Equity LG/WS 11 Fiduciary duties: Intro to trust investment

  • Created by: Emma13
  • Created on: 23-06-18 17:14
What are fiduciary duties?
To act in good faith as trustees are in a position to make profit for self
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Who are fiduciaries?
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
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Who does a fiduciary assume power over?
Assumes power over another aka Principal
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What are the different types of fiduciaries?
Private client - T'ee to personal reps, company/commercial - directors to company, company director to company, business partner to each other, agent to principal, Employment - senior empl'ee to empl'ers,Solicitor - solicitors to clients
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What did Corona establish?
Other situations where X has undertaken to act for Y and Y reasonably believes that X will act exclusively in Y's interest or in their joint interest = fiduciary realtionship
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What is the core fiduciary duty?
A fiduciary must act in the best interests of principal
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Can a fiduciary make a personal profit?
A person in a FD is not entitled to make a personal profit, from role as fid he must not put himself in a position where his personal interest and his duty to the trust conflict
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What did Bray v Ford establish?
Human nature being what it is, there is a danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than duty, and thus prejudging those whom he was bound to protect
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Are fiduciaries strictly liable?
If a fid breach there duty they are strictly liable; good as deter and too difficult for court to tell if honest or not
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When can a trustee make a profit?
If authorised by settlor in trust instrument (expressly authorised by trust doc/statute) or all b's are sui juris, know the full facts and consent (full infor/not forced/age/mental cap) or a court order
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What did ex p Lacey establish?
A t'ee must not purchase trust property for himself (self dealing) as conflict of interest between best possible price v best possible profit
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Would a purchase by the self dealing rule be immediately voidable?
Purchase not immediately void, b's have reasonable time to object = equitable doctrine of laches
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What did Re Thompson establish?
Competition with a business belonging to trust is breach of FD
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What did s31(1)(a) TA 2000 establish?
Trustee can recover out of pocket expenses from trust fund - payment for time spent/ work done as trustee. Different from reimbursement of out of pocket expenses Trustee Act 2000
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When can Trustee recover remuneration?
Authorised by trust instrument (charging clause) or b's consent or trustee obtain court order of s29 TA 2000 applies
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What does s29 Trustee Act 2000 establish?
Implies provision into trust allowing limited payment to trustees subject to express in trust deed. T'ee who act in professional capacity receive reasonable remuneration for services, if not sole T'ee & all other T'ee give written consent
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What does s28 Trustee Act 2000 establish?
"act in professional capacity" = T'ee act in course of professional business which provides services in relation to trust management
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What did Williams v Barton establish?
Incidental profits; commission not allowed
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What did Re Macadam establish?
Directors salary - trust includes a shareholding in a comp, share holding appt T'ee to be a director, comp pays him a salary. T'ee must surrender his directors salary to trust if he acquired the directorship only by virtue of being T'ee
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What did Boardman v Phipps establish?
Grounds for majority decision - fiduciary is accountable for profit made out of info or opportunity which comes to him in fiduciary position, possible conflict of interest. Consent defence n/a as not fully informed consent
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What is a personal claim for breach of FD?
A fid is 'accountable for profit' pay amount equal to unauthorised profit made (or loss of trust)
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What is proprietary claim for breach of FD?
Proprietary claim for the property representing profit, claim asset representing profit, can claim even if T'ee bankrupts
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What did Cedar Capital Partners establish?
Personal or proprietary claim - a fiduciary hold an unauthorised profit on constructive trust
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What are a t'ee dutis to invest the trust funds aims?
To make value of trust fund grow and to produce income(Cook)
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What are the 5 conditions of investment strategy?
For developing an invest strategy;how much invest?investor must decide how risk adverse,makes difference if investor t'ee/not,investor consider investment short/longterm?aiming for income/capital?
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What must a trustee consider?
Object of trust, income/capital, short term/long term amount in trust
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Exam structure...
1.Is D fiduciary? 2.Did he place himself in a position of conflict of interest? 3. Did he make a profit,was it authorised? 4. If not, what is the remedy?
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What does Cook establish?
S3 - general power to investment - Authorised
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What does s4(1) TA 2000 establish?
standard investment criteria
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What did s4(3) TA 2000 establish?
suitability and diversity
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What did s4(2) TA 2000 establish?
need for review - balancing capital growth and generate life interest
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What does s5 TA 2000 establish?
need to take ‘proper advice’ s5(4)
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What does s5(3) TA 2000 establish?
The exception is that a trustee need not obtain such advice if he reasonably concludes that in all the circumstances it is unnecessary or inappropriate to do so.
