Fiduciary duty

Question 1

Two underlying principles

Answer 1

1. no profit

2. no conflict of interest

Question 2

Bray v Ford

Answer 2

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

Question 3

Role of a trustee?

Answer 3

Holding property for the benefit of another person

Question 4

Law of Property Act 1925, s 20

Answer 4

under 18 cannot act as a trustee and any such appointment is void.

Question 5

Re Vinogradoff

Answer 5

A child could hold personal property on resulting trust

Question 6

Lay trustee

Answer 6

Someone who does not get paid for his/her services

Question 7

Professional trustee

Answer 7

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.

Question 8

Judicial trustee

Answer 8

The court may take over the functions of trustees where the administration of the trust has broken down.

Question 9

Judicial trustees are appointed under?

Answer 9

Judicial Trustees Act 1896

Question 10

Judicial trustee is subject to?

Answer 10

Control of the court and court can make directions about the administration of the trust.

Question 11

Insolvency - Trustee in Bankruptcy

Answer 11

Official Receiver, receiver or liquidator. The job is to liquidate and distribute the assets, but are not true trusts.

Question 12

Public Trustee

Answer 12

An officer appointed by Lord Chancellor. Residuary function to act as a trustee when there is nobody else available.

Question 13

Corporate trustee

Answer 13

A company can be a trustee

Question 14

Trust corporations

Answer 14

includes Public Trustee, Treasury Solicitor and Official Solicitor or corporations entitled to act as custodian trustee under Public Trustee Act 1906

Question 15

How are trustees appointed?

Answer 15

• Normally by settlor/testator

- Settlor can appoint themselves

Question 16

Trust is properly constituted when?

Answer 16

Title to the trust property passes to the trustee

Question 17

There is no limit on?

Answer 17

The number of trustees (except for private trusts that contain land where the maximum number is 4)

Question 18

Once settlor appoints trustees they cannot?

Answer 18

Remove/appoint new trustees (unless expressly provided for in the trust instrument)

Question 19

s 36 Trustee Act 1925

Answer 19

Statutory powers to appoint new trustees

Question 20

Trust instrument can?

Answer 20

Expressly specify that new trustees can be appointed or old trustees be removed

Question 21

How are further trustees appointed?

Answer 21

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

Question 22

Re Smirthwaite (1871)

Answer 22

The court appointed a new trustee because all the trustees named in the will had predeceased the testator

Question 23

Re Lemann’s Trusts (1883)

Answer 23

The existing trustee was incapable of acting because of old age

Question 24

Saunders v Vautier

Answer 24

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

Question 25

Re Brockbank (1948)

Answer 25

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.

Question 26

s 31 Trustee act 2000

Answer 26

provides that trustee can be reimbursed from the trust fund for out of pocket expenses

Question 27

Re Duke of Norfolk’s Settlement Trust (1982)

Answer 27

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)

Question 28

Re Northcote (1949)

Answer 28

Where the trust property is situated abroad and the foreign jurisdiction permits payment to trustees, T can keep these

Question 29

Trustess can be?

Answer 29

Remunerate where the beneficiaries unanimously authorise payment to the trustee

Question 30

Self-dealing rule.

Answer 30

Cannot purchase the trust property- conflict of interest (even if the terms are fair).

Question 31

Self-dealing does not apply where?

Answer 31

The instrument permits it or where the beneficiaries acting together, authorise it or it is approved by court

Question 32

Wright v Morgan (1926)

Answer 32

T cannot evade the rule by retiring and then making the purchase (self-dealing)

Question 33

Re Postelthwaite (1888)

Answer 33

T cannot evade by appointing a nominee to make the purchase | self-dealing

Question 34

Re Thompson (1930)

Answer 34

A director (owing fiduciary duties) ran a rival business. He was restrained from doing this.

Question 35

Nestle v Nestle v National Westminster Bank - duty to act fairly

Answer 35

Cannot favour one beneficiary over another. Should maintain fairness between them.

Question 36

Part 2 of TA 1925

Answer 36

Give trustees the powers to sell, partition and insure the trust property

Question 37

Powers under s 6(1) TOLATA 1996

Answer 37

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

Question 38

Mothew v Bristol & West Building Society

Answer 38

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

Question 39

Regal (Hastings) Ltd v Gulliver

Answer 39

Company direct and company: fiduciary must NOT exploit an opportunity to make a profit

Question 40

Boardman v Phipps

Answer 40

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

Question 41

Cowan v Scargill [1985]

Answer 41

Trustees must consider the best financial interests of the beneficiaries when choosing investments.

Question 42

Keech v Sandford (1726)

Answer 42

Trustees cannot retain any profits deriving from their connection with the trust.

Question 43

RE THOMPSON'S SETTLEMENT [1986]

Answer 43

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

Question 44

TURNER V CORNEY (1841)

Answer 44

'Trustees who take on themselves the management of property for the benefit of others have no right to shift their duty on other persons

Question 45

Holder v Holder 1968

Answer 45

Trustees cannot buy trust property except in VERY EXCEPTIONAL circumstances