Head 17: Trust Administration

Question 1

How can trustees be appointed?

Answer 1

1) By the trust deed
2) By a quorum of the existing trustees
3) By court
4) The truster may reserve the right to appoint new trustees.

Question 2

How are the original trustees usually appointed?

Answer 2

The original trustees are usually appointed this way.

Question 3

How is a trustee appointed by a quorum of the existing trustees?

Answer 3

⁃ This is governed by the Trusts (S) Act 1921 s 3(b) unless excluded by the trust deed. Appointment is by deed of assumption (s 21 & schedule B)

• This needs to be a unanimous decision to assume new trustees.
• Occasionally a trustee will appoint a new trustee, often used in commercial trusts.

Question 4

How is a trustee appointed by a court?

Answer 4

⁃ (a) the Court of Session or the sheriff court under 1921 Act, s 22[ I think that this is where trustees cannot be assumed under any trust deed. Provides a method for assumption of trustees. ]; or
⁃ (b) the Court of Session under nobile officium (under the common law), Taylor, Petr 1932 SC 1, or s 34(5) of the Charities and Trustee Investment (Scotland) Act 2005. This is now only used where a statutory procedure is not available - e.g. where there is deadlock[ e.g. when you have four trustees and two want to do one thing and two are against it, and neither are prepared to give way. this is often found in family trusts. This is not regarded as a s22 situation: “when trustee’s cannot be assumed under a trustee…” ]., or
⁃ (c) OSCR (see Head 19), s 70A 2005 Act. Court may appoint a judicial factor instead.

Question 5

How can the truster reserve the right to appoint new trustees?

Answer 5

If there are no trustees the truster may appoint new trustees to a private trust even if the deed is silent (this is an implied power):

Question 6

Lord Glentanar v Scottish Industrial Musicial Assn 1925

Answer 6

⁃ Lord Glentanar gave a silver shield to the SIMA as a trophy/prize for a competition amongst brass bands. The original trustee was a company which became insolvent. Lord Glentanar appointed new trustees to carry on the competition.
- The court struggled to see why the trust would be a private one?? [Look this up].
⁃ NB if this had been a public trust then an application would have to have been made to the court for new trustees.

Question 7

Can third parties appoint new trustees?

Answer 7

NB it is possible for third parties to be given the power to appoint new trustees. Sometimes some of the beneficiaries might be given power — it all depends what is in a trustee. If a new trustee is appointed or assumed, they become a joint owner of the trust patrimony along with the existing trustees.

Question 8

What happens to the trust patirmony when a new trustee is appointed or assumed?

Answer 8

If a new trustee is appointed or assumed then they become the joint owner of the trust patrimony along with the other existing trustees. A conveyance is actually necessary - there must be some deed that confers the titles. There is a simple form given as a schedule to the 1921 Act - they simply convey the whole trust estate/patrimony to themselves and the new trustee.

This only gives the new trustee a personal right to the trust property and they may wish to have a real right, in which case the various registers will have to be amended. Most people do not bother however because the deed of assumption is a good indicator of title.

Question 9

Can appointed trustees decline office?

Answer 9

Appointed trustees can choose to accept office or decline.[ Often this is found in mortis causa trusts, that the elderly widow decides not to become one of the trustees. You have to produce a written declamation to the commissory office before they will take you off the list.

Question 10

What form must acceptance be in?

Answer 10

Acceptance can be expressly (usually in writing) or by implication from actings:

Question 11

Ker v City of Glasgow Bank (1879)

Answer 11

⁃ A trustee was held to have been appointed as a trustee by his actings rather than expressly accepting office.

• This case shows that you do not need to formally accept office, you can accept office by acting as a trustee.
• Held: to have accepted office by his actings

Question 12

What should you do if you are appointed as sole trustee?

Answer 12

If you are appointed as sole trustee you should never decline. You can assume trustee, appoint new ones, then resign.

Question 13

What happens if one trustee resigns?

Answer 13

If one trustee resigns, dies or is removed then the remaining trustees automatically become the new joint owners.
⁃ Here no conveyance is necessary - the trustees don’t have to convey the property to the remaining new trustees.

