It is established that the powers of the manager are not delegated powers derived from the trustee; the manager is a primary source of authority, having been responsible for the set up of the unit trust. However, despite this stated position, it is submitted that the trustee has reserve powers incidental to its status as a trustee by reason of its legal ownership of the properties and equity’s imposition of duties on such an owner. The position appears to be that if the manager cannot find authority for a particular act in the express or implied powers of the unit trust deed, the manager cannot do the act. The unit trust deed is the source of the manager’s authority. Doctrinally, the manager cannot go beyond that and seek the court’s approval or sanction of a particular action. By contrast, the status of a trustee gives the trustee the right to seek authorization or assistance from the court. In The Application of Permanent Trustee Nominees (Canberra) Ltd. in an application for advice by the trustee under section 63 of the Trustee Act 1925 (NSW), Young J held that in the unit trust where the power to manage and the ‘watchdog’ power were deliberately compartmentalized, there was no scope to find ‘a manifestation of intention . .that the trustee may adjust his conduct to the change and act as he would not otherwise be intended to act‘ .However, his Honour held, obiter, that the court can grant power to the trustee to act as the manager in the interim period under section 81 of the Trustee Act 1925 (NSW), which is the equivalent section 57 of the Trustee Act 1925. Two observations can be made.

FundsFirst, there is no reason to question his Honour’s judgment to the extent that it must be a question of construction. However, it would be too sweeping a proposition to say that in a unit trust the trustee does not have any management power at all or that the court can never find any manifestation of an intention that the trustee may act in an emergency. At the very least, when the primary trust is terminated and a secondary trust for sale and distribution arises, the trustee must have such powers to manage trust assets as may be implied from the power to sell or as are conferred by trustee statutes. Thus the requisite intention is present in the majority of trust deeds. For an authorized unit trust, regulation 7.12 of the Financial Services (Regulated Schemes) Regulations 1991 provides that `the manager and the trustee have, by virtue of these regulations, all the powers conferred on them by the general law‘ unless such powers are qualified or restricted by the Regulations. While it is not entirely clear what powers have been conferred on a manager by the general law, it is clear that there is a considerable body of principles and provisions with regard to trustees’ powers. Thus, the position with regard to an authorized unit trust is that if a particular power is not vested expressly or implied by the Regulations in the manager of the unit trust, the trustee’s powers under general law will apply. For a non-authorized unit trust, since the Regulations do not apply, the question is one of construction of the trust deed. In the absence of any clear exclusion of powers conferred by equitable principles or statute, the very status of a trustee must imply that it will have such powers.

Secondly, whatever the outcome of construction of the unit trust deed, the decision in The Application of Permanent Trustee Nominees (Canberra) Ltd. has two implications:

  1. As the application in the case itself demonstrates, the trustee of a unit trust has the same power of a private trustee to apply to court for the determination of any question or for any relief which could be determined or granted under an administration action. By itself, this is a kind of reserve power not available to the manager.
  2. The decision recognizes that the court can confer powers of management on the trustee of a unit trust in an emergency or when the circumstances justify the court’s exercise of jurisdiction under section 57 of the Trustee Act 1925. Logically it follows that a trustee of a unit trust can also apply to the court for variation of the trust under the Variation of Trusts Act 1958 or inherent jurisdiction of the court. An application under the 1958 Act has the advantage that alteration of beneficial interests is also possible. In practice, this will be an open court hearing which is more expensive than a chamber hearing of a section 57 application. As it is unlikely that an order for variation of beneficial interest will be sought by the trustee of a unit trust, a section 57 application is more likely. In any event, it is uncertain as to the implication on such an application of the fact that the unit trust deed is a contract between the manager, the trustee, and the participants.

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Residual Management Powers of the Trustee