Trustee Duties

Question 1

Duty to comply with the terms of the trust deed

Answer 1

Young Pty v Minter Ellison Morris Flecture (Australia)

“perhaps the most important duty of a trustee is to obey the terms of the trust”

Question 2

The equitable duty of care

Answer 2

Leoroyd v Whiteley

Speight v Gaunt

T generally required to display no higher degree of diligence than a person of ordinary prudence would exercise in the management of her own private affairs

Question 3

The equitable DOC (exception)

Answer 3

In the investment sphere, T’s duty is “to take care as an ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide”

Re Whiteley

Nestle v National Westminster Bank

Question 4

Saif Ali v Sydney Mitchell & Co

Answer 4

T is liable for breach if their acts, advice or omissions in the course of professional work is one which “no member of the profession who was reasonably well-informed and competent would have given or done or omitted to do”

Question 5

Bartlett v Barclays Bank Trust Co

Answer 5

If trust property is 99.8% of shares in a company

• T has a duty of care that extends to overlooking activities of the board
• restated law of Speight v Gaunt

Question 6

Nestle v National Westminster Bank

Answer 6

No breach of trust because T’s actions can’t be judged with hindsight

• at the time equities were regarded risky

Question 7

Duties when investing

Answer 7

Nestle v National Westminster Bank Plc

• act as a prudent person investing for other people (reviewing portfolio of investments regularly)

Question 8

Gregson v HAE Trustees

Answer 8

T might legitimately decide against diversification if instructed by S to retain particular assets within the trust fund

Question 9

Jeffrey v Gretton

Answer 9

if property includes real estate, s.4 Trustee Act requires T to consider from time-to-time whether the property should be sold

Question 10

Brynes v Kendle (Heydon and Crennon JJ)

Answer 10

Duty to maximise financial returns

• if property is business assets it should be employed in business
• if property is lettable land it should be let for rent

Question 11

Baxendale-Walker v Middleton

Answer 11

Trustee must secure a commercial rate of interest for it is “a breach of trust to offer a loan on ‘soft’, commercial terms to a person who is not a beneficiary”

Question 12

Downes v Graysbrook

Answer 12

When selling trust property, it is overriding duty of T to get the best possible price for B

Question 13

Harper v Hayes

Answer 13

T must secure by every means in her power a proper competition for the property in order to obtain the best price

Question 14

Ord v Noel

Answer 14

T cannot make sale that advances purpose of one B at the expense of another

Question 15

Buttle v Saunders

Answer 15

even if T feels honour bound to a deal, T has to gazump to obtain higher price for B even if as honourable people they would prefer to implement bargain

Question 16

Cowan v Scargill

Answer 16

If T choses not to invest in something because of personal morals, that is a breach of duty to maximise financial returns

• unless T can show that it makes no difference
• S can exempt T from certain investments

Question 17

Harries v Church Commissioners

Answer 17

in charities

Basic rule: T can pursue ethical investment policy only if it doesn’t jeopardise the financial return they get on trust capital

EXCEPTIONS:
1) where investment of a particular type conflicts with aims of charity

2) where investments might hamper charity’s work by making potential B unwilling to be helped because of source of charity’s funding or by alienating potential donors

Question 18

Charity Com (Oct 2011)

Answer 18

Charity can just make ethical investments if it can justify it is in its best interest

• look at aims of charity
• look at support that might be lost if no ethical investment
• look at whether it is a significant financial detriment

T should evaluate risk of any policy on investment and balance any risk of lower returns against risk of alienating support/damage to reputation

Question 19

Armitage v Nurse

Answer 19

duty to tell beneficiaries that they are beneficiaries

• because T has a duty to B and if B has no rights enforceable against T there are no trusts
• if B doesn’t know, B cannot enforce

Question 20

Re Manisty’s Settlements

Answer 20

T only needs to tell primary objects

e.g. discretionary trusts, tell the most important group

Question 21

Provision of trust accoutns

Answer 21

Armitage v Nurse

B has a right to see trust accounts, whether his interest is in possession or not

Question 22

Schmidt v Rosewood Trust Co

Answer 22

T has a duty to keep proper accounts and to produce these on demand

Question 23

Mason v Coleman

Answer 23

if T cannot produce accounts, T has to pay for costs to obtain accounts

Question 24

Re Londonderry’s Settlement

Answer 24

basic rule: B has a right to see “trust documents”

exception: T has a right not to be obliged to give reasons for their exercise of discretionary distributive functions, so some trust documents are exempt
- e.g. minutes of trustee meetings

Question 25

Breakspear v Ackland

Answer 25

letter of wishes is generally subject to Londonderry principle that exercise of T of their discretionary powers should be regarded as a confidential process