Australian Equity and Trusts: Fiduciary Duties, Equitable Remedies, and the Administration of Trusts

Introduction

Equity and trusts form an essential part of Australian private law. They regulate relationships in which legal rights and obligations cannot always be adequately explained through ordinary contract, property, or tort principles. Equity provides doctrines and remedies concerned with conscience, loyalty, fairness, and the enforcement of obligations that arise from particular relationships or circumstances. Trust law, in turn, provides a legal structure through which property can be held and administered by one person for the benefit of another or for a legally recognised purpose.

These principles influence a wide range of legal and commercial activities. Trusts are used in estate planning, family arrangements, investment structures, charitable organisations, superannuation, business transactions, and the administration of property. Fiduciary duties also arise outside formal trusts, particularly in relationships involving directors, partners, agents, solicitors, and other persons entrusted with responsibility for another’s interests.

Australian equity is derived from the English equitable tradition but has developed through Australian legislation and judicial decisions. The High Court of Australia has played a particularly important role in defining fiduciary obligations, identifying the limits of equitable intervention, and determining the remedies available when equitable duties are breached.

There is no single Australian statute that comprehensively codifies equity and trusts. The general law remains substantially based on judicial precedent, supplemented by state and territory legislation. Trustee legislation regulates important aspects of trust administration, including investment powers, appointment and retirement of trustees, delegation, indemnification, and court supervision. The details differ between jurisdictions.

This article examines the foundations of equity and trusts in Australia, the creation and administration of trusts, fiduciary duties, equitable remedies, and the legal responsibilities of trustees. It also considers significant High Court decisions and recent legislative developments relevant to the modern Australian law of trusts.

1. The Nature and Sources of Equity in Australian Law

Equity developed historically as a body of legal principles that supplemented the common law. Its origins lie in the jurisdiction exercised by the English Court of Chancery, which intervened in circumstances where the strict application of common-law rules could produce an inadequate or unconscionable result.

Equity did not simply replace common law. It developed alongside it, recognising rights and obligations that were not necessarily available through ordinary common-law actions.

Australian courts inherited this tradition and continue to apply equitable principles as part of the general law. Equity is therefore not an independent system operating outside the Australian legal order. It is an established part of the jurisdiction exercised by Australian courts.

1.1 The principal sources of equitable law

The principal sources of Australian equity include:

• judicial decisions of Australian courts, particularly the High Court;
• inherited equitable principles developed in English law, where received and not displaced by Australian authority;
• state and territory legislation governing trusts and equitable matters;
• Commonwealth legislation affecting particular relationships, assets, or institutions;
• the terms of contracts, trust instruments, and other legal arrangements that operate within the framework of equity.

The High Court is the final authority on the interpretation and development of Australian equitable principles. Decisions of state and territory appellate courts also contribute significantly to the law.

The application of equitable principles is not unlimited. Courts must identify the relevant doctrine, the legal relationship involved, and the nature of the obligation allegedly breached. Equity is not a general jurisdiction to impose whatever outcome a court considers morally preferable.

1.2 The relationship between common law and equity

Historically, common law and equity developed through separate courts and procedures. Their administration was later brought together through judicial reforms, including the Judicature reforms in England. Australian courts inherited the resulting structure, under which common-law and equitable claims may be considered within the same judicial system.

However, the historical distinction remains legally important.

Common law and equity may recognise different interests, impose different obligations, and provide different remedies. For example, a breach of contract may result in an award of damages, while a breach of fiduciary duty may justify an account of profits or equitable compensation.

The same conduct may sometimes give rise to both common-law and equitable claims. A court must then determine the legal basis for each claim and avoid granting inconsistent or duplicative relief.

1.3 Equitable maxims

Traditional equitable maxims express recurring ideas that influence the exercise of equitable jurisdiction. They are not independent statutory rules, nor do they provide automatic answers to disputes.

Common examples include:

• equity acts in personam;
• equity regards as done that which ought to be done;
• he who seeks equity must do equity;
• he who comes to equity must come with clean hands;
• delay may defeat equitable relief;
• equity will not permit a statute to be used as an instrument of fraud.

These maxims help explain the historical character of equitable jurisdiction, but their application depends on established legal doctrines and the circumstances of the particular dispute.

2. The Nature and Structure of a Trust

A trust is a legal relationship in which a trustee holds property subject to obligations to administer it for the benefit of beneficiaries or for a legally recognised purpose.

The defining feature is the separation between legal title and beneficial entitlement.

The trustee ordinarily holds legal ownership of the trust property and exercises powers associated with that ownership. The beneficiaries hold equitable interests or rights under the trust, depending on the nature of the arrangement.

The trustee cannot treat the trust property as freely available personal property. Its administration is restricted by the trust instrument, applicable legislation, and equitable duties.

2.1 The principal parties

A conventional private trust involves three principal roles.

The settlor is the person who creates the trust or transfers property into it. In a testamentary trust, the arrangement is established under a will and takes effect following the testator’s death.

The trustee is the person or entity responsible for holding and administering the trust property. A trustee may be an individual, a company, or an authorised trustee corporation.

The beneficiary is the person entitled to benefit from the trust. The beneficiary may have a fixed entitlement to income or capital, or may belong to a class from which the trustee has discretion to select recipients.

These roles are not necessarily held by separate people. A settlor may also be a trustee or beneficiary, provided the relevant legal requirements for creating and administering the trust are satisfied.

2.2 Legal and beneficial ownership

The distinction between legal and beneficial ownership is central to trust law.

The trustee holds legal title and is responsible for dealing with the property in accordance with the trust. The beneficiary holds the equitable rights recognised by the trust structure.

For example, a trustee may hold shares in a company and exercise the voting rights attached to them. The economic benefit of those shares, however, may belong to the beneficiaries under the trust.

The trustee’s legal ownership is therefore constrained by fiduciary and trust obligations. The trustee cannot simply use the property for personal purposes or distribute it contrary to the trust.

The distinction also matters when trust property is transferred, invested, mixed with other assets, or affected by insolvency proceedings.

2.3 Trust property

Trust property may include:

• land and buildings;
• money and bank accounts;
• shares and other securities;
• business interests;
• contractual rights;
• personal property;
• other assets capable of being held on trust.

The trust instrument and applicable law determine which assets form part of the trust and how they may be managed.

Trust property must generally be identifiable. Where the trust concerns an asset or fund that cannot be sufficiently identified, difficulties may arise in establishing whether a valid trust exists.

3. The Creation and Recognition of Trusts

Australian law recognises several forms of trust. Some are deliberately created by a settlor, while others arise through the operation of equitable principles or legislation.

The legal requirements depend on the type of trust and the property involved.

3.1 Express trusts

An express trust is intentionally created by a person who intends to place property under trust obligations.

