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25 Cards in this Set
- Front
- Back
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Bartlett V Barclays Bank |
It is the duty of a trustee to conduct business of the trust with the same care as an ordinary prudent man of business would extend towards his own affairs |
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Schedule 1 TA 2000 (exclusion of the duty of care) |
The duty of care does not apply if or in so far as it appears from the trust instrument that the duty is not meant to apply.
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Restrictions on the power of investment |
Duty of care-ss1 & 2 TA 2000, Schedule 1 General law; Speight v Gaunt, Bartlett v Barclays Bank and Nestle v National Westminster Bank Standard investment criteria-ss4,5 and 6 TA 2000 |
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S11 TA 2000 |
Power to employ agents |
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s23 TA 2000 |
Liability for agents, nominees and custodians |
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Agents |
someone who does something on your behalf |
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Principle |
Someone who gives instructions (fiduciary relationship) |
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Nominees |
Holding trustees (e.g. they hold shares in name only) |
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Custodians |
someone who guards assets (e.g. they hold money/objects) |
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Control of trustees: duties |
Fiduciary duties Duty to act unanimously-Luke v South Kensington Hotel Ltd Duty to exercise discretion properly-rule in Hastings-Bass |
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Luke v South Kensington Hotel Ltd (duty to act unanimously) |
Family trust and three trustees. One of the trust assets is a loan to a hotel. The hotel ran into financial difficulties and goes to the trustees wanting to accept a scheme of arrangement (where less debt has to be repayed to keep the business alive). Two of the trustees said yes, they would accept £5000 instead of £1000. The solicitor (third trustee) said no. The others signed the document but the court said without the third trustee's signature, the scheme of arrangement was void. |
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Re Hastings-Bass (Dec'd): duty to exercise discretion properly |
Case involved a guy who was left money by his father and great aunt. Advisors told him that if he died, he would have to pay lots of death duties. One of the ways to avoid this was to roll the two trusts into one. The problem was that they screwed this up due to the rule or perpetuities meaning it was no longer a valid trust. Guy died and his elder son wanted the money but the tax officer claimed that as the law of perpetuities was breached, the trustees had exceeded their powers. The court accepted the breach of the law but said this didn't mean they exceed their powers because the court looked to the motive (which was to act in a way which was best for the trust). They said the breaking of the law was inadvertent, if it had been deliberate then the trustees would have exceeded their powers. Also the son got the property free of death duties anyway because the trust was invalid due to the law of perpetuities so he held the property outright. This case led to a run of new cases where trustees essentially unfolded their bad decisions. |
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Buckley J in Hastings-Bass |
In our judgment, where a trustee is given discretion under which he acts in good faith, the court should not interfere notwithstanding that it does not have the full effect which he intended, unless what he has achieved is unauthorised by the power conferred upon him or it is clear that he would not have acted as he did, had he not taken into account considerations which he should not have taken into account or had he not failed to take into account considerations which he ought to have taken into account. (second part of this quote was obiter) |
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Mettoy Pension Fund Trustees Ltd v Evans (duty to exercise discretion properly.) |
Company which made metal toys went bust, When the company went bust a pension fund was in surplus. During the life of the company the pension fund had been varied on numerous occasions. On the second last amendment, the power had been given to the employers on what to do with the money. One of the ways the employees tried to get the power was to invalidate the change of the trust deed. They argued the trustees faield to consider relevant considerations (i.e. that the company was near liquidation) but the court said that the second rule in Hastings Bass was not in the ration and so the CA could overrule this. They said the rule had gone too far and that it was not enough to show there were considerations not considered but you also have to show that a different decision would have been reached. On the facts of the case, the judge was not convinced a different decision would have been made because he said the fact the company was near liquidation wasn't the deciding factor in making the decision. |
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Pitt v Holt/Futter v Futter |
This was a case of two trustees trying to minimise tax and getting it wrong. As a result the beneficiaries of both trusts ended up with a huge tax liability. The trustees both had professional advice. When the tax fix was discovered to be a tax wrong, there were two options: either the sue the lawyer or undo the mistake. The courts took into account policy concerns e.g. the lawyer getting off the hook if the allowed the mistake to be undone. In this case, the tax bill remained in Futter v Futter but in Pitt v Holt the scheme was so bad the couple could invoke the doctrine of mistake. |
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Breadner v Granville-Grossman (duty to exercise discretion properly) |