Question 14

Which trustees can resign?

Answer 14

Under the Trusts (S) Act 1921 all trustees have the power to resign. This is now a statutory power to resign.

Question 15

Who cannot resign as a trustee?

Answer 15

However, there are four exceptions to this rule (those who cannot resign):
⁃ 1) A sole trustee who has not assumed new trustees
⁃ This is for obvious reasons - if a sole trustee resigned then there would be a large expenditure in court applications to have the new one appointed. Thus a sole trustee must assume new trustees then resign.
⁃ 2) An executor-dative cannot resign because they are appointed by the court.
⁃ 3) Trustees who are paid for acting can’t resign unless the power to resign has been expressly granted (s 3(2) Trusts (S) Act 1921)
⁃ Look up the procedure - in these circumstances you have to apply to the court to resign and this could be on the condition that the trustee pay the money back.[ Look this up - mentioned in the tutorial.]
- e.g. Banks etc will not accept office if they cannot resign.
⁃ 4) Trustees who accept a legacy given expressly for acting as trustees cannot resign unless the power has been expressly granted. (This is common in wills and may require the legacy to be repaid.

Question 16

How does a trustee resign?

Answer 16

⁃ Normally by a minute of resignation which is intimated to the other trustees and becomes effective on the last intimation (s 19 & Sch A of the 1921 Act).
- The essentials are the resignation and the letting the other trustees know about this.

Question 17

McKenna v Rafique 2008

Answer 17

⁃ Suggests other ways of resignation may be effective. Sheriff principal Sir Steven Young suggested that a trustee “may” do so by minute under s19. And s20 … the statute clearly shows that the two methods in s19 are not the only methods.
⁃ [NB also, according to the ‘Trusts and Executors’ book by Wilson and Duncan they suggest that trustees can resign by a letter. Thus a verbal resignation is probably ineffective.]

Question 18

Ker v City of Glasgow Bank (1879)

Answer 18

⁃ Inaction is insufficient for resignation (but this may be a ground for removal). He never attended any trust meetings etc., but found he was still a trustee when the bank collapsed and found himself liable for a significant sum of money.

Question 19

What happens to resignation?

Answer 19

On resignation the remaining trustees become joint owners. There is no need for a conveyance in this case, the law does it automatically.

Question 20

Can you avoid a breach by resigning from the trust?

Answer 20

Resignation is not a get out of jail card, if you have committed a breach you cannot escape liability by resigning. In order to escape liability you need a discharge by the remaining trustees or by the court of session, s4(1)(g) and s 18 Trusts (Scotland) Act 1921 respectively.

Question 21

What happens if a trustee won’t resign? Can they be got rid of in another way?

Answer 21

In the absence of wider powers conferred by the trust deed (e.g. on a truster or third party) (see: Gibb v Stanners 1975[ Case where the trustees were given power to remove one of their members on certain grounds. ]),

Question 22

Moness Country Club v First National Trust Co Ltd 2013 CSOH 188

Question 23

How can a trustee be removed?

Answer 23

A trustee can be removed by:

1) Court of Session or sheriff court (Trusts (S) Act 1921 s 23)
⁃ This only covers certain grounds:
⁃ a) On the ground of insanity or incapacity the court shall remove the trustee.
⁃ b) On the ground of absence from the UK or disappearance for 6 months or more then the court has a discretion to remove the trustee.
⁃ The application may be made by co-trustees or the beneficiaries.

2) Court of Session by virtue of the nobile officium
⁃ This method is appropriate where none of the statutory reasons from s 23 (above) apply.
⁃ However there is a high hurdle to meet - the court must be convinced that the running of the trust or the beneficiaries will be severely prejudiced unless the trustee is removed or the trustee purposes will be obstructed due to the trustee either not doing something they were supposed to do or doing something they were supposed to do badly or in bad faith. So they are reluctant to remove trustees.

Question 24

Stewart v Chalmers (1904)

Answer 24

The lay-trustee was prepared to carry on only if the lawyer who was also a trustee agreed to share his fees with him. The court held that this was a grossly improper suggestion and they had to be removed at once.

