Trusteeship

Question 1

Millet LJ’s definition of a fiduciary (Bristol v Mothew)

Answer 1

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

Question 2

Key attributes of a fiduciary (5)

Answer 2

• Act honestly
• Act in good faith
• No conflict rule
• Take no unauthorised profits
• Always act in the very best interest of the trust

Question 3

Is the extent of fiduciary relationships limitless?

Answer 3

No - e.g. simple carelessness in giving advice as a solicitor is going too far

Question 4

Ward v Ward 1843

Answer 4

If the person has not voluntarily accepted the post of a trustee, then there can be no breach of duty

Question 5

When do trustee obligations start in RTs and CTs?

Answer 5

When they are made aware of the existence of the trust

Question 6

S20 TA 1925

Answer 6

Any person who is sui juris (of age and capacity) can act as a trustee

Question 7

S26 TA 1925

Answer 7

Subsequent and additional appointments

Question 8

S69(2) TA 1925

Answer 8

S36 can be excluded by the trust instrument

Question 9

S41 TA 1925

Answer 9

Courts’ power of appointment of trustees

Question 10

Re Tempest 1886 - what should courts have regard to when appointing new trustees?

Answer 10

• 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

Question 11

S19 TOLATA 1996

Answer 11

Beneficiaries can appoint trustees too

Question 12

Provisions dealing with termination of trusteeeship

Answer 12

S36(2) TA 1925
S41 TA 1925
S19 TOLATA 1996

Question 13

S36(1) TA 1925

Answer 13

Voluntary retirement of trustees

Question 14

Westdeutsche requirement of good conscience

Answer 14

• Avoid conflict of interest

- Act in the best interest of the trust

Question 15

Common law standard of care

Answer 15

Speight v Gaunt

Standard of care was that of prudence - dealing with the trust assets fairly

Question 16

Re Dixon 1826

Answer 16

When there is more than one trustee, they have to act together (joint liability) unless the trust instrument provides otherwise and S11 TA 2000

Question 17

Rights of trustees

Answer 17

• Right to remuneration
• Right to reimbursement
• Right to indemnity

Question 18

Sections dealing with the right to remuneration

Answer 18

S28-32 TA 2000

Question 19

Does a trust have a legal personality?

Answer 19

No, it operates through the personality of the trustees

Question 20

S31 TA 2000

Answer 20

Trustees entitled to reimbursement for expenses incurred in course of trust business

Question 21

Duties of trustee on acceptance

Answer 21

• 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)

Question 22

Clough v Bond 1838

Answer 22

Failure to comply with the duty to obey the directions of trust equals breach of trust

Question 23

Exceptions to the rule in Clough v Bond 1838

Answer 23

• No trust instrument

- Instrument silent on a particular issue

Question 24

What is there a duty to safeguard in trustee duties?

Answer 24

Trust property

Question 25

How do trustees have to act between beneficiaries?

Answer 25

Impartially

Question 26

Nestle v Westminster Bank plc 1993

Answer 26

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"

Question 27

Ege v Pensions Ombudsman 2000

Answer 27

There might be a reasonable justification for differentiating between different classes, but it must be justified

Question 28

S1 Trustee Act 2000

Answer 28

Statutory duty of care

Question 29

Statutory duty of care

Answer 29

What would a reasonable man do

Question 30

Klug v Klug 1918

Answer 30

Trustees under no duty to give reasons for their decisions

Question 31

S31 & 32 TA 1925

Answer 31

Powers of maintenance and advancement

Question 32

How to vary a trust

Answer 32

- Using the Variation of Trusts Act 1958 - Applying the Saunders v Vautier rule - Applying the doctrine of cy-pres for charitable trusts

Question 33

Saunders v Vautier 1841

Answer 33

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

Question 34

Berry v Green 1938

Answer 34

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

Question 35

S3 TA 2000

Answer 35

General power of investment

Question 36

S6(1) TA 2000

Answer 36

Trustee has investment power of absolute owner

Question 37

S4 TA 2000

Answer 37

Standard investment criteria

Question 38

Standard of care in investments

Answer 38

- Must act prudently and safely - Must act fairly between beneficiaries - Must maximise financial return - Must take professional advice - Must manage risks appropriately

Question 39

What characteristics will a balanced portfolio have in this context?

Answer 39

Liquidity, stability, growth

Question 40

The duty to exercise sound discretion (4)

Answer 40

- 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

Question 41

The duty to invest with prudence

Answer 41

Basically that investing must be in the benefit of the beneficiaries

Question 42

What are the requirements for the advisor in investment powers?

Answer 42

She must be reasonably believed by the trustee to be reasonably qualified

Question 43

Bartlett v Barclays Bank Trust Co (No 1) 1980

Answer 43

"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"