Trusteeship Flashcards
Millet LJ’s definition of a fiduciary (Bristol v Mothew)
A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence
Key attributes of a fiduciary (5)
- Act honestly
- Act in good faith
- No conflict rule
- Take no unauthorised profits
- Always act in the very best interest of the trust
Is the extent of fiduciary relationships limitless?
No - e.g. simple carelessness in giving advice as a solicitor is going too far
Ward v Ward 1843
If the person has not voluntarily accepted the post of a trustee, then there can be no breach of duty
When do trustee obligations start in RTs and CTs?
When they are made aware of the existence of the trust
S20 TA 1925
Any person who is sui juris (of age and capacity) can act as a trustee
S26 TA 1925
Subsequent and additional appointments
S69(2) TA 1925
S36 can be excluded by the trust instrument
S41 TA 1925
Courts’ power of appointment of trustees
Re Tempest 1886 - what should courts have regard to when appointing new trustees?
- Intention/wishes of the settlor/testator
- Interests and wishes of ALL the beneficiaries
- Whether the appointment of a particular person will be beneficial or detrimental to the administration and management of the trust
S19 TOLATA 1996
Beneficiaries can appoint trustees too
Provisions dealing with termination of trusteeeship
S36(2) TA 1925
S41 TA 1925
S19 TOLATA 1996
S36(1) TA 1925
Voluntary retirement of trustees
Westdeutsche requirement of good conscience
- Avoid conflict of interest
- Act in the best interest of the trust
Common law standard of care
Speight v Gaunt
Standard of care was that of prudence - dealing with the trust assets fairly
Re Dixon 1826
When there is more than one trustee, they have to act together (joint liability) unless the trust instrument provides otherwise and S11 TA 2000
Rights of trustees
- Right to remuneration
- Right to reimbursement
- Right to indemnity
Sections dealing with the right to remuneration
S28-32 TA 2000
Does a trust have a legal personality?
No, it operates through the personality of the trustees
S31 TA 2000
Trustees entitled to reimbursement for expenses incurred in course of trust business
Duties of trustee on acceptance
- Trustee is bound by obligations in trust document (Clough v Bond 1838)
- Trustee should become familiar with terms of trust (Re Pumfrey)
- Trustee should consider nature of trust property (Moyle v Moyle 1831)
Clough v Bond 1838
Failure to comply with the duty to obey the directions of trust equals breach of trust
Exceptions to the rule in Clough v Bond 1838
- No trust instrument
- Instrument silent on a particular issue
What is there a duty to safeguard in trustee duties?
Trust property
How do trustees have to act between beneficiaries?
Impartially
Nestle v Westminster Bank plc 1993
F: Bank a sole executor trustee, life interest to widow, annuities between two sons and remainder to grandchild, the bank invested very narrowly
I: Could the grandchild sue for bad investment?
H: There’s a human dimension to trusteeship, they should be thinking about all beneficiaries equally and invest with that in mind
Still, the claimant failed
Re investment:
“Modern trustees acting within their investment powers are entitled to be judged by the standards of current portfolio theory, which emphasises the risk level of the entire portfolio rather than the risk attaching to each investment taken in isolation”
Ege v Pensions Ombudsman 2000
There might be a reasonable justification for differentiating between different classes, but it must be justified
S1 Trustee Act 2000
Statutory duty of care
Statutory duty of care
What would a reasonable man do
Klug v Klug 1918
Trustees under no duty to give reasons for their decisions
S31 & 32 TA 1925
Powers of maintenance and advancement
How to vary a trust
- Using the Variation of Trusts Act 1958
- Applying the Saunders v Vautier rule
- Applying the doctrine of cy-pres for charitable trusts
Saunders v Vautier 1841
It laid down the rule of equity which provides that, if all of the beneficiaries in the trust are of adult age and under no disability, the beneficiaries may require the trustee to transfer the legal estate to them and thereby terminate the trust
Berry v Green 1938
For the rule in Saunders v Vautier to work, there must be certainty of objects per Knight v Knight, all must be sue juris, all must consent, all must be identifiable
S3 TA 2000
General power of investment
S6(1) TA 2000
Trustee has investment power of absolute owner
S4 TA 2000
Standard investment criteria
Standard of care in investments
- Must act prudently and safely
- Must act fairly between beneficiaries
- Must maximise financial return
- Must take professional advice
- Must manage risks appropriately
What characteristics will a balanced portfolio have in this context?
Liquidity, stability, growth
The duty to exercise sound discretion (4)
- Cannot be influenced by matters unrelated to the purposes of the trust
- Must manage the fund in a way that is most beneficial to the beneficiaries, even if such a a course conflicts with their personal morality
- Discretion cannot be exercised dishonestly, capriciously, or subject to trustee’s own benefit
- Trustees not permitted to abdicate responsibility for decision making, restrict choices available to them or place themselves in a position where they are powerless to exercise free discretion
The duty to invest with prudence
Basically that investing must be in the benefit of the beneficiaries
What are the requirements for the advisor in investment powers?
She must be reasonably believed by the trustee to be reasonably qualified
Bartlett v Barclays Bank Trust Co (No 1) 1980
“The courts must not be astute to fix liability upon a trustee who has committed no more than an error of judgment, from which no businessman, however prudent, can be expected to be immune”
