Avoiding a crime when changing trustees
In Issue 2, June 2023, of the STEP Australia Newsletter, the writer published a case note pertaining to the decision of Application of MLC Investments Limited (ACN 002 641 661) [2022] NSWSC 1541 which had, at the time, been recently determined.[1] The case discussed the relevance of a corrupt purpose to section 249E of the Crimes Act 1900 (NSW) (Crimes Act). That section outlined when the giving and receiving of a benefit upon changes to ‘a person entrusted with property’ constituted a criminal offence, and applied to trustees, executors and administrators of deceased estates, attorneys and financial managers.
Specifically, the potential implications of the decision included the following:
- If, as determined in the decision, a corrupt purpose was not a feature of s 249E, arguably any change to ‘a person entrusted with property’ that included, for example, indemnities to an incoming trustee, or expense reimbursement to an outgoing trustee, would require the consent of each person beneficially entitled to the trust property or the Supreme Court to avoid the commission of an offence.
- Accordingly, indemnities and costs coverage commonly provided for in, for example, deeds of retirement and appointment of trustee, were potentially captured by the section even if seemingly innocuous.
- The section had a potentially broad ambit due to the wide definition of ‘a person entrusted with property’, which encompassed not only trustees but also, for example, legal personal representatives of deceased estates and attorneys under a power of attorney.
The decision also had a potential bearing on future case law in Queensland, Victoria and Western Australia, where similar legislation exists.[2]
In the case note, practitioners Australia-wide were urged to be mindful of the decision to avoid the inadvertent commission of an offence, including, where necessary, to obtain the consent of all those beneficially entitled to the trust property or the Supreme Court.
At the time of publication of the earlier case note, STEP Australia had made a submission to the Attorneys General of NSW, Queensland, Victoria and Western Australia raising its concerns about the effect of the decision.[3]
It should now be noted that s 249E of the Crimes Act has since been amended to alleviate the concerns raised by the decision.
The new section, which commenced on 20 September 2023 and applies retrospectively, now expressly makes corruption an element of the offence. The consent of beneficiaries or the Supreme Court is no longer required. Instead, a person will be guilty of an offence – with a maximum penalty of 7 years’ imprisonment – if:
- the person corruptly offers or gives a benefit to a person entrusted with property as an inducement or reward for the appointment of a person to be a person entrusted with the property, or
- the person is entrusted with property and corruptly receives or solicits a benefit for any person as an inducement or reward for the appointment of a person to be a person entrusted with the property.
It remains to be seen whether the revised NSW provision will be replicated in Queensland, Victoria and Western Australia where, at the time of writing, the law remains unchanged. However, the amendment represents a welcome alteration to NSW law.
This article first appeared in the STEP Australia Newsletter Issue 25, June 2024. To read the newsletter, click here.
[1] See https://stepaustralia.com/wp-content/uploads/2023/08/STEP-Australia-Newsletter_June-2023.pdf on page 6.
[2] See Criminal Code Act 1899 (Qld) Sch 1 s 442F, Crimes Act 1958 (Vic) s 180 and Criminal Code Act Compilation Act 1913 (WA) s 535.
[3] See https://stepaustralia.com/wp-content/uploads/2023/01/Letter-The-Hon.-Mark-Speakman-SC-MP_25.01.23.pdf.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.