Investment and delegation

Question 1

Re Wragg

Answer 1

An investment is any asset that produces income

Question 2

Cowan v Scargill

Answer 2

An asset that can produce a capital appreciation can also be an investment (e.g. something that increases in value over time)

Question 3

Nestle v Natwest

Answer 3

Trustees have to act in best financial interests of trust which means taking an evenhanded approach between the capital and the income

Question 4

Re Power’s Settlement Trusts

Answer 4

The historic ‘legal list’ approach to investments did not include the power to invest in private companies or land, and was very limited

Question 5

Speight v Gaunt

Answer 5

Duty of care - the ‘ordinary prudent man of business’ doesn’t need to act MORE prudently just because he is a trustee

Question 6

Learoyd v Whiteley -

Answer 6

Duty of care - the test is not what level of care and skill an ordinary prudent man of business would apply in relation to his own investments, to that of someone else (which reflects the actual situation)

Question 7

Re Waterman’s Will Trusts

Nestle v Natwest

Answer 7

Before TA 2000, both suggested obiter that there was possibly a higher duty of care for professional trustees - sch1 confirms this is the case

Question 8

Re Luckings

Answer 8

When a trust is a majority shareholder in acompany they ,must have representation on the board ot checkthe way the company is being run

Question 9

Bartlett v Barclays

Answer 9

Criticised Re Luckings (which said that trusts as majority shareholders had to have representation on the board) as overly onerous as there are other ways to check the company such as minutes, agendas and the examination of filed accounts

Question 10

Nestle v Natwest (SIC)

Answer 10

Expounded the ‘modern portfolio theory’ as a way of spreading investments - risky investments can be made as long as they are part of a larger, diversified and safe portfolio

Question 11

Ex parte Belchier

Answer 11

Confirmed that delegation of trustee functions was possible in theory (practically very difficult otherwise)

Question 12

Speight v Gaunt (delegation)

Answer 12

Trustees are only liable for breaches of their agents if they did not act as an ordinary prudent man of business in their delegation (pre 1925 TA)

Question 13

Fry v Tapson

Answer 13

A trustee can only delegate his functions, not his discretions (pre 1925 TA)

Question 14

Rowland v Witherden

Answer 14

There is a duty to supervise any agent appointed under delegation (pre 1925 TA)

Question 15

Re Vickery

Answer 15

A solicitor twice suspended from practice absconded with the trust property, but the court ruled that the trustees had not been wilful in their actions (honest idiot) - however now governed by TA2000 s11 duty of care in appointment

Question 16

Target Holdings v Redfern

Answer 16

Usual common law rules of remoteness and damages do not apply to trustee breaches. If trustees have breached their duties, they must make good all losses in the form of restitution