Trustees Duties Flashcards
What are the circumstances in which a trustee may retire from his position?
- if the trust instrument expressly permits him to do so
- if he obtains the consent of all beneficiaries, provided each of them is sui juris and they are between them entitled to the entire beneficial interest in the trust property
- s.11 of the Trustee Act 1893 provides that if there are multiple trustees one may retire with the consent of the co trustees and any person with the power to appoint trustees under the trust instrument
- if he requests the court to appoint a new trustee under s. 25 Trustee Act 1893
When can beneficiaries remove a trustee from his position?
If all consent provided they are all sui juris and between them all are entitled to the entire beneficial interest of the trust property .
The trust instrument may expressly define the circumstances in which a trustee may be removed from their position
When can the courts remove a trustee from his postition?
Under Section 25 of the Trustee Act 1893 the court has the jurisdiction to appoint a new trustee. In exercising this jurisdiction they may remove an existing trustee who refuses or is unfit to act.
The court also enjoys an inherent jurisdiction to remove a trustee who acts with dishonesty or incompetency or whos conduct is deliberately obstructive as is noted by Biehler.
Arnott v Arnott
- trustee was removed when her persistent non-cooperation rendered the trust virtually unworkable
- the court noted that regard must be had to all relevant circumstances including the conduct of the trustee prior to the proceedings.
The court has also removed trustees due to clear conflicts of interest between the trustees duties to the trust and their own personal interest.
Moore v McGlynn
- defendant was removed as a trustee when he set up a rival business in competition with that which he was trustee for the benefit of his deceased brother’s family.
Spencer v Kinsella
- the primary concern which the court should have regard for when debating whether a trustee ought to be removed from their position is the welfare of the beneficiaries.
What are the duties of a trustee?
Paramount duty of trustees
Cowan v Scargill
-to exercise their powers in the best interests of the present and future beneficiaries of the trust
1.Duty to ascertain and understand the nature and extent of trust property and the terms of the instrument upon appointment, seeking legal advice if necessary.
- Hallows v Llyod
- Duty to safeguard assets with such due diligence and care as an ordinary prudent man would use in the management of his own affairs
- Duty to properly exercise discretion
- rule in Hastings Bass - Duty to invest
- Duty to maintain equality between beneficiaries
- Duty to distribute
- Duty to keep accounts and provide information
- Duty not to profit
- Duty not to delegate
Expand on the duty to exercise discretion properly
If a trustee enjoys discretion in the performance of a duty or in the exercise of a power he must exercise it properly. Discretion is improperly exercised where a relevant consideration is not taken into account or an irrelevant consideration is.
What is the oldest influential case on the duty to exercise discretion properly and what did it provide?
Re Hastings Bass
- Where by the terms of a trust … a trustee is given a discretion as to some matter under which he acts in good faith, the court should not interfere with his action unless
(1) what he has achieved is unauthorised by the power conferred upon him, or
(2) it is clear that he would not have acted as he did
(a) had he not taken into account considerations which he should not have taken into account, or
(b) had he not failed to take into account considerations which he ought to have taken into account
Mettoy Pensions Trustees Ltd v Evans
- for the rule in Hastings Bass it must be shown that had they had a proper understanding of the effects of their act they would not have acted as they did
Abascus Trust Co (Isle of Man) v Barr
- more recent authority and more flexible approach
- does not require a fundamental mistake, rather there was some unconsidered relevant consideration that would or might have affected the trustees decision
In what case did the English Supreme Court alter the scope of Hastings Bass?
Pitt v Holt
- limited scope of the principle as a ‘magic eraser’
- claimant acted on professional advice to place money in a discretionary trust for her husband after a skiing accident
- was not told to put a clause in the trust stating half the money would be used for her husbands benefit and thus the entirety was subject to inheritance tax which could have been avoided
- court held that the duty to take all relevant matters in account is a fiduciary duty so an act done in breach of that duty is voidable
- however, if the trustees seek advice from apparently competent advisers and follow this advice they are not in breach of this duty even if a failure occurs becuase it turns out the advice given to them was materially wrong
- mere errors or misunderstandings of an action are not enough to set it aside, only a fundamental breach of trust
What is the Irish courts approach to the rule in Hastings Bass?
