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Flashcards in Trustee Duties, Beneficiary Rights Deck (30):
1

For Trustee Appointment, who can remove/appoint?

S36 Trustee Act 1925
• Anyone nominated in trust instrument as able to; or
• If nobody is nominated, then any existing trustee/representative

S41 Trustee Act 1925
• The court can do so against existing trustees
[Re Tempest]
[Re Somerset]
[Re Henderson]

2

For Trustee Appointment, when can remove/appoint?

S36(1) Trustee Act 1925
• Where trustee is dead; out of UK for ≥12 months; or wants or needs to be discharged as trustee

S36(6) TA 1925
• Additional trustee(s) may be appointed if there are no more than 3 existing trustees

3

For Trustee Appointment, how to remove/appoint?

S36 Trustee Act 1925
• By writing

4

Re Tempest (1866)

[IF TRUSTEES CANNOT AGREE ON WHO TO APPOINT, COURT CAN DO IT INSTEAD]

[If existing trustee refuses to cooperate with new court-appointed trustee, can be ground for removing existing trustee]

5

Re Somerset [1887]

[WHERE TRUSTEES CANNOT PRACTICALLY APPOINT NEW TRUSTEES, COURT CAN DO IT INSTEAD]

Facts:
• Trustees were separated married couple living at opposite ends of the world

6

Re Henderson [1940]

Rules for S41 TA 1925 (Removal/Appointment of Trustee by Court)?

1) Is there a breach of trust or is the trustee in a position of conflict?

2) Is there a dispute of fact?
• Usually not if T is bankrupt; criminally convicted; resides permanently abroad; or is mentally incapable
• Even if yes, Bs can bring proceedings alleging breach of trust and also for s41 order

7

For Trustee Appointment, when is it 'expedient' to remove/replace a trustee?

Serious Deciders:
1) Mentally incapable
[Re Lemann's Trust (1883)]

2) T poses a danger to trust property
[Re Wrightson [1908]]

Factors:
1) Hostility between Ts and Bs
+ TS' DISHONESTY in acts/omissions
[Letterstedt v Broers (1884)]

2) Hostility between Ts
[Scott v Scott [2012]]

3) T's interests are in conflict with trust and thus TRUST CANNOT FUNCTION because T has to choose between trust and private interests
[Public Trustee v Cooper [2001]]

8

Re Lemann's Trust (1883)

[INCAPABLE OF EXECUTING DOCUMENTS = GROUND FOR REMOVAL]

'through old age and consequent bodily and mental infirmity'

9

Re Wrightson [1908]

[T'S CONTINUING OFFICE IS A THREAT TO TRUST PROPERTY = GROUND FOR REMOVAL]

Obiter:
• Court may be reluctant to remove trustees because of the admin expense in doing so (so more reluctant for smaller trusts)

10

Letterstedt v Broers (1884)

[TS' DISHONESTY > HOSTILITY BETWEEN BS AND TS AS GROUND FOR REMOVAL]

Main guide of court in removing any trustee must be 'the welfare of the beneficiaries'

11

Rafferty v Philp [2011]

[TS' MISTAKES NEED NOT ALWAYS MEAN REMOVAL]

Facts:
• Trustee wrongfully assumed she was beneficially entitled to trust property

Held:
• Was not removed after court pointed out her error

12

Do beneficiaries always have the right to see trust documents?

Up to trustee's discretion
[Breakspear v Ackland [2009]]

13

Breakspear v Ackland [2009]

[UP TO Ts' DISCRETION WHETHER TO DISCLOSE TRUST DOCUMENTS]

Facts:
• S set up discretionary trust for himself and children
• By a non-binding 'wish letter', S listed matters for Ts to consider when distributing trust
• 3 of the beneficiaries asked for disclosure of the letter so as to evaluate their future expectations under the trust

Held:
• Request for disclosure allowed
• Court + Trustees should approach requests for disclosure as an exercise of discretion rather than the adjudication upon a proprietary right of Bs to see trust documents

• BUT even though disclosure could mean family division, the need to give the Bs proper opportunity to ask the court to sanction a scheme of distribution of the trust fund was more important

14

What is the Trustee's Duty of Care to comply with terms of trust deed?

S1 Trustee Act 2000
• T generally required to display no more diligence than a person of ordinary prudence would exercise in own private affairs (Sch 1: In investments + land acquisition)
[Speight v Gaunt (1883): OBJECTIVE test against prudent bizman]
[Re Whiteley (1886)]
[Cowan v Scargill [1984]]

"Perhaps the most important duty of a trustee is to obey the terms of the trust"
[Young Pty v Minter Ellison Morris Flecture (Australia)]

15

For investments, what can a trustee invest in?

