Trustees: Duties & Powers

[Flash Card 1 of 6]

Trustees: fiduciary position

• equity classifies: T (fiduciary) / B (principal) / T must not act in own interest above B's
• nature of specific fiduciary duties / differ depending on particular fiduciary relationship Attorney-General v Blake
• T must surrender to trust / any profit / out of conflict / irrelevant: T honest / trust could not have made profit itself / trust not lost anything
• strict liability approach Bristol & West Building Society v Mothew / evidential difficulty showing T honest or not Keech v Sandford / court not investigate honesty T Bray v Ford
• if T make unauthorised profit / personal remedy: B seek monetary compensation for breach of trust from T / if breach not resulted in loss to trust but T made unauthorised profit: B require T / pay unauthorised profit to trust (action to account) / proprietary remedy: B claim property representing profit / as trust property & T holds property on constructive trust for B
• engaging in competition / T personal interest conflicts with trust Re Thomson

Fiduciary position: purchase of trust property

• clear breach of no conflict rule: if T attempts purchase trust property / self dealing rule applies & B can apply for transaction to be voided / sale valid: if B not apply void within reasonable time / if void: T must return property (& reimbursed purchase price) / if T sold to bone fide purchaser: B demand profit made on sale
• traditionally self-dealing rule applied strictly Ex parte Lacey & Ex parte James / limited exception Holder v Holder / strict approach upheld: all purchases trust property by T are voidable regardless price is fair or T took advantage Re Thompson's Settlement
• exceptions where sale not voidable: all Bs sui juris & consent to sale with full knowledge of facts / trust instrument authorises sale to T / T obtains court's consent

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Trustees: Duties & Powers

[Flash Card 2 of 6]

Fiduciary position: purchase of equitable interest

• fair-dealing rule: T must show: fair & no undue influence / less as B in control of sale of interest (as opposed to sale of trust property)

Fiduciary position: remuneration of trustees

• exceptions to no-remuneration rule: charging clause in trust instrument / all Bs consent
• court order: inherent jurisdiction to authorise remuneration / if in interest trust (skill of T / professional fees not excessive) Re Duke of Norfolk's Settlement Trusts
• statutory provision to charge fees / Trustee Act 2000 s.29: T acting in professional capacity / reasonable fees in certain circumstances if no charging clause

Fiduciary position: incidental profits

• T must account / personal profit gained / use of trust property or opportunity gained as T Boardman v Phipps / or B make proprietary claim & profit held on constructive trust
• indirect remuneration from 3rd party: director fees / did T acquire position by virtue of his position as T? Re Macadam / keep fee: if T director without trust share voting decisive Re Gee / commission must be surrendered to trust Williams v Barton
• general rule: T accountable for any profit made from 3rd party as result of trusteeship / except: if authorised by trust instrument or court order / lease Keech v Sandford / freehold reversion: constructive trsut Bs (T reimbursed purchase price & expenses) Protheroe v Protheroe
• company directors / Companies Act 2006 s.175 : D must avoid conflict interest / unless cannot reasonably be regarded as likely give rise to conflict of interest / s.176: D prevented accepting 3rd party benefits / unless acceptance not reasonably be regarded as likely give rise to a conflict of interest / or authorised by shareholders

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Trustees: Duties & Powers

[Flash Card 3 of 6]

Breach of fiduciary duty: remedies

• personal claim: Bs can sue trustee for compensation equal to profit / proprietary claim: Bs claim actual property is held on constructive trust for them
• proprietary claim more advantageous: if T bankrupt / invested profit & made further gain
• S worked for L as purchaser & placed orders with V / V paid S secret commission / S purchased land with commission / personal claim only for amount of commission Lister v Stubbs
• D owed employee C fiduciary duties / D accepted bribes & used money to invest in properties / proprietary claim possible constructive trust of the properties for C AG for Hong Kong v Reid
• CoA: approved approach in Lister v Stubbs / proprietary claim not universally available to claim unauthorised profit / only if made out of use of trust property / opportunity / right / belonging to trust Sinclair Investments v Versailles Trade Finance

Trustees: duties

• Bs can force trustees to carry out their duties / & claim compensation if duty is breached / resulting loss to trust / Ts also owe duty of care (statutory & case law)
• Ts must act as prudent men of business Speight v Gaunt / higher standards expected of paid professional Ts Bartlett v Barclays Bank

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Trustees: Duties & Powers

[Flash Card 4 of 6]

