The ‘proper’ approach to a trustee’s right to indemnity out of trust assets

Abstract

A trustee’s right to indemnity in respect of expenses properly incurred in the administration of the trust is a right inherent to trusteeship. But need those expenses be ‘reasonably’ incurred? Despite recurrent curial deference to this proposition, the requirement for ‘reasonableness’ seems incongruous. This article advances the argument that the reference to reasonableness in re Beddoe should be read down as not intended to provide a universal criterion applicable to a trustee’s right to indemnity. It notes that an orthodox listing of the traditional qualities of trusteeship would not typically include a duty to be reasonable. Why then should a trustee’s right to indemnity be conditional on the reasonableness of the expenditure? The article further identifies that the requirement of reasonableness is unnecessary and distorting in a substantive sense as equity’s concerns can be addressed adequately without importing into trust law a criterion more familiar in tort than in equity.

Keywords: trustee, right of indemnity