It may be established through a trust deed, a will, or another legally effective arrangement. The instrument ordinarily identifies the trust property, the trustee, the beneficiaries or charitable purpose, and the powers and duties governing administration.

The traditional requirements for an express trust are commonly described as the three certainties:

1. Certainty of intention: there must be an intention to create a trust rather than merely an informal promise or moral obligation.
2. Certainty of subject matter: the property subject to the trust must be identifiable.
3. Certainty of objects: the beneficiaries or purposes must be sufficiently certain under the applicable rules.

These requirements prevent an arrangement from being treated as a trust where its essential elements are too uncertain to administer.

The language used by the settlor is relevant but not decisive. A trust may be created without using the word trust, provided the necessary intention and legal requirements are established.

3.2 Resulting trusts

A resulting trust may arise where property is transferred or held in circumstances indicating that the beneficial interest was not intended to pass to the legal owner.

For example, where one person contributes the purchase price for property registered in another person’s name, the circumstances may support a resulting trust in favour of the person who provided the funds.

The precise result depends on the transaction, the parties’ intentions, any applicable presumptions, and relevant statutory provisions.

Resulting trusts may also arise where an express trust fails or does not dispose of the entire beneficial interest in the property.

3.3 Constructive trusts

A constructive trust is imposed by equity in circumstances where recognised legal principles justify treating a person as holding property for another.

Unlike an express trust, it does not necessarily depend on an intention by the parties to create a trust.

Constructive trusts may arise in disputes involving fiduciary wrongdoing, misuse of property, certain failed transactions, and other circumstances recognised by equitable doctrine.

They are important because they may provide proprietary relief. Instead of merely requiring a defendant to pay money, a court may recognise that particular property or its proceeds should be held for the claimant.

However, constructive trusts are not imposed whenever a court considers a transaction unfair. Their availability depends on established principles and the nature of the claim.

3.4 Charitable trusts

A charitable trust is established for purposes recognised by law as charitable, rather than for the private benefit of identified individuals.

Charitable purposes commonly include the advancement of education, relief of poverty, advancement of religion, and other purposes recognised under the applicable legal framework.

Charitable trusts are subject to distinct rules concerning public benefit, administration, supervision, and the enforcement of charitable purposes.

The Australian Charities and Not-for-profits Commission regulates many charitable organisations under Commonwealth legislation, although the existence and administration of a charitable trust may also involve state and territory trust law.

4. Types of Trusts in Australia

Trusts serve different purposes and may be classified according to how they are created, the nature of beneficiaries’ entitlements, and the function of the arrangement.

4.1 Fixed trusts

Under a fixed trust, beneficiaries’ entitlements are determined by the trust instrument.

The trustee has limited discretion concerning the allocation of trust property. For example, the instrument may provide that two beneficiaries are each entitled to a specified share of the trust income.

The trustee must administer the trust according to those entitlements.

4.2 Discretionary trusts

A discretionary trust gives the trustee authority to decide how benefits are distributed among a defined class of beneficiaries, subject to the trust instrument and applicable law.

A beneficiary may not have an immediate fixed entitlement to a particular amount of trust property. Instead, the beneficiary may have rights associated with the proper administration of the trust and the lawful exercise of the trustee’s discretion.

The trustee must act within the powers conferred by the trust instrument and cannot exercise discretion arbitrarily, dishonestly, or for an improper purpose.

Discretionary trusts are frequently used in family and business arrangements, but their tax, succession, asset-protection, and regulatory consequences depend on the wider legal context.

4.3 Testamentary trusts

A testamentary trust is created under a will and generally takes effect following the testator’s death.

It may provide for the management of assets for children, dependants, or other beneficiaries over a specified period. The trustee may be required to preserve capital, distribute income, or make payments according to the terms of the will.

The executor and trustee may be the same person, but their legal functions are distinct. The executor administers the deceased estate, while the trustee administers assets held under the testamentary trust.

4.4 Unit trusts

A unit trust divides beneficial interests into units. Holders of units generally have entitlements determined by the trust instrument and the number or class of units they hold.

Unit trusts are commonly used in investment and commercial structures. Their legal and regulatory treatment depends on the instrument, the nature of the investment, and any applicable financial services or corporations legislation.

4.5 Bare trusts

A bare trust exists where the trustee holds legal title but has very limited active responsibilities because the beneficiary is absolutely entitled to the trust property and may generally direct the trustee to transfer it.

The trustee’s role is largely custodial, subject to any remaining legal obligations.

4.6 Superannuation trusts

Superannuation funds commonly operate through trust structures. Trustees hold and administer fund assets for members and other beneficiaries under the governing rules and relevant legislation.

Superannuation trustees are subject to a detailed regulatory framework, including the Superannuation Industry (Supervision) Act 1993 (Cth), prudential requirements, and duties concerning the management of fund assets.

These obligations are not identical to those governing an ordinary private family trust.

5. Fiduciary Relationships and Their Legal Significance

A fiduciary relationship arises where one person undertakes or is entrusted with responsibilities that require them to act with loyalty in relation to another person’s interests within a defined scope.

The fiduciary is subject to obligations designed to prevent conflicts of interest and unauthorised personal gains.

Trustees are among the clearest examples of fiduciaries. However, fiduciary relationships are not limited to trusts.

They may also arise between:

• principal and agent;
• solicitor and client;
• partners in a partnership;
• company directors and their company;
• joint venturers in certain circumstances;
• persons exercising particular powers or responsibilities on behalf of another.

The existence of a fiduciary relationship depends on the nature of the relationship and the responsibilities undertaken. It should not be assumed merely because one party trusts another or because the parties have a commercial relationship.

5.1 Identifying the scope of a fiduciary duty

Recognising that a person is a fiduciary is only the beginning of the legal analysis.

A court must determine:

• to whom the fiduciary duty is owed;
• the subject matter to which it applies;
• the nature of the obligation;
• whether a conflict or unauthorised profit occurred;
• whether the alleged conduct falls within the scope of the duty.

In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, the High Court examined fiduciary obligations in a commercial relationship and emphasised the importance of the particular relationship and the responsibilities undertaken.

The decision demonstrates that fiduciary duties are not automatically imposed on every commercial party who exercises influence or has access to confidential information.

5.2 Fiduciary duties are not universal duties of care

Australian law distinguishes fiduciary obligations from duties of care.

A fiduciary duty is primarily concerned with loyalty, conflicts of interest, and unauthorised profits. A duty of care, by contrast, concerns the standard of conduct expected in performing a task or exercising a responsibility.

The distinction was particularly important in Breen v Williams (1996) 186 CLR 71. The High Court rejected the proposition that the existence of a fiduciary relationship automatically creates a general positive obligation to act in every respect in the beneficiary’s interests.

