WS 5 - Running a trust: Powers, Controlling and Variation Flashcards
Re Brockbank
• Performance is at the discretion of trustees; can’t be forced to exercise power
Can statutory powers be excluded by trust instrument?
• Remember that statutory powers are implied only if there is no contrary provision in the trust instrument (MUST ALWAYS LOOK AT THE TRUST INSTRUMENT FIRST)
Power of advancement?
s.32(1) TA 1925 Power to advance in their absolute discretion, to those with an interest in trust capital, vested or contingent, provided:
s.32(1)(a) TA 1925
Does not exceed half of B’s share (once one half received, trustees cannot give more even if TF goes up in value – Re Marquess of Abergavenny’s Estate – although the terms of the trust may remove this restriction); and,
s.32(1)(b) TA 1925
Is brought in account as part of such share; and
s.32(1)(c) TA 1925
Does not prejudice beneficiaries with prior interest (unless of full age and consents in writing) – NEED THIS PERSON’S CONSENT FOR ADVANCEMENT
Does s.32 ta 1925 apply to children?
yes
Does the power of advancement apply to life tenants?
– s.32 DOES NOT APPLY TO LIFE TENANTS AS THEY ONLY HAVE AN INTEREST IN THE TRUST INCOME, NOT THE TRUST CAPITAL!!!!!!
Does the power of advancement apply to objects of a discretionary trust?
DOES NOT APPLY TO OBJECTS OF A DISCRETIONARY TRUST UNTIL TRUSTEES HAVE EXERCISED THEIR DISCRETION
• Pilkington v IRC
advancement = any use of money which will improve B’s material situation (Viscount Radcliffe)
What should trustees do when advancing to minors?
cannot give good receipt. Advance direct to the cause
Re Pauling’s Settlement
when parents of young beneficiaries request an advancement to B, trustees should be cautious, and if they doubt intentions, they should apply money directly to the cause (e.g. school fees)
What if B has received an advancement but dies before reaching contingency?
B’s estate need not repay the advancement
s.31(1)(i) TA 1925
if B under 18, T can pay whole/part of trust income (whatever is reasonable) to his parents or towards B’s maintenance, education or benefit – BUT – only if there are no prior interests (e.g. B is not the life tenant)
s.31(1)(ii) TA 1925
When B reaches 18 and still does not have a vested interest, he may demand trustees to pay him all trust income
s.31(2) TA 1925
Any income not so used must be accumulated (invested like capital). Proviso to s.31(2) – accumulations can be used for future maintenance, education and benefit while B under 18
Can Bs compel Ts to carry out duties?
Yes
Tempest v Lord Camoys (1882)
Courts may intervene if trustee’s exercising powers or duties improperly
What if the trustees merely do as the settlors tell them?
a. Court may intervene if trustees merely do as settlor tells them, rather than exercising discretion (Turner v Turner [1983])
When else will court intervene in exercise of trustee power/duty
b. Court will intervene to prevent the exercise of the discretion in favour of a non-object
Re Manisty’s Settlement
- Court may intervene if trustees act capriciously
Dundee General Hostipals Board of Management v Walker [1952]
- Courts may intervene if the exercise of power is wholly unreasonable
Schmidt v Rosewood Trust
c) Beneficiaries entitled to see trust documents, subject to confidentiality (Schmidt v Rosewood Trust [2003] Privy Council)
1. Even if confidential, court has power to order them to be disclosed. Court will need to take account of all interests
Re Londonderry’s Settlement
d) Documents containing trustee’s deliberations/reasons for decisions made:
1. Beneficiaries not entitled to see these (Re Londonderry’s Settlement [1965])
Klug v Klug
- If trustees do state reasons, court may find decision void if they deem it irrational (Klug v Klug – revealed had not exercised power as beneficiary daughter had married without her consent. Deemed irrational.)
Exceptions to Re Londonderry’s Settlement?
a. Where B had a legitimate expectation that discretion would be exercised in his favour and it wasn’t (e.g. if income suddenly stops) (Scott v National Trust)
b. Pension funds. Different to Bs of family trust. Here the Bs pay for the benefit
Justification for keeping reasoning secret?
- Cause bad feeling in families
2. No trustee would take a position if thought his decisions on discretionary matters open to challenge
(a) Saunders v Vautier: beneficiaries can end the trust if:
- 18+ and of sound mind (sui juris)
- All agree
- Are all in existence and ascertained, and absolutely entitled
Re Smith [1928],
• According to Re Smith [1928], Saunders v Vautier does apply to discretionary trusts where all the objects are:
o Sui juris
o Ascertainable
o Agree
Does saunders and vautier apply to successive interests
• Saunders v Vautier does apply to trusts containing successive interests, but there Y’s children are infants and some may be unborn and so not everyone sui juris
s.1(1) Variation of Trusts Act 1958
• S.1(1): On application, courts can consent for those who cannot consent themselves, provided variation will benefit them.
Goulding v James
. Immaterial whether variation is contrary to settlor’s wishes
o Re Holt
eg of entitlement being delayed in terms of age, but this disadvantage being offset by a prior life interest being surrendered – allowed by court
o Raising the contingency age to a more responsible age
Re T
On whose behalf can the court consent over s.1 VTA 1958/
- S.1(1)(a) – on behalf of those who by reason of infancy or other incapacity is incapable of assenting
- S.1(1)(b): on behalf of next of kin
- S.1(1)(c): - on behalf of unborn children
o Re Ball’s Settlement:
Variation of the trust (e.g. altering interests) is permitted, but a complete resettlement of the trust will not be approved (e.g. changing the beneficiaries)
(Knocker v Youle [1986])
o Court cannot consent for an adult ascertained who is capable of consenting himself
