Trustees and Fiduciaries

Question 1

Is it true that the position of a trustee can fluctuate? Aka trustee can be removed, leave and be replaced and can select someone to replace them?

Answer 1

YES.

Question 2

Can a beneficiary change a trustee?

Answer 2

Yes, if they have Saunders v Vautier rights because they 3 things…

Question 3

Can a trustee be replaced if they are out of the UK for more than 12 months?

Answer 3

Yes

Question 4

Can a trustee be replaced if they are child?

Answer 4

Yes.

Question 5

Can a trustee be replaced if they are unfit to be a trustee, is bankrupt or refuses to be trustee?

Answer 5

Yes.

Question 6

When does the court replace a trustee?

Answer 6

When the trustee is incapacitated or when they are bankrupt

Question 7

When can a trustee be removed?

Answer 7

1. When they voluntarily retire
2. When they refuse to be a trustee
3. Death
4. Beneficiaries that qualify for the Saunders v Vautier
5. Removal by other trustees or by court.

Question 8

What must a trustee be like during the trust?

Answer 8

NO profit. NO conflict.

Be impartial in treatment of beneficiaries.
To keep accounts and records.
To invest.
To distribute accordingly.
Keeping trust assets separate from their own personal assets.

Question 9

Trustee DUTY OF CARE - at common law

Answer 9

Same standard of care and diligence that would be excercised by a prudent business person of their own business.

If trustee is paid to be a trustee, the standard here is higher.

Question 10

Trustee DUTY OF CARE - statutory duty under Trustee Act

Answer 10

Standard of care is that they exercise the care and skill as is reasonable in all circumstance. Additional expectations as according to their special skills, knowledges etc.

Standard is high if trustee is a professional.

This statutory duty of care can be excluded can be excluded by trust deed.

Question 11

What duty do trustees have when the trust property is a trust fund?

Answer 11

They are expected to invest it. But check the trust deed to see whether this power has been amplified or reduced etc.

Cannot invest in land overseas.

Can invest in land, overseas or in chattels.

Question 12

What must trustees be mindful about when investing the trust property?

Answer 12

1. That they do so with duty of care standards etc.
2. That they disregard any personal and ethical considerations - this investment thing is purely focused on whats best for the beneficiaries and increasing the trust fund.
3. Trustees can delegate the investment job to an agent.
4. Make investments according to with the Standard Investment Criteria (diversify the investment)…
   When exercising a power of investment the trustees must have regard to the standard investment criteria: suitability and diversification.
5. Regularly monitor and review the stuff
6. Balance the interests of the beneficiaries - such as increasing the income for the Life Tenant and maximising capital growth for the remainderman

Question 13

What is the power of maintenance?

Answer 13

Note: trust deed can disallow this power, so make sure you check it.

Allows the trustee to use the income for the benefit of the minor beneficiary’s education, maintanence and benefit.

Question 14

What is the power of advancement?

Answer 14

Trustee can advance aka give a certain amount from the trust fund in a situation where (1) the beneficiary is a minor or (2) the adult beneficiary has met a contingency interest.

Limitations:
+The advance cannot exceed the beneficiaries share

Question 15

What are the 2 ways a breach of trust occurs?

Answer 15

1. The misapplication of the trust property - they make an unauthorised and unnecessary purchase with the trust money: they must pay and make the trust what it would have been if not for their error.
2. Negligent trust administration - they have made a poor decision that has made a loss to the trust: they must pay and make the trust what it would have been if not for their error.

Question 16

Who takes the hit for a breach of trust?

Answer 16

The trustee that was responsible.
If the trustees did it together, they are both held jointly liable.

Question 17

What are the defences to a breach of trust?

Answer 17

1. That the beneficiary (of sound mind and not subject to undue influence) consented to the breach of trust before or after the breach.
2. The court finds that the trustee was acting with honesty and integrity.
3. If only one beneficiary had consented to the breach, the one beneficiaries interest can be used to pay up for the loss etc.
4. Trust deed says breach of trust is ok
5. Or too much time has passed and therefore the breach cannot be claimed against (6 years have passed)
6. Laches can be used if there has been fraudulent use of trust and there has been an unreasonable delay in bringing a claim.

Question 18

Is the fiduciary duty that arises between trustee and beneficiary automatic?

Answer 18

Yes.

Question 19

Can a fiduciary aka the trustee use the information they have attained via the trustee for their own use and advantage>

Answer 19

No.

Question 20

If a trustee has been made a director etc, can they draw fees from a salary?

Answer 20

No. They can only draw fees for things they have paid for out of their own pocket.

BUT they can if the beneficiaries consent or the trust deed allows trustee to do so.

Question 21

What does it mean when we say a trustee must not conflict with the beneficiaries? Aka breaching fiduciary duty

Answer 21

They must not put themselves in a position where their interests conflict with the beneficiaries.

Beneficiary on top.

Trustee must do fair-dealing: If they want to buy property from the trust - it must be done in the proper way. With all the due process followed - such as proper valuations and no duress etc..

Trustee must not self-deal: be the buyer and seller of the house property. Since they would do it to their own benefit. Any such transaction will be voidable.

Trustee must not compete with a beneficiary.

Question 22

What are the 2 remedies to a breach in fiduciary duty?

Answer 22

1. Personal remedy: fiduciary hands over profits they have made through the breach
2. Proprietary remedy: constructive trust is made over the any profits or things bought using the trust that has resulted from a fiduciary breach duty. Such as if trustee bought a villa using that money, this villa will be given to the beneficiaries.