The Court emphasised that fiduciary obligations are principally proscriptive: they prohibit certain forms of conduct, particularly conflicts of interest and unauthorised profits. hcourt.gov.au+1

This distinction prevents fiduciary law from becoming an unlimited mechanism for imposing duties that are more appropriately addressed through contract, negligence, statute, or other legal doctrines.

6. The Core Fiduciary Duties

Two central principles define the traditional fiduciary obligations recognised in Australian law: the duty to avoid conflicts of interest and the duty not to obtain unauthorised profits through the fiduciary position.

These principles are strict because they aim to protect the integrity of relationships involving loyalty and entrusted responsibility.

6.1 The duty to avoid conflicts of interest

A fiduciary must not place themselves in a position where personal interests conflict, or may materially conflict, with the interests they are required to protect.

The duty is preventive. It is not necessary in every case to prove that the fiduciary acted dishonestly or that the beneficiary suffered measurable financial loss.

For example, a trustee who purchases trust property for personal benefit may create a conflict between the trustee’s duty to obtain the best outcome for the trust and the trustee’s personal desire to acquire the asset at a favourable price.

Similarly, a director who participates in a transaction in which they have an undisclosed personal interest may breach fiduciary obligations owed to the company.

The rule is not confined to situations in which a conflict has already caused damage. A sufficiently real possibility of conflict may be enough to engage the doctrine.

6.2 The duty not to make unauthorised profits

A fiduciary must not obtain an unauthorised benefit through the use of their position, powers, opportunities, or information.

The duty may apply even where the fiduciary believes that the transaction benefits the principal or where the principal could not have taken advantage of the opportunity personally.

For example, a trustee who uses knowledge obtained through trust administration to acquire an investment opportunity for personal benefit may be required to account for the resulting profit.

The central question is whether the benefit was obtained in circumstances sufficiently connected with the fiduciary position or the opportunity entrusted to the fiduciary.

In Warman International Ltd v Dwyer (1995) 182 CLR 544, the High Court considered a manager who established a competing business using commercial opportunities connected with his employment. The Court examined the fiduciary breach and the appropriate account of profits, including the circumstances in which an allowance could be made for the defendant’s own skill and effort. CaseChat AU+1

6.3 The duty of loyalty

Loyalty is the underlying idea connecting the core fiduciary duties.

A fiduciary must not use entrusted authority to pursue personal interests in circumstances inconsistent with the responsibilities undertaken.

However, the concept of loyalty must be applied within the actual scope of the fiduciary relationship. A fiduciary is not necessarily required to subordinate every personal interest in every aspect of life or business.

The duty is connected to the particular responsibilities that give rise to the fiduciary relationship.

6.4 Informed consent and authorisation

A conflict or profit may be permissible where it has been properly authorised.

Authorisation may be given through the trust instrument, a contract, legislation, or the informed consent of the person or persons entitled to give it.

For consent to be effective, the relevant person must receive sufficient information about the material circumstances, including the nature of the conflict or benefit.

The timing and scope of consent are important. A fiduciary generally cannot rely on vague or incomplete disclosure to justify a transaction that should have been fully explained.

Where beneficiaries are minors, lack legal capacity, or have only future or contingent interests, obtaining effective consent may require additional legal safeguards or court approval.

7. The Duties of Trustees

A trustee is subject to a combination of equitable duties, statutory obligations, and duties imposed by the trust instrument.

The exact content of those obligations depends on the trust’s terms and the legislation of the relevant state or territory.

7.1 Duty to act in accordance with the trust

The trustee must administer the trust according to its terms.

This includes respecting the identity of the beneficiaries, the nature of their entitlements, the permitted purposes of the trust, and any restrictions on the use or distribution of trust property.

A trustee who distributes assets to an unauthorised person or uses trust property for a purpose outside the trust may commit a breach of trust.

7.2 Duty of care and skill

Trustees must exercise an appropriate standard of care in managing trust property.

The required standard may depend on the trustee’s professional status, experience, and the nature of the responsibility.

A professional trustee may be expected to exercise the level of care and skill reasonably expected of a person engaged in that profession. A non-professional trustee may be assessed by reference to the applicable statutory and equitable standards.

The Trustee Act 1925 (NSW), for example, contains provisions governing investment powers and the standard of care required when exercising them. Section 14A distinguishes between professional trustees and other trustees and requires an appropriate level of care, diligence, and skill. legislation.nsw.gov.au

7.3 Duty to act impartially

Where a trust has multiple beneficiaries, the trustee must administer it impartially.

Impartiality does not necessarily mean treating every beneficiary identically. A trust instrument may confer different entitlements or allow the trustee to exercise discretion among beneficiaries.

The trustee must nevertheless act within the trust’s purposes and consider the interests of the relevant beneficiaries fairly.

A trustee must not favour one beneficiary for an improper reason or disregard the interests of others whose rights must be considered.

7.4 Duty to preserve trust property

Trustees must take reasonable steps to protect trust assets from loss, misuse, unauthorised transfer, and avoidable deterioration.

The duty may require proper record-keeping, appropriate insurance, secure custody of assets, monitoring of investments, and timely action where trust property is threatened.

The precise steps depend on the nature and value of the property and the powers and responsibilities of the trustee.

7.5 Duty to account

A trustee must maintain accurate records of the trust’s property, transactions, income, expenses, and distributions.

The duty to account is fundamental because beneficiaries are entitled to have the administration of the trust carried out transparently and in accordance with the trust instrument.

A trustee who fails to maintain adequate records may face difficulty demonstrating that the trust has been properly administered.

7.6 Duty to avoid unauthorised delegation

Trustees generally cannot simply transfer their responsibilities to another person without legal authority.

A trustee may use professional advisers, agents, investment managers, or administrative service providers where permitted, but remains responsible for complying with applicable duties concerning delegation and supervision.

Statutory provisions may authorise particular forms of delegation, subject to conditions.

7.7 Duty not to profit personally

A trustee must not use the office to obtain unauthorised personal benefits.

A trustee may be entitled to remuneration where the trust instrument, legislation, court order, or valid agreement permits it. Without proper authority, a trustee generally cannot charge for services or take trust property for personal use.

The distinction between authorised remuneration and unauthorised profit is important in professional trust administration.

8. Investment and Management of Trust Property

Investment is one of the most important responsibilities of a trustee where the trust holds financial assets or property intended to generate income or appreciate in value.

The trustee must exercise investment powers in accordance with the trust instrument, applicable legislation, and equitable duties. The fact that an investment produces a loss does not automatically establish a breach of trust. The legal question is whether the trustee acted properly when selecting, managing, and reviewing the investment.

8.1 The prudent trustee standard

Trustees are generally expected to approach investment decisions with the care and diligence appropriate to their role.

Relevant considerations may include:

• the purpose and duration of the trust;
• the needs of current and future beneficiaries;
• the balance between income generation and capital growth;
• the need to diversify investments;
• the liquidity requirements of the trust;
• the risks associated with particular asset classes;
• the terms of the trust instrument.

