Trustee Duties Flashcards
Buttle v Saunders
Trustees must comply with the terms of the trust deed to maximise the interest of the Bs, even if they feel morally bound to act otherwise.
So the trustees in this case had to accept the gazumping offer for the property as it would maximise the increase in trust property value for Bs, even though they had accepted another offer in principle and felt it was morally wrong to accept the higher one afterwards.
Bs can seek an injunction from the courts in order to ensure T’s compliance with the trust deed - so Bs here got an injunction against Ts selling property to anyone who was not the highest bidder.
Speight v Gaunt
The basic test for whether a trustee has breached their duty of care with the trust property is whether T took all steps that an ordinary, prudent businessman would have = OBJECTIVE test.
s.1 Trustee Act 2000
T must exercise reasonable care AND utilise any specialist knowledge he has or professes to have
s.2 Trustee Act 2000
When such a duty arises is outlined in Schedule 1:
Schedule 1 provides that this standard of care applies to:
1) Investment
2) Acquisition of land
s.3 Trustee Act 2000
T can make any type of investment they would make as if they were absolute owners of the trust - so Ts have broad discretionary power generally in terms of what they can invest in
s.4 Trustee Act 2000
When exercising the power of investment, trustees must take into account the standard investment criteria.
These are set out under s.4(3) - standard investment criteria are suitability of investment to the trust and the need for diversification of investments.
s.5 Trustee Act 2000
Where T is not an investment expert, then it would NOT be reasonable to make an investment without professional advice.
Bartlett v Barclays Bank
If T is a majority shareholder of a company, then T (as the standard of an ordinary, prudent businessman) has a duty to ensure that the company directors are competent and performing well - should remove them if they are being negligent which is losing B’s trust money
Nestle v National Westminster Bank
Note that a trustee has not necessarily breached their duty of care where they are relatively inactive in terms of not investing trust money.
Court held that B would have to show that Ts took decisions that no reasonable person would have made, without the benefit of hindsight, to show they breached their duty - so they would have to show that not investing would be a decision that no reasonable person would have taken.
Cowan v Scargill
Ts have a duty to ensure they maximise financial returns when investing trust property.
So Megarry VC held that Scargill’s request to not invest coal miners’ pension money in competing energy sources with coal would be a breach of trust duty because Ts have a duty to maximise financial interests of the Bs, even if this involves investing in rival companies.
Harries v Church Commissioners
However, there are two circumstances in which it may be permissible to exclude certain types of investments for CHARITABLE TRUSTS:
1) If the entity invest into runs directly contrary to the purpose of the charity
2) If the entity invested into will likely reduce the amount of donations to the charity
Armitage v Nurse
Millet LJ held that it is necessary for the trustees to inform the Bs about the trust and supply them with trust info. This is because in order for a trust to be valid and meaningful, the Bs must have the information about the trust so they can hold the trustee to account.
This is a primary duty of the trustee - irreducible core obligation to provide Bs with the information about the trust accounts.
Re Londonderry’s Settlement
Some trust information does NOT need to be supplied to trustees - e.g. if there is a discretionary trust, T does NOT need to explain why he used his powers in the way he did. Although if they do explain and these reasons were unreasonable/irrational, then they could be held to be in breach of T duty.
HL argued that the reason why Ts must supply Bs with trust documents is because these contain the traceable proceeds of trust money and the substitute assets acquired by trust funds.
Note that trustees are NOT under a duty to supply information about confidential letter of wishes which S may have sent to T about how to exercise their powers in a discretionary trust. This means that Ts can rely on letters of wishes to explain why they exercised their powers in a particular way, without having to provide any reasons since that information is confidential.
Schmidt v Rosewood Trust
Where there is a wide power of appointment to include further beneficiaries in the trust, and the criteria for whom it can be extended to is disclosed in a confidential letter of wishes, then B can be entitled to receive that information from the trustee even though it is confidential.
This is because if there is such a wide power to add new beneficiaries, not all of the new potential beneficiaries would be suitable to monitor T’s activities and duties - hence it is most likely that S wanted Ts to exercise the power in favour of the original Bs, entitling Bs to this trust information.
Breakspear v Ackland
Briggs J stated that if S gives Ts discretion in appointing Bs, then the letter of wishes has different effects depending on how it was written.
E.g. if he states that “I place T under the legal duty to distribute property in the following proportions”, then this is binding on T and removes their discretion - so such clear language becomes trust terms and thus must be disclosed to Bs. So if the letter of wishes imposes a legal duty on T to act in a way, then this becomes part of the trust and thus B is entitled to access that information.
Note that generally, letters of wishes are not legally binding on Ts and so they do not have to follow them. However, they must take them into account to some extent, because if they just ignore them then they can be challenged for capricious use of power.
