Can a POA act for a trustee?

 

Can a Trustee delegate its authority? Can a POA act on the trustee’s behalf?

A human Trustee can not outsource the job of being a trustee to another person. Even if that other human holds a Power of Attorney for the Trustee. The position is different for a company. A company can give a corporate POA.

• Can a human Trustee of a family trust or unit trust delegate their powers to another person?

• Or, can a human Trustee of a Self-Managed Super Fund delegate his or her powers to an attorney?

Human Trustee’s Duties vs a POA’s Duties

Trustees and people holding POAs while similar, perform different jobs:

1. The duties of a human trustee:

• act personally – you can not delegate the job
• act unanimously if multiple Trustees – this is not a democracy but the trust deed may have rules on this
• avoid fettering of discretion – the trustee cannot just make up a set of rules and slavishly follow them
• act in good faith – exercise powers reasonably, not arbitrarily or for some irrelevant purpose
• act in the best interest of the beneficiaries – “The Trustee must, of course, obey the law; but subject to that, they must put the interests of their beneficiaries first.” Lock v Westpac (1991) 25 NSWLR 593

2. The duties of a POA:

• stands in the shoes of the principal – with their best interests in mind
• keep the attorney’s money and assets separate from the principal’s
• keep proper accounts and records of how the attorney handles the principal’s money and assets
• act honestly in all matters concerning the principal’s legal and financial affairs

The Human Trustee has a duty to act personally

A trustee’s duties cannot be delegated. This is unless permitted by the trust deed, statute or court order.

Similarly, the trustee cannot make up some set of rules to deal with some future occurrence.

A trustee may not fetter its discretion: Dagenmont Pty Ltd v Lugton [2007] QSC 272). The trustee cannot decide now how it exercises its discretion at a future time. The trustee’s job is to exercise the trustee’s discretion. This is at the relevant time. This is after taking into account all of the peculiar and current set of facts at that specific time.

A set of rules made up by the trustee on how he or she deals with some future occurrence is ‘fettering’ the trustee’s discretion. The trustee is duty-bound to look at all situations with fresh eyes, as the situation arises. That is the trustee’s job.

So the trustee is not allowed to reduce its power of discretion. Similarly, it certainly cannot just hand over the job of being a trustee to someone else.

Attorneys under a POA cannot do the Trustee’s job

A human can give a Power of Attorney to another person. This human is called an ‘attorney’. However, the attorney cannot use the POA to take over the trustee’s responsibilities.

Delegating a trustee’s role in New South Wales

“A prescribed power of attorney does not confer authority to exercise any function as a trustee that is conferred or imposed on the principal.” Section 10 Powers of Attorney Act 2003 (NSW)

This act merely reflects the common law. The general rule in New South Wales is that a Trustee cannot delegate.

Can a Human Trustee delegate under a Victorian Power of Attorney?

In Victoria, under the Powers of Attorney Act 2014 (VIC) a delegation of the Trustee’s powers is not allowed for:

POA and trustee’s powers in South Australia

South Australia does not allow a human holding your enduring power of attorney to take over your job of being a trustee: Powers of Attorney and Agency Act 1984 (SA).

Delegation of a trustee’s powers in Queensland and Western Australia

There are limited opportunities to allow a trustee to delegate in Queensland and Western Australia.

While the Queensland or Western Australian Trustee is:

• temporarily out of the State (e.g. Qld or WA only); or

• the Trustee is temporarily incapable of performing their duties as Trustee due to physical infirmity

then the trustee can delegate to the human holding their QLD or WA POA. See section 56 Trusts Act 1973 (Qld) and section 54 Trustees Act 1962 (WA).

However, since most banks and financial institutes are in Melbourne or Sydney this has limited scope. Queensland and Western Australia’s legislation has to be read together with other States and Territories’ rules on POAs. Also, WA and QLD POAs only work in their home states.

Human Trustee appointing an Agent vs a Power of Attorney

The law generally stops a Trustee from delegating the job. However, a Trustee may appoint agents to help administer the trust. This is different from a person holding a POA. This is because they are ‘standing in the shoes’ of the principal. In contrast, an agent merely acts on behalf of a principal.

Each State and Territory has different rules for appointing agents.

Duty of a trustee to Act Unanimously

What about if there are two human trustees of the same trust?

Can one human trustee delegate his or her authority to the other trustee? Can one trustee sit back and let the other trustee ‘run the show’? Can a trustee fetter his discretion? This is by allowing the trustee to do the job without oversight.

Decisions must be reached jointly and unanimously.

A trustee breaches this duty if they leave control of the trust entirely in the hands of a co-trustee. See Hanbury v Kirkland (1829) 57 ER 998.

What if the trustee blindly just sides with the majority of trustees?

Consider Cock and Howden v Smith (1909) 9 CLR 773. The High Court of Australia said that the Trustees failed to exercise discretion. This was because one of the Trustees, in the mistaken belief, that he was bound by the majority decision of all the Trustees, failed to address his mind to the issue at hand.

Griffith CJ (page 799) asked :

“how far has there been a real exercise of joint discretion applied to the relevant facts” (page 799) and

upon the evidence the “trustees never applied their minds collectively to all the circumstances of the case.” (page. 800)

Any decision by them is deemed to be joint and unanimous. They are always seen to be acting together.

Company POAs

A company POA has different rules.