A trustee should not treat trust investments as speculative opportunities for personal gain. Investment decisions must be made for the purposes of the trust and with proper regard to the beneficiaries’ interests.

8.2 Diversification and review

Diversification may reduce the risk associated with excessive reliance on one investment or asset class. Whether diversification is appropriate depends on the trust’s circumstances, including its size, duration, investment objectives, and the nature of its assets.

Trustees should also review investments periodically. An investment that was initially reasonable may become unsuitable because of changes in financial conditions, the trust’s objectives, or the beneficiaries’ circumstances.

Under section 14A of the Trustee Act 1925 (NSW), trustees exercising investment powers must meet the applicable standard of care and review investment performance at least annually. The legislation also preserves relevant equitable duties, including duties concerning the interests of present and future beneficiaries. legislation.nsw.gov.au

8.3 Conflicts in investment decisions

Trustees must avoid investments that create unauthorised conflicts between their personal interests and their responsibilities.

For example, a trustee should not direct trust funds into a business in which they have a personal financial interest without proper authority and informed consent.

The trustee must also consider whether an investment is appropriate for the trust itself, rather than merely beneficial to the trustee or another associated person.

9. Beneficiaries’ Rights and Access to Information

Beneficiaries have important rights under trust law. The precise nature of those rights depends on the trust’s structure, the beneficiary’s entitlement, and the applicable legislation.

A beneficiary under a fixed trust may have a defined equitable interest in income or capital. A beneficiary under a discretionary trust may instead have rights to proper administration and consideration under the terms of the trust, without having an immediate entitlement to a particular distribution.

9.1 The right to proper administration

Beneficiaries are entitled to expect that the trustee will:

• act within the powers granted by the trust;
• comply with applicable duties;
• preserve and properly manage trust property;
• consider relevant beneficiaries and interests;
• avoid unauthorised personal benefits;
• distribute trust property according to the governing instrument.

Where a trustee acts outside those obligations, beneficiaries may seek appropriate judicial relief.

9.2 The right to accounts and information

The trustee’s duty to account is closely connected with beneficiaries’ ability to understand how the trust is being administered.

Beneficiaries may be entitled to inspect trust accounts and obtain information necessary to protect their interests. However, the extent of disclosure is not unlimited in every circumstance.

The distinction between a right to trust documents and a general entitlement to every document held by a trustee can be important. Confidentiality, the nature of the document, the terms of the trust, and the interests of other beneficiaries may affect disclosure.

The administration of discretionary trusts can present particular difficulties because beneficiaries may not be entitled to know every detail of the trustee’s deliberations or the reasons for every discretionary decision.

Nevertheless, a trustee cannot use confidentiality as a blanket justification for refusing to provide information that beneficiaries are legally entitled to receive.

9.3 Challenging the exercise of discretion

A trustee’s discretionary powers must be exercised for proper purposes and within the scope of the trust instrument.

A court may intervene where a trustee:

• acts dishonestly or in bad faith;
• misunderstands the nature of the power;
• considers irrelevant matters;
• ignores relevant considerations;
• acts for an improper purpose;
• fails genuinely to exercise the discretion.

Judicial intervention does not ordinarily mean that the court simply substitutes its preferred distribution for the trustee’s decision. The court examines whether the power was exercised lawfully and in accordance with the trust.

10. The Administration of Trusts

Trust administration involves the practical and legal management of trust property throughout the life of the arrangement.

The trustee’s responsibilities may include collecting assets, maintaining records, making investments, paying liabilities, distributing income, and transferring capital when beneficiaries become entitled to it.

The nature of the administration depends on the trust’s terms and purpose.

10.1 Appointment and replacement of trustees

A trust instrument may specify how trustees are appointed, removed, or replaced. Trustee legislation also provides procedures for circumstances in which the instrument does not provide an adequate mechanism or where statutory intervention is necessary.

A trustee may cease to hold office through retirement, removal, incapacity, death, or another event recognised by law.

The appointment of a replacement trustee is important because trust property must continue to be held and administered without an unintended break in legal authority.

10.2 Trustee powers

Trustees may have powers to sell, lease, invest, insure, maintain, or otherwise deal with trust property.

These powers may be contained in the trust instrument or conferred by statute.

A power to deal with trust property does not give a trustee unrestricted authority. It must be exercised for a proper trust purpose and consistently with the trustee’s duties.

For example, a trustee may have power to sell a property held by the trust, but the decision must still be made in accordance with the trust’s terms and the trustee’s obligations to beneficiaries.

10.3 Payment of trust expenses

Trustees may incur expenses in administering a trust, including professional fees, maintenance costs, insurance, legal expenses, and investment-related charges.

The trust instrument and legislation determine which expenses may properly be paid from trust assets.

Trustees are generally entitled to an indemnity from trust property for liabilities and expenses properly incurred in administering the trust. This protection is important because trustees may otherwise be personally exposed to liabilities arising from their office.

The indemnity does not necessarily extend to expenses arising from wrongdoing, unauthorised transactions, or breaches of trust.

10.4 Delegation and professional assistance

Trust administration may require specialised knowledge in areas such as accounting, financial management, property administration, and legal compliance.

Trustees may engage professionals where authorised and appropriate. They must nevertheless exercise proper care in selecting, instructing, and supervising those persons.

Delegation does not automatically remove the trustee’s responsibility. The legal consequences depend on the statutory framework, the trust instrument, and the nature of the delegated function.

10.5 Termination and distribution

A trust may terminate when its specified purpose has been fulfilled, when the trust instrument provides for termination, or when another legally recognised basis for termination arises.

On termination, the trustee must account for the trust property, settle properly payable liabilities, and distribute the remaining assets to those entitled under the trust.

The trustee must ensure that the final distribution complies with the trust instrument and applicable law.

11. Equitable Remedies for Breach of Duty

Equity provides a range of remedies for breaches of equitable obligations. These remedies are designed to address different forms of wrongdoing and may be personal, proprietary, preventive, or restorative.

The appropriate remedy depends on the nature of the breach, the loss or benefit involved, the property affected, and the circumstances of the parties.

Equitable remedies are generally discretionary. Establishing a legal basis for relief does not mean that every remedy requested must be granted.

11.1 Equitable compensation

Equitable compensation is a monetary remedy designed to address loss caused by a breach of an equitable obligation.

It may be available for breaches of trust and fiduciary duty. Its purpose is to restore the claimant, so far as money can do so, to the position that would have existed had the breach not occurred.

The assessment of equitable compensation does not simply reproduce the common-law rules governing contractual or tort damages. Different principles may apply to causation, the assessment of loss, and the relevance of subsequent events.

For example, where a trustee improperly transfers trust funds and the trust suffers a loss, the trustee may be ordered to restore the amount required to remedy that loss.

