You discover that decisions are being made without your knowledge. Trust assets are disappearing into ventures that benefit the trustee, not the beneficiaries. Or worse, you find out months later that a valuable property has been sold to the trustee’s business at half its market value.
At what point does mismanagement become something you can actually sue over?
Most beneficiaries struggle to distinguish between decisions they simply disagree with and decisions that cross the line into breach of duty. The difference matters. One is frustrating but lawful. The other gives you rights.
This article explains when you can sue a trustee for breach of fiduciary duty, what remedies Australian courts can order, and what you should do if you suspect a breach.
Key Takeaways
- Standing to sue: Beneficiaries can sue trustees for breach of fiduciary duty, as can co-trustees, successor trustees, and in some cases personal representatives or insolvency practitioners
- What counts as breach: Self-dealing, conflicts of interest, misapplying trust assets, or acting for an improper purpose typically cross the line from poor judgment into actionable breach
- Available remedies: Courts can order equitable compensation, removal of the trustee, recovery of profits, tracing of misused assets, or injunctions to prevent further breaches
- Third party liability: You can potentially pursue advisers, business partners, or others who knowingly assisted or benefited from the trustee’s breach
- Time-sensitive nature: Evidence deteriorates, assets move, and limitation periods run. Early action to secure documents and freeze positions is critical
- Strategic considerations: Not every breach justifies litigation. Your response should be proportionate to the loss, the strength of your evidence, and the likelihood of recovery
What does a trustee’s fiduciary duty actually mean in practice?
A trustee holds legal title to assets for the benefit of others. That position creates obligations.
At its core, the fiduciary duty of a trustee requires complete loyalty to the beneficiaries. The trustee must act in good faith, avoid conflicts of interest, and use trust assets only for proper purposes as defined by the trust deed.
Think of it this way: the trustee cannot treat trust property as their own. They cannot prefer their personal interests. And they cannot use their position to profit at the expense of beneficiaries.
In practical terms, this means several things.
First, the trustee cannot enter into transactions where their personal interest conflicts with their duty to the trust. Selling trust property to themselves, lending trust money to their own business, or awarding themselves fees beyond what the trust deed permits are all red flags.
Second, the trustee must exercise their powers for proper purposes. If the trust deed gives them discretion to distribute income, they must exercise that discretion genuinely for the benefit of beneficiaries, not to punish someone they dislike or reward a family member inappropriately.
Third, the trustee must act with reasonable care. While this doesn’t mean they’re liable for every bad investment, it does mean they cannot be reckless, ignore obvious risks, or fail to inform themselves before making significant decisions.
The standard is high because the law recognises the vulnerability of beneficiaries. You typically cannot see the day-to-day decisions being made. You rely on the trustee to act properly.
When that trust breaks down, the law provides remedies.
Fiduciary duty is not about perfection. Courts understand that trustees make judgment calls. But those judgment calls must be made honestly, without conflicts, and genuinely in the interests of beneficiaries, not the trustee.
When does poor behaviour become a breach you can sue for?
This is where most beneficiaries get stuck.
You might be frustrated with how the trustee manages investments. You might think distributions are unfair. You might disagree with their strategic direction.
None of that, on its own, gives you a cause of action.
Courts do not second-guess trustees’ honest business judgments. If the trustee genuinely believes an investment is sound, acts within their powers under the trust deed, and has no personal interest in the outcome, the mere fact that the investment fails does not make them liable.
So where is the line?
A breach you can sue for typically involves one of the following:
Self-dealing or conflicts of interest. The trustee sells trust property to themselves or to a company they control without proper disclosure and independent valuation. Or they borrow trust funds to prop up their struggling business. These are classic breaches because the trustee’s personal interest conflicts with their duty to the trust.
Misapplication of trust assets. The trustee uses trust money for purposes not authorised by the trust deed. Examples include paying personal expenses from the trust account, making loans to parties outside the permitted scope of investments, or distributing income to someone who is not a beneficiary.
Failure to act impartially between beneficiaries. If the trust deed requires the trustee to consider all beneficiaries fairly, consistently favouring one beneficiary or excluding another without lawful reason can amount to breach.
Acting for an improper purpose. The trustee exercises a discretion not to benefit the beneficiaries but to punish, control, or achieve some collateral advantage for themselves.
Reckless or grossly negligent conduct. While mere poor judgment is not enough, failing to make even basic enquiries before a major decision, ignoring clear legal advice, or proceeding with an investment that no reasonable trustee would consider can cross into breach.
Can you articulate which category your concern falls into?
If the trustee made a decision you dislike but acted honestly, without personal interest, and within their powers, you likely do not have a claim. If the trustee put their own interests first, misused assets, or acted for a purpose outside the scope of the trust, you likely do.
