Trustee's right to reimbursement from trust property

The Federal Court of Australia has recently applied the principle that a trustee is entitled to be reimbursed or indemnified from the trust property for any expenses which have been properly incurred in the management of the trust.

In Saker, in the matter of Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation) (No 2) [2011] FCA 958, the responsible entity of one of the Great Southern managed investment schemes had erroneously distributed insurance proceeds in contravention of the scheme's constitution. This resulted in a shortfall which had to be covered from the responsible entity's own funds. The court found that, as the responsible entity's error was not unreasonable, dishonest or improper, the responsible entity retained its right to be reimbursed from the trust property.

Allens has prepared a more detailed Focus article on this case.