Article by Manny Wood published in the Coffs Coast News Of The Area on 4 July 2025.
William passes-away, leaving $300,000 to his grandson, Peter. Peter is 15 years old and the terms of the will stipulate that he does not receive his inheritance until he turns 21.
William appoints his best friends as his executors, who are responsible to hold Peter’s inheritance in trust until he attains the “preservation age”.
The executors do not wish to be involved in a long-standing trust, so they decide to appoint Peter’s father as the replacement trustee. A solicitor drafts a Deed, formalising their retirement and the appointment of the replacement trustee.
The Deed is executed by all parties and the $300,000 is paid to Peter’s father, on trust for Peter.
Unfortunately, several years later, Peter’s father’s car repair business experiences financial difficulties and he uses the trust funds to pay creditors. He then files for bankruptcy a short time later.
When the misappropriation of funds is discovered, Peter’s father has no assets to repay Peter’s trust.
It also comes to light that the original trustees do not have sufficient assets to warrant any action against them.
Peter seeks legal advice and commences action against the solicitor who drafted the Deed appointing his father as trustee.
Peter’s claim alleges “knowing assistance” of a breach of trust.
Peter’s counsel argue that the solicitor was “alive to the danger” of fraud in circumstances where the Deed only appointed a single replacement trustee, who could potentially act “unchecked”. It is argued that the solicitor who prepared the document “assisted in the commission of a breach of trust”.
The matter proceeds to the Court of Appeal and the Court acknowledges that third parties can be held liable under two “limbs” for breach of trust, namely “knowing receipt” and “knowing assistance”.
However, the Court rules that the solicitor in question, had “no knowledge or suspicion of improper or dishonest conduct” and ultimately dismisses Peter’s claim.
This case demonstrates the importance of carefully considering appropriate executors as part of your estate planning and highlights the risks involved in long-standing trusts and the replacement of trustees.
Email Manny Wood, Principal Solicitor and Accredited Specialist in Wills and Estates at TB Law at manny@tblaw.net.au or call him on (02) 66 487 487.
This fictional column is not legal advice.
