A corporate trustee facing a dispute between competing beneficiaries as to beneficial ownership of trust assets cannot pledge those trust assets to secure the legal costs of one beneficiary's defence. A director of a corporate trustee who authorises such charges breaches duties under ss 180, 181 and 182 of the Corporations Act 2001 and may be liable as a constructive trustee under Barnes v Addy. The subjective test for directors' good faith may be assessed objectively by reference to what a reasonable and honest director could have believed.
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