Duties of Trustees

Question 1

Arnott

Answer 1

where one of the trustees, the widow of the testator, refused to agree with anything that was suggested by the other trustees. Although there was no question of dishonesty or incompetence, Murnaghan J decided that the welfare of the beneficiaries required the removal of the trustee. Welfare of the beneficiary is important here

Question 2

Kirby-

Answer 2

Conflicts of interest between the trustee claims and the estate may warrant a removal

Question 3

MK

Answer 3

seeking to have defendant removed as trustee from will of the mother. Motherdies in 1998 and appointed sister as sole executor, trustee and guardian of child. Subsequently the planitingss father was appointed as joint guardian. Essentially dispute between the father and defendant trustee because the trustee decided to sell some of the trust property: the family home. The court held here NO GROUNDS for removal of defendantas a trustee unless the decision to sell would not be in the welfare of the plaintiff. Paramoun tconsideration for the court. HC concluded the decisions to sell was bona fides, not prompted by animosity and she had sought proper financial advise.

Question 4

General duties of the trustee

Answer 4

1. Acquaintance with trust terms
2. Inspect Documents
3. Vesting of property
4. Investigation of previous breaches

Question 5

Re Dean v Foal Trust

Answer 5

do not always need to initiate proceedings but must investigate

Question 6

Trustees’ Powers

Answer 6

Trust deed can confer as much power as the drafter seeks.

Question 7

1. Power of Maintenance

Answer 7

power to access trust income for routine expenses HOWEVER this has to be either in express words or it has to be in under the limited statutory power under s43 Conveyancing Act.

Question 8

Power of Advancement

Answer 8

s 11 Guardianship of Infants Act 1964 (capital), s 58 Succession Act, 1965 or express power in trust

Question 9

. Power of Sale

Answer 9

may be expressed in the trust deed or it may be implied. Section 20 LCLRA - provides trustees with the power of sale of land, subject to relevant duties.

Question 10

Power of Receipt

Answer 10

Where land is conveyed by trustee to purchaser any equitable interest in the land will be overreached. So any trust attached to that land will no longer apply. The land will be effectively transferred and the trust will effectievy be trandferred ot the proceeds of sale and the purchaser will walk free provided the purchaser has notice. The overreach here will NOT effect the purchaser if he is equatitys darling: bona fide purchaser without notice. If it is a trust for sale of land for persons in sucession, if it is a trust for a minor OR a strict settelmetn of property.. in all of these cases you will need at least 2 trustees to sign.- ion all other circumstances a single trustee can sign off on that purchase

Question 11

Bristol and West Building Society v. Mothew

Answer 11

A fiduciary is someone who agrees to act for or on behalf of another person in a specific matter, creating a relationship of trust and confidence. The key responsibility of a fiduciary is loyalty. The person they represent is entitled to their unwavering loyalty. This fundamental duty has several aspects. A fiduciary must act honestly and with integrity. They should not profit from their role unless explicitly allowed. They must avoid situations where their duty conflicts with their personal interests. Additionally, they cannot act for their own benefit or for someone else’s without the clear and informed consent of the person they represent. While this list isn’t exhaustive, it captures the essence of fiduciary obligations, which are the defining characteristics of this role

Question 12

.Duty to Avoid Conflict of Interest

Answer 12

Moore v McGlynn

Question 13

Moore v McGlynn

Answer 13

he defendant trustee, upon the death of the testator, applied for and was awarded the position of postmaster, subsequently moving the post office from the trust shop to his own, which competed with the trust’s interests. The court ruled that while the defendant was entitled to remuneration as postmaster based on his personal merit, there was no breach of trust in setting up a competing business, as long as he did not actively solicit or deceive customers from the trust shop. However, given the potential conflict of interest, the court suggested that it would be inconsistent with the defendant’s duties as a trustee to continue in a position where his personal interests might conflict with those of the trust, demonstrating a preemptive approach to avoiding conflicts of interest.

Question 14

Duty not to make an unauthorised profit

Answer 14

Bray v Ford, Boardmann v Phipps

Question 15

Bray v Ford

Answer 15

Yorkshire college man was making money in a fiduciary capacity.