Question 25

Sharif v Hamid 2000

Answer 25

There was a disagreement between the trustees but it didn’t go so far as to require the trustee(s) to be removed.
- The conduct was held not to be high enough

Question 26

Earl of Cawdor Trust[ Look up the name!!!]

Answer 26

??

Question 27

What happens to the trust patrimony upon resignation or death?

Answer 27

On resignation or death, a trustee ceases to hold the trust patrimony which is held by the remaining trustee(s). This happens automatically without any conveyancing.

Question 28

What happens if you go bankrupt or are convicted of an offence?

Answer 28

As soon as you go bankrupt or have been convicted you must resign or else you will be removed.

Question 29

When does a lapsed trust occur?

Answer 29

A lapsed trust occurs where there is no trustee left capable of acting/no trustee remains in office (this usually happens where a sole trustee dies). The trust remains, it is just that there is noone there to manage the trust affairs. [Ship analogy - if all the crew die then the ship remains but it requires new crew to get it going again.]

Question 30

What happens if a trustee dies in office?

Answer 30

The common law rule is that if a trustee dies in office, no rights pass to his or her executor.

Question 31

How must a new trustee be appointed?

Answer 31

The new trustees must be appointed by the Court or perhaps a truster.

Question 32

What happens upon the death of a sole trustee?

Answer 32

On the death of sole trustee, the executors of the sole trustee confirm to the private patrimony and then confirm to the estate held in trust. Then once this has been done the executors have a personal right to the trust property and can convey it to the new trustees once they are appointed. But if all that remains to be done is that the property just needs to be distributed, the executors of the deceased trustee can do that, rather than having to transfer to new trustees. - s 6 Executors (Scotand) Act 1900.[ The common case to the deceased trustee is governed by this section and Act. ] s22 - the common law is used where this does not apply.

NB If the trust is at a stage when all that is required is the administration of property then the executor can carry this out.

Question 33

Does Scotland require unanimity for decisions binding upon the trust patrimony?

Answer 33

Scotland is different from other jurisdictions as it does not require unanimity, all the trustees do not have to agree to a particular action. It is sufficient if a quorum of trustees makes the decision.

Question 34

How can trust decisions be reached?

Answer 34

Decisions may be reached by a quorum of trustees (unless the trust deed provides otherwise[ So sometimes the trust deed may provide that decisions must be made by all trustees, or even setting the quorum lower than a majority.].) Any sine quo non trustee[ They essentially have a veto.] (rare) must be part of the quorum.

Question 35

What is a quorum and where is it defined?

Answer 35

⁃ A quorum is defined in s 3(c) of the Trusts (S) Act 1921 as being a majority of the acting trustees.
⁃ So if you have 10 trustees overall, the quorum is 6. This means that if there is a meeting and only 7 of them turn up, if 5 of them vote in favour of doing something then since this hasn’t met the quorum of 6 the decision is not binding. But 2 to 2 is deadlock.

Question 36

What is a deadlock and when may it occur?

Answer 36

Deadlock may occur with even numbers of trustees.
⁃ If there is persistent deadlock then it is usually resolved by some of the trustees resigning or new trustees being assumed.
⁃ If the deadlock is so bad that people won’t even agree to resign or assume new trustees then must go to the court to sort it out. If this does not work then you will have to apply to the court to have additional trustees appointed. The court will either appoint an additional trustee of it will sack them all and replace them.

Question 37

Can a trustee with a personal interest in a decision take part in the vote?

Answer 37

Any trustee with an adverse personal interest in the decision to be made cannot take part in the vote unless the trust deed allows this.

Question 38

What are the requirements for a decision binding upon the trust patrimony?

Answer 38

⁃ *All the trustees must be notified and must give trustees time of consideration and opportunity to put forward their views. Some may fit on the fence.

• Even if e.g. 6 out of 10 agree (quorate), they must consult the other 4 before they act. All trustees must be ‘consulted’ — in the absence of this consultation any decision reached is invalid. It is sufficient to give notice of the trust business to be done but you must give them adequate time for consideration and an opportunity to put forward their views. The majority decisions must be made by a majority of the trustees, not merely a majority of those trustees at the meeting.