Before you approach a lawyer, write down the specific conduct you’re concerned about and ask yourself: did the trustee benefit personally? Did they act outside the trust deed? Did they conceal information or ignore obvious conflicts? If the answer to any of these is yes, you may have a claim.
Who can bring a claim against a trustee?
You do not need to be the sole beneficiary to sue a trustee for breach of fiduciary duty.
Beneficiaries are the most common plaintiffs. If you have a beneficial interest in the trust, whether vested or contingent, you generally have standing to bring proceedings to enforce the trustee’s duties.
This includes beneficiaries of discretionary trusts, even though the trustee has discretion over distributions. You still have an interest in ensuring the trust is administered lawfully and that the trustee exercises discretion properly.
Co-trustees can also sue. If you are one of two or more trustees and the other trustee has acted in breach of duty, you may bring proceedings to remove them, seek compensation, or obtain directions from the court. This often arises in family businesses where one trustee is sidelined and the other acts unilaterally.
Successor trustees step into the shoes of the original trustee and can pursue claims on behalf of the trust for breaches committed by their predecessor. This is common where a corporate trustee is replaced and the new trustee discovers historic misconduct.
Personal representatives and insolvency practitioners can bring claims in certain circumstances. For example, if a beneficiary dies and their estate has a claim against the trustee, the executor can pursue it. Similarly, if a beneficiary is bankrupt, their trustee in bankruptcy may have standing.
In some cases, creditors of the trust may also have rights, particularly if the trustee’s breach has depleted trust assets to the point where creditor claims cannot be satisfied.
The key requirement is that you have a genuine interest in the trust being properly administered. Courts are not willing to entertain claims by parties with no stake in the outcome, but the category of who can sue is broader than many people assume.
If you are unsure whether you have standing, the question to ask is: do you have a legal or equitable interest that has been, or could be, harmed by the trustee’s conduct?
Standing rules are designed to ensure that those who are genuinely affected by a breach can enforce the trustee’s duties. If you are a beneficiary, co-trustee, or stand in the place of a beneficiary, you likely have the right to bring proceedings.
What remedies can you actually get if a trustee breaches their duties?
The court has broad powers to respond to breaches of fiduciary duty. The remedy depends on what the trustee did, what loss or harm resulted, and what outcome is practically achievable.
Here are the main remedies, explained in plain terms.
Equitable compensation. This is the most common remedy. If the trustee’s breach caused a loss to the trust, the court can order them to compensate the trust for that loss. Think of it as putting the trust back in the position it would have been in if the breach had not occurred.
Example: the trustee sells a property worth two million dollars to their own company for one million. The trust suffers a one million dollar loss. The court can order the trustee to pay that million back into the trust.
Equitable compensation is not exactly the same as damages at common law. The test for causation is different, and the court focuses on what the trust has lost rather than applying strict foreseeability rules. But the practical effect is similar: the trustee pays money to make good the loss.
Account of profits. If the trustee made a profit from the breach, you can ask the court to order them to hand over that profit to the trust. This applies even if the trust did not suffer a loss.
Example: the trustee uses trust funds to invest in a venture for their own benefit and makes a three hundred thousand dollar profit. The court can order them to disgorge that profit to the trust, regardless of whether the trust lost anything.
The principle is simple: a trustee cannot keep profits obtained through misuse of their position.
Tracing and recovery of assets. If trust assets have been misapplied or mixed with the trustee’s personal assets, you can trace those assets and seek their recovery. This remedy is particularly useful when the trustee has transferred property out of the trust wrongfully.
The court can impose a constructive trust over the traceable asset, meaning it is treated as trust property in the hands of the trustee or third party. Alternatively, the court can impose an equitable lien, giving the beneficiaries a charge over the asset to secure their claim.
Tracing can become complex when assets are mixed or converted, but it remains a powerful tool when trust property can be identified.
Injunctions. If the breach is ongoing or threatened, you can seek an injunction to stop the trustee from acting. This is critical when assets are about to be dissipated, transferred offshore, or otherwise placed beyond reach.
Example: you discover the trustee is planning to sell the trust’s commercial property to a related entity below market value. An urgent injunction can freeze the sale while the court determines whether it amounts to a breach.
Injunctions are also used to prevent trustees from making further distributions, incurring liabilities, or dealing with assets pending resolution of the dispute.
Removal or replacement of the trustee. The court has the power to remove a trustee and appoint a replacement. This is often sought where the relationship has broken down irretrievably, or where the trustee’s conduct makes it impossible for beneficiaries to trust them going forward.
Removal does not require proof of dishonesty. If the trustee’s conduct has destroyed confidence, or if continued administration by that trustee is not in the interests of beneficiaries, the court can intervene.