Question 16

Boardman v Phipps-

Answer 16

Textile manufacturer with 3 manufacturing. Coventry was good and Australia was vad. Minority shares were held by the Phipps family trust. Trustees of the PFT consulted Thomas Boardman along with a beneficiary who attended a meeting to elect one of the Phipps on the Board. Met with a tough reception and came away unsuccessful. 2 men had the bit between their teeth and bought up Lester and Harris and using the Phipps shares, redistributed and rearranged. Phipps’s family benefited. Capital distributions were paid on the shares. John Phipps objected. John Phipps complained that he never consented to the scheme and that Boardman and Phipps had a fiduciary duty to him and owed a proportion of the profits, on constructive trust for his benefit. John Phipps won and got a constructive trust, and got profits distributed on the shares. Boardman and Tom Phipps had made a profit for everyone. Boardman and Tom Phipps owed fiduciary obligations. The first route was agency. John Phipps said that Boardman and Tom Phipps were acting on behalf of the trust. No contract of agency though. The other route was raised by Denning LJ, Boardman was a solicitor who worked as when for the PFT. All solicitors owed a duty to the client. Thus had a fiduciary duty arising from the relationship. A co-adventurer?
What was the breach? There is a fundamental rule of equity that a person in a fiduciary relationship must not make a profit out of the trust out of the larger duty of interest and conflict.
The main profit happened and was not authorised. John Phipps had never consented.
Was there a conflict of duty and interest? The boardman owed duty of impartial advice but was never asked about whether the trust should buy the shares. Because Boardman was never asked, it follows that any duty of conflict of interest was entirely hypothetical. No real possibility of conflict of interest but an hypothetical one.
Policy implications? Common case used in Courts.
Where there is a conflict of interest even a hypothetical one, the conflict arises.
Micheal Conniglan, the law in this area as prolactin - kills the temptation to act in a self interested way, might be tempted to betray the people to whom they had a fiduciary duty,
BUT if a case like this not particularly black and white- if you want to escape the effects of this fiduciary role you must make full disclosure AND obtain consent of all interested parties.
“The proposition of law in this case is that no person in a fiduciary position where a demand is made upon him by a person to whom he stands in a fiduciary position, to account for profits acquired by reason of his position and opportunity or knowledge is entitled to defeat the claim on any ground, save that he made the profit with the knowledge and consent or assent of the other person.

Question 17

Duty to Invest
Default?

Answer 17

Trustee (Authorised Investment) Act 1958 and recent SIs 1992, 1998 & 2002

Question 18

Learoyd v Whiteley

Answer 18

..Trustees must invest trust property to benefit all beneficiaries, balancing the needs of life tenants and remaindermen. They must invest in authorized securities with ordinary prudence. Unauthorized investments lead to personal liability for losses.
The exercise of discretion Standard of Care - “To take such care as an ordinary prudent man would take if he was under a duty to invest for the benefit of other persons for whom he felt morally obliged to provide”

Question 19

Re Harari WT

Answer 19

court construing “in or upon such investments as to them may seem fit,“ in natural context with no justification for implying any restriction when tees acted honestly.

Question 20

Stacey v Branch

Answer 20

Trustee was given great/wide power to deal with the properties. Dealwith them as in his absolute discretion he should see fit. The settlor died in 1981 and put a caretaker into one of the properties but it was free of rent. The case comes before the court in 1995 and plaintiff was seeking damages for breach of trust. Said defendant had no managed the property with the necessary degree of care.. if he had he would have rented and brought ina rental income which wouldhave been a substantial gain to the trust. Murphy in the HC said the trust gives the trustee absolute discretion but cannot abandon reasonable care and prudence. The exentof the obligation imposed on the trustee goes back to the TRUST DEED. Said the trsute deed places extra ordinary emphasis on the trustees dicretiona dn while the course of conduct adopted by the trustee here was unusual the judge felt he had properly exercised his discretion

