Trustees' Powers and Duties - Trustees' Duties - Flashcards in University Law

Re Hulkes (1886)

General obligation on trustee not to deviate from the trust

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Hallows v Lloyd (1889)

On accepting the office, the trustee is expected to ascertain the terms of trust and to confirm that he has been validly appointed and that the trust property has been vested in him

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Nestle v National Westminster Bank (1990)

If a trust investment has fallen in value and threatens to jeopardise the trust fund, the trustee should consider whether to reinvest elsewhere

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Re Medland (1889)

Otherwise, he will be liable for failure to review; here, trust money lent on mortgage, but security for loan had depreciated in value and now risked interests of trust; held: trustee should have deliberated whether or not to call in the mortgage

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Bailey v Gould (1840)

Surprisingly, there appears to be no duty to insure the trust property

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Re Brogden (1888)

Trustee should ensure that, where part of the trust property is a loan due for repayment, this loan should be called in

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Re Brogden (1888)

If not, trustee might show well-founded belief that any enforcement would be pointless; however, usually no defence for trustee to argue that he thought it somehow indelicate or inapprop to ask for the loan to be repaid and to initiate recovery proce

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Ward v Ward (1843)

However, held: trustee had acted reasonably in failing to sue debtor who was also a beneficiary in circum’s where to bring action would have financially ruined the debtor and impacted deleteriously upon other beneficiaries (his children)

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Lewis v Nobbs (1878)

A new trustee should ensure that investments are in names of all trustees; if not, where trust property is misapplied by a trustee, the co-trustees are potentially liable for any loss that arises

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Lewis v Nobbs (1878)

Here, trust property included bearer bonds which were in sole control of one trustee; when this trustee went off with the bonds in his custody, other trustee was held liable because by his neg, he facilitated the misappropriation

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Keech v Sandford (1726)

Here, a trustee of a lease applied for its renewal for benefit of infant beneficiary; refused but landlord agreed to renew lease in trustee’s own favour; no question fraud, but held: trustee held lease on trust for infant; reason: there would be less

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Psycare Ltd v Mundy (2013)

Here, there was a blatant breach of such duty as a company director misappropriated over £600,000 of company funds; his claim that it was authorised remuneration failed

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Reading v Attorney General (1951)

Here, an army sergeant earned £19,000 by transporting smuggled goods in an army vehicle and while in army uniform; proceeds were confiscated, on release from prison, he took action for its return; failed: he was a fiduciary and was liable to account

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A-G for Hong Kong v Reid (1994)

Here, a fiduciary accepted bribes during the course of employment by the Crown; held: the Crown was able to claim the property acquired by the bribes (3 houses) even though the houses were now of a higher value than the bribes received

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FHR v CCP (2014)

Here, Reid approach reaffirmed; the €10million secret commission obtained by agent was held to be the property of the principal

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FHR v CCP (2014)

Lord Neuberger: “the whole reason that the agent should not have accepted the bribe or commission is that it puts him in conflict with his duty to his principal”

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Campbell v Walker (1800)

Subj to any contrary provision in the trust instrument, the purchase of trust property by a trustee is voidable by any beneficiary

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ex p Lacey (1802)

A beneficiary’s ability to set aside the transaction applies even if the prop was bought at a public auction

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Vyse v Foster (1874)

However, rule does not apply if the contract or sale occurs before assuming the role of trustee

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Tito v Waddell (No 2) (1977)

This means that the consideration provided must be adequate, there must be no undue influence exerted by trustee and the beneficiary must be given full and accurate information re the extent of the beneficial interest to be bought

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Coles v Trecothick (1804)

Here, sale upheld where beneficiary took control of sale by auction; beneficiary chose both venue and auctioneer, and was also content with the price obtained on sale

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Dougan v Macpherson (1902)

However, here, two brothers=beneficiaries; one bro also trustee; trustee purchased bro’s beneficial interest without disclosing to him a valuation report of the trust estate; the beneficial share was worth much more than the trustee paid; transaction

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Williams v Barton (1927)

Here, a stockbroker trustee had to hand over to the trust the commission he earned on valuation by his firm of the trust assets

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Re Macadam (1946)

Often a trustee will obtain remuneration as a director of a company; if the directorship was acquired because of his position as a trustee, he will be accountable to the trust

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Re Dover Coalfield Extension Ltd (1908)

However, this is not so if the trustees were directors before they became trustees; if the trustees were appointed directors without any reliance on the trust votes (Re Gee (1948)

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Re Llewellin’s Will Trusts (1949)

 he will or settlement may authorise the trustee to keep any remuneration

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Industrial Development Consultants v Cooley (1971)

Here, a managing director of a company had been negotiating contract with Eastern Gas Board; EGB did not wish to enter dealings with Company, but was prepared to enter contract with MD privately; conseq’y, he terminated association with Company on fa

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Industrial Development Consultants v Cooley (1971)

