Trustees Flashcards
Appointment of Trustees
Describe the legislative power to appoint a trustee?
S.10 Trustee’s Act 1893 sets out the legislative power to appoint a trustee.
• The power may be exercised if (1) a trustee dies, (2) remains out of the jurisdiction for more than 12 months’ (3) wants to be discharged of duties (4) Refuses to act or (5) is unfit/incapable of acting.
• Replacement power only: gives the power to replace an original or substituted trustee although where a trustee is being replaced, the number of trustees can be increased.
• Power can be exercised by the person who has the power to appoint under the trust instrument.
• If no such person or unable to act, the power can be exercised by the surviving trustees.
• S.10(1) any appointment must be made in writing.
Appointment of Trustees
Describe the statutory basis for the Court appointing a trustee?
S.25 Trustee’s Act 1893: Court has the power to appoint a new trustee when it is expedient to do so and would be inexpedient, difficult or impracticable to do so without the assistance of the court.
• Generally used if no power of appointment in the instrument or s.10 power can’t be exercised.
• As s.10 only permits replacement trustee, must use s.25 to appoint additional one if no power.
Retirement of Trustees
Describe the operation of the retirement of a trustee?
A trustee may retire if either (i) the trust instrument expressly lets him or (ii) he obtains the consent of all the beneficiaries provided each of them is of age and entitled to the entire beneficial interest.
S.11 Trustee’s Act 1893: Where there’s a number of trustees, a trustee can retire if the co-trustees and any person w power to appoint trustees under the trust consents.
S.25 Trustee’s Act 1893: He could also seek the courts assistance.
Removal of Trustees
Describe the three main ways to remove a trustee?
Three main ways to remove:
(a) Instrument may expressly define the circs where a trustee may be removed
(b) All beneficiaries provided each is of age + entitled to entire beneficial interest can remove a trustee
(c) Court may remove a s.25 while appointing an additional one.
Removal of Trustees
Arnott v Arnott [1924]
- Held jurisdiction exercised if trustee acted dishonestly/incompetently/wilfully obstruct the object of trust
Removal of Trustees
Moore v McGlynn [1894]
- D held post office on trust for benefit of fam of deceased bro. He set up a rival PO in comp w fam one.
- Held trustee isn’t in breach of a trust by setting himself up in similar line of business in the neighbourhood provided he doesn’t resort to deception or solicitation of custom form persons dealing at the old shop.
- But held the trustee’s new position disqualifies him from remaining a trustee anymore.
Removal of Trustees
Spencer v Kinsella [1996
In deciding to exercise, must primarily have regard to beneficiaries’ welfare
Duties and Powers of Trustees
What is the rule for a trustee exercising discretion?
If a trustee has discretion, in exercising his discretion, he must (i) take all relevant considerations into account and (ii) ignore all irrelevant considerations
Re Hastings Bass [1975] NB
- The Rule: If a trustee is given a discretion as to a matter, the court shouldn’t interfere with his action notwithstanding that it doesn’t have the full effect which he intended unless:
(1) What he has achieved is unauthorised by the power conferred upon him or
(2) It’s clear he would not have acted as he did (a) had he not taken into account considerations he
shouldn’t have or (b) had he not failed to take account of considerations he should have.
Duties and Powers of Trustees - Exercising Discretion
Abacus Trust Co v Barr [2003] - 40% v 60% - Loosening
- Held the principle doesn’t require the trustee’s mistake be fundamental, just that the unconsidered relevant
consideration would or might have affected his decision. Here, a settlor asked trustees to create a
discretionary trust of 40% of the trust fund. The message was mistakenly conveyed as 60%.
Criticism: It was allowing decisions by trustees be unscrambled on basis they’d unintended consequences: tax
Duties and Powers of Trustees - Exercising Discretion
Sieff v Fox [2005]
- Held court can set aside an exercised of trustee discretion if the effect was diff from that intended + trustee wouldn’t have acted as they did had they not failed to take account of relevant circs. But note Pitt v Holt [2011]
Duties and Powers of Trustees - Exercising Discretion
Pitt v Holt [2011] - Tax consequences case
- CA overturned HC decision letting a trustee decision to pay accident compensation into a settlement that had inheritance tax consequences to be unravelled.
- Held act of trustee only voidable if it amounts to a breach of fiduciary duty. Failure to consider tax
consequences didn’t amount to a breach of fiduciary duty. Rule being used too widely. Narrowed scope.
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position
General rule?
If he makes an unauthorised profit, he holds it on constructive trust for the beneficiaries.
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position
Keech v Sandford [1726] - Renewed Lease
- Trustee held a lease of profits of a market on trust for a child. Applied for renewal of lease for kid’s benefit before it expired. Landlord refused but offered renewal in trustee’s name. Trustee accepted
- Held T held the renewed lease on constructive trust for the kid. Obliged to transfer profits to the child.
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position
Boardman v Phipps [1967] - Solicitor Asset Stripping
- Ds solicitors to + beneficiaries under a trust. Trust had large no of shares in a private co. Using info from trust, took control of co by buying remainder of shares + sold off lots of its assets.
- V profitable so trust benefited a lot. D also benefited in regards to the shares they bought to take control.
- D did inform the beneficiaries + trustees of the take-over + asked if they objected but they got info on the co by purporting to act for the trust. Thus held liable to account for the profit they’d made. CT for trust.
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position
Regal Hastings v Gulliver [1967] Cinema Lease Acquisition
As a fiduciary, a director can’t make undisclosed personal profit from position + must account for any profit:
- Cinema being sold, acquiring 2 more leases to make more attractive, subsidiary (directors contributed to) formed to take a lease for other 2, then sold them + got a profit
- Held directors can’t use position to gain advantages through dealings w 3rd parties. Irrel in good faith
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position
Industrial Development Consultants v Cooley [1972] Gas Board - Resigned
- D MD of P. Tried to get contract w gas board for P. Failed but they offered it to him. Accepted + resigned
- P sought to make him account for profit, argued P couldn’t have benefited anyways. Rejected: CT for co
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position (Remuneration)
What is the self dealing rule?
Self-Dealing Rule: A trustee may not buy the trust property. If he does, transaction voidable by beneficiaries.
Duties and Powers of Trustees - Duty Not to Make an Unauthorised Profit from the Trustee’s Fiduciary Position (Remuneration)
Kane v Radley-Kane [1999] - Administratrix Widow
- Woman (administatrix of husband’s estate) bought from/sold to herself shares in satisfaction of statutory legacy she was entitled to on her H’s intestacy. Did it w/o other heirs’ consent.
- Held the appropriation of the shares breached the self-dealing rule: she held the shares on CT for his estate