Question 21

Bartlett v Barclays

Answer 21

Barclays Bank acted as the sole trustee of the Bartlett trust, which primarily held shares in a family company. The trustee, seeking to raise funds, engaged merchant bankers to explore the possibility of taking the company public. Upon their advice, the trust agreed to expand the company’s business into property development, provided it didn’t impact beneficiary income. However, this decision led to speculative developments, including one that resulted in a substantial loss when planning permission couldn’t be obtained for a large project (the Old Bailey project).
ank liable to the trust. Faile to act how ordinary prudent person would. Additionally as a professional practice it owed a HIGHER DUTY OF CARE. A paid trustee is expected to exercise greater skill and attention and it would be liable if a fund was devalued owing to their negligence. This is not in the Under Trustee Act 2000 Section 1 provides trustee must exercise REASONABLE CARE. Reasonable care interpreted in terms fo professional trustee of any special knowledge that a reasonable person of that calibre is expected to have. Held to the standard of your colleagues.(not applicable in Ireland )

Question 22

Re Nestle

Answer 22

-In 1922 there was £53,963 and in 1986 when Georgina became entitled, there was £269,203. She claimed that had the fund been invested properly it would have been worth well over £1m. The trust company had failed to conduct periodic reviews of investments. They invested in tax-exempt gilts because the sons were domiciled abroad, meaning exemption from inheritance tax.

Question 23

Buttler v Sloss -

Answer 23

The High Court ruled that while maximizing financial returns typically serves a charity’s purpose, trustees can exclude investments conflicting with charity goals. The UK Charity Commission updated its guidance, confirming trustees’ discretion to exclude investments based on non-financial factors, while ensuring investment policies align with the charity’s aims and balance financial goals with risk monitoring.

Question 24

Cowan v Scargill

Answer 24

ase conceredn a coal minors pension fund. 10 trustees with 5 of them union reps. They refused to invest In any energy source thatcompeted with coal. In terms of energy source and breach oversees investment. Were they in breach of trust? Have to keep out pension fund in coal stock? Ethically would can understand that the coal minors do no what another business to make money BUT is that a breach of trust for trustees to refuse to approve a more financially viable plan. Mr Justice McGarry said YES breach of trust by refusing to adopt the plan. Clearly … financial considerations are primary over making investment decisions you can take ethical considerations into account BUT not to such a degree that will cause the trust to lose value. Has to be a balancing in your portfolio.”“take such care as an ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide”. The Court also found that “when the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests”.
Yet, under a trust if investments of this type would be more beneficial to beneficiaries than other investments, the Tees must not refrain from making the investments because of the views they hold.”

Question 25

Duty to Information

Answer 25

hey are required to provide beneficiaries with all necessary information regarding the trust’s affairs, and beneficiaries have the right to inspect the accounts, though they may need to cover the costs of obtaining copies. However, the trustee is only obligated to furnish information relevant to a beneficiary’s interest in the property; for instance, a remainderman is entitled to details concerning the capital but not necessarily the income received by the life tenant

Question 26

Chaine v Nickson

Answer 26

Beneficiaries are entitled to trust account copies and investment details, rejecting the notion that trustees can withhold information due to potential lack of entitlement. Trustee accountability is crucial, especially in discretionary trusts. While this approach is supported in England, adjustments may be needed for trusts with broad beneficiary scopes.

Question 27

Tamplin v Lewis

Answer 27

the beneficiaries are entitled to know in principle what the trustees have done.Kept informed. They are not entitled to make the trustees decision for them and NOT eneittled to be consulted on decision regarding the trust. Management of the trust is givn tot e trustees and not the beneficiaries.

Question 28

Speight v Gaunt (1883)

Answer 28

establishes duty of care – ordinary prudent person. Tee not responsible for default of agent if reas prudent businessman would have employed agent. Tee must exercise choice of agent personally and retain residual responsibility for their control and supervision. The House of Lords upheld the principle that trustees must exercise a standard of care comparable to that of an ordinary prudent person in managing their own affairs, except where the terms of the trust expressly prohibit certain actions. Trustee actions following established industry practices are generally justified, as long as they do not contravene the trust’s provisions.