Held: although a contract between Company and EGB would never have come to fruition, its former MD had to account to the company for the benefit of the contract he had personally entered

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Regal (Hastings Ltd v Gulliver (1942)

Here, directors of Regal wished to buy 2 further motion picture theatres for Company; as Regal could fund only £2,000 of required £5,000, directors decided to club together and to raise the shortfall themselves; purchase went ahead; directors sold th

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Regal (Hastings Ltd v Gulliver (1942)

Held: although directors argued they had acted in good faith and had secured a benefit to Regal, HL: directors were liable to account to Company for the profits made

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Boardman v Phipps (1967)

Mr B (trust solicitor) concerned about a trust investment in a failing private company; he concluded: only way to protect trust investment was for trust to obtain a majority shareholding in Company and to appoint a new management; as trustees were u

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Boardman v Phipps (1967)

Held: profit had been made by use of info acquired by pair while acting on behalf of the trust and in a fiduciary capacity; they had to account to trust for profit made

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Barrett v Hartley (1866)

One conseq of rule not to make a profit, unless authorised in trust deed (a comprehensive charging clause is always best) or approved by all beneficiaries sui juris, a trustee cannot charge for his time and trouble

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TA 1925, s 42

Court has statutory jurisdiction to authorise payment where it appoints a corporation to be a trustee

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Judicial Trustees Act, s 1(5)

A Judicial Trustee may be paid out of trust property

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Re Portman Estate (2015)

Alternatively, the court can vary or increase the amount that can be charged when there is a charging clause

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Cardigan v Moore (2014)

HC: this jurisdiction should be exercised sparingly

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Re Duke of Norfolk’s Settlement (1981)

Here, trust corporation accepted administration of trust for a low annual fee; as trustee, it subseq’y became involved in an extensive redevelopment project and was allowed an increase in remuneration as the duties became unexpectedly onerous

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Perotti v Watson (2001)

Here, a solicitor undertook administration of estate that in time became unexpectedly complex; although services provided were not always of high standard, CA allowed solicitor to claim fees, albeit scaled down to 75% to reflect the varying quality o

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Cradock v Piper (1850)

Oft-criticised rule; a solicitor-trustee is entitled to profit costs in litigation where he acts as solicitor for himself and a co-trustee re the trust; provided that the costs are no more than they would have been had he acted for the co-trustee alo

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TA 2000, s 28

Operates where there is already an express charging clause in the trust deed and enables a trust corporation or professional trustee to apply for additional payment

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TA 2000, s 28(2)

This is so even if the services could have been rendered by a lay trustees

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TA 2000, s 29

Where there is no entitlement to remuneration given by trust instrument or by another statutory provision: 1. A trustee that is a trust corporation is entitled to reasonable remuneration; 2. A trustee who acts in a professional capacity is also entit

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TA 2000, s 31(1)

A trustee has a right to recover “expenses properly incurred by him when acting on the behalf of the trust”

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Holding & Management v Property Holding & Investment Trusts (1990)

In other cases, trustee will obtain costs only if the action was properly brought or defended for the benefit of the trust estate

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Malcom v O’Callaghan (1835)

Here, the trustee’s claim for expenses for frequent trips to Paris on trust business was disallowed as his presence there was not nec

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Re Thomson (1930)

Here, the trust property included a yacht broker’s business; a trustee wanted to set up similar business in same locality; court issued injunction restraining trustee as his plans would have taken trade away from the trust business

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Balston Ltd v Headlines Filters Ltd (1990)

Here, a former director wished to set up competing business with the company; HC: this was not a conflict of interest and fiduciary duty as he had not competed while he was a director; it did not matter that the intention to compete had been formed p

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Foster Bryant Surveying Ltd v Bryant (2007)

Here, alleged breach of director’s fiduciary duties during a period of notice after he had resigned as a director, but while his resignation had not yet taken effect; Mr B formed new company a few days before his resignation took effect and the newly

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Foster Bryant Surveying Ltd v Bryant (2007)

Held: no breach of Mr B’s fiduciary duties; Mr B’s resignation had no ulterior purpose as both he and wife had been effectively frozen out by his former company; he had not sought employment or any business from the client and the client had pressed

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TA 1925, s 22(4)

Trustee is given absolute discretion to have the accounts audited by an independent accountant, but no more than once in every three years unless there are special circum’s

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O’Rourke v Darbishire (1920)

Beneficiaries are entitled to see all trust docs and title deeds

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Schmidt v Rosewood Trust Ltd (2003)

Trustees are not bound to give reasons why they have exercised their discretion in a particular way

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Re Londonderry’s Settlement (1965)

Hence, they are not bound to disclose docs, e.g. minutes of meetings between trustees, which contain this confidential info

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TA 2000, Part II

Unless trust instrument contains express investment clause, duty to invest is now widened and regulated ; Duty is designed to ensure that the trustees treat income and capital beneficiaries in an impartial manner; might be described as a duty to act

