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Trust administration (Investment and Delegation)

kazzasingh's version from 2018-05-02 10:51


Question Answer
Speight v Gaunt (1883)Duty of Care (the general standard) --> Trustees may not delegate their decision making to others. HOWEVER, their Lordships accepted that it was reasonable for a trustee to employ a stockbroker to make investments as directed by the trustee. Hence, the delegation of mere ministerial acts is permitted, to the extent that such delegation is prudent.
Trustee Act 2000 s1(1)The duty of care applies to a trustee “exercising the general power of investment or a power of investment”; exercising section 19 of the Trustee Act 1925 insurance powers; and exercising investment duties, land acquisition powers, powers to appoint an agent/nominee/custodian, duties to review such agent/nominee/custodian BUT “The duty of care does not apply to powers conferred by a trust instrument if or in so far as it appears from the trust instrument that the duty is not meant to apply.”
Richards v Wood [2014] The Court of Appeal has confirmed that the 2000 Act has not ‘materially altered’ the ordinary trustee standard of care as set out in the Speight case
Trustee Act 1925Authorizes trustees to employ agents to ‘transact any business or do any act required to be transacted or done in the execution of the trust’ and relieved trustees of liability for the defaults of such agent employed in good faith.

Trustee Investments

Question Answer
Trustee Act 2000 s8Investment in land
Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980]Investment in limited companies
Nestle v National Westminster Bank plc [1993]Care in investment
Re Harari’s ST [1949]Express Provision in the Trust Instrument
Nestle v National Westminster Bank plc (1996)Duty to Act Impartially --> Fairness need not import “equality” (per Hoffmann J).


Question Answer
Re Pilkington’s WT [1964]The Personal Service ‘Rule’
Fry v Tapson (1884)Choice of Agent
Speight v Gaunt (1883)Supervision of Agent
Trustee Act 2000 part IVCollective delegation
Trustee Delegation Act 1999Individual delegation
Section 19The only persons permitted to act as nominees or custodians to trusts are corporations controlled by trustees, corporations recognized under the Administration of Justice Act 1985, and persons whose business including acting as a nominee or custodian.

The duty to exercise a sound discretion --> when the duty is qualified by express words

Question Answer
Bishop v Boham‘As the trustees think fit’ --> this means ‘within the limits of the duty of reasonable care imposed by the general law – no more, no less.’
Gisborne v Gisborn‘Absolute and uncontrollable discretion’ --> ‘uncontrolled authority’
The rule in Hastings-BassA trustees’ decision, even if it was based on unsound reasoning, should not be reviewed by the courts or sent back to the trustees for reconsideration if, were the trustees to reconsider the issue on a sound basis, they might simply confirm their original decision. The rule promotes practical certainty and gives trustees confidence to make decisions without fear of constant challenge.
Futter v. HMRC Commissioners; Pitt v. HMRC CommissionersIf the trustee has in accordance with his duty identified the relevant considerations and used all proper care and diligence in obtaining the relevant information and advice relating to those considerations, the trustee can be in no breach of duty and its decision cannot be impugned merely because in fact that information turns out to be partial or incorrect.


Question Answer
Mallott v. WilsonWhere the trustee disclaimed the trust ‘as soon as he heard of it’ and the trust property was never transferred to him, the judge decided that the trust had been valid until it was disclaimed. It could therefore take effect with a new trustee.
The Trustee Act 1925Whenever a trustee dies, remains out of the UK for more than 12 months, desires to be discharged, refuses to act, is unfit to act, or is incapable of acting, replacement trustees may be appointed by writing.
Trustee Act 1925 s41Authorizes the court to appoint a new trustee with, or without, replacing the existing trustees.
Re May’s Will TrustsA trustee was trapped in a territory occupied by the Germans during WW2, but the existing trustees had no authority to replace her under s.36 because she was not deemed to be ‘incapable’ in the s.36 sense. It was therefore inexpedient to appoint a replacement trustee without the court’s assistance. A factor that the court will consider when appointing a trustee under section 41 is the intentions of the settlor. The court is careful to appoint not to appoint a trustee who is supported by some of the beneficiaries but opposed by others.
Re BrogdenThis case illustrates the potentially devastating personal liability that may befall a new trustee who fails to bring the trust property under his control.

Removal of Trustees

Question Answer
Trustee Act 1925 s36Trustees may be removed from office against their will. They may be removed under a power contained in a trust instrument, in which event, they may be replaced under s.36 of the Trustee Act 1925 as if they had died.
Trustee Act 1925A trustee may retire whenever the trust instrument entitles him to do so, or, as a last resort, whenever the court approves an application for retirement. He can be forced to retire by the beneficiaries of the trust (written declaration)
  Otherwise, a trustee may only retire by: s36 – at least one new trustee be appointed in the place of the retiring trustee. s39 – a trustee who retired is not replaced. The trustee must, by deed, express his intention to retire. The trustee must obtain the consent of the other trustees and any person who is empowered to appoint new trustees. Such consent must be given by a deed/must approve of the retirement/must approve of the vesting of the property in the remaining trustees alone