The conclusion from the foregoing discussion is that the trustee and the manager are not in partnership or in a general agency relationship. They are independent contracting parties to the unit trust deed. An examination of the terms of a typical trust deed of a non-authorized unit trust in detail reveals that the majority of the provisions are covenants made by either of them with unitholders or are provisions conferring powers or discretions on them by unitholders. When the regulations of the Financial Services (Regulated Schemes) Regulations 1991 are incorporated expressly into the trust deed of an authorized unit trust, it appears that they may be construed in the same manner. There are not many provisions that can operate as promises between these two parties.

Where provisions in the deed embody covenants made with unitholders, they can be enforced by unitholders as promisees. In respect of an exercise of power or discretion by the trustee which is without good faith or otherwise wrongful, unitholders can sue the trustee for breach of trust. In the case of the manager, unitholders may bring an action for an abuse of power on the basis of a breach of fiduciary duty. Thus, there is no problem of standing to sue for aggrieved unitholders.

FundsAs between the manager and the trustee, the position is less clear if a claim cannot be based on contract. There are numerous situations where this may happen. Both the trustee and the manager may exercise powers as fiduciaries of unitholders. The exercise of some of these powers by one fiduciary may cause damage or injury to the other fiduciary. For example, the trustee of an authorized unit trust may abuse the power under the Financial Services (Regulated Schemes) Regulations 1991 that enables it to give notice in writing to the manager to remove the manager if for good and sufficient reason it is of the opinion that a change of the manager is desirable in the interests of unitholders. The trustee may also take actions claimed to be pursuant to its duty to take all reasonable care and to exercise all due diligence . . . ‘to exercise such degree of supervision of the manager’s operation of the scheme as is appropriate’. The trustee may also use its power to require the manager to furnish information concerning the management and administration of the scheme” 8 for its own ulterior motive. The trustee may convene a unitholders‘ meeting not for the purpose contemplated by the Regulations or the trust deed but with a view to embarrass the manager. This type of action by itself will at least cause disruption to the business of the manager. Likewise, the manager may abuse its powers. For example, it may refuse to approve an increase of remuneration where the terms of the trust deed require its approval as a condition .

In the exercise of these powers, the power holder stands in a fiduciary relation to the unitholders and any abuse can give rise to a cause of action by the unitholders based on fiduciary principles. Since the manager and the trustee are independent contractors standing at arm’s length to each other, the question arises whether any abuse of such power by one of them to the detriment of the other will give the other party victimized the right to sue.

In Parkes Management Ltd. v. Perpetual Trustee Co. Ltd. ,the Court of Appeal of the Supreme Court of New South Wales held that such a right did exist on the particular facts of the case. The issue was seen as one of contractual construction of the particular unit trust deed and the construction adopted by their Honours was strained. It is submitted that their Honours could have framed the issue as one of fiduciary duties between co-fiduciaries, i.e., the trustee and the manager.

The question in this type of situation is whether the manager and the trustee, as fiduciaries of unitholders, could also be fiduciaries between themselves. If the answer is yes, in what particular circumstances will this situation arise? Before Parkes Management is examined, it may be instructive to consider the principles under which one of two persons may be characterized as a fiduciary of the other.

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