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What does s5(1) TA 2000 establish?
Before exercising any power of investment, whether arising under this Part or otherwise, a trustee must (unless the exception applies) obtain and consider proper advice about the way in which, having regard to the standard investment criteria
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What does s5(2) TA 2000 establish?
When reviewing the investments of the trust, a trustee must (unless the exception applies) obtain and consider proper advice about whether, having regard to the standard investment criteria, the investments should be varied.
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What does s8 TA 2000 establish?
can purchase leasehold or freehold for investment if for occupation of beneficiary
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What does s5(4) TA 2000 establish?
Proper advice is the advice of a person who is reasonably believed by the trustee to be qualified to give it by his ability in and practical experience of financial and other matters relating to the proposed investment.
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What does s4(3)(b) TA 2000 establish?
the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust.
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What does s1 TA 2000 establish?
Applies to trustee Exercise reasonable care and skill Having regard Special knowledge or expertise (holds himself out as having) It was on T in course of behaviour on profession
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What does Schedule one establish?
application of duty of care When activity as trustee
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What does Keech v Sandford establish?
T'ee may not make an unauthorised profit from his position as T'ee, can't put himself in position where his duty to trust + own personal interest may conflict
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What does s42 Trustee Act 1925 establish?
Court has a statutory jurisdiction to authorise payment when it appoints a corporation to be a trustee
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What did Cradock v Piper establish?
A solicitor T'ee is entitled to profit costs in litigation where he acts as solicitor for himself and co-t'ee in relation to the trust
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What does s28 Trustee Act 2000 establish?
Operates where there is already an express charging clause in trust deed and enables a trust corporation or professional trustee to apply for the additional payment; even if services by lay trustee
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What does s29 TA 2000 establish?
Caters for payment in 2 ways; t'ee is trust corporation is entitled to reasonable remuneration, t'ee acts in professional capacity entitled to reasonable remuneration provided each t'ee agree in writing. NA to sole t'ee
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What does s31(1) TA 2000 establish?
T'ee entitled to be reimbursed for out of pocket expenses provided that a t'ee has a right to recover "expenses properly incurred by him when acting on behalf of the trust"
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What did Hoffman J say in Nestle ?
"T'ee must act fairly in making investment decisions which may have different consequences for different classes of ben's" it is intended to minimise risk while t'ee achieve a reasonable return on capital invested
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What did S31(1) Trustee Act 2000 establish?
Offers T'ee general power of investment and authorises "any kind of investment that he could make if he were absolutely entitled to the assets of the trust fund"
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What does s8 Trust Investment Act 1961 establish?
Gives T'ee general power to acquire land whether or not it is designed to generate income or provide a home for a ben
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What does s15 TA 2000 establish?
T'ee can delegate tasks of investment to someone with the necessary skills and expertise, must be done in writing and a policy doc must be provided to the agent as to trust objectives
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What does Nestle establish?
Under s4, T'ee required to add diversity to their investment portfolio, have to be judged on overall performance and not the failure/success of a particular investment(modern portfolio theory)
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What does s4(2) TA 2000 establish?
T'ee must carry out periodic reviews of their investment portfolio + if necessary investments
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What did Adams v Bridge establish?
T'ee not obliged to follow advice received, but if they decline to do so they run the risk of being liable for any relevant loss
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What did Whiteley establish?
T'ee must invest trust property wisely, acting as an ordinary prudent man making business investment (portfolio theory)
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What does Bartlett v Barclays establish?
Standard of care - s1 TA 2000; confirms that a professional t'ee is expected to show a higher degree of care than a lay person
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What did Cowan v Scargail establish?
The duty of T'ee is to act in best financial interest of b's. T'ee obtain the best rate of return available coupled with diversification of risks. Even if against political/social/moral views of b's
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What can b's do about non-ethical portfolios?
B's may collectively sanction an investment policy + T'ee retain ability to choose ethical investment when financial returns will be equivalent to an alternative
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What did Harries establish?
Charitable trusts have a modified approach, T'ee are entitled to decline investment that runs contrary to the objective of trust
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What is an exoneration clause?
A trust instrument will commonly restrict the liability of a T'ee, clause offer protection for the T'ee while reducing protection of b's
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What did Barker establish?
Exclusion of liability arising from fraud or intentional wrongdoing n/a
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Card 2


Who are fiduciaries?


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

Card 3


Who does a fiduciary assume power over?


Preview of the front of card 3

Card 4


What are the different types of fiduciaries?


Preview of the front of card 4

Card 5


What did Corona establish?


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