Question 39

*Wyse v Abbott (1881)

Answer 39

⁃ This was not done in this case. 2 trustees out of the three decided to assume new trustees and it was held invalid because the third hadn’t been consulted at all. Despite the majority decision, the lack of consultation made the appointment invalid.

Question 40

What happens if the views of the trustee are difficult or impossible?

Answer 40

Sometimes getting the views of trustees can be difficult or impossible - in this case you can dispense with getting their views:

Question 41

Malcolm v Goldie (1895)

Answer 41

⁃ In this case the 3rd trustee recently emigrated to Australia and it would have been impossible in the 1890s to get a decision and to intimate it back since the boat took around 3 months. So in this case it was fine for the remaining trustees to assume a third trustee without notifying the emigrating trustee.
⁃ [NB this would no longer be an excuse because you can contact people all over the world now.]
- Now being abroad is no barrier to acting.

Question 42

Is it essential to have trustee meetings?

Answer 42

Its not essential to have meetings but it is good practice to do so if practicable, at least once a year ideally (particularly for big decisions). What is essential is time to consider and an opportunity to give their views (you can send an email round the trustees (usually the lawyer for the trustees stating the proposal and requesting views). It can be that the missing trustees are also met with on Skype.

Question 43

What happens if trustees want to sell some heritable property?

Answer 43

So if trustees wish to sell some of the trust property, if it is heritable then a disposition will need to be signed

Question 44

How many trustees must sign a disposition?

Answer 44

⁃ This is not at all clear - in principle all joint owners should join in a disposition of joint property but it may be that a majority can carry out a transaction just like a majority can make a decision or perhaps a majority can compel the others to sign.
⁃ We don’t really know the answer to this.

Question 45

Section 7 of the 1921 Act

Answer 45

[Look up a textbook about this - not too clear about the finer details.]

Appears to allow execution of deeds by a quorum. This applies to the decision to sell. However, Professor Gretton finds holes in this everywhere - does it mean a quorum of trustees who have registered title or a quorum of all the trustees or is it just a majority of the trustees. It also mentioned that it must be in good faith, but what does this mean?
- Section 7 says that in some cases majority signature suffices, but the section’s exact meaning is obscure. In practice all trustees sign. A majority can compel the others to sign, so that you get all the trustees signing.

Question 46

What is required for conveyancing law?

Answer 46

Whether as a matter of conveyancing law, signature by a majority suffices

Question 47

Harland Engineering and Stark’s Trs

Answer 47

• The Outer House held that majority signature was sufficient. The case was appealed to the Inner House on another point, and there some doubt was expressed as to whether the decision on signatures had been correct. There is no other authority.

Question 48

What is the safest course of action?

Answer 48

The safest course of action is to get ALL the trustees to sign the deed. But the Keeper will accept a deed signed by a quorum if he is told some good reason why all the trustees haven’t signed.

Question 49

What are the powers of the trustees?

Answer 49

Trustees need powers to operate the trust and deal with trust property

1) Common law gives them basic administrative powers
⁃ These include looking after property, instructing repairs, opening and operating a bank account, paying people for goods and services etc.
- Invariably the trustee would give wider powers than this. Sometimes there are restrictions, e.g. They must not invest in tobacco companies, or sell specific items of company.

2) Section 4 of the 1921 Act contains a list of default powers-exercisable as long as not ‘at variance with the terms or purposes of the trust[ So if the trust deed says that the trustees must not do something then this overrides section 4.

NB it can be difficult to find out what the ‘purpose’ of the trust is for these purposes. But consider if there were trustees holding an estate for a young child until the child grew up. The purpose is quite clear - it is for the trustees to continue to hold the property and it would be at variance with the purposes of the trust for them to exercise their power to sell.]’. This governs the whole of s4(1).
⁃ The main ones are sale and lease of trust property and borrowing on the security of the trust estate, buying heritage etc.

