Trustees: role, appointment & removal Flashcards
What type of office is trusteeship?
Trusteeship is a voluntary and normally unpaid office, therefore trustees may decline the role.
Who can be a trustee?
In general, any person except a minor may be a trustee.
In relation to trusts of land, a maximum of four trustees can be appointed and it is also necessary for such trusts to have a minimum of two trustees, in order to give good receipt.
In what five ways may a replacement trustee be appointed?
- Using any express power founds in the trust instrument
- Using statutory powers to appoint trustees under S36 Trustee Act 1925
- By the beneficiaries exercising their Saunders v Vautier rights
- In the case of charitable trusts, by the Charity Commission
- By the Court
In what ways may a trustee be removed?
Similar rules apply to the removal of trustees as to their appointment.
- The trust instrument may contain express rules dealing with removal of trustees
- The general statutory power to appoint trustees also effectively extends to removing trustees in the circumstances where it is considered necessary to replace them
- The Court also has both statutory and common law powers to remove trustees
- The Charity Commission also has the power to remove charity trustees
How can a trustee voluntarily retire?
A trustee can voluntarily retire by deed where there are at least two people or one trust corporation to act as trustees and the co-trustees and any person with a power to appoint trustees consents: s39(1) TA 1925.
What should a trustee who retires from the trust obtain?
A trustee who retires from the trust should obtain a formal discharge of liability from the beneficiaries.
What can beneficiaries with Saunders v Vautier rights compel a trustee to retire from the trust?
The direction must be made in writing and requires the agreement of all beneficiaries.
This power can only be exercised if, after the retirement of the trustee, there will remain at least two trustees or one trust corporation.
What is the nature of the trustee-beneficiary relationship?
The trustee-beneficiary relationship is fiduciary in nature, in that they involve one party owing a duty of single-minded loyalty to the other.
What are the two key fiduciary duties a trustee has?
No conflict-a fiduciary must not put themselves in a position where their personal interests conflict with their duties to the principal.
No profit-a fiduciary must not obtain an unauthorized benefit as a result of their position as a fiduciary either for themselves or for a third party.
What is self-dealing and what is its effect?
This involves a trustee purchasing assets from the trust or selling assets to the trust-there is a clear conflict here.
If the trustee does enter into an unauthorised self-dealing transaction, the transaction will be voidable.
What is fair dealing and what is its effect?
This involves the trustee directly transacting with the beneficiary to buy their interest.
The transaction will be voidable unless the trustee can demonstrate that they made full disclosure to the beneficiary, acted honestly and fairly and did not take advantage of their beneficiary.
What will breach of the no-profit rule result in?
Breach of the no-profit rule will result in the fiduciary being stripped of their profit.
