Seeking Judicial Advice and the Right of Indemnity

Trustees have been able to obtain judicial advice on matters affecting the management or administration of trust property and in respect to the interpretation of trust deeds for more than 150 years.

What follows is an Overview of when a Trustee should seek Judicial Advice and be able to receive the right of indemnity.

Prudent Trustees Seeking Judicial Advice

Pursuant to section 63 of the Trustee Act 1925 (NSW) requests for Judicial Advice is usually made in the Supreme Court.

Before the court is able to provide Judicial Advice, the applicant must be able to point to a “question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument”. The majority of the High Court in the Macedonian Orthodox case (2008) 237 CLR 66 confirmed that this requirement is the only “jurisdictional bar” that needs to be satisfied for the giving of Judicial Advice under section 63.

Following the Macedonian Orthodox Case not surprisingly there has been an increase in the number of applications for Judicial Advice brought by trustees involved in litigation.

Counsel opinion should be sought to satisfy the Court that a claim or defence to warrant the trustee to proceed with litigation. In the Application of NSW Trustee & Guardian [2014] NSWSC 423 at [27] it was held that Counsel Opinion will be a significant matter which the Court will take into account in determining whether or not to give the advice sought”:

Judicial Advice and the Right of Indemnity

When trustees incur expenses in the ordinary administration of a trust, they are generally entitled to be reimbursed or indemnified out of trust assets (under the general law and the Trustee Act 1925 (NSW)) provided that the expenses have been incurred properly (which is not outside the scope of Trustee powers).

In respect to litigation to which the trust is or may be a party it is usually advisable for a Trustee to consider making an application for Judicial Advice in relation to whether bringing or defending the proceedings to determine the best interests of the trust.

If a trustee acts in accordance with the opinion advice or direction of the court, provided that the court was fully informed of all the relevant facts, controversy or doubt may be alleviated in certain circumstances in relation to whether the trustee has discharged its duty and is entitled to exercise its right of indemnity.

Recently in Bideena Pty Ltd ([2016] NSWSC 735) an application for security for costs by defendants against a plaintiff trustee arose. The defendants argued that, because the trustee had not obtained judicial advice before bringing the proceedings, the trustee would not be entitled to apply trust assets towards any adverse costs order. The defendants argued that, in the absence of such an entitlement, the trustee would not be able to meet any adverse costs order and should therefore be obliged to provide security for costs.

In response to this application, the trustee sought judicial advice on whether it was required to seek judicial advice in order to be entitled to an indemnity from the trust assets. The trustee sought advice on whether it should bring the proceedings.

Reluctantly, the court did provide advice that it was not necessary to seek its advice – and also advised that the trustee was entitled to bring the proceedings. Justice Sackar concluded that, irrespective of the decision of the High Court in Macedonian Orthodox Community Church, obtaining judicial advice is not a pre-requisite to being indemnified from trust assets for the costs of litigation.

Nevertheless a cautious approach in seeking judicial advice before commencing or defending court proceedings should be taken. There will be a risk for trustees that, in the absence of obtaining judicial advice, they may be personally responsible for the costs of the proceedings or for any adverse costs order.

Accordingly, assuming that the conduct of litigation was in the best interests of the trust (which would include consideration of, amongst other matters, whether the costs incurred by the trustee were proportionate to the issues and the significance of the case), there would seem to be no bar to indemnity for costs to litigant trustees (especially successful ones, but even unsuccessful ones) who did not obtain judicial advice to the effect that it was justified in prosecuting or defending proceedings.


Judicial advice may not be appropriate in every case Trustees who intend to seek judicial advice should seriously consider Counsel Opinion.

Good reasons for not seeking Judicial Advice, may include:

  • factual circumstances do not warrant judicial advices; or
  • the likely costs, or terms of the relevant trust deed.

Trustees may be allowed indemnity for the costs

  • even if they do not seek judicial advice,
  • even if they are unsuccessful in the proceedings,
  • so long as the costs were reasonably incurred.

Counsel Opinion is likely to be crucial, particularly if Judicial Advice was not obtained and the trustee is unsuccessful in proceedings.

Our Services

Pavuk Legal’s Lawyers have the necessary skills and experience to provide advice and act for you in relation to your Dispute Resolution and Litigious matters. We take the time to fully comprehend our clients’ legal position, and diligently seek favourable outcomes. In doing so, our lawyers will consider mechanisms of alternative dispute resolution in resolving your dispute. However, if such methods fail, our team is confident to engage in formal litigation on your behalf.

Many other essential hot topics for business owners is all found in the book Nobody Else’s Business. Nobody Else’s Business is about helping business owners live the life they want to live, now and in the future. It is the ultimate guidebook for succession planning of modern Australian businesses.

To purchase your own copy of Nobody Else’s Business please follow the link

For the full range of Legal Services that Pavuk Legal offers please go to:

Book now