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Authors: Vicki Ammundsen, Jeremy Johnson
Published: 14 November 2018
Pages: 33

Introduction

Being appointed a trustee can be an avenue to a revenue stream; and for many accountants and lawyers it is still a regular part of day-to-day business. While appointment as a trustee raises issues of liability and risk, these risks can be managed through appropriate governance and trust management practices, and in some circumstances with the assistance of the court.

By way of background, it is a fundamental proposition of trust law that trustees act personally. This means that a trustee who incurs liability can put that trustee’s personal assets at risk. While this may be able to be addressed in some part through the use of a corporate trustee, the simple adage of “prevention being better than cure” cannot be over-stated in the matter of trustee liability.

While the risk of incurring liability as a trustee cannot ever be completely avoided, this paper will demonstrate how the risks can be substantially minimised through the adoption of appropriate governance.

The purpose of this paper is to highlight some of the obvious risks of acting as a trustee and provide some practical advice as to what steps can be taken to minimise liability. The paper:

• discusses sources of trustee liability;
• considers how to limit liability through suitable indemnity and limitation of liability clauses;
• considers how to limit liability with the assistance of the court;
• discusses insurance options;
• sets out governance considerations; and
• outlines practical steps that can be taken to minimise liability.

Content outline

• Sources of Trustee Liability
• Extent of Trustee Liability
• Limiting Liability and Indemnities
• Insurance
• Governance Considerations
• How Trustee Liability can be addressed or mitigated though appropriate Governance
• Directions Pursuant to the Trustee Act
• The use of Corporate Trustees to minimise Liability
• Director Liability