Equitable compensation is distinct from an account of profits. The former focuses on loss suffered by the claimant; the latter focuses on unauthorised gains obtained by the defendant.

11.2 Account of profits

An account of profits requires a defendant to account for benefits obtained through a breach of fiduciary duty or another recognised equitable wrong.

The remedy is concerned with stripping unauthorised gains rather than compensating the claimant for a particular financial loss.

A fiduciary may therefore be required to account even where the beneficiary cannot demonstrate that the same amount would otherwise have been earned.

In Warman International Ltd v Dwyer (1995) 182 CLR 544, the High Court considered the calculation of an account of profits following a fiduciary’s diversion of a business opportunity. The Court recognised that the assessment may require attention to the contribution made by the defendant’s own work and skill. CaseChat AU+1

The remedy is not intended to punish. Its purpose is to prevent the fiduciary from retaining benefits that equity requires them to surrender.

11.3 Constructive trust

A constructive trust may provide proprietary relief by recognising that property is held for another person.

It may arise in certain cases involving fiduciary wrongdoing, misuse of trust property, or other circumstances recognised by equitable doctrine.

A proprietary remedy can be particularly significant where the defendant is insolvent. A claimant with a recognised proprietary interest may have a stronger position than an unsecured creditor seeking only a personal monetary judgment.

However, a constructive trust is not an automatic consequence of every breach of fiduciary duty. The court must identify a recognised legal basis for imposing it and consider the rights of third parties.

11.4 Rescission

Rescission is an equitable remedy that may set aside a transaction in appropriate circumstances.

It may be available where a transaction was affected by misrepresentation, undue influence, certain forms of unconscionable conduct, or a fiduciary’s undisclosed conflict of interest.

The purpose is generally to reverse the transaction and restore the parties, so far as possible, to their former positions.

Rescission may be unavailable where restoration is impossible, third-party rights have intervened, or another recognised bar applies.

11.5 Specific performance

Specific performance is an order requiring a party to perform a contractual obligation.

It is an equitable remedy traditionally associated with situations where damages would not provide an adequate substitute for performance.

For example, a contract for the sale of a particular parcel of land may justify specific performance because land is treated as sufficiently distinctive that a monetary award may not fully replace the promised transaction.

The remedy may also be relevant to agreements concerning particular assets or obligations where performance is sufficiently clear and legally appropriate.

11.6 Injunctions

An injunction is a court order requiring a person to do something or refrain from doing something.

An injunction may be used to prevent threatened misuse of trust property, restrain a breach of fiduciary duty, preserve assets, or prevent the continuation of conduct that would cause equitable harm.

Interlocutory injunctions may be granted before the final determination of proceedings where the legal requirements are satisfied. Their purpose is to preserve the position until the court can decide the substantive dispute.

A final injunction may provide continuing protection after the merits of the claim have been determined.

11.7 Account and inquiry

A court may order a trustee or fiduciary to provide an account of property, transactions, receipts, payments, or profits.

An account may be necessary to establish the extent of a breach, identify missing assets, or determine the amount that must be restored.

The accounting process may involve examination of financial records and, where necessary, an inquiry into particular transactions.

12. Tracing and the Recovery of Misapplied Trust Property

Tracing is an important equitable process through which property or its value may be followed into other assets.

It is particularly relevant where trust property has been misappropriated, transferred, or mixed with property belonging to another person.

Tracing is not itself a remedy. It is a process of identifying the property or its proceeds so that an appropriate remedy can be sought.

For example, if a trustee improperly transfers trust money into an investment account and uses the funds to purchase shares, tracing principles may help establish the connection between the original trust money and the acquired investment.

12.1 Tracing into substituted property

Where trust property is exchanged for another asset, equitable principles may permit the claimant to assert rights in the substituted property.

The outcome depends on the nature of the transaction, the relevant property interests, and whether the asset can be identified.

12.2 Mixed funds

Difficulties arise where trust money is mixed with the trustee’s own money or with funds belonging to other people.

Equity has developed rules for dealing with certain mixed funds, but the result depends on the circumstances and the applicable principles.

A claimant may seek a proportionate interest in an asset, a charge, or another proprietary remedy, depending on the facts.

12.3 Third-party recipients

Trust property may be transferred to a person who was not originally responsible for the breach.

Equity recognises certain forms of third-party liability, including claims involving knowing receipt and knowing assistance.

The legal requirements are distinct and must be established separately. A recipient is not automatically liable merely because property passed through their hands, and a person who assisted a breach is not necessarily liable simply because they knew the parties were involved in a trust arrangement.

The court must examine the relevant conduct, knowledge, receipt, and connection with the underlying equitable wrong.

13. Third-Party Liability and the Principles in Barnes v Addy

Equitable liability may extend beyond the trustee or fiduciary who directly committed the breach.

The traditional framework is associated with Barnes v Addy (1874) LR 9 Ch App 244, an English decision that has influenced Australian equitable jurisprudence.

The principles are commonly discussed through two categories.

Knowing receipt concerns a person who receives trust property or property transferred in breach of fiduciary duty in circumstances giving rise to equitable liability.

Knowing assistance concerns a person who assists in a dishonest and fraudulent design involving a breach of trust or fiduciary duty, with the required level of knowledge.

Australian courts have applied these principles carefully. The relevant requirements cannot be reduced to a general proposition that everyone who deals with trust property becomes responsible for the trustee’s conduct.

The High Court’s decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 remains an important authority concerning equitable third-party liability, including knowing assistance and knowing receipt.

13.1 Knowing receipt

A person may be liable where they receive trust property transferred in breach of trust or fiduciary duty and the circumstances satisfy the applicable equitable requirements.

The analysis involves the nature of the property, the transaction, the recipient’s knowledge, and the relevant legal consequences of the receipt.

The mere receipt of property is not enough in every case. The claimant must establish the elements required by Australian law.

13.2 Knowing assistance

Knowing assistance concerns participation in a dishonest and fraudulent design involving a breach of trust or fiduciary duty.

A person may be liable even though they did not themselves hold the position of trustee or fiduciary.

The doctrine is important in commercial and corporate disputes where third parties may facilitate the misuse or diversion of trust assets.

13.3 The significance of Naaman v Jaken Properties

In Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1, the High Court considered whether a successor trustee owed a fiduciary duty to a former trustee in relation to the former trustee’s right of indemnity from trust assets.

The former trustee had an equitable entitlement to be indemnified for liabilities properly incurred in administering the trust. After the appointment of a successor trustee, trust assets were transferred to third parties, leaving insufficient assets to satisfy that entitlement.

The High Court, by majority, dismissed the appeal. It held that the successor trustee did not owe the former trustee the particular fiduciary obligation alleged in relation to the right of indemnity. The Court’s reasoning emphasised the nature of the former trustee’s entitlement and the legal framework governing the application of trust assets to satisfy it. High Court of Australia+1

The decision is important because it demonstrates that fiduciary duties cannot be extended simply because one party’s interests may be vulnerable in a particular transaction. The nature of the legal relationship and the specific obligation asserted must be established.