Which remedy is right for your situation depends on what you want to achieve. Do you need the trustee gone? Do you need money back? Do you need to stop something from happening now?
Courts tailor remedies to the circumstances. If the breach is historic and the trustee has since been replaced, equitable compensation may be your focus. If the breach is live and assets are at risk, an injunction comes first. Think about your goal before you instruct lawyers.
Can you pursue advisers and third parties who helped the trustee breach their duties?
In many cases, the trustee does not act alone.
Perhaps an accountant helped structure a transaction that diverted trust income to the trustee’s personal benefit. Or a business partner knowingly received trust assets that were transferred in breach of duty. Or a lawyer drafted documents to effect a transaction they knew the trustee was not authorised to make.
Can you sue those third parties?
Yes, in certain circumstances.
Australian law recognises two main categories of third party liability for breach of fiduciary duty: knowing assistance and knowing receipt.
Knowing assistance applies where a third party assists the trustee to commit a breach of fiduciary duty with actual knowledge of the breach. The third party does not need to be a fiduciary themselves. They simply need to have helped, and known that what they were helping with was a breach.
Example: a corporate adviser structures a related-party loan from the trust to the trustee’s private company. The adviser knows the trustee has not obtained independent advice, has not disclosed the conflict to beneficiaries, and is acting beyond the powers in the trust deed. That adviser may be liable for knowing assistance.
The key element is knowledge. The third party must have known the essential facts that made the conduct a breach. Turning a blind eye or deliberately not asking questions can be enough.
Knowing receipt applies where a third party receives trust property for their own benefit, knowing that the property was transferred in breach of trust or fiduciary duty.
Example: the trustee transfers a valuable property to their spouse at an undervalue. The spouse knows the property belongs to the trust and that the transfer was not authorised. The spouse may be liable to account for the property or its value as a knowing recipient.
Again, knowledge is the critical element. If the recipient genuinely did not know the property was trust property or that the transfer was wrongful, they may not be liable.
Why does this matter?
Often, the trustee has dissipated assets or does not have the means to satisfy a judgment. Pursuing third parties who assisted or benefited from the breach can provide an alternative route to recovery.
It also sends a clear message to advisers and other participants in trust structures: you cannot knowingly facilitate breaches without consequences.
Bringing claims against third parties adds complexity and cost to litigation. You need to prove knowledge, which often involves document discovery and contested evidence. But where the facts support it, third party claims can be the difference between recovering losses and obtaining a worthless judgment against an impecunious trustee.
Advisers and other parties involved in trust dealings owe no fiduciary duty to beneficiaries, but they can still be liable if they knowingly help a trustee breach their duties. If someone materially assisted or benefited from the breach, consider whether a claim against them is warranted.
How to respond if you suspect a breach: practical steps before and during litigation
Suspecting a breach and proving one are different things.
Before you instruct lawyers, you need information. And before litigation becomes inevitable, you should explore whether the dispute can be resolved without court proceedings.
Here is a practical framework.
Step one: secure the evidence you already have. Gather every document that supports your concerns. Trust deeds, trustee resolutions, financial statements, bank statements, contracts, emails, correspondence. If you are a beneficiary entitled to accounts, you likely have a legal right to this information. If you do not have it yet, that is step two.
Step two: request accounts and information. Beneficiaries are generally entitled to see the trust accounts and be informed of how the trust is being administered. Write to the trustee and request full accounts, including details of any transactions that concern you. If the trustee refuses or provides incomplete information, that itself can support an application to the court for production of documents.
Keep your request factual and calm. Do not make accusations at this stage. Simply say you are entitled to the information and you need it to understand the trust’s position.
Step three: document your concerns clearly. Write down the specific conduct you believe amounts to a breach. What did the trustee do? When? What conflict of interest existed? What loss has the trust suffered? What benefit did the trustee or a third party receive? Be precise.
If you cannot articulate the breach clearly, a lawyer will struggle to advise you. And a court will struggle to grant relief.
Step four: obtain specialist legal advice early. Breach of fiduciary duty claims involve equitable principles, complex remedies, and often contested questions of fact. You need advice from a lawyer who litigates these disputes regularly, not a generalist.
The lawyer should be able to tell you whether the conduct you describe is likely to amount to a breach, what remedies are realistically available, what evidence you need, and what the litigation will cost and how long it will take.
If the advice is that you do not have a strong claim, listen to it. Not every trustee decision you dislike is actionable.
Step five: consider whether the dispute can be resolved short of litigation. In some cases, the trustee may agree to step down, repay amounts, or submit to mediation once the issues are raised clearly. This is particularly true in family trusts where litigation will be expensive and destructive.
Before you commence proceedings, consider whether a letter of demand, a without prejudice discussion, or a mediation might achieve a workable outcome.