Question 29

Re Brogden (1888)

Answer 29

When a trust is owed money. The trustee is bound to demand payment. Obliged to go out and seek these debts to be repaid. And if that demand is not met within a reasonable time the trustee must take active measures to enforce payment including legal proceedings unless there is a well founded basis it would fail or be futile

Question 30

Re Beddoe

Answer 30

Gives an indemnity to trustees who seek court authority. Remember a trustee can always go to court and seek directions before taking any action. Always have the at ability open to you. A wise move. A trustee can only be indemnified in respect of expenses that are properly incurred for the benefit of the trust. What are property incurred expenses? They must both be REASONABLY and HONESTLY incurred. Often a good idea to ask the court if you are unsure.

Question 31

2 types of purchase rules?

Answer 31

Self Dealing Rule and Fair Dealing Rule

Question 32

Scott v Dunbar (1828)

Answer 32

Fair Dealing RuleThe onus [lies] upon him to show that in that transaction (1) he put his principal in possession of all the facts, and (2) set him at arms’ length with all the knowledge he had acquired’

Question 33

Wright v Morgan

Answer 33

rustee for his father’s estate, bought two properties from the trust before resigning, using an option granted to him by another trustee. Mrs. Morgan, a beneficiary, contested the sale and sought an account of profits. The case was appealed to the Privy Council from the Court of Appeal of New Zealand. Set aside.
self dealing rule

Question 34

Tito v Wadell

Answer 34

Does not mater that you have paid a fair price. Does not matter that you have not gained anyadvantage from the purchase self dealing rule.

Question 35

Howe v Dartmouth

Answer 35

The principle that trustees must act impartially between successive beneficiaries and not favour the interests of one beneficiary (e.g. a life tenant) over another (e.g. a remainderman), unless the trust instrument expressly provides that this rule is not to apply or makes it impossible for the trust assets to be applied evenly as between beneficiaries. The rule originates from the case of Howe v Earl of Dartmouth (1802) 7 Ves 137, which established that assets of a trust created by will should be converted, despite the absence of an express direction to do so, as long as the trust property is comprised of residuary personal estate, the property is of a wasting or reversionary character, and there is expressed an intention that the legatees should enjoy the same thing in succession.

Question 36

Rule in Howe v Dartmouth

Answer 36

duty to convert may exist even if not expressed if (1) must be created by will for 2 beneficiaries in succession (2) residuary personalty (3) no contrary intention

Question 37

Rule in Saunders v Vautier –

Answer 37

beneficiaries are of full age and of full capacity if together, they are 100% entitled to trust property they can terminate the trust and require it be distributed according to their directions.
Testator bequeathed stock on trust for beneficiary until he was 25, when he was 21 went to court and successfully claimed entitlement to stock.
Previously limited court jurisdiction. New statutory powers for court to sanction trust variation under s.24 LCLRA, beneficiary or other appropriate person can apply for variation order, vary, revoke, resettle, or in relation to trustees can ask to vary, restrict or enlarge trustees’ powers. Have to give revenue advance notice (neccesitated in part by the abolition of the rula v perpetuties)
Previously limited Court jurisdiction to vary

Question 38

Trustees’ Duty to Exercise Discretion Properly Cases

Answer 38

ReTampoys , Re Hastings Bass, Pitt v Holt, Greene v Coady(ir)

Question 39

ReTampoys -

Answer 39

once the trustees are within the realm of reasonableness in carrying out their duties and within the realm of discretion they have beengranted the court will not intervene it will keep its hands off

Question 40

Re Hastings Bass - (

Answer 40

(changed the law) The court would not interfere unless the trustee acted beyond their authority or failed to consider relevant factors or considered irrelevant ones. Thus, Hastings v Bass outlines a framework for court intervention, emphasizing non-interference unless trustees acted ultra vires or failed to properly consider relevant and irrelevant factors.

