Trustee decision making: will you make the right decision this time?**

The decision in Finch v Telstra Super Pty Ltd [2010] HCA confirms the situations where a decision of a trustee can be reviewed by a court.

In very broad terms, the position that seems to have evolved in this area, is that the exercise of a discretion by a trustee is not subject to review by the courts unless one of the following three factors is present:

1. The trustee does not act in good faith;
2. The trustee does not give real and genuine consideration to the exercise of the discretion and the purposes for which the discretion was granted; or
3. Reasons for the decision are provided by the trustee, but those reasons are unsound.

Furthermore, a trustee's decision cannot be reviewed unless on the material before the trustee it is one that no reasonable trustee could have made.

Given this test, best practice dictates trustees adopt a disciplined and detailed analysis of all possibly relevant issues before reaching a decision and clearly document their considerations.

Thus, as further explained in Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705, the matters a trustee should consider may not be limited to simple matters of fact but will, on occasion (indeed, quite often) include taking advice from appropriate experts, whether the experts are lawyers, accountants, actuaries, surveyors, scientists or whomsoever may be relevant.

While documenting all such investigations is critical, it is generally preferable to not formally record the reasons for the final decision as to do so unnecessarily exposes the trustee to a challenge based on having unsound reasons.

As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Smiths song ‘London’.

Listen here:

The PPSA – making an effort** with some practical issues

Previous posts have looked at various aspects of the Personal Property Securities Act 2009 (PPSA).

Broadly the PPSA applies to most types of property (whether tangible or intangible) other than land.

The rules ignore legal ownership and instead create the concept of 'perfecting a security interest' by way of registering on the online PPSA register (PPSR) to create priority of rights in relation to property.

The range of examples of potential security interests is vast and, for example, include:

1. leases, licences or hire purchase arrangements;
2. loan arrangements;
3. shares and units; and
4. consignment and bailment of goods.

A failure to register an interest on the PPSR will likely result in the loss of property if the party to the transaction who has possession becomes insolvent.

Importantly there are also strict timeframes within which registration on the PPSR must occur in order to ensure priority. Broadly these time limits are as follows -

1. inventory of the entity giving the security interest - registration must occur prior to delivery of possession of the goods;
2. non-inventory goods - registration must occur within 15 business days of the giving of possession of the goods; and
3. in the case of all other goods - registration must occur within 20 business days of the creation of the security interest.

As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Breeders song ‘Dawn: making an effort’.

View here: