A trustee controls other people’s money. The Capital Market Act 2015 does not leave its obligations to the trust deed or to general trust law alone. Section 191 writes them into the statute and attaches a criminal penalty.
The eleven duties in section 191(1)
| Paragraph | The trustee shall |
|---|---|
| (a) | act honestly |
| (b) | exercise the care and diligence a reasonable person in its position would exercise |
| (c) | act in the members’ best interests and, on a conflict, give priority to the members |
| (d) | treat members of the same class equally and members of different classes fairly |
| (e) | not use information gained as trustee to gain an improper advantage or cause members detriment |
| (f) | ensure the trust deed meets sections 210 and 211 |
| (g) | ensure scheme property is clearly identified and held separately from its own and any other scheme’s |
| (h) | ensure scheme property is valued at regular intervals appropriate to its nature |
| (i) | ensure all payments out of scheme property comply with the deed and the Act |
| (j) | report to the Commission, as soon as practicable, any breach of the Act relating to the scheme that has had or is likely to have a materially adverse effect on members |
| (k) | carry out any other duty the deed confers that is not inconsistent with the Act |
Honesty, care and loyalty
Paragraphs (a) to (e) are the core fiduciary duties. The standard of care is objective: what “a reasonable person would exercise if they were in the trustee’s position”, which for a licensed professional trustee is a high bar. The loyalty duty in paragraph (c) matters most where the trustee earns fees from the fund. Suppose the trustee’s fee is calculated on assets under management and it is deciding whether to sell a poorly performing property. Its own interest is in keeping the asset base large; the members’ interest may be in selling. Section 191(1)(c) requires the members to win. Paragraph (d) prevents favouring one investor, such as a large superannuation fund, over thousands of small unit holders in the same class. For the trustee buying units itself, see can a trustee buy units in its own scheme.
Property, valuation, payments and reporting
Paragraphs (g) to (i) protect the fund itself. Scheme property must be identifiable and segregated, which sections 193 and 194 reinforce through compulsory trust accounts (see how scheme money must be held). Regular valuation underpins unit pricing, so that a Port Moresby retiree who redeems units is paid a fair price (see how units are valued). Paragraph (i) means every fee, expense or distribution must be traceable to a clause in the deed or a provision of the Act; section 210(3) adds that a trustee’s right to fees or indemnity must be written in the deed and is “available only in relation to the proper performance of those duties”. Paragraph (j) turns the trustee into a self-reporter: a material breach must be disclosed to the Commission promptly, even where the trustee itself committed it.
In a 2019 Gazette notice the Commission said a 2018 review had found the trustee of the Pacific Balance Fund insolvent since 2014 and that it had paid itself significant fees. When it revoked that trustee’s licence in 2023, the Commission alleged excessive fees and poor governance; the trustee denied the allegations and appealed. The episode shows that fee payments are where paragraphs (c) and (i) are tested.
Property held on trust, override and penalty
“(2) The trustee shall hold the scheme property in trust for the unit holders or members. (3) A duty of the trustee under Subsection (1) or (2) overrides any conflicting duty an officer or employee of the trustee has. (4) A person who contravenes Subsection (1), commits an offence and shall be liable to a fine not exceeding K10,000,000.00 or imprisonment for a term not exceeding ten years, or both.”
Subsection (2) is the foundation: the trustee is a true trustee, not merely a contracting party, so the members are beneficial owners of the fund. Subsection (3) means a director of the trustee company cannot excuse a breach by pointing to a duty owed to the company’s shareholders. Subsection (4) makes breach of any paragraph of subsection (1) a serious offence. Under section 456, the trustee’s directors and officers are deemed to have committed the same offence unless they prove it occurred without their consent or connivance and that they exercised due diligence. The trustee is also answerable for agents and outsourced managers it appoints, “even if such duties or functions were performed fraudulently” (section 190(3)). See the duties of officers and employees.
General trust law and the deed
Section 191 sits on top of, not in place of, ordinary trust law. The Trustees and Executors Act (Ch 289) and the equitable principles PNG inherited still supply the background rules on investment, accounts and breach of trust, so far as the deed and the 2015 Act do not displace them. The deed itself is “legally enforceable as between the members and the trustee” (section 212), and paragraph (k) turns every deed duty into a statutory one. The Supreme Court recognised the same approach in National Superannuation Fund Ltd v Pacific Equities and Investments Ltd [2006] PGSC 12; SC845, holding that whoever prepares a unit trust’s accounts owes unit holders “a positive duty of disclosure” and that transparency and accountability in applying public investors’ funds outweighs the interests of the corporations running the trust. Members who suffer loss may sue under section 262: see suing the trustee.
Sources
- Capital Market Act 2015 — ss 190, 191, 193, 194, 210(3), 212, 262, 456
- Trustees and Executors Act (Ch 289)
- National Superannuation Fund Ltd v Pacific Equities and Investments Ltd [2006] PGSC 12; SC845
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.