S5 Trustee Act 2000:
• Trustee should take advice from someone who can give proper advice before investing, unless really unable to

Have a diverse portfolio
[Nestle v National Westminster Bank [1988]]
[Learoyd v Whiteley (1887)]

Maximise financial returns
[Brynes v Kendle]

16

For investments, how much can a trustee invest?

S4 Trustee Act 2000
• Have regard to 'standard investment criteria' or 'suitability to the trust' and 'diversification of investments

• If real estate on trust, T to consider selling it now and then
[Jeffrey v Gretton]

17

For investments, must a trustee pay heed to the social/ethical preferences of beneficiaries?

Not really, can focus on doing the best for beneficiaries' financial interests

[Cowan v Scargill [1984]: Breach of Ts' duty to not invest because of personal morals unless T can show makes no difference]
[Martin v City of Edinburgh District Council (1988)]

18

Mettoy Pension Trustees v Evans

[TRUSTEE'S DUTY TO SELECT WHO AND HOW MUCH TO RECEIVE; Bs DON'T HAVE INTEREST IN PROPERTY UNTIL SHARE IS ALLOCATED TO Bs]
(Warner J)

19

Nestle v National Westminster Bank [1988]

[Ts' ACTIONS CAN'T BE JUDGED IN HINDSIGHT = NO BREACH OF TRUST]
[INVESTING: ACT AS PRUDENT PERSON]

Held:
• At the time, equities were regarded to be risky

20

Learoyd v Whiteley (1887)

[GENERALLY, LAW REQUIRES TRUSTEES TO EXERCISE 'NO HIGHER DEGREE OF DILIGENCE' THAN 'A MAN OF ORDINARY PRUDENCE']

[TRUSTEES MUST BE CONFINED TO INVESTMENTS PERMITTED BY THE TRUST AND MUST AVOID ALL INVESTMENTS 'ATTENDED WITH HAZARD']

21

Bartlett v Barclays Bank

[T HAS DUTY TO OVERSEE ACTIVITIES OF A COMPANY BOARD THAT TRUST HAS 99.8% OF SHARES IN]
[Affirmed Speight v Gaunt]

22

Gregson v HAE Trustees

[INVESTMENT: T MIGHT DECIDE AGAINST DIVERSIFICATION IF S ORDERS RETENTION OF SOME ASSETS]

23

Jeffrey v Gretton

[IF REAL ESTATE ON TRUST, S4 TA REQUIRES T TO CONSIDER WHETHER PROPERTY TO BE SOLD FROM TIME TO TIME]

24

Brynes v Kendle

[Ts HAVE DUTY TO MAXIMISE FINANCIAL RETURNS]

Held:
• If property is business assets, should be employed in business
• If property is lettable land, should be let for rent

25

When investing in property, what are Ts' duties?

1. Ts must get best possible price for Bs
[Downes v Graysbook]

2. In selling, Ts must secure proper competition for property to get best price
[Harper v Hayes]
despite their own values
[Buttle v Saunders: Must accept higher bid, even if Ts accepted earlier bid and feel morally bad, to benefit B]
that benefits ALL Bs equally
[Ord v Noel]

3. Ts must rent property
[Brynes v Kendle]
or consider selling
[Jeffrey v Gretton]

26

When giving loans, what are Ts' duties?

Ts must secure commercial rate of interest
[Baxendale-Walker v Middleton]

27

Harries v Church Commissioners

[CAN EXCLUDE CERTAIN INVESTMENT TYPES FOR CHARITABLE TRUSTS UNDER 2 CONDITIONS]

1. Potential investee runs directly contrary to the purpose of the charity

2. Potential investee will likely reduce the amount of donations to the charity

28

Armitage v Nurse

[Ts MUST INFORM Bs ABOUT THE TRUST AND SUPPLY WITH TRUST INFO; IRREDUCIBLE CORE OBLIGATION]

For a trust to be valid and meaningful, Bs must have info about the trust to hold Ts to account.

29

Re Londonderry's Settlement

[TRUST INFO THAT DOESN'T NEED TO BE SUPPLIED: EXPLANATION FOR Ts' EXERCISE OF POWERS; AND CONFIDENTIAL LETTERS OF WISHES]

BUT if Ts do explain unreasonably/irrationally, they may be held to account for it.

30

Schmidt v Rosewood Trust

[WHERE LETTER OF WISHES INCLUDES INFO ON WHICH Bs CAN BE INCLUDED, MUST BE DISCLOSED TO Bs]

Where there is wide power of appointment to add new beneficiaries, not all new potential Bs would be suitable to monitor Ts' activities.