3) Powers in the trust deed, wider or restrict

4) The Court of Session under nobile officium or s 1 of the 1961 Act can grant additional powers[ This will be covered later under Head 21.].
⁃ One possible use of this is if you accidentally do something which is not actually authorised, the court can be applied to for retrospective validation.
- It used to be used regularly to buy heritage (since previously no s4 power) but now it is allowed under s4(1)(b). ??

NB most useful use of this is to retrospectively invalidate something.

Question 50

Marquess of Lothian’s CB 1927

Answer 50

⁃ The Curator Bonis was a guardian who was a trustee for the purposes of the 1921 Act, who wanted to sell of a small portion of the Marquess’s very large landed estate. This required a useful discussion of what ‘terms and purposes’ meant. At ‘variance with the terms’ is taken to mean in the face of an express prohibition. (There is something in the trustee which prevents you from doing this). To determine what ‘variance with the purpose’ means, one must look at the purposes of the trust to advance this. In this case, since the Marquess had an enormous estate selling off a small portion would not be contrary to the purposes of the trusteeship, so they could sell the land.

Question 51

What happens if you can’t apply under s4?

Answer 51

Even if a power is at variance with the terms or purposes under s 4 then you can apply to the court under section 5 of the 1921 Act for power to do one of the s 4 things, notwithstanding that such act is at variance with the terms and purposes of the trust as long as it is expedient to do so.

Section 5 applications where proposed power at variance with terms or purposes but expedient. Note exclusion of trusts created by local or private Acts (like National Trust - would have to get the Act amended).

Question 52

Rezac’s Exs v Rezac’s Ex 25 April 2014, Sheriff Arthurson at Edinburgh on scotcourts website

Answer 52

Here they had no express power to sell in the trustee so they looked the s4. The court said they couldn’t rely on s4 because it was at variance with the purposes of the trust, to hand over this purpose of property to the beneficiary. They had no power to sell under s4.

Question 53

Can Trustees invest in trust property?

Answer 53

Trustees have in general to invest trust property while the trust is running.

There is (now, since 2005) an unrestricted right of investment (Trusts (Scotland) Act 1921, s 4(1)(ea)) and an unrestricted right to acquire land wherever situated[ E.g. overseas, the moon etc.], whether for investment or otherwise, s 4(1)(eb).

Question 54

What are the restraints on the trustees power to invest trust property?

Answer 54

NB there are some restraints on the trustees powers

1. The trust deed may restrict these unlimited default investment powers - so you cannot exercise any of these above powers if they are at variance with the terms and purposes of the trust.
2. The trustees also have an overarching duty of care towards beneficiaries under the common law. The common law takes the view that the trustees should be prudent.
3. The trustees also have a statutory duty in s 4(4A) to consider the suitability of proposed investments for the trust, consider the need to diversify[ I.e. not to put all your eggs in one basket.] and must obtain and consider advice from an expert.
4. It is not enough to sit back once the investments have been made - they must be monitored too, at least every quarter (DN thinks).

Question 55

What are the two questions you should ask when wondering if a trustee has power to deal with trust property?

Answer 55

1) Do the trustees have power to deal with the trust in question?
2) What effect does any lack of power have on third parties who transact with the trustees?

Question 56

What are the remedies for gratuitous transactions made with the trust property?

Answer 56

⁃ It is clear that gratuitous transactions can be ‘unscrambled’ if trustees give property away to people who aren’t entitled to it - either the property can be recovered or its value can be recovered (this is simply U/E).
⁃ If the value of the property can’t even be recovered (e.g. If the third party are now insolvent) then the trustees will be personally liable for the value.

Question 57

Can onerous transactions be attacked in the same way as gratuitous transactions?

Answer 57

Onerous transactions (primarily sales) by trustees cannot be attacked on grounds of lack of capacity since the trustees have full capacity (as the owners) to sell any trust asset. The proceeds will of course themselves be trust property. However it can be attacked as a breach of trust.

Question 58

When is the third parties title voidable?

