Trustee Duties, Beneficiary Rights

Question 1

For Trustee Appointment, who can remove/appoint?

Answer 1

S36 Trustee Act 1925
•Anyone nominated in trust instrument as able to; or
•If nobody is nominated, then any existing trustee/representative

S41 Trustee Act 1925
• The court can do so against existing trustees
[Re Tempest]
[Re Somerset]
[Re Henderson]

Question 2

For Trustee Appointment, when can remove/appoint?

Answer 2

S36(1) Trustee Act 1925
•Where trustee is dead; out of UK for ≥12 months; or wants or needs to be discharged as trustee

S36(6) TA 1925
•Additional trustee(s) may be appointed if there are no more than 3 existing trustees

Question 3

For Trustee Appointment, how to remove/appoint?

Answer 3

S36 Trustee Act 1925

• By writing

Question 4

Re Tempest (1866)

Answer 4

[IF TRUSTEES CANNOT AGREE ON WHO TO APPOINT, COURT CAN DO IT INSTEAD]

[If existing trustee refuses to cooperate with new court-appointed trustee, can be ground for removing existing trustee]

Question 5

Re Somerset [1887]

Answer 5

[WHERE TRUSTEES CANNOT PRACTICALLY APPOINT NEW TRUSTEES, COURT CAN DO IT INSTEAD]

Facts:
• Trustees were separated married couple living at opposite ends of the world

Question 6

Re Henderson [1940]

Rules for S41 TA 1925 (Removal/Appointment of Trustee by Court)?

Answer 6

1) Is there a breach of trust or is the trustee in a position of conflict?

2) Is there a dispute of fact?
• Usually not if T is bankrupt; criminally convicted; resides permanently abroad; or is mentally incapable
•Even if yes, Bs can bring proceedings alleging breach of trust and also for s41 order

Question 7

For Trustee Appointment, when is it ‘expedient’ to remove/replace a trustee?

Answer 7

Serious Deciders:
1) Mentally incapable
[Re Lemann’s Trust (1883)]

2) T poses a danger to trust property
[Re Wrightson [1908]]

Factors:
1) Hostility between Ts and Bs
+ TS’ DISHONESTY in acts/omissions
[Letterstedt v Broers (1884)]

2) Hostility between Ts
[Scott v Scott [2012]]

3) T’s interests are in conflict with trust and thus TRUST CANNOT FUNCTION because T has to choose between trust and private interests
[Public Trustee v Cooper [2001]]

Question 8

Re Lemann’s Trust (1883)

Answer 8

[INCAPABLE OF EXECUTING DOCUMENTS = GROUND FOR REMOVAL]

‘through old age and consequent bodily and mental infirmity’

Question 9

Re Wrightson [1908]

Answer 9

[T’S CONTINUING OFFICE IS A THREAT TO TRUST PROPERTY = GROUND FOR REMOVAL]

Obiter:
• Court may be reluctant to remove trustees because of the admin expense in doing so (so more reluctant for smaller trusts)

Question 10

Letterstedt v Broers (1884)

Answer 10

[TS’ DISHONESTY > HOSTILITY BETWEEN BS AND TS AS GROUND FOR REMOVAL]

Main guide of court in removing any trustee must be ‘the welfare of the beneficiaries’

Question 11

Rafferty v Philp [2011]

Answer 11

[TS’ MISTAKES NEED NOT ALWAYS MEAN REMOVAL]

Facts:
• Trustee wrongfully assumed she was beneficially entitled to trust property

Held:
• Was not removed after court pointed out her error

Question 12

Do beneficiaries always have the right to see trust documents?

Answer 12

Up to trustee’s discretion

[Breakspear v Ackland [2009]]

Question 13

Breakspear v Ackland [2009]

Answer 13

[UP TO Ts’ DISCRETION WHETHER TO DISCLOSE TRUST DOCUMENTS]

Facts:
• S set up discretionary trust for himself and children
• By a non-binding ‘wish letter’, S listed matters for Ts to consider when distributing trust
• 3 of the beneficiaries asked for disclosure of the letter so as to evaluate their future expectations under the trust

Held:
• Request for disclosure allowed
• Court + Trustees should approach requests for disclosure as an exercise of discretion rather than the adjudication upon a proprietary right of Bs to see trust documents

• BUT even though disclosure could mean family division, the need to give the Bs proper opportunity to ask the court to sanction a scheme of distribution of the trust fund was more important

Question 14

What is the Trustee’s Duty of Care to comply with terms of trust deed?

Answer 14

S1 Trustee Act 2000
• T generally required to display no more diligence than a person of ordinary prudence would exercise in own private affairs (Sch 1: In investments + land acquisition)
[Speight v Gaunt (1883): OBJECTIVE test against prudent bizman]
[Re Whiteley (1886)]
[Cowan v Scargill [1984]]

“Perhaps the most important duty of a trustee is to obey the terms of the trust”
[Young Pty v Minter Ellison Morris Flecture (Australia)]

Question 15

For investments, what can a trustee invest in?