There must surely be some limits. It cannot be right that whenever trustees do something which they later regret and think that they ought not to ave done, they can say they never did in the first place. This was approved of in Pitt v Holt/Futter v Futter |
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Lord Walker in Pitt v Holt/Futter v Futter |
'It is not enough to show that the trustees deliberations have fallen short of the highest possible standards or that the court would, on a surrender of discretion by the trustees, have acted in a different way. Apart from exceptional circumstances only breach of fiduciary duty justified judicial intervention.' But this means only decision resulting in breach of fiduciary duty can be undone but if this happens the trustees can be sued for breach of fiduciary duty so what is the point? there are some positives-it means legal and beneficial owners are treated in the same way, lawyers are getting sued and you can use it as an out. |
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Sanders v Vautier (supervision by beneficiaries) |
Beneficiaries can bring a trust to an end and resettle it in order to instate new trustees. Case involved a trust from a grandfather fir a guy. There were shares in the East India Trading Company. Trust deed said that the trustees had to keep shares and income until the beneficiary turned 25. at 21 he asked the trustees if he could get the money and they said no. He took them to court and got rid of them. As he was the sole beneficiary and an adult, the deed of the trust authorised him to take the property at that age because it didn't explicitly say the trustees couldn't give it to him. |
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s19 Trusts of Land and Appointment of Trustees Act 1996 |
Appointment and retirement of trustee at instance of beneficiaries |
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Re Londonderry's Settlement (supervision by beneficiaries) |
Young 20 year old was an unsatisfied beneficiary in a discretionary trust. She got an amount from the trustees but didn't think it was enough. The trustees refused to tell her why they gave her the amount they did so she goes to court but they say she does not have a right to get reasons for a trustee decision. They said she was entitled to documents of the trust except those detailing decisions. The reason for this decision was that most trusts at the time were family trusts and the court was concerned that allowing beneficiaries the right to access reasons for decision made by the trustees would have a negative impact on family life (e.g. cause lots of arguments) |
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O'Rourke v Darbishire (supervision by beneficiaries) |
Court said trust documents are part of the property of the trust (which the beneficiaries own) but in this case the question was the availability of legal professional privilege so the court's ruling was very specific (and didn't talk more generally about when you could get access to trust property). 'The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access them.' |
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Schmidt v Rosewood (important case-supervision by beneficiaries). READ THIS CASE |
Court gets rid of notion that trust documents are property at all. Russian man was found naked and dead alone in his apartment. He doesn't leave a will and the son takes it upon himself to try and find his dad's assets. What the son manages to trace is his dad's asset to a company on the Isle of man which has acted as trustee for two trusts which contained 100 million dollars. But he is unable to find the beneficiaries. They were set up to avoid tax to the dad was only a discretionary beneficiary (not a fixed one). He writes to them to try and unravel the mess and asks for the documents of the trust. The trustee say no and so the son takes them to court. First question for the court was whether trust documents are actually property. They said no. At best the beneficiary has a right to ask the court to use the inherent jurisdiction to administer the trust to help out. Is this a good decision? How are we meant to know if something is going wrong with the trust? Also how do trustees know if they should be handing over trust documents when a beneficiary asks for it (do they have to go to court every time a beneficiary asks for a document?) The court didn't give a lot of guidance. Is this giving trustees a lot of protection? Especially consider the change in the type of trust now used (from family to commercial trusts). |
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Armitage v Nurse (limiting liability) |
court said you can exclude liability for everything but there are some core duties without those it is not a trust and they are the obligation to distribute the assets in good faith and with honesty. This case gives a general rule saying you can exclude everything unless you are dishonest. Law Commission originally said professional trustees shouldn't be able to exclude liability but this was changed due to lobbying. |
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Millet J in Armitage v Nurse (limiting liability) |
'There is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of a trust...the duty of the trustees to perform the trusts honestly and in good faith for the benefit of the beneficiaries is the minimum necessary to give substance to the trusts.' |
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Walker v Stones (limiting liability) |
the word 'honest' at first sight points exclusively to a state of mind. But, as the Twinsectra case illustrates its scope cannot be so limited. A person may in some cases act dishonestly to the ordinary use of language, even though he genuinely believes that his action is morally justified. 'The clause in the trust deed would not exempt the trustees from liability for breaches of trust, even if committed in the genuine belief that the course taken by them was in the interests of the beneficiaries. if such belief was so unreasonable that no reasonable solicitor-trustee could have held that belief. |