Answer 58

At common law there were problems in relation to third party title.[ The third party’s title was voidable by the beneficiaries if the third party was in bad faith. The problem was that it wasn’t clear what in bad faith meant. Did it mean you had to make exhaustive enquiries? Did it mean there was nothing to excite your suspicions? So in practice people played safe and proceeded only if they were quite satisfied if the trustees had power, which meant reading the trust deed very carefully and raising any questions, and applying to the court under s 5, just incase the act was at variance with the terms and purposes of the trust. Another way to satisfy yourself was to obtain an expert opinion on which you could rely (or sue them). But both of these were expensive and exert a chilling factor (i.e. it makes it unnecessarily difficult to buy property from trustees).]

So s 2 of the 1961 Act was enacted to held trustees - it states that third parties in relation to certain onerous transactions (sale, leases, borrowing, investment) are protected from challenge on the ground that the transaction was at variance with the terms and purposes of the trust. Thus the buyer gets a good title even if the trustees had no power to do so and even if the buyer knew about it (so good faith is no longer a requirement).

Question 59

Brodie v Secretary of State 2002

Answer 59

Not that important but it is the only case on s 2. (Look up though - it concerns s 2(2) - good faith where the transaction involved one of the trustees individually).

Question 60

What is the effect of s2?

Answer 60

So while the effect of s 2 is that the transaction cannot be reduced, the beneficiary’s can be sued for breach of trust.

Question 61

What is the loss if the thing is sold against the terms and purposes of the trust?

Answer 61

⁃ It could have been sold for less than full value
⁃ Possible the transaction has harmed the rest of the trust estate.
⁃ What about sentimental value (e.g. trustees selling family portraits etc) - nobody knows the answer to this!

Question 62

Does the offside goals rule apply to the investment of trust property?

Answer 62

DN - thinks it applies to sales by trustees too (so if a second buyer from trustees knew of the sale to the first buyer then won the race to the register then their transaction can be reduced a sa result of the offside goals doctrine.) There is nothing in s 2 that prevents a challenge on this ground (because s 2 only concerns challenges on the ground the transaction was at variance with the terms and purposes of the trust.)

Question 63

What is the general rule concerning contracts entered into by trustees?

Answer 63

In the course of administering the trust the trustees will enter into contracts with third parties. There is usually no problem here. And even if the trustees act ultra vires or negligently the contract cannot be reduced (as we’ve just seen above [So while the trustees would be liable for breach of trust this wouldn’t affect the third parties.]).

Question 64

What problems can arise where trustees contract with third parties?

Answer 64

The problems arise where the trustees contract with third parties but cannot or will not perform their part in the contract and are liable to the third party for damages arising out of the contract:

Suppose for example the trustees enter into missives to buy a house. They were hoping to pay for the house with HBOS shares. A weak later the shares are worth half their value and the trustees cannot proceed. So the owner of the house resells at a loss and claims the loss from the trustees. The question with trustees is which patrimony is liable?
⁃ To answer this question it is useful to divide the contracts into two types.

Question 65

What are the two types of contract that can be entered into by trustees?

Answer 65

1) Intra vires contracts (where the trustees have power)
⁃ For these contracts it is possible to contract as trustees so that generally you are only liable in that capacity. Only the trust patrimony is engaged - so third parties can only claim against the trust patrimony.

2) Ultra vires contracts (where the trustees do not have power)
⁃ Always personally liable. The private patrimonies of the trustees are always liable and the trustees have no recourse against the trust patrimony
See Sanders v Sanders’ Tr (1880)

Question 66

*Gordon v Campbell

Answer 66

Demonstrates the intra vires contract principle.

⁃ The trustees borrowed money from Colonel Gordon on the security of an estate that they held in trust. They were very careful to grant a security as trustees and the personal obligation to repay was also granted as trustees. So when things went wrong and the loan didn’t get paid up and the security was sold for less than the debt, Gordon tried to attach the patrimonies of the trustees individually - however the court held that this was not possible because they were not personally liable.

Question 67

How can contracting trustees escape personal liability?

Answer 67

Generally by stating in a contract that you are acting as a trustee and not as an individual will work to avoid personal liability - but very occasionally the nature of the contract is such that the trustees will be personally liable even if they contract on that basis.