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Nestlé v National Westminster Bank (1988)

Hoffman J: “The trustees must act fairly in making investment decisions which may have different conseq’s for different classes of beneficiaries”

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TA 2000, s 3(1)

Trustees have general power of investment and can make “any kind of investment that he could make if he were absolutely entitled to the assets of the trust”

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TA 2000, s 8

Trustee has general power to acquire land whether or not it is designed to generate a rental income; it might be used, e.g. to provide a home for a beneficiary

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TA 2000, s 15

Trustees can delegate the task of investment to someone with the nec skills and expertise

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TA 2000, s 4

Trustees are required, when making an investment, to have regard to the suitability of particular investments and the need for diversification; these are described as the standard investment criteria

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Nestlé v National Westminster Bank (1988)

As the trustees are required to add diversity to their investment portfolio, they have to be judged on overall performance and not the failure or success of a particular investment

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TA 2000, s 4(2)

Trustees must carry out periodic reviews of their investment portfolio and, if nec, vary the investments

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TA 2000, s 5

Trustees are required to obtain and consider investment advice from a suitable licensed source

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Adams v Bridge (2009)

Trustees are not obliged to follow advice received, but if they decline to do so they run risk of being liable for any resultant loss

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Re Buckley (2013)

2010, 78-yr-old woman (B) executed power of attorney in favour of niece (C); attorneys hold a fiduciary position; the attorney invested almost £88,000 of B’s funds to set up a reptile-breeding business; she did not obtain and consider proper advice f

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Re Buckley (2013)

Held: C contravened her authority and acted in way that was not in B’s interests; highly unsuitable, high-risk investment made without obtaining proper investment advice; Judge Lush: “a hazardous and speculative investment of this kind would have bee

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Learoyd v Whiteley (1886)

General yardstick at common law: the trustee must invest the trust property wisely, acting as an ordinary prudent man making investments

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Nestlé v National Westminster Bank (1988)

Modern portfolio theory: as trustees will often introduce an element of diversity to their investment portfolio, they are to be judged on their overall performance and not on the failure or success of a particular investment

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TA 2000, s 1

A professional trustee is expected to show a higher degree of care than a lay trustee; • trustee must exercise such care and skill as is reasonable in the circum’s having regard: special knowledge (subj and obj)

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Bartlett v Barclays Bank Trust (1980)

A trust company with specialist staff will be judged on a different level to an unpaid, family trustee

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Cowan v Scargill (1985)

Here, the investment policy of the mineworkers’ pension fund was challenged; dispute re investments in foreign energy companies; some trustees objected on ground that these companies were in direct competition with the domestic mining industry

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Cowan v Scargill (1985)

HC: trustees had to act in best financial interests of the beneficiaries and, hence, they would be in breach of duty if they failed to invest in overseas energy companies; trustees had to put aside their personal interest and views

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Harries v Church Commissioners for England (1992)

Re charitable trusts, modified approach: trustees are entitled to decline investments that run contrary to the objectives of that trust (e.g. investing in armament companies)

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Harries v Church Commissioners for England (1992)

Charitable trustees are not allowed to pursue a blanket policy of ethical investment if this would be detrimental to value of the trust land

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Armitage v Nurse (1997)

Here, an express exemption protecting a trustee “from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud” was upheld; this expressly excluded liability for breach of trust in absence of a dishonest intention on pa

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Baker v JE Clark & Co (Transport) Ltd (2006)

However, in any event, there can be no exclusion of liability arising from fraud or intentional wrongdoing; sometimes referred to as the “fraud carve-out”

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Halliwells LLP v Austin (2012)

Exploitation of position alone is not enough to fall beyond the reach of exclusion; Warren J: it cannot be right that an innocent breach of trust or even a breach of the self-dealing rate is nec’y a fraud. Only if it is designed to release the truste

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Walker v Stones (2000)

Previously, “fraud” and “dishonesty” were seen as difficult to define

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Cavell USA Ltd v Seaton Insurance Company (2009)

Recently supported view: trustee will not be acting dishonestly unless he did something that ordinary people would regard as dishonest and he knew that ordinary people would so regard it

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Barraclough v Mell (2005)

Here, a trustee exemption clause excused trustee from liability for breach of duty for his own personal acts except when he knew that the relevant acts were wrongful or when he had no belief that the act was right and did not care if it was wrong; tr

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Barraclough v Mell (2005)

HC: as she had genuinely though that she was acting within the terms of the trust, she was protected by the exemption clause

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Law Commission Consultation Paper, 2003

Law Com provisionally concluded: present law was unsatisfactory and professional trustees should not be exempt from liability following a neg breach of trust

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Report of the Law Commission, “Trustee Exemption Clauses” (2006)

However, this notion was rejected; instead a rule of practice was recommended under which the professional trustee must take steps, when the trust is created, to make the settlor aware of the meaning and effect of including an exclusion clause

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Trustees' Powers and Duties - Trustees' Duties

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