Trustees Duties

Question 1

2 categories of trustees duties

Answer 1

• duties under common law
• duty under statute

Question 2

Common law duties

Answer 2

Duty of care and
Fiduciary duties

Question 3

Duties under statute

Answer 3

TA 1925 and 2000
- duty of care
- duty to safeguard trust assets
- duty to invest
- duty to obtain advice
- duty to obtain the best price
- duty to maintain a fair balance
- duty to keep accounts
- duty to distribute
- duty to inform beneficiaries and objects of their status

Question 4

Duty of care- common law

Answer 4

• ordinary prudent person of business- speight v gaunt
• prudent = sensible, cautious and careful
• objective test- doesnt consider absence of skills
• however standard is higher for professional trustees- Bartlett v Barclays Bank trust co ltd

Question 5

Fiduciary duties- common law

Answer 5

Bristol and west building society v Mathew
- duties are prospective in nature
2 duties: duty to avoid conflict of interest and duty not to make a profit: bray v ford

Duty to avoid conflict of interest- ‘no conflict’ rule
- Aberdeen railway co v Blaikie
- trustees cannot enter transactions or put themselves in a position where their personal interest conflicts with the beneficiaries interests in terms of managing the properties
- self-dealing= cannot sell property to themselves (Tito v Waddell) or sell their property to the trust (Armstrong v Jackson)
2 exceptions: consent and trust instrument

Duty not to make profit: ‘no profit’ rule
- cannot profit from their position as a trustee- Gwembe valley development v koshy
2 exceptions: consent and trust instrument - murad v Al-Saraj

Question 6

Duty of care- statutory duty

Answer 6

S1 TA 2000
- reasonable person and reasonable in the circumstances
- judged based on the level of knowledge they possess

Question 7

Duty to safeguard trust assets

Answer 7

• responsible for any destruction or reduction in value
• achieved by investing, insuring and safeguarding chattels
• debts also must be paid- re millers deed trust

Question 8

Duty relating to investments

Answer 8

S4 and 5 TA 2000
- duty to adopt standard investment criteria- includes need for diversification of investments- 4.3
- regularly review investments- 4.2
- duty to obtain professional advice- 5
- duty to avoid ethical considerations- Cowan v Scargill

Exceptions: where there is a choice of two investments with equal investment returns for the beneficiaries, where the beneficiaries consent (rule in Saunders v vautier), where the trust instrument excludes certain investments

Question 9

Duty to obtain the best price

Answer 9

• duty to obtain best price when buying/selling trust property even if it means acting dishonourably (not illegally)- buttle v Saunders
• duty to ‘Gazump’

Question 10

Duty to maintain a fair balance between beneficiaries

Answer 10

• cannot prefer a class or one beneficiary over another- nestle v national westminister bank plc
• conflict arises in relation to apportionment with capital and income

Question 11

Difference between capital and income in relation to apportioning expenses

Answer 11

Income: expenses related to ordinary, recurrent outgoings such as taxes and bills and expenses incurred in generating the income e.g advertising the property and estate agent fees

Capital: bears all costs, charges and expenses incurred for the benefit of the trust property itself e.g costs of repairing trust property, insurance premiums etc- carver v Duncan

Question 12

Duty to distribute

Answer 12

• duty to distribute trust property as and when due without any demand for payment from the beneficiaries- Hawkesley v may

Question 13

Duty to inform beneficiaries of their status

Answer 13

• duty to seek and inform of their status
• failure to do so will result in them being personally liable to the beneficaires