It also illustrates the importance of distinguishing a trustee’s rights against trust property from personal fiduciary obligations owed by another trustee.

14. Defences and Limitations in Equitable Claims

Equitable relief is subject to recognised defences and limitations. A claimant who establishes a breach may still face legal obstacles to obtaining a particular remedy.

14.1 Informed consent

A fiduciary may be protected where the person entitled to the benefit of the duty gave fully informed consent to the relevant conduct.

The consent must be genuine and based on adequate disclosure of material facts.

14.2 Authorisation under the trust instrument

A trust deed may expressly authorise certain transactions, powers, or forms of remuneration that would otherwise raise fiduciary concerns.

The authority must be interpreted according to the instrument and applicable law. A trustee cannot rely on a general power to justify conduct outside the intended scope of the trust.

14.3 Ratification

A beneficiary or other person entitled to protect the relevant interest may, in appropriate circumstances, ratify a transaction that would otherwise constitute a breach.

Ratification requires legal capacity and sufficient knowledge of the material circumstances. It may also be affected by the rights of other beneficiaries or third parties.

14.4 Delay and equitable bars

Delay may affect the availability of equitable relief, particularly where the claimant’s conduct has prejudiced the defendant or third parties.

The doctrines of laches, acquiescence, and related equitable bars may become relevant.

However, delay does not automatically defeat every equitable claim. The court must consider the nature of the right, the circumstances, and any applicable statutory limitation period.

14.5 Statutory limitation periods

State and territory legislation may impose limitation periods on claims involving trusts, trustees, and equitable obligations.

The relevant period depends on the nature of the claim, the jurisdiction, and any statutory exception.

Claims involving fraud, recovery of trust property, or certain forms of fiduciary wrongdoing may be treated differently from ordinary monetary claims.

15. Court Supervision and the Judicial Administration of Trusts

Courts have an important supervisory role in trust administration.

They may determine disputes about the meaning of a trust instrument, remove or appoint trustees where authorised, approve particular transactions, settle accounts, and grant relief where a trustee has breached their obligations.

Judicial supervision is especially important where a trust has become difficult to administer or where beneficiaries disagree about the exercise of trustee powers.

15.1 Directions and judicial advice

Trustee legislation in some jurisdictions permits trustees to seek the court’s opinion, advice, or direction on questions arising in the administration of a trust.

This procedure can help a trustee address uncertainty before taking a significant step.

It does not mean that a court will take over ordinary administration or approve every proposed decision. The availability and legal effect of judicial advice depend on the applicable statute and the circumstances of the application.

15.2 Removal of trustees

A court may remove a trustee where the circumstances justify intervention under the relevant legal principles or legislation.

Possible grounds include serious misconduct, incapacity, persistent failure to administer the trust properly, conflicts that prevent effective administration, or circumstances in which removal is necessary to protect the trust.

The central consideration is the proper administration of the trust and the interests of those entitled to benefit from it.

15.3 Appointment of replacement trustees

A court or other authorised person may appoint a replacement trustee where the existing trustee has died, resigned, become incapable, or otherwise ceased to hold office.

Replacement procedures are designed to preserve continuity in the legal ownership and administration of trust property.

15.4 Approval of compromises and transactions

In certain circumstances, a trustee may seek court approval for a compromise, transaction, or course of action involving trust property.

This may be relevant where beneficiaries have different interests, some beneficiaries are under a legal disability, or the proposed action requires judicial authorisation under the applicable legislation.

16. Australian Legislation Governing Trusts

Australian trust law is principally governed by general equitable principles and state and territory legislation.

The statutory frameworks are similar in many respects, but they are not uniform. Trustees must therefore identify the legislation governing the particular trust and consider the trust instrument alongside it.

Examples of important legislation include:

Jurisdiction	Principal trustee legislation
New South Wales	Trustee Act 1925 (NSW)
Victoria	Trustee Act 1958 (Vic)
Queensland	Trusts Act 2025 (Qld)
Western Australia	Trustees Act 1962 (WA)
South Australia	Trustee Act 1936 (SA)
Tasmania	Trustee Act 1898 (Tas)
Australian Capital Territory	Trustee Act 1925 (ACT)
Northern Territory	Trustee Act 1893 (NT)

These statutes address matters such as trustee appointment and retirement, investment powers, delegation, indemnification, and other aspects of trust administration.

16.1 Queensland’s Trusts Act 2025

An important recent development is the commencement of the Trusts Act 2025 (Qld) on 28 April 2026, replacing the previous Trusts Act 1973 (Qld).

The legislation modernises Queensland’s statutory framework for trust administration. Among other matters, it addresses trustee duties, powers, investment, records, indemnification, and remedies associated with wrongful distribution of trust property.

For example, sections 60–62 establish different standards of care for professional trustees, trustees with relevant special knowledge or experience, and other trustees. Section 63 addresses the duty to act honestly and in good faith, while sections 64–65 concern trust records and access to accounts. Queensland Government+2

The Act is a significant jurisdictional development, but it should not be treated as a national trust code. The other Australian jurisdictions continue to operate under their respective trustee legislation and the general law.

16.2 Commonwealth legislation

Commonwealth legislation affects particular categories of trusts and trust-related activities.

Examples include:

• Superannuation Industry (Supervision) Act 1993 (Cth);
• Corporations Act 2001 (Cth);
• Charities Act 2013 (Cth);
• Income Tax Assessment Act 1997 (Cth);
• Trusts (Hague Convention) Act 1991 (Cth).

These statutes may regulate particular trust structures, investment arrangements, charitable activities, tax treatment, and cross-border recognition.

The applicable legal framework therefore depends not only on the trust’s location but also on its purpose, assets, parties, and activities.

17. Equity and Trusts in Commercial and Corporate Relationships

Equitable principles have considerable practical importance in commercial law.

Commercial transactions frequently involve agents, directors, advisers, partners, and other persons who exercise authority or handle property on behalf of another party.

Fiduciary law may apply where the nature of the relationship justifies the imposition of duties of loyalty and the avoidance of unauthorised profits.

17.1 Company directors

Company directors owe fiduciary duties to the company. These duties include obligations concerning conflicts of interest and unauthorised profits.

They operate alongside statutory duties under the Corporations Act 2001 (Cth), including the statutory obligations to act in good faith in the best interests of the corporation and for a proper purpose.

The statutory and equitable duties overlap in important respects but are not identical. A director’s conduct may give rise to both statutory and equitable consequences.

17.2 Partnerships

Partners owe fiduciary duties to one another in relation to partnership affairs.

They must not secretly obtain personal benefits from partnership opportunities or place personal interests in conflict with their responsibilities to the partnership.

