Trust Administration, Investment And Delegation

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Duty to obey the trustEavesv Hickson (1861)

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Strict duty. Trustees induced to pay out fromtrust to unentitled parties because of convincing fraud. The trustees made tohandle the costs.

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TrusteeAct 1925, s 61

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Gives power to exonerate trustee who has breached trust (honestand reasonable, excused from personal liability)

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Duty of careSpeightv Gaunt (1883)

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Trustee wasn’t liable because he handed it to broker and thebroker breached trust. Duty of care for the trustee. Set the standard of careby “ordinary prudent man”

- formulation changed

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Learoyd v Whiteley

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Theduty of a trustee is not to take such care only as a prudent man would take ifhe had only himself to consider; the duty rather is to take such care as anordinary prudent man would take if he were minded to make an investment for thebenefit of other people for whom he felt morally bound to provide.

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TrusteeAct 2000, ss 1, 2, sch 1uty ratjӷ

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statutory standard of care, must exercise such care and skillas is reasonable in the circumstances chj.귿

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Bartlettv Barclays Bank Trust Co Ltd

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Loss of half a million pounds lack of supervision of shares intrust. Breach of duty and equitable compensation was ordered. It is very likecommon law damages. Putting back in the position. Equitable compensation a lot more favourable to beneficiary an invj߷

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Gregson v HAE Trustees ,jo%8

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beneficiary claimed trust acted inbreach of duty of care failing to diversity investment in trust, trust assetsnow worthless. Trust company has no assets of its own for compensation.Rejected to make the company directors pay out the money themselves. Because itwould circumvent rules, directors have no direct duty jݷ

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SinclairInvestments v Versailles Trade Finance Ltd

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exceptionsunless they directly take duty for directors. Courts will not want to piercethe corporate veil.

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Re Mulligan

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Shows trustees failing astoundingly to strike right balancebetween different beneficiaries. Partly because one of the trustees was one ofthe beneficiaries. The widow and the trust company made investments, whichmeant the capital value decreased. She ensured that the trust was managed in away that gave her the greatest income. Other beneficiaries sued her estate andthe trust company. Breached duty to act impartially and there were reliable. )j4

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TrusteeAct 2000, ss 3-8gment--jз

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section8 clarifies that any powers that are given by section 3 are in addition to thepowers that are given to the trustee but they should be read in light ofrestrictions imposed by trust instrument – can be varied. Modern approach –flexible and generous view by courts, giving them powers to invest. Investmentscan be made in any part of assets.

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Nestlév National Westminster Bank plc jҷ

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‘No testator, in the light of this example, would choose thisbank for the effective management of his investment. But the bank's engagement was as a trustee,and as such, it is to be judged not so much by success as by absence of provendefault.’Grandfather leaves alot of money for family. Granddaughter absolutely entitled to trust property.Starts out worth 50 thousand parts, increases to 270 thousand. Trustees haven’tbeen that wise. Should been about 100 thousand. Some money for income and trustexpenses, but trustees had invested very badly. Trustees had behaved belowappropriate standard, failed to review the trust investment. 1922 and 1959 onlyone change made to portfolio. Not enough just to show below standard care and thusmade decisions that no reasonable trustee would’ve made. Couldn’t make out acausal linkHard to show link.Best way is to show a mistake investment rather than just carelessness somisapplication of trust fund.“don’t put all eggs in one baskets”. In large trust fund,high risk investment, high risk return. jl

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dutyof review and diversification. hansi-tj5

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section 4

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dutyfor professional financial advice if they have no expertise. j0

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section 5

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Buttle v Saunders xxjԷ

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Cannot take moral, personal or political feelings into account.Is a trustee is selling property and someone comes along with a higher offer,trustees have a duty to gazump the purchaser even if this is contrary to theirmoral beliefs. j(췿

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Harries v ChurchCommissioners

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trustees should seek 'max return, whether by income or capitalgrowth, which is consistent with commercial prudence.' Significant. Concernedinvestments of charitable trust, wanted trust to place ethical above financial.Only entitled if they can do so without jeopardising the financial claim. xxjԷ

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Cowanv Scargillj+ѷ

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KEY CASE – Confirms financial best interests that matter.Pension fund of the members of the national union of miners. Administrated by10 trustees 5 of whom were appointed by the union and 5 by the coal board(employer). The miner trustees were refusing to adopt annual investmentproperty unless it prohibited overseas investment, opportune withdrawal for existingoverseas investment, prohibited investment in other competing energy industry. Thesechanges wouldn’t bring the best financial return. So therefore, they would bein breach. )j4

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Armitage v Nurse )J#"

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· Exemptionclause was valid to relieve the trustee of any loss caused by their negligence· Inclusionof exclusion clause didnt fundamentally undermine nature of trusteerelationship/concept of the trust

'Theduty of the trustees to perform the trusts honestly and in good faith for thebenefit of the beneficiaries is the minimum necessary to give substance to thetrust, but in my opinion it is sufficient.’

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Walker v StonescjԷ

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solicitor trusteedeliberately acted in breach of trust. It was not done in a way that wasreasonably though to benefit beneficiaries. The court said that no reasonabletrustee was in the best interest of the beneficiary. jַ

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Exclusion clause v ouster clause

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Exclusion clause specifically excludetrustees from liability from a breach of trustOusting a duty in the first place,removing a duty altogetherEx: if a duty but if you breach it youwont be liableOu: no duty to take care in the firstplace If there still is a duty, the personal wontbe personally liable but the beneficiary can take other actions e.g. removal oftrustee, stopping future breachOusted all together: nothing for thetrustee to breach so beneficiaries will have no ‘comeback’ at all j

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Speight v Gaunt

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employing investment broker to purchase investments on behalfof trust – reasonable prudent man would do, so not a bad delegation

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Learoyd v Whiteley

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trustees held liable for breach of duty of care, but land over which theyhad a mortgage was insufficient security. Fine to rely on valuation given byvaluer but still exercise their own brain if a mortgage was suitable out of thetrust fund. Didn’t use their own skill so they were liable

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Fry v Tapson

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Trustees who were deciding to buya house in Liverpool with trust assets. Delegated to a surveyor. The ordinaryprudent man of business would’ve done that. But foolishly got a surveyor from London.Liable for losses. No appropriate care and skill in this surveyor. They had to exercisegeneral supervision