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Trustees, Trusts

I’m a trustee if I say so … or am I?

Or am I?  The unsuccessful summary judgment application in Herron v Wallace highlights the importance of being able to evidence appointment as trustee.  In this case the plaintiff was seeking to recover over $2.5m under a deed of settlement and a deed of acknowledgment of debt.  Due to the plaintiff’s intervening bankruptcy it was essential that the plaintiff evidence his appointment as trustee.  Perhaps surprisingly the plaintiff did not provide any deed of appointment of trustee to support his assertion that he had been appointed a trustee.  A further difficulty was that at the time the plaintiff entered into the deed the deed was silent as to the capacity in which he entered into the deed.  While it is correct, and in fact a fundamental proposition of trust law, that trustees act personally, it is not sufficient to later aver that a deed was entered into as a trustee without anything else to confirm this capacity.

In this regard it is noted that  trustees can delegate certain functions (subject to the terms of the deed of trust and the Trustee Act, s 31).  However, in the case in hand no evidence of permissible delegation was put before the court.

Trustees can also appoint agents. Although this was also alleged as a basis for which the plaintiff entered into the deeds, again, no evidence of agency was put before the court.

Herron v Wallace highlights, again, the need for correct documentation to be produced and maintained to evidence trustee appointments.  It also, helpfully, shows that that the requirement to do so, while in this case, potentially compromising the trust’s ability to recover a debt owed, (if in fact that debt is owed to the trust); also protects a trust against allegations of a person acting as an unproven trustee incurring debt on behalf of a trust, rather that personally. 

References:

  • Herron v Wallace [2013] NZHC 2073
  • Niak v MacDonald [2001] 3 NZLR 334
  • GE Dal Pont The  Law of Agency  (2nd Ed, Lexis Nexis, Australia) at 3.31
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