See *Muir v City of Glasgow Bank 1879

Question 68

*Muir v City of Glasgow Bank 1879

Answer 68

⁃ The city of Glasgow Bank collapsed in 1878 owing huge sums of money and all the shareholders were called on to pay up. The bank was an incorporated partnership (there was unlimited personal liability for shareholders(who were in fact all partners)). If you held £1000 worth of shares you had to pay £27,000 to satisfy all the creditors. The partnership deed allowed only individuals or corporations to become shareholders. Trustees were not corporations so they had to be individuals and thus they had to be individually personally liable.
⁃ [So although the trustees registered expressly as trustees they became personally liable.]

Question 69

What happens if the contract is silent as to the trusteeship of the trustees?

Answer 69

If the contract is silent as to trusteeship of the trustees simply describe themselves as trustees without stating that they are acting in that capacity (‘trustees of x’ as opposed to ‘acting as trustees of x’) then they are personally liable.

But very occasionally the nature of the contract is that you are not held personally liable even though you’ve just signed as individuals[ This is the converse of the situation above in Muir.].

See Alexander’s Trs v Dymock’s Trs 1883

Question 70

*Brown v Sutherland 1875

Answer 70

A bill was granted by trustees of an association for work done. There was no reference to the trustees status in the bill, so they were held personally liable.

Question 71

Alexander’s Trs v Dymock’s Trs 1883

Answer 71

Agreement by trustees to submit a claim to arbitration. Although it was signed by the trustees as individuals the court held that in reality it was an agreement by the body of trustees because the dispute was between one body of trustees and the other, and therefore the new set of trustees who had taken over were bound by the arbitration agreement.

Question 72

Do you have to pay out your own pocket where you are liable as an individual?

Answer 72

NB even if you are liable as an individual then it doesn’t necessarily mean you have to pay out your own pocket. As long as the transaction was one which was properly entered into on trust business then the trustees are entitled to pay the third party from the trust patrimony first[ But are they bound to do so?

This is an open question.] and only when this is empty will you be required to pay any balance from your own pocket.

Question 73

Cunningham v Montgomerie 1879

Answer 73

Another Glasgow Bank case. The trustees held a fairly modest amount of Glasgow Bank stock (£1000) and yet they were required to pay the claim of £27,000. The whole of the trust patrimony was wiped out and the two not very rich trustees were bankrupted because they had to foot the balance, and couldn’t do so.

Question 74

Sanders v Sanders’ Tr (1880)

Answer 74

[Ultra vires contract]

Power was given to the trustees to invest in the stock of any chartered bank. The trustees invested in City of Glasgow Bank stock which was ultra vires and thus not covered by the terms of the trust. Thus the trustees were personally liable.

Question 75

Can Trustees appoint agents?

Answer 75

Section 4(1)(f), Trusts (Scotland) Act 1921 Trustees can appoint “factors and law agents” and pay them.

Question 76

Who is liable for the losses caused by agents?

Answer 76

Trustees

Question 77

What is the extent of the agent-trustee delegation?

Answer 77

It isaAdministrative not discretionary: Easdaile v Inland Revenue (1936) TC 700,

Question 78

Easdaile v Inland Revenue (1936) TC 700

Answer 78

?

Question 79

Scott v Occidental Petroleum (Caledonia) Ltd 1990 SC 201.

Answer 79

Lord President Normand at 709

Question 80

s 16, Trusts (Scotland) Act 1921

Answer 80

Advance of vested share to minor beneficiary for education and maintenance

Question 81

Macfarlane v Macfarlane’s Trs 1931 SC 95

Answer 81

?

Question 82

When is the nobile officium used?

Answer 82

Court of Session nobile officium used where s 16 inapplicable, Sinclair’s Trs 1921 SC 484.

Question 83

Sinclair’s Trs 1921 SC 484.

Answer 83

?

Question 84

Is there a statutory power to use income from a beneficiary’s share for education and maintenance if not vested or there is a direction to accumulate it?

Answer 84

No - But Court of Session under nobile officium can authorise this, Latta (1880) 7R 881.