Section 63 of the Trustee Act 1925 (NSW) allows a Trustee to apply to the court for judicial advice on any question about the management or administration of trust property, or with respect to interpreting a trust instrument.
The upshot of seeking judicial advice is that a trustee who follows judicial advice given to them is considered to have discharged their duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion, advice or direction.
The purpose of judicial advice is to provide protection to a trustee. The need for protection usually arises because there is a conflict between beneficiaries or because there is a suggestion, sometimes only faint, that there may be an alleged breach of trust if the trustee adopts a certain course of action. The conflict between beneficiaries or the possible breach of trust must arise out of some ‘question’ respecting the management or administration of the trust or in relation to the interpretation of the trust instrument.
At times an application for judicial advice will be refused or even considered inappropriate.
In NSW Trustee and Guardian v Eleison [2018] NSWSC 1691, an application for judicial advice was brought by the Plaintiff.
The facts which were the subject of the advice sought in the proceedings were complicated and uncertain. In this case the beneficiary was said to have killed the testator by negligently driving. One of the question on which the trustee sought advice from the court was whether the beneficiary’s action would be considered as “unlawful killing” under legislation.
The Court held that it is one thing to seek advice whether the trustee is justified in distributing the estate in a certain way. It is quite another thing to condition that justification for distribution by reference to a series of questions that require the determination of substantive questions of fact and law.
It was decided that it was inappropriate for the Court to provide advice in the absence of a substantive proceeding in which all interested parties have put submissions and all admissible evidence has been elicited, to reach a final conclusion as to the essential underlying questions.
If a trustee is seeking advice in relation to a trust, it would be beneficial to seek immediate advice to ascertain how the trustee’s application to seek advice may affect its interests under the trust.
