts and trustees

• The maximum number of trustees is four trustees.¹⁶  However, on application to the Court, the Court may make an order approving the appointment of more than four trustees.¹⁷
• The Court will have the power to appoint or remove a trustee and disqualify a trustee (from any trust).¹⁸
• The circumstances in which purposes of a charitable trust may be changed to allow the trust property to be applied cy pres will be broader. Those circumstances will include, not just the “the spirit of the trust” but also the social and economic conditions prevailing at the time of the proposed change.¹⁹
• The Attorney-General, rather than the Court, will have the power to approve a scheme to allow charitable trust property to be applied cy pres where:
  • a trustee makes an application to the Attorney-General;
  • the purposes of the trust have not previously been changed by the Court; and
  • the value of the trust property does not exceed the District Court’s monetary limit ($750,000).²⁰
• The definition of “Court” now extends to the District Court and District Court has jurisdiction relating to the trust or trust property, where the value of all of the trust property does not exceed the District Court’s monetary limit ($750,000).

Final thoughts

When enacted, the Trusts Bill will provide a much-needed modernisation of the Act. The amendments are significant and complex. Consequently, trustees and people who deal with trusts ought to be aware of these changes and obtain advice in respect to their duties and how they deal with trusts.

The Trusts Bill will still need to traverse the usual governmental and parliamentary processes for enacting legislation, and it may be some time before the Trusts Bill receives Royal Assent because:

• the Housing, Big Build and Manufacturing Committee are held a public hearing in relation to the Trusts Bill 2024 on 10 July;
• the Committee are now required to table its report by 2 August 2024; and
• once the Committee’s report has been tabled, the Queensland Government will have 3 months to respond to the report’s recommendations.

Useful resources

The Trusts Bill  Read more	The Explanatory Note  Read more	The Act Read more

This Bulletin was written by Nuncio D’Angelo (Partner, Australian Banking & Finance based in Sydney), Joshua Henderson (Partner, Litigation and disputes based in Brisbane) and Madeleine McEniery (Associate, Litigation and disputes based in Brisbane).