Nolan v CollieAny expense incurred by the trustee acting in breach of trustwill be improperlyincurred and not subject to the right of indemnityBut a ‘mere slip’ or ‘error in judgment’ by itself will not mean an expense is improperly incurredThe trustee had acted correctly in entering into a mortgage and the error was the provision of additional security, which was an ‘oversight’. In summary expenses that are honestly and reasonably incurredIndemnity still availableOrmiston JA
ROI ROI = charge over trust assetsTakes precedence over beneficiaries’ rights(Octavo; Buckle)No distribution of T assets until ROI satisfiedCreditors subrogated into the trustee’s ROI—but only to the extent of ROICannot subrogate to T’s personal right against the beneficiariesIn this case, should sue the T for the remaining balance
Proprietary implications of of ROI: BeneficiariesA trustee cannot be compelled to surrender trust property to beneficiaries until after ROI has been satisfied. This means that beneficiaries are only entitled to the balance of the trust fund, if any, after the trustee has exercised the ROI over the T fundThis gives trustee priority in the administration of the trust.Chief Commissioner for Stamp Duties v Buckle
BuckleTrustee has a ROI for $10,000Total value of fund = $20,000TRUST ‘FUND’ $10 000Balance = T fund avail to B’s LIEN for ROI$10 000Not part of TRUST ‘FUND’ Not avaialble to BS
Proprietary implications of ROI: BeneficiariesIf total amount of ROI equals value of T asset (i.e trustee’s liabilities equal total value of trust assets) , trustee entitled to:1. entire beneficial interest E.g. ROI = 10,00.00Trust fund = 10,000.00Trustee entitled to all of trust fund See next slide
Proprietary Implications of ROI: BeneficiariesIf total amount of ROI exceeds value of T asset (i.e trustee’s liabilities exceedtotal value of trust assets), trustee entitled to:1. entire beneficial interest E.g. ROI = 12,000.00Trust fund = 10,000.00 Trustee entitled to all of trust fund PLUS2. Balance of $2,000 from the beneficiaries (later)TOTAL $12,000
Proprietary Implications of ROI: Third partiesCreditors of Trust T creditors can be subrogated to Ttees’ ROI to satisfy claim for payment of expenses incurred by TteeTherefore, can access T ROI exercisable over T property directly BUTcreditors only entitled to so much of property as represents value of ROI Successor trustee with notice takes assets subject to right of indemnity – so loss of office no effect upon ROI OctavoCreditors of TrusteeT property itself generally not available to T’tees’ Trustee in bankruptcy ButIf trustee bankrupt T’tees ROI passes to trustee in bankruptcyIf trustee dies, ROI passes to personal representativeIf beneficial interest assigned, assignee takes subject to ROI, unless BFPVWN.