Do Unitholders Have Fiduciary Duties to One Another? The Court Says No

The Victorian Supreme Court recently addressed a significant issue in the case of Re Lingamaneni Momentum Melbourne Unit Trust [2025] VSC 40.[1] The central question was whether unitholders in a unit trust owe fiduciary duties to one another. The Court concluded that they do not.

The case involved a dispute where two unitholders accused another of mismanaging the trust and ending it unfairly. The Court found that the trust deed did not create fiduciary duties among unitholders.

This decision highlights the importance for unitholders to carefully review their trust deeds and understand the commercial agreements they enter into.

Case Details

The dispute involved three main unitholders: Graham Gniel, Tony Boniello, and Paul Huggins. These individuals had a long-standing business relationship and had jointly pursued various investment opportunities, including a major development project in Doncaster, Melbourne. To manage this project, they established the Lingamaneni Momentum Melbourne Unit Trust. The trust deed included a unique clause allowing any unitholder to terminate the trust with just seven days' notice.

However, the relationship between Huggins and the other unitholders soured in 2020. Gniel and Boniello accused Huggins of mismanaging the trust's assets and breaching his duties. They alleged that Huggins had unilaterally changed the terms of the trust, overpaid a capital contribution to his own unitholding vehicle, and transferred a property to his own entity without proper consent.

Court's Reasoning

The Court examined whether the trust deed imposed fiduciary duties among the unitholders. Fiduciary duties typically arise when one party agrees to act in the interests of another. In this case, the Court found that the trust deed did not create such duties. The broader context was that the Court viewed the unitholders as experienced businesspeople who had entered into the trust arrangement freely and without pressure. The Court emphasised that the trust deed did not require unitholders to act for the benefit of other unitholders when exercising their powers – such as the power to require the trust to be wound up.

Implications for Unitholders

This ruling has important implications for unitholders. It highlights:  

1. The need for unitholders to carefully review the terms of their trust deeds, especially clauses that allow unilateral decisions.
2. How important clear definitions of roles and responsibilities are in commercial agreements, which help to avoid disputes.
3. That unitholders should be aware that trust deeds may not automatically impose fiduciary duties and should take steps to protect their interests.
4. That unitholders should seriously consider seeking third-party legal advice when making decisions that could affect their interests. This will help ensure that their trust deeds include balanced terms that protect all parties involved, and may highlight the need for a more detailed ‘unitholder agreement.
   
   

What are the Cleardocs products available?

Cleardocs offer the following relevant products:

• Unit Trust – Fixed
• Unit Trust - Non-Fixed
• Change of Trustee Unit Trust
• Discretionary (Family) Trust
  
  

Please read the Product Benefits, Product Information and Asked Legal Questions carefully and consider if it is appropriate in your circumstances before purchasing any Cleardocs product.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

• Necessary safeguard for SMSFs and Trusts: Why you should have an Enduring Power of Attorney in place
• What is the appropriate governing law jurisdiction for my Trust Deed?
• Be careful when varying a trust deed for a trust that holds property! A change in ‘beneficial ownership’ may result in transfer duty

[1] Re Lingamaneni Momentum Melbourne Unit Trust [2025] VSC 40.