But be realistic. If the trustee has acted dishonestly, dissipated assets, or refuses to engage, early resolution is unlikely.
Step six: if litigation is necessary, move quickly to protect the trust’s position. If assets are at risk of being dissipated or transferred, seek urgent interlocutory relief. An injunction freezing dealings with trust property can be obtained on short notice if the circumstances justify it.
Similarly, if you need access to documents and the trustee is obstructive, an application for preliminary discovery or production can be made early in the proceedings.
Litigation over breach of fiduciary duty is not a quick process. Expect twelve to twenty-four months from commencement to trial in contested matters, longer if appeals are involved. But you can take steps within the first few weeks to secure evidence and preserve assets.
Step seven: be prepared for litigation realities. Costs, uncertainty, and time are unavoidable. Even strong claims involve contested evidence, disputed valuations, and arguments over causation and loss. Your lawyer should be upfront about the risks.
That said, trustees who have acted in breach of duty often settle once the evidence is clear and they understand the court’s powers. Many of these disputes resolve before trial, particularly where the conduct is egregious and the trustee’s liability is plain.
Do not wait until assets have been dissipated or evidence has been destroyed. If you suspect a breach, act quickly to secure information, freeze assets if necessary, and obtain legal advice. Delay can turn a recoverable loss into an unrecoverable one.
What suing a trustee for breach of fiduciary duty will actually cost and how long it will take
Let’s be direct about the realities.
Litigation over breach of fiduciary duty is expensive, uncertain, and slow. If someone tells you otherwise, they are not being honest.
Costs. A straightforward breach of trust claim that settles after initial disclosure might cost fifty to one hundred thousand dollars in legal fees. A contested matter that goes to trial can easily exceed three hundred thousand to five hundred thousand dollars per party, depending on complexity.
Why so high? Because these cases involve:
- Extensive document discovery, often going back years
- Expert evidence on valuations, accounting, or financial analysis
- Contested interlocutory applications for injunctions, security for costs, or production of documents
- Lengthy trials where both factual and expert witnesses are cross-examined
- Detailed written submissions on equitable principles and remedies
If you win, you will recover some of your costs from the other side, but not all. Cost orders typically cover sixty to seventy per cent of actual legal costs. The remainder comes out of your recovery.
If you lose, you pay your own costs and a significant portion of the other side’s costs.
This is why early case assessment is critical. If the amount at stake does not justify the likely costs of recovery, litigation may not be the right path.
Timeframes. From commencement of proceedings to trial, expect twelve to twenty-four months in most superior courts. Complex cases with multiple parties, extensive discovery, or novel legal issues can take longer.
Urgent interlocutory relief can be obtained within days or weeks if the circumstances warrant it. But the substantive hearing of the breach of duty claim itself is a long process.
Appeals add another twelve to eighteen months.
During this time, the dispute consumes management attention, strains relationships, and creates uncertainty for the trust and beneficiaries.
Outcomes. Not every claim succeeds. Courts require clear evidence of breach and loss. If the trustee can show they acted honestly, within their powers, and without personal benefit, you may not recover anything despite the costs you have incurred.
Even where breach is established, quantifying loss can be contested. The trustee may argue that the trust would have suffered the loss anyway, that other factors caused the loss, or that the loss has been mitigated. These are all defences that can reduce or eliminate the compensation payable.
Tracing claims can fail if assets have been dissipated, sold to bona fide purchasers without notice, or mixed with other funds in a way that makes identification impossible.
All of this points to the need for rigorous early assessment. Before you commit to litigation, you need a realistic view of the strength of your evidence, the likely quantum of recovery, the costs you will incur, and the time it will take.
Does this mean you should not sue a trustee for breach of fiduciary duty?
No. It means you should do it with your eyes open, with specialist advice, and with a clear understanding that litigation is a tool of last resort where the potential recovery justifies the cost and risk.
In many cases, the mere act of initiating proceedings and demonstrating that you have strong evidence prompts settlement. Trustees facing personal liability and adverse costs orders often become more reasonable once litigation is on foot.
But you need to be prepared to see it through if settlement does not occur.
Breach of fiduciary duty litigation is not cheap or fast, but it is sometimes the only way to hold a trustee accountable and recover losses. Go in with realistic expectations, strong evidence, and a clear view of what success looks like for you.
Disclaimer: This article provides general information only and does not constitute legal advice. The law relating to breach of fiduciary duty by trustees is complex and fact-specific. If you are considering bringing proceedings against a trustee, you should obtain advice from a lawyer experienced in trust and fiduciary litigation based on your specific circumstances. Aptum Legal is a litigation-only commercial and tax dispute resolution firm. We act for beneficiaries, trustees, and other parties in breach of fiduciary duty disputes across Australia.
