DUTIES OF EXPRESS TRUSTEES Flashcards
Harries v Church Ommission
Duties of trustees
- Sir Donald Nicholls explained that “trustees are concerned to further the purposes of the trust of which they have accepted the office of the trustee…to enable them the better to discharge that duty, trustees have powers vested in them. Those powers must be exercised for the purpose for which they have been given: to further the purposes of the trust”
- There are duties and powers given because of the acceptance of the office of trustee
- With an express trust, the trustee cannot be forced to do anything, they agree to be an express trustee and assume that office, and that brings with it responsibilities and powers
- Trusts are important because trustees have onerous duties imposed on them because they agreed to take on the position
Duties of express trustees v other kinds of duties
- Normal duties of express trustees
- Duties may be complex and onerous
- Trustees have agreed to perform the trust
- Constructive and resulting trustees (bare trusts)
- Arisen by operation of law in particular circumstances, and so the nature of the obligations is different
- We are not justified in imposing the extensive, complex and onerous duties of an express trustee
Sources of powers and duties
Express
Implied
Statute
Court
Sources of powers and duties
Express
- On the terms of the trust
- The starting point must always be the trust instrument to see what the powers and duties are expressly recognised in the trust document
- To a limited extent, the trust document may exclude trustees from liability in certain circumstances, where the clause dictates
- The trust instrument can impose extra duties by the terms
Sources of powers and duties
Implied
- Duties imposed by law
- The law gives the trustee certain powers (the body of a trust) as a matter of equity
Sources of powers and duties
Statute
- Statutory extensions or restrictions
- Duties, extensions and clarifications imposed by the Trustee Act 2000
- By becoming a trustee, the law imposes a number of duties and obligations by virtue of accepting the office of trustee
Sources of powers and duties
Court
- Can grant permission for certain things
- The court has a limited residual jurisdiction in certain circumstances to approve something that otherwise the trustee would not be allowed to do
Terms of the trust
- Start with the trust instrument
- Supplement with general law of trusts
- Trustee Act 1925, s19 power to insure
- Trustee Act 2000, ss3-10 power to invest
- Laws for special types of trust
Duties on appointment of trustees
Trustees must
- Understand the terms of the trust
- Must know what the trust assets are
- Separate from requirement of certainty of subject matter
- Inventory trust assets
- Ensure compliance
- Account from previous trustee
Exercise of discretions
- Not obliged to exercise discretions
- Must act unanimously
- Must not consider irrelevant matters
- Duty to account
- No general duty to give reasons
- Beneficiaries do not have a broad entitlement to access trust documents
- There is no general duty on the part of the trustees to consult the beneficairies over what they are doing
- There is a duty of evenhandedness as between beneficiaries
Exercise of discretions
No obligation to exercise discretions
Tempest v Lord Camoys
- Trustees were given absolute discretion to sell land and the proceeds should be applied to buy other properties
- A trustee wanted to buy a large estate, and apply the fund to pay into court ahead of a further purchase, but the other trustee did not agree. The trustee wanted to get the court to force the other to agree
- A trustee cannot be obliged to exercise their discretion to agree to a particular sale
- Held: the court is not able to require the trustee to exercise their discretion in a particular way
Exercise of discretions
Requirement of unanimous action
- Unless the trust instrument provides otherwise
- In Luke v South Ken Hotel, it was held that the act of a majority of trustees cannot bind a dissenting trustee
- Unless the trust instrument provides it expressly, we require all the trustees to agree for it to be binding
- In Staechelin v ACLBDD Holdings, there was a provision in the trust instrument for the trustees to act by majority decision
Exercise of discretions
Failure to exercise discretion at all
- Trustees cannot be obliged to exercise their discretion, but they can be obliged to do their duty as trustees in considering whether to exercise their discretion
- Trustees have a duty to understand the terms of the trust. In Turner v Turner, the trustees did not know what being a trustee involved, they just deferred entirely to what the settlor wanted and they did not exercise their discretion at all.
- Trustees are under a duty to consider to exercise their discretion
Exercise of discretions
Duty not to take account of irrelevant matters
Klug v Klug
- A third of the testators residuals estate was held on trust for his daughter, and there was provision that it could be applied to benefit her children. The mother of the beneficiary was one of the trustees and she declined to exercise powers in favour of her daughter because she had married without her consent.
- By holding a grudge, the mother was not taking into account relevant considerations
- This does not account as exercising discretion
- Trustees have a duty only to take into account relevant matters
Exercise of discretions
Duty to account
- Requires trustees to maintain records
- Statement of accounts
- Other documents, such as minutes of meetings
- They may be obliged to provide information as to the status of the trust fund and account for it at the end of the trust
- Obligation to account at the end will either be at the end of the trusteeship, or if the trust is being wound up
Exercise of discretions
Duty to give reasons?
- Trustees generally do not owe a duty to give reasons to their discretions
- All they have to do is decide whether to exercise their discretion
- The court requires to see the trustees are deciding to exercise their discretion, not to require reasons for them
- In Re Beloved Wilkes Charity, the court ruled that although you are not required to give reasons, if you do give reasons the court can scrutinise them to check whether or not they were relevant
Exercise of discretions
Condifentiality
- Re Londonderry’s Settlement*
- Schmidt v Rosewood Trust*
- Breakspear v Ackland*
Re Londonderry’s Settlement
- Beneficiaries do not have a broad entitlement to access trust documents
- In this case, the court says that there is a difference between information relating to the assets of the trusts and the provision of information as to why a decision was made
- Beneficiaries have the right to information as to what assets are held, they do not have a general right (unless the trustees chose to provide it) to know the reasons for the decisions being made
- If the trustees do disclose the reasons, the adequacy of the reasons can be scrutinised [Re Beloved Wilkes Charity]
Schmidt v Rosewoord Trust
- A Privy council decision on the administration of trusts. Mr Schmidt was the son of the settlor of the trust, and he had a discretionary interest and wanted disclosure as to the trustees decision making
- Lord Walker said that the role of the court in supervising the operation of the trust is more important. It is a discretionary judgment by the court as to what is expected in cases. He points to relevant factors such as:
- The nature of the claimants interest
- Competing interests of beneficiaries and trustees
- The type of document that is being requested
- The need to protect confidentiality
- A reaffirmation of the fact that there is no right to access documents that speak to the reasons of trustees and the fact that trustees do not need to give reasons, but it needs to be considered bearing in mind all the circumstances
- Lord Walker said that the role of the court in supervising the operation of the trust is more important. It is a discretionary judgment by the court as to what is expected in cases. He points to relevant factors such as:
Breakspear v Ackland
- The idea of confidentiality was reaffirmed in Breakspear v Ackland, beneficiaries are not normally entitled to disclosure of trust documents
- Settlors and beneficiaries can provide the trustees with a letter of wishes which describe how they would like the discretion to be applied
- The courts are cautious of allowing beneficiaries too much information
- Briggs J says that if the trustees consider that it is appropriate to disclose documents, that is fine. They are not to be hindered by the settlor not wanting them to disclose the information