3): Trustees' Duties, Powers and Liability Flashcards
(18 cards)
Who can be appointed as a trustee?
Appointed by trust instrument, will, or statutory powers
Must be adult of sound mind or a trust corporation
Trusts of land: 2–4 human trustees or a trust corporation
s.36(6) TA 1925: add trustees (max 4)
s.41 TA 1925: court can appoint if others can’t
s.19 TLATA 1996: beneficiaries (if all adult & absolutely entitled) may appoint
When and how can trustees be removed or replaced?
Trust instrument
s.36(1) TA 1925: e.g. death, retirement, incapacity
s.41 TA 1925: court can act where impractical
s.19 TLATA 1996: beneficiaries can remove & appoint
Court may intervene for beneficiary welfare
When can trustees retire?
Express power in trust
s.39(1) TA 1925: trustee retires if ≥2 remain
s.19 TLATA 1996: beneficiaries can direct retirement
What are trustees’ duties on appointment?
Review trust docs
Confirm valid trustee chain
Identify beneficiaries
Transfer legal title to current trustees
What are trustees’ duties during the trust’s lifetime?
Run trust prudently and fairly
Act jointly (unanimous decisions)
Supervise co-trustees
Exercise powers rationally, in good faith
What investment powers do trustees have under Trustee Act 2000?
Broad investment powers unless excluded by the trust instrument
Must consider:
-Suitability
-Diversification
-Proper advice (unless unnecessary)
What must trustees consider when investing?
Ethical investments: must not compromise returns
Must balance life tenants vs remaindermen
Can appoint agents for management
What is the statutory power of maintenance under s.31 Trustee Act 1925?
Trustees may use income for under-18 beneficiaries
Discretionary unless beneficiary turns 18
Payments usually made to guardian/school
Not available where prior income interest exists
What is the statutory power of advancement under s.32 Trustee Act 1925?
Trustees may advance capital before vesting
Post-2014 trusts: 100%
Pre-2014 trusts: 50%
Must benefit beneficiary and deduct from final share
Consent needed if prior interest exists
When is a trustee liable for breach of trust?
Own acts or omissions
Post-retirement breaches during their term
Co-trustees’ breaches if they enabled or ignored them
Joint and several liability applies
What are some examples of breach of trust?
Bad investments
Misapplying funds
Paying wrong party
Improper delegation
Failure to get advice
What does the Civil Liability (Contribution) Act 1978 allow trustees to do?
Seek court apportionment of liability between trustees based on what is just and equitable.
What must be proven for breach liability?
Breach + resulting loss
But-for test
Remedy: restore trust fund or account for profit
What are three remedies a trustee may face for breach?
Restore loss
Account for unauthorised profit
Cannot offset loss with unrelated profits
When may a beneficiary be barred from suing for breach?
If they:
-Instigated
-Requested
-Consented to
-Concurred in the breach
What statutory protections exist for trustees?
s.62 TA 1925: Court can impound beneficiary’s share
s.61 TA 1925: Relief if trustee acted honestly, reasonably, and ought fairly to be excused
Exclusion clauses may limit liability but not for fraud or dishonesty
What is the role of exoneration clauses?
Limit trustee’s liability under the trust instrument
Cannot exclude liability for fraud or intentional wrongdoing
Limitation periods for breach of trust
General: 6 years from breach (s.21(3) LA 1980)
For postponed interests: runs from vesting
For minors: runs from 18 (s.28 LA 1980)
