Trustee Duties

Question 1

T’s (4) duties to B

Answer 1

• duty of obedience
• duty to account
• duty of care
• fiduciary duty

Question 2

Duty of obedience

Answer 2

= obey the trust settlement, avoid unauthorised investments and disbursals

Question 3

Duty to account

Answer 3

= give information as to what has happened to trust assets

Question 4

Duty of care

Answer 4

= duty to take due care in managing the trust property (investments etc)

Question 5

Fiduciary duty

Answer 5

= no profits & no conflicts of interest & no self-dealing (unless B consents)

Question 6

T’s 2 types of powers

Answer 6

• Dispositive powers = vary entitlements under the trust
• administrative powers = deal w/ trust assets (investments, changing what the fund is made of etc)

Question 7

DO - Fraud on a power

Answer 7

= idea that not only must you only make decisions within the scope of your powers, you must also exercise your (authorised) powers for the right reason

/!\ ‘fraud’ doesn’t have to be dishonest, just exercising power for the wrong reason

Question 8

DO - AP : Cowan v Scargill

Answer 8

Main point : when considering what investments to make, T must consider only the best interest of Bs, and disregard their personal / political / ethical views

Summary : Ts of the Mineworker’s Pension Scheme disagreed abt overseas investments (Ts who were members of National Union of Mineworkers (Ds) disapproved bcs investing in overseas energy bad for national mining)
=> court held that D’s concern relevant to interest of union but not of Bs of trust fund (only thing in their interest = making money for the fund) => union trustees were in breach

Question 9

DO - AP Harries v Church Commissioners

Answer 9

summary: Ps sought declaration that D trustees managing assets for C of E were obliged to have regard to object of the trust = promoting the Christian faith
=> Court refused the declaration

Question 10

DO - AP Butler-Sloss v Charity Commission (2022) (MP)

Answer 10

Main point : possible to make investment decisions that somewhat compromise your financial interest bcs directly related to the purpose of the (charitable) trust

Question 11

DO - AP Butler-Sloss v Charity Commission (2022) (summary)

Answer 11

Cs = trustees of two evmt protection charities, proposed new investment policy excluding any investment in ventures not aligned w/ Paris Climate Ag, despite risk of financial detriment to the charities => sought declaration that they were permitted to adopt proposed investment policy

=> Court said that they were : Ts are allowed to make such decisions provided that they can show they have reasonable ground to believe the investments they choose to exclude are detrimental to purpose of trust (and that is the only reason they made the decision)

Question 12

DO - DP Saunders v Vautier

Answer 12

Main point = S v V power : B absolutely entitled and of full capacity can compel Ts to transfer trust property to him/her (or them if gp acting together)

Question 13

DO - DP Re Lofthouse

Answer 13

• B (infant girl) entitled to trust fund when she attained 21 or married
• Ts had power to ‘apply all or any part’ of income to her maintenance and education – dispute abt T’s exercise of power,

=> CA held that court didn’t have jurisdiction to interfere w/ T’s discretion, since T was exercising power for the right purpose = within scope of his powers

Question 14

DO - DP Vatcher v Paul

Answer 14

‘fraud’ in ‘fraud of a power’ doesn’t mean CL fraud / dishonesty, just exercising a power for the wrong reason

=> “It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power” (Lord Parker)

Question 15

DO - DP Klug v Klug

Answer 15

mother (one of 2 Ts) refused to exercise power to give some trust money to daughter (B) who needed it bcs didn’t like her husband

=> Court held that this was a breach of trust bcs power related to need of daughter (so refusing to exercise it for the wrong reason)

A points out ≠ admin powers: mother could perhaps have ag ‘I don’t think it’s in my daughter’s best interest to get the trust money bcs her husband will take it and that is not the purpose of the trust (meant for family / direct descendants)

Question 15

DA - admin powers

Answer 15

Duty to maintain and produce on request an account of what they are doing with the fund
=> exercise of administrative powers cannot be kept secret from Bs [find authority]

Question 16

DA - distributive powers

Answer 16

• no automatic duty to disclose trust documents (other than what B needs to know what is happening to trust property) = Schmidt v Rosewood
• duty to consider disclosure = breakspear v Auckland

Question 17

DC - Speight v Gaunt (quote)

Answer 17

T “ought to conduct the business of the trust in the same manner that an ordinary prudent man of business would conduct his own, and that beyond that, there is no liability or obligation on the trustee” – Jessell MR

Question 18

DC - Speight v Gaunt (content of duty)

Answer 18

not a duty to guarantee the trust fund, not ‘come what may you have to make sure the trust never drops in value’ or make sure all your decisions have good outcomes

=> just a duty to do what an ordinary prudent man of business would do

Question 19

DC - Trustee Act 2000, s1

Answer 19

(1) “whenever the duty under this subsection applies to a trustee, he must exercise such care and skill as is reasonable in the circumstances, having regard in particular –
(a) To any special knowledge or experience that he has or holds himself out as having, and
(b) If he acts as trustee in the course of a business of profession, to anu special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession”

Question 20

DC - investment decisions - Learoyd v Whiteley

Answer 20

T doesn’t quite have the same discretion in his choice as of investments as ordinary prudent man of business conducting his own affairs would => must confine himself to investments permitted by the trust and avoid those which are (too) risky

Question 21

DC - standard investment criteria

Answer 21

= Trustee Act 2000, s4
- Suitability to the trust
- diversification

/!\ court will not interfere w/ T’s decisions if T can justify them w/ reasonable ag