The scope of these obligations depends on the partnership relationship and applicable partnership legislation.

17.3 Agents and principals

An agent entrusted with authority to act for a principal may owe fiduciary duties within the scope of that agency.

An agent must not secretly receive commissions or other benefits connected with the agency without proper authorisation. Nor may the agent use the principal’s confidential information or opportunities for unauthorised personal advantage.

17.4 Professional advisers

Certain professional relationships may give rise to fiduciary obligations, although not every professional service relationship is fiduciary in every respect.

A solicitor, for example, owes duties of loyalty and must avoid conflicts between the solicitor’s personal interests, the interests of other clients, and the duties owed to the current client.

The precise scope of fiduciary obligations depends on the professional relationship and the responsibilities undertaken.

18. Contemporary Issues in Australian Equity and Trust Law

Equity and trust law continue to adapt to changes in commercial practice, financial structures, technology, and the administration of property.

18.1 Corporate and family trust structures

Trusts are frequently used in family businesses, investment arrangements, and estate planning.

Their flexibility makes them useful, but the separation between legal and beneficial ownership can create complex disputes when relationships break down or when assets are transferred between related parties.

Courts may need to distinguish between genuine trust arrangements, contractual rights, beneficial ownership, and attempts to use trust structures to defeat existing legal obligations.

18.2 Insolvency and trust property

The treatment of trust property in insolvency is a significant area of legal complexity.

A trustee may become insolvent while holding property on trust. The trustee’s personal creditors do not necessarily have the same rights against trust assets as creditors of the trust or persons with proprietary claims.

The trustee’s right of indemnity from trust assets, the beneficiaries’ interests, and the rights of third parties may all become relevant.

The High Court’s decision in Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1 illustrates the importance of these issues, particularly where a former trustee’s entitlement to indemnification remains after replacement by a successor trustee. High Court of Australia+1

18.3 Digital assets and trust administration

Trust property may include digital assets and rights associated with online accounts, intellectual property, electronic records, and digital investments.

Trustees may face practical and legal challenges in identifying, securing, transferring, and administering these assets.

The general principles of trust law can apply to property that takes digital form, but the legal character of a particular asset and the contractual terms governing access may affect the trustee’s powers.

18.4 Cross-border trusts

Trusts may involve settlors, trustees, beneficiaries, and property located in different countries.

Questions may arise concerning the governing law, recognition of the trust, jurisdiction of courts, and enforcement of trustee obligations.

Australia is a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition, implemented through the Trusts (Hague Convention) Act 1991 (Cth).

The Convention provides rules for determining the law applicable to certain trusts and for recognising qualifying trusts across borders. It does not eliminate all jurisdictional questions or make every foreign trust automatically enforceable in Australia. legislation.gov.au

19. Important Judicial Decisions

Australian equity and trust law have been shaped by decisions addressing fiduciary relationships, trust administration, remedies, and the protection of beneficial interests.

The following cases are particularly significant.

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41

The High Court examined fiduciary obligations in a commercial relationship and emphasised that the existence and scope of fiduciary duties depend on the nature of the relationship and the responsibilities undertaken.

The case remains important when determining whether a commercial relationship gives rise to fiduciary obligations.

Breen v Williams (1996) 186 CLR 71

The High Court distinguished fiduciary duties from general positive duties to act in another person’s interests. It emphasised the proscriptive character of fiduciary obligations, particularly the duties to avoid conflicts and unauthorised profits.

Warman International Ltd v Dwyer (1995) 182 CLR 544

This case concerned a manager who diverted a business opportunity in breach of fiduciary duty. The High Court examined the availability and assessment of an account of profits, including possible allowances for the defendant’s contributions.

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165

The High Court considered the scope of fiduciary obligations in a professional commercial relationship and rejected an overly broad approach to the existence of fiduciary duties.

The decision reinforces the importance of identifying the specific responsibilities undertaken and the subject matter to which fiduciary obligations attach. High Court of Australia

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89

This decision is an important authority on equitable third-party liability, including knowing receipt and knowing assistance. It demonstrates the need to establish the relevant elements of these doctrines rather than relying on general allegations of participation in wrongdoing.

Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1

The High Court considered the relationship between successor and former trustees and the former trustee’s right of indemnity from trust assets. The majority rejected the particular fiduciary obligation asserted against the successor trustee.

The case is a significant recent authority on trustee indemnification, fiduciary relationships, and the limits of equitable third-party claims. High Court of Australia+1

20. Key Takeaways

1. Equity is an established part of Australian law and operates alongside common-law principles.
2. Australian equitable doctrine is developed through judicial decisions and supplemented by legislation.
3. A trust separates legal ownership from beneficial entitlement.
4. A trustee holds and administers trust property subject to legal and equitable obligations.
5. Express trusts require certainty of intention, subject matter, and objects.
6. Resulting and constructive trusts may arise through the operation of equitable principles.
7. Trusts may be fixed, discretionary, testamentary, unit, bare, charitable, or superannuation trusts.
8. Fiduciary relationships are not limited to trustees and beneficiaries.
9. The existence and scope of a fiduciary duty depend on the nature of the relationship and the responsibilities undertaken.
10. Australian fiduciary law principally prohibits unauthorised conflicts of interest and unauthorised profits.
11. A fiduciary may obtain authorisation through valid consent or another legally recognised source.
12. Trustees must administer property according to the trust instrument and applicable legislation.
13. Trustees owe duties concerning care, impartiality, preservation of property, and proper accounting.
14. Investment decisions must comply with the trust instrument and applicable statutory and equitable standards.
15. Beneficiaries may have rights to proper administration, accounts, and relevant information.
16. A trustee’s discretionary powers must be exercised honestly, for proper purposes, and within the scope of the trust.
17. Equitable compensation addresses loss caused by an equitable wrong.
18. An account of profits requires the surrender of unauthorised gains.
19. Constructive trusts may provide proprietary relief in recognised circumstances.
20. Injunctions may prevent or restrain breaches of equitable obligations.
21. Tracing may identify trust property or its proceeds but is not itself a remedy.
22. Third parties may incur equitable liability through knowing receipt or knowing assistance where the relevant requirements are established.
23. Trustees may be entitled to indemnification for liabilities and expenses properly incurred in administering the trust.
24. Courts supervise trust administration and may grant appropriate directions or orders.
25. Trust legislation differs between Australian jurisdictions.
26. Queensland’s Trusts Act 2025 commenced on 28 April 2026 and modernised that state’s statutory trust framework.
27. Commonwealth legislation regulates particular trust structures, including superannuation and charitable arrangements.
28. The High Court’s decision in Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1 clarifies an important limit on fiduciary obligations between successor and former trustees.

21. Frequently Asked Questions

1. What is equity in Australian law?

Equity is a body of legal principles that operates alongside common law. It recognises particular rights and obligations and provides remedies such as injunctions, specific performance, equitable compensation, and accounts of profits.

