Trustees Power of Investment : The Impact of the Trustees and Trustee Companies (Amendment) Act (1995) Vic

This Article explores the impact of the Trustees and Trustee Companies (Amendment) Act 1995 (Vic) (the 'Victorian Amendments') on trustees' power of investment. The Victorian Amendments are based on South Australian and New Zealand legislation.The Victorian Amendments replaced the legal list approach to trustee investment with the prudent investor approach. A number of important issues follow from this, two of which are addressed in the Article.The Article first examines the means by which trustees' investment decisions are to be evaluated; that is, whether the Victorian Amendments endorse investment under the Line-by-Line Theory or under the Modern Portfolio Theory or both. This is done through a discussion of both theories and their impact on trustees investment, a consideration of the relevant common law, and then an examination of the Victorian Amendments, as well as the South Australian and New Zealand Amendments where relevant. The Victorian Amendments do indicate that Market Portfolio Theory has a role to play in the assessment of trustees' investment choices, but not to the exclusion of the Line-by-Line Theory.Secondly, the Article considers the standard of care expected of trustees when exercising their power of investment. The Victorian Amendments impose a different standard on professional and non-professional trustees. A comparison is made between the treatment of non-professional trustees under the common law and the Victorian Amendments, as well as the South Australian and New Zealand Amendments where relevant. Such a comparison is also made in respect of professional trustees. In the final evaluation, the concept of a double standard of care for professional and non-professional trustees under the Victorian Amendments is approved. However, the actual standard expected of non-professional trustees is criticised, as it does not expect non-professional trustees to exercise the skill of the ordinary prudent person of business