Question 22

DC - duty to seek advice

Answer 22

= s5 Trustee Act 2000

Question 23

DC - Nestle v National Westminster Bank (main point)

Answer 23

to be lb for breach of duty of care, T must breach duty and the breach must cause loss to the trust

Question 24

DC - *Nestle v National Westminster Bank* (summary)

Answer 24

S left shares on trust for his family, appointed bank as trustee – settlement included clause 13 = broad powers of investment, bank (T) didn’t take any legal advice but interpreted it as limiting its powers of investments + failed to review the investments regularly => CA found that bank = a v bad trustee, had breached duty to acquaint itself w/ scope of its powers and review / take care of investments BUT **C hadn’t proven that breaches had caused him any loss ** (bcs stock mk doing badly anyway) **so bank not liable**

Question 25

FD - Millet LJ in *Bristol and West BS v Mothew*

Answer 25

“a fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty”

Question 26

FD - Conflicts of interest

Answer 26

T has a duty to act only in best interest of B = avoid placing himself in position where interest of B might conflict with his own interest = *Bray v Ford*

Question 27

FD - CI - Lord Hershell in *Bray v Ford*

Answer 27

“a person in a fiduciary position, […] is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict.”

Question 28

FD - profits (1)

Answer 28

A fiduciary is not permitted to make a profit by virtue of his position, unless expressly authorised to do so = *Phipps v Broadman*

Question 29

FD - profits (2)

Answer 29

Any unauthorised profits made by T will be held on CT for B = *Phipps v Broadman* + see also Russel J in *Williams v Barton*

Question 30

FD - profits (3)

Answer 30

Liability to account for profits does not depend on any wrongdoing by T or loss caused to B = *Phipps v Broadman* => in *phipps*, Bs actually benefited from increase in value of the shares, and T did try to make profit for Bs first but was told he couldn't

Question 30

FD - profits - remuneration - CL

Answer 30

*Re Duke of Norfolk ST*: the court has inherent jurisdiction to authorise a T to retain remuneration where none provided by trust settlement + to vary remuneration provided by trust settlement

Question 31

FD - profits - remuneration - Trustee Act 2000

Answer 31

s28(1) : Trustee can be remunerated (out of trust fund) if (a) the trust settlement provides they can (b) T is a trust corporation or acting in a professional capacity* /!\ even where services are capable of being provided by a lay trustee = s28(2) /!\ for T acting in professional capacity: other Ts must agree in writing that T may be remunerated for svc

Question 32

FD - self dealing

Answer 32

self dealing (by fiduciary) is generally prohibited bcs entails conflict of interest = *Keech v Stanford* => renders the transaction voidable = *Wright v Morgan*

Question 33

FD - self dealing - exception (1)

Answer 33

Self dealing is ok if 'fair dealing = fiduciary takes no advantage and fully discloses transaction, which must be fair and honest = *Tito v Waddell*

Question 34

FD - self dealing - exception (2)

Answer 34

*Holder v Holder* : D = executor of father’s estate, brought father’s farm at auction for a fair price => ok bcs was not actively taking pt in admin of estate as executor (he hadn’t authorised the sale so no conflict of interest)

Question 35

FD - *Bray v Ford*

Answer 35

a fiduciary is not (unless expressly authorised) entitled to make a profit or to put himself in a position where his interest and duty conflict – although rule can be departed from to the extent of remunerating professional T

Question 36

FD - *Re Thomson*

Answer 36

- S left yacht broking business to trustees to hold on trust for family, - one of the Ts = S’s business partner = D - When S’s lease for business premises ended, D moved business to new premises, leased to D alone - D excluded C (S’s daughter) from premises and carried out similar business for himself => court held that D was not allowed to do that, breach of fiduciary duty to set up his own similar business bcs conflict of interest

Question 37

FD - *Tito v Waddell*

Answer 37

self dealing (fiduciary dealing w/ himself) not ok => renders transaction voidable unless ‘fair dealing’ = fiduciary takes no advantage and fully discloses transaction, which must be fair and honest

Question 38

FD - *Williams v Barton* (main point)

Answer 38

“A person who has the management of property as a trustee **is not permitted to gain any profit by availing himself of his position**, and **will be a constructive trustee of any such profit** for the benefit of the persons equitably entitled to the property” (Russel J)

Question 39

FD - *Williams v Barton* (summary)

Answer 39

- D = one of 2 trustees under S’s will – employed by firm of stockbrokers, salary dependant on what firm owned from business he introduced them to - on D’s recommendation, D’s firm employed to value S’s assets - firm was paid out of S’s estate and D got half of that => court held : in D’s interest to chose this (his) firm for valuation of the estate + only got money (salary) bcs of his position as T = smth he was not supposed to do –> **held the money paid by firm on trust for the estate**

Question 40

FD - *Phipps v Broadman*

Answer 40

fiduciary has a duty to account for any profits acquired by reason of his fiduciary position, and will hold them on trust (CT) unless expressly authorised to make such profits (by principal / trust settlement)

Question 41

FD - *Wright v Morgan*

Answer 41

where T engages in self dealing, transaction is rendered voidable => B can rescind transaction and claim account of profits

Question 42

FD - *Holder v Holder*

Answer 42

D = executor of father’s estate, brought father’s farm at auction for a fair price => ok bcs was not actively taking pt in admin of estate as executor (he hadn’t authorised the sale so no conflict of interest)