Irish Pensions Trust Ltd v Central Remedial Clinic
- court preferred the formulation of Would have acted differently over Might
Greene v Coady
- once trustees are shown to have acted honestly and in good faith, having taken account of all relevant considerations and excluded all irrelevant ones then…
- only a decision which can be characterised as ones which no reasonable body of trustees could have made may be impugned.
- once a consideration is relevant it is up to trustees to weight the factors in the balance
- did not make mention of Pitt v Holt
What is the first basic rule in a trustee’s duty not to profit?
A trustee is not automatically entitled to seek renumeration for his services.
Renumeration may be authorised by an express clause in the trust instrument, statue, order of the court, or by contract with the beneficiaries (if they are sui juris and absolutely entitled)
s. 24 Trustees Act 1993
- Trustees are entitled to be reimbursed for reasonable/ legitimate expenses
Cradock v Piper (UK)/ Re Smiths Estate (IRL)
If a trustee is acting as a solicitor they are entitled to legal fees for work concerning the trust if acting in litigation re the trust but there must be co trustees
Boardman v Phipps
The court has an inherent jurisdiction to award renumeration
What are the rules which apply to profits made by fiduciaries in their work for the trust?
- Basic rule of no renumeration
- Self dealing and Fair dealing rule
- Profits must return to the trust
- No conflict of interest
What are the rules surrounding the purchase of trust property by a beneficiary?
- Generally a trustee is not permitted to purchase trust property from himself and his co-trustees as he would effectively be both vendor and purchaser.
Tito v Wadell (no 2)
Such a sale is voidable by any beneficiary ex debito justitae (however fair the transaction
The exception to this is where the trust instrument permits it, it is sanctioned by a court, or the beneficiaries consent sui juris
- Tito v Wadell (No 2)
A trustee may be allowed to purchase a beneficiary’s interest in a trust property so long as the transaction is fair and honest, there is a presumption of undue influence but this may be rebutted.
What if a trustee profits as a result of their fiduciary position?
Armstrong v Armstrong
- If a trustee makes a commodity of his position and gains a profit which but for it he would not have secured the profit should be retained for the benefit of that trust estate (constructive trust)
What if a trustee places himself in a situation where his interest and duty may conflict?
Greene v Coady
-Trustees are not entitled to put themselves into a situation of conflict of interest whereby they may be influenced by how themselves may profit from any decision which a body of trustees may make
Moore v Glynn
- a trustee may not compete with the trust business as this results in a conflict between fiduciary duties and his personal interests
- in this case the trustee set up a competing business and it was held improper for him to continue in his position
How may a power of investment be given in a trust instrument?
- There may be a investment clause in the trust
- Commonly this clause gives the trustee to invest in such investments as he thinks fit
Re Harari’s Settlement Trusts
- Trustees should be empowered to invest in any investments they honestly think desirable. Court saw no reason to impose any restriction on the plain and ordinary meaning of the words employed
- Alternatively the clause may authorise specific securities which may be invested in
What is the legislative power of investment?
Part 1 of the Trustee Act 1893 as amended by Trustees (Authorised Investment) Act 1958
- s.3 provides that the statutory power of investment is to be exercised according to the discretion of the trustees
1958 Act
-s. 1 sets out a list of authorised investments
- revised and extended by statutory
instruments of the Minister for Finance as
permitted by s.2 of the act
- SI no.28 of 1998
- SI no.595 of 2002
- provides that a trustee must take due account of the nature of the liabilities of the trust, and appropriate diversification and liquidity and investments.