Question 41

Pitt v Holt

Answer 41

the broad interpretation of Hastings v Bass was overturned. The Supreme Court clarified that if a trustee achieves an outcome not authorized by their powers (acting ultra vires), that decision is void. However, failure to consider relevant factors or considering irrelevant ones does not automatically render a decision void; instead, it may be voidable. The court may intervene if the trustee breaches their fiduciary duty, but mere mistakes, even if based on professional advice, do not constitute a breach. Trustees are not held liable for decisions made in good faith, even if the outcome is unfavorable due to poor professional advice; beneficiaries can seek recourse against negligent advisors instead.
requires a breach of fiduciary duty

Question 42

Greene v Coady(ir)

Answer 42

-once trustees are shown to have acted honestly and in good faith and if they have taken relevant considerations into account and ignored irrelevant then only decisions that could be categorized as decision that no reasonable trustee would make, can be impuned by the court. So court will not interfere with a trustee who is properly exercising hisdiscretion, who is honest and is operating in good faith. Charleton says once a factor is relevant, it is then a matter for the trustees to decide how relevant it is. And how much weight they will attach to it. SO court very much respecting discretion of the trustees once it is a factor they are entitled to take into account

Question 43

Can a trustee be vicariously liable

Answer 43

Yes, under the Wilful Deafult rule

Question 44

Wilful Default cases

Answer 44

Bahan v Hughes. Graham v Northern Railwa

Question 45

Graham v Northern Railway,

Answer 45

involves misconduct to which the trustee’s will is a party, far beyond negligence or gross negligence, and entails knowingly and persistently acting in a manner contrary to the trustee’s duties.

Question 46

Bahin v Hughes

Answer 46

Passive trustees who fail to actively participate or intervene in breaches of trust may still be held liable,In that case there were two trustees, one of whom was passive in the management of the trust, one of those trustees acted honestly but in breach of the trust terms in making an investment. The passive trustee was unsuccessful in claiming an indemnity on the basis that it had been the actions of the other trustee that had caused the breach of trust. Cotton LJ felt that it would be wrong to punish a trustee who had acted honestly more than a trustee who had failed to act at all.

However, it is not clear exactly how far this principle can be extended and it is generally thought that Bahin v Huges should be treated with caution .[9]

Question 47

Personal Liability

Answer 47

Surcharging and Falsifying A/C

Question 48

Re Target Holdings

Answer 48

involving inflating property prices to secure larger mortgages resulted in substantial losses when the market crashed. Redfern solicitors released mortgage funds before the mortgage papers were signed in the correct order. The High Court and Court of Appeal found Redferns liable for breach of trust and ordered them to pay the missing one million pounds. However, the House of Lords overturned this decision, stating that Redferns’ early release of funds did not directly cause the ultimate losses suffered by Target Holdings. The market crash and inflated property prices were the primary factors contributing to the loss, unrelated to the timing of the mortgage papers. Lord Wilberforce emphasized the need for a causal connection between the breach of trust and the claimant’s loss. This principle was reaffirmed in the 2014 UK Supreme Court decision in AIB v Redler. causal link

Question 49

Aib v Redler

Answer 49

This time the solicitors did not by mistake pay off the full mortgage owed to the original bank. Got the money from bank number 2 to pay off bank number one, they gave too much money to the householders and failed to pay off the full ortgage to mortgage holders number 1 and as a result their bank, AIB ended up as a second charge holder, they were ot thefirst charge holder because the first bank were stil owed money. Market crashed, house sold, massive loss and the small bit of money that is recouped some of it has to go to the first bank, Barclays so AIB sues mark Redler and says you are in breach oftrsute you were meant to make us firt charge holders You are liable for all the loss suffered. Could AIB recover the full loss including the market depreciation. OR will they be limmted to compensation for the amount of money that was tied up in that first charge… just get the 300,000. UK SC said they are only getting the 300,000 not getting the full loss because you lack causation. Lord Toulson gives good judemetn inthis case and Lord Reade. Hold you do need some link between the loss sought and the amount paid out.

Question 50

Fry v Fry

Answer 50

trustees were held liable for the difference in price resulting from their improper retention of a coach house that should have been sold when the testator died. The trustees rejected an offer of £900 for the property, and it remained unsold for 26 years, during which its value depreciated. When the court compelled the sale, the trustees were found responsible for the decrease in value and were required to reimburse the trust fund for the difference between the price they obtained and the offer they had turned down 26 years earlier.