2. What is a trust?

A trust is a legal relationship in which a trustee holds and administers property for the benefit of beneficiaries or for a legally recognised purpose.

3. Who are the main parties to a trust?

The conventional parties are the settlor, who creates the trust; the trustee, who administers it; and the beneficiaries, who are entitled to benefit from it.

4. What is the difference between legal and beneficial ownership?

Legal ownership is generally held by the trustee, while beneficial entitlement belongs to the beneficiaries according to the trust’s terms and applicable law.

5. What are the three certainties?

They are certainty of intention, certainty of subject matter, and certainty of objects. They are traditional requirements for establishing an express trust.

6. What is a resulting trust?

A resulting trust may arise where property is held in circumstances indicating that the beneficial interest was not intended to pass to the legal owner, or where an express trust fails to dispose of the entire beneficial interest.

7. What is a constructive trust?

A constructive trust is imposed by equity in circumstances recognised by law, often involving fiduciary wrongdoing or other conduct that justifies proprietary relief.

8. What is a discretionary trust?

It is a trust under which the trustee has discretion to distribute income or capital among a defined class of beneficiaries, subject to the trust instrument and applicable law.

9. What is a fiduciary relationship?

It is a relationship in which a person undertakes responsibilities requiring loyalty to another person’s interests within a defined scope.

10. Are all commercial relationships fiduciary?

No. A commercial relationship does not automatically create fiduciary duties. The nature of the relationship and the responsibilities undertaken must justify their imposition.

11. What are the main fiduciary duties?

The central duties are to avoid unauthorised conflicts of interest and not to obtain unauthorised profits through the fiduciary position.

12. Must a beneficiary prove financial loss to establish a breach of fiduciary duty?

Not necessarily. Certain fiduciary breaches, particularly unauthorised profits and conflicts of interest, may give rise to equitable remedies even where the claimant cannot demonstrate conventional financial loss.

13. Can a trustee receive remuneration?

Yes, where remuneration is authorised by the trust instrument, legislation, a valid agreement, or a court order. A trustee cannot ordinarily assume an unrestricted right to charge for services.

14. What happens if a trustee misuses trust property?

The trustee may be required to restore the property or compensate the trust for loss. Depending on the circumstances, the court may also order an account of profits, impose a constructive trust, or grant other equitable relief.

15. What is equitable compensation?

It is a monetary remedy designed to address loss caused by a breach of an equitable obligation, such as a breach of trust or fiduciary duty.

16. What is an account of profits?

It is a remedy requiring a defendant to surrender unauthorised profits obtained through a breach of fiduciary duty or another recognised equitable wrong.

17. What is tracing in equity?

Tracing is the process of identifying trust property or its proceeds after they have been transferred, exchanged, or mixed with other assets.

18. Can a third party be liable for a trustee’s breach?

Yes, in certain circumstances. Knowing receipt and knowing assistance may give rise to third-party equitable liability where their respective legal requirements are satisfied.

19. Can a court remove a trustee?

Yes. A court may remove a trustee where authorised by law and where removal is justified by the circumstances, particularly where necessary for proper trust administration.

20. What legislation governs trusts in Australia?

Trusts are governed by general equitable principles, trust instruments, state and territory trustee legislation, and relevant Commonwealth legislation. There is no single national statute governing all Australian trusts.

21. What changed under Queensland’s Trusts Act 2025?

The Act commenced on 28 April 2026 and replaced the previous Trusts Act 1973 (Qld). It modernised Queensland’s statutory framework for trustee duties, investment, administration, records, and other trust matters.

22. What is the difference between a fixed and discretionary trust?

A fixed trust specifies beneficiaries’ entitlements, while a discretionary trust gives the trustee authority to decide how benefits are distributed among a defined class, within the limits of the trust instrument.

23. Can a trustee delegate responsibilities?

A trustee may delegate certain functions where authorised by the trust instrument or legislation. However, delegation does not automatically remove the trustee’s responsibility to comply with applicable duties.

24. What happens when a trust terminates?

The trustee must account for the trust property, pay properly payable liabilities, and distribute the remaining assets to the persons entitled under the trust instrument and applicable law.

25. Why is Naaman v Jaken Properties Australia Pty Ltd important?

The 2025 High Court decision clarified that a successor trustee does not owe the particular fiduciary obligation asserted by a former trustee in relation to the former trustee’s entitlement to indemnification from trust assets. It is an important authority on the limits of fiduciary obligations in trust administration.

Conclusion

Equity and trusts remain fundamental components of Australian private law. Equity supplements the common law by recognising obligations and remedies that respond to particular relationships, property arrangements, and forms of wrongdoing. Trust law provides a flexible structure through which property can be held and administered for the benefit of others or for recognised purposes.

The trustee’s position is central to this framework. Although a trustee holds legal title and may possess substantial powers over trust property, those powers are constrained by the trust instrument, legislation, and equitable duties. The obligations to avoid conflicts of interest, refrain from unauthorised profits, preserve trust property, and administer the trust properly are essential to maintaining confidence in the trust relationship.

Equitable remedies provide the means of addressing breaches. Compensation, accounts of profits, constructive trusts, injunctions, rescission, and tracing serve different legal functions and must be applied according to established principles. Their availability depends on the nature of the wrong, the rights affected, and the circumstances of the parties.

Australian equity and trust law is not entirely uniform. State and territory legislation regulates important aspects of trustee administration, while Commonwealth statutes govern particular trust structures and activities. Recent developments, including Queensland’s Trusts Act 2025 and the High Court’s decision in Naaman v Jaken Properties Australia Pty Ltd, demonstrate that the field continues to evolve.

Ultimately, the law of equity and trusts seeks to ensure that entrusted powers are exercised within legally defined limits and that property held for another’s benefit is administered with integrity, accountability, and fidelity to the purposes for which the trust was established.

Further Reading and Primary Legal Sources

Legislation

• Trustee Act 1925 (NSW)
• Trustee Act 1958 (Vic)
• Trusts Act 2025 (Qld)
• Trustees Act 1962 (WA)
• Trustee Act 1936 (SA)
• Trustee Act 1898 (Tas)
• Trustee Act 1925 (ACT)
• Trustee Act 1893 (NT)
• Corporations Act 2001 (Cth)
• Superannuation Industry (Supervision) Act 1993 (Cth)
• Trusts (Hague Convention) Act 1991 (Cth)

Official resources

• High Court of Australia – Judgments
• Australian Charities and Not-for-profits Commission
• Queensland Public Trustee – The Role of a Trustee
• NSW Government – Dealing with a Will and Estate After a Death

Important cases

• Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.
• Warman International Ltd v Dwyer (1995) 182 CLR 544.
• Breen v Williams (1996) 186 CLR 71.
• Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165.
• Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.
• Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1.

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