Answer 15

S5 Trustee Act 2000:
• Trustee should take advice from someone who can give proper advice before investing, unless really unable to

Have a diverse portfolio
[Nestle v National Westminster Bank [1988]]
[Learoyd v Whiteley (1887)]

Maximise financial returns
[Brynes v Kendle]

Question 16

For investments, how much can a trustee invest?

Answer 16

S4 Trustee Act 2000
• Have regard to ‘standard investment criteria’ or ‘suitability to the trust’ and ‘diversification of investments

• If real estate on trust, T to consider selling it now and then
[Jeffrey v Gretton]

Question 17

For investments, must a trustee pay heed to the social/ethical preferences of beneficiaries?

Answer 17

Not really, can focus on doing the best for beneficiaries’ financial interests

[Martin v City of Edinburgh District Council (1988)]

Question 18

Mettoy Pension Trustees v Evans

Answer 18

[TRUSTEE’S DUTY TO SELECT WHO AND HOW MUCH TO RECEIVE; Bs DON’T HAVE INTEREST IN PROPERTY UNTIL SHARE IS ALLOCATED TO Bs]
(Warner J)

Question 19

Nestle v National Westminster Bank [1988]

Answer 19

[Ts’ ACTIONS CAN’T BE JUDGED IN HINDSIGHT = NO BREACH OF TRUST]
[INVESTING: ACT AS PRUDENT PERSON]

Held:
•At the time, equities were regarded to be risky

Question 20

Learoyd v Whiteley (1887)

Answer 20

[GENERALLY, LAW REQUIRES TRUSTEES TO EXERCISE ‘NO HIGHER DEGREE OF DILIGENCE’ THAN ‘A MAN OF ORDINARY PRUDENCE’]

[TRUSTEES MUST BE CONFINED TO INVESTMENTS PERMITTED BY THE TRUST AND MUST AVOID ALL INVESTMENTS ‘ATTENDED WITH HAZARD’]

Question 21

Bartlett v Barclays Bank

Answer 21

[T HAS DUTY TO OVERSEE ACTIVITIES OF A COMPANY BOARD THAT TRUST HAS 99.8% OF SHARES IN]
[Affirmed Speight v Gaunt]

Question 22

Gregson v HAE Trustees

Answer 22

[INVESTMENT: T MIGHT DECIDE AGAINST DIVERSIFICATION IF S ORDERS RETENTION OF SOME ASSETS]

Question 23

Jeffrey v Gretton

Answer 23

[IF REAL ESTATE ON TRUST, S4 TA REQUIRES T TO CONSIDER WHETHER PROPERTY TO BE SOLD FROM TIME TO TIME]

Question 24

Brynes v Kendle

Answer 24

[Ts HAVE DUTY TO MAXIMISE FINANCIAL RETURNS]

Held:
• If property is business assets, should be employed in business
• If property is lettable land, should be let for rent

Question 25

When investing in property, what are Ts’ duties?

Answer 25

1. Ts must get best possible price for Bs
   [Downes v Graysbook]
2. In selling, Ts must secure proper competition for property to get best price
   [Harper v Hayes]
   despite their own values
   [Buttle v Saunders: Must accept higher bid, even if Ts accepted earlier bid and feel morally bad, to benefit B]
   that benefits ALL Bs equally
   [Ord v Noel]
3. Ts must rent property
   [Brynes v Kendle]
   or consider selling
   [Jeffrey v Gretton]

Question 26

When giving loans, what are Ts’ duties?

Answer 26

Ts must secure commercial rate of interest

[Baxendale-Walker v Middleton]

Question 27

Harries v Church Commissioners

Answer 27

[CAN EXCLUDE CERTAIN INVESTMENT TYPES FOR CHARITABLE TRUSTS UNDER 2 CONDITIONS]

1. Potential investee runs directly contrary to the purpose of the charity
2. Potential investee will likely reduce the amount of donations to the charity

Question 28

Armitage v Nurse

Answer 28

[Ts MUST INFORM Bs ABOUT THE TRUST AND SUPPLY WITH TRUST INFO; IRREDUCIBLE CORE OBLIGATION]

For a trust to be valid and meaningful, Bs must have info about the trust to hold Ts to account.

Question 29

Re Londonderry’s Settlement

Answer 29

[TRUST INFO THAT DOESN’T NEED TO BE SUPPLIED: EXPLANATION FOR Ts’ EXERCISE OF POWERS; AND CONFIDENTIAL LETTERS OF WISHES]

BUT if Ts do explain unreasonably/irrationally, they may be held to account for it.

Question 30

Schmidt v Rosewood Trust

Answer 30

[WHERE LETTER OF WISHES INCLUDES INFO ON WHICH Bs CAN BE INCLUDED, MUST BE DISCLOSED TO Bs]

Where there is wide power of appointment to add new beneficiaries, not all new potential Bs would be suitable to monitor Ts’ activities.