Duties of trustees: investment

• Ts duty to invest trust property / if not liable for loss caused to fund / no statutory definition of investment / investment: is something which is expected to produce income or capital growth Cook v Medway Housing Authority

Trustee Act 2000

• s.1: Ts owe duty care / exercise reasonable care & skill in circumstances / with regard special knowledge or experience he holds / if professional: reasonable professional
• s.3: Ts can make any investment / as absolutely entitled to trust fund
• s.4(1): exercise investment powers / regard to standard investment criteria / s.4(2): T time to time review investments & vary if necessary / s.4(3): review: suitability of investment: type / beneficial interest / diversification
• s.5: Ts must obtain & consider / proper advice / before investing / unless unnecessary or inappropriate
• s.6: trust instrument may exclude / restrict / add / to provisions of TA 2000
• s.7: TA 2000 applies to all trusts
• T duty act in best financial interest of Bs Bartlett v Barclays Bank / & impartially between Bs / breach: if not disregard ethical considerations when investing Cowan v Scargill
• Bs cannot insist Ts exercise their discretions in particular way Stephenson v Barclays Bank
• failure trust fund to grow / in line what prudent trustee would have achieved / evidence Ts breached duty of care / importance of preservation fund always outweigh success in its advancement Nestle v National Westminster Bank

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Trustees: Duties & Powers

[Flash Card 5 of 6]

Duties of trustees: delegation

• traditionally: Ts acting personally Turner v Corney / now: Ts cannot delegate unless have authority to do so Pilkington v IRC
• collective delegation: all Ts agree delegate aspect of trust management
• s.11(1) TA 2000: Ts authorise any person to exercise any or all delegable functions as agent /s.11(2): not delegable: (a): dispositive power to distribute trust property to Bs / (b): powers to decide whether payments should be made from income or capital / (c): powers appoint new trustee / s.12(3): not delegate to Bs
• s.32 TA 2000: if delegation permitted / Ts can pay agent / reasonable remuneration / from trust funds
• s.15 TA 2000: Ts authorise agent / carry out asset management functions (investment / acquisition / managing & disposing or creating interest in trust property) / by written agreement / policy statement guidance & agent must agree to comply / policy statement: ensure functions exercised in best interests of trust
• policy statement highlight: fiduciary duties apply / nature of beneficial interests (priority capital growth or income or balance) / investment provisions of trust instrument / date Ts need to sell or realise investment / require agent to report to Ts
• s.23 TA 2000: T not vicariously liable for agent's defaults / unless T not complied with duty of care (s.22) / s.22(1): T duty to keep under review arrangement with agent / s.22(2): if agent authorised exercise asset management functions: T duty to consider policy statement (revision & compliance)
• Ts only liable if / breached one of own duties / & breach caused or contributed to the loss
• individual delegation: if T cannot act for period / can appoint attorney / all Ts under duty to play active role in trust affairs / if absent may be liable for loss caused by remaining trustees
• appointment of attorney: execution of formal PoA document / Trustee Act 1925 s.25: T delegate any powers, discretions or duties / maximum 12 months / T liable for attorney's acts (as if his own)

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Trustees: Duties & Powers

[Flash Card 6 of 6]

Trustees' powers: advancement

• Trustee Act 1925 s.32: Ts pay trust capital / for advancement or benefit / B entitled to or share of capital / B entitled absolutely or contingently / amount not exceed half Bs share / if B becomes absolutely & indefeasibly entitled: reduced by amount of advancement / consents necessary if prior interest / T must check whether trust instrument varies power / if B dies before contingency age: estate not repay
• advancement or benefit: improve material situation of B / tax savings / valid advancement may incidentally benefit others too Pilkington v IRC / valid: relief from anxiety about future maintenance of family Re Halsted / valid: B felt morally obliged to donate to charity (donation not made from his own funds) Re Clore's ST
• breach of trust: if advancement seeks to improve material situation of someone other than B Re Pauling's ST
• advancement / T's discretion / B can only demand T considers whether to exercise powers
• Ts can make loan to B secured by mortgage on B's land / Trustee Act 2000 s.3: loan secured on land is an authorised investment

Trustees' powers: maintenance

• Ts should pay trust income / adult life tenant or B with interest in trust income / if B infant cannot pay as no good receipt
• Trustee Act 1925 s.31: Ts discretion / apply trust income / infant's maintenance, education or benefit / income not paid: accumulated & used in future years or paid on end of trust
• settlor may vary statutory powers of maintenance

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