Trust corporations and professional trustees that take on the role of trustees as part of carrying on a business invariably wish to ensure they can:
Charge and recover their fees and expenses; and
Minimise their exposure to claims made against them for breach of trust.
Trustees’ fees and expenses are frequently a source of disputes with beneficiaries, the settlor or successor trustees. Trustees’ commercial interests in administering the trust efficiently and profitably can, on occasion, conflict with their duty to administer the trust in the best interests of the beneficiaries. In order to manage this conflict it is suggested that trustees should:
Ensure that the trust instrument authorises the payment of the trustees’ fees and expenses from the trust fund or that the settlor or some other person(with sufficient resources) has agreed to pay and, if necessary, provide security for such fees and expenses;
Ensure the level and type of fees charged are not precluded by the terms of the trust instrument and are clearly set out in the trustees’ fee schedule;
Ensure their fee schedule has been disclosed to the settlor, protector, enforcer, primary beneficiaries, unit holders or such persons to whom the trustees have a duty to account1;
Provide sufficient notice (to the persons to whom the trustees have a duty to account) for any changes to the fee schedule; and
Clearly set out the level of fees and expenses charged to the persons to whom the trustees are required to account to.
In most common law jurisdictions, these requirements are reflected in the general law,2 applicable trust and regulatory statutes and codes of practice.
Trustees’ terms of engagement often contain provisions which may purport to set out the services the trustees have agreed to provide, indemnify the trustees, release trustees from liability and limit the amount of the damages that the trustees may be required to pay if they become personally liable for any loss. This Guide considers the extent whether trustees’ terms of engagement can achieve such objectives. This Guide also considers issues for trustees to consider when negotiating terms of exoneration and indemnification with their (unrelated) delegates.