Fiduciary duty Flashcards
Two underlying principles
- no profit
2. no conflict of interest
Bray v Ford
Person in a fiduciary position.. is not unless expressly otherwise provided, entitled to make profit or allowed to put himself in a position where his interests and duty conflict
Role of a trustee?
Holding property for the benefit of another person
Law of Property Act 1925, s 20
under 18 cannot act as a trustee and any such appointment is void.
Re Vinogradoff
A child could hold personal property on resulting trust
Lay trustee
Someone who does not get paid for his/her services
Professional trustee
E.g. a solicitor, accountant or bank. Usually a higher standard of care would be expected. More likely to be liable for a breach of trust. Can charge for services.
Judicial trustee
The court may take over the functions of trustees where the administration of the trust has broken down.
Judicial trustees are appointed under?
Judicial Trustees Act 1896
Judicial trustee is subject to?
Control of the court and court can make directions about the administration of the trust.
Insolvency - Trustee in Bankruptcy
Official Receiver, receiver or liquidator. The job is to liquidate and distribute the assets, but are not true trusts.
Public Trustee
An officer appointed by Lord Chancellor. Residuary function to act as a trustee when there is nobody else available.
Corporate trustee
A company can be a trustee
Trust corporations
includes Public Trustee, Treasury Solicitor and Official Solicitor or corporations entitled to act as custodian trustee under Public Trustee Act 1906
How are trustees appointed?
- Normally by settlor/testator
- Settlor can appoint themselves
Trust is properly constituted when?
Title to the trust property passes to the trustee
There is no limit on?
The number of trustees (except for private trusts that contain land where the maximum number is 4)
Once settlor appoints trustees they cannot?
Remove/appoint new trustees (unless expressly provided for in the trust instrument)
s 36 Trustee Act 1925
Statutory powers to appoint new trustees
Trust instrument can?
Expressly specify that new trustees can be appointed or old trustees be removed
How are further trustees appointed?
A new trustee can be appointed in the place of one who is
- dead
- out of the UK for 12mths+
- wants to be discharged
- unfit/incapable of acting
- is an infant
- has been removed
Re Smirthwaite (1871)
The court appointed a new trustee because all the trustees named in the will had predeceased the testator
Re Lemann’s Trusts (1883)
The existing trustee was incapable of acting because of old age
Saunders v Vautier
Gives the beneficiaries who are absolutely beneficially entitled the power to compel the trustee to transfer the trust property to them. This will terminate the trust
Re Brockbank (1948)
The Saunders power only applies to bringing the trust to an end. Does not give the beneficiaries the right to interfere with the running of the trust.
s 31 Trustee act 2000
provides that trustee can be reimbursed from the trust fund for out of pocket expenses
Re Duke of Norfolk’s Settlement Trust (1982)
Court can authorise payment to the trustee if in the interests of the beneficiaries (e.g. if it would improve the administration of the trust)
Re Northcote (1949)
Where the trust property is situated abroad and the foreign jurisdiction permits payment to trustees, T can keep these
Trustess can be?
Remunerate where the beneficiaries unanimously authorise payment to the trustee
Self-dealing rule.
Cannot purchase the trust property- conflict of interest (even if the terms are fair).
Self-dealing does not apply where?
The instrument permits it or where the beneficiaries acting together, authorise it or it is approved by court
Wright v Morgan (1926)
T cannot evade the rule by retiring and then making the purchase
(self-dealing)
Re Postelthwaite (1888)
T cannot evade by appointing a nominee to make the purchase
self-dealing
Re Thompson (1930)
A director (owing fiduciary duties) ran a rival business. He was restrained from doing this.
Nestle v Nestle v National Westminster Bank - duty to act fairly
Cannot favour one beneficiary over another. Should maintain fairness between them.
Part 2 of TA 1925
Give trustees the powers to sell, partition and insure the trust property
Powers under s 6(1) TOLATA 1996
In relation to land, the trustee has all the powers of an absolute owner. Sale of land- money to be paid to at least 2 trustees to overreach the trust
Mothew v Bristol & West Building Society
Defines fiduciary duties as a relationship of trust and confidence, distinguished by an obligation of loyalty. The principal is entitled to single-minded loyalty of the agent.
- No conflict rule (Self dealing rule, Fair dealing rule)
- No profit rule
Regal (Hastings) Ltd v Gulliver
Company direct and company: fiduciary must NOT exploit an opportunity to make a profit
Boardman v Phipps
Fiduciaries cannot benefit personally, all the profit they made had to be accounted for and paid back to the trust as the profit came from the information they received as T
Cowan v Scargill [1985]
Trustees must consider the best financial interests of the beneficiaries when choosing investments.
Keech v Sandford (1726)
Trustees cannot retain any profits deriving from their connection with the trust.
RE THOMPSON’S SETTLEMENT [1986]
upheld strict approach in Ex parte Lacey that all purchases of trust property by a trustee are voidable regardless of whether the price is fair and whether the trustee took advantage
TURNER V CORNEY (1841)
‘Trustees who take on themselves the management of property for the benefit of others have no right to shift their duty on other persons
Holder v Holder 1968
Trustees cannot buy trust property except in VERY EXCEPTIONAL circumstances
