Trust Law Trustee Powers And Duties Notes

TRUSTEE APPOINTMENT, REMOVAL AND DUTIES ➢ The leading legislation is the trustee act but must look to express trust itself first - the duties and powers contained in the deed are the absolute starting point, and the act is the default where no provision has been made or is missing WHAT IS A FIDUCIARY • Trustee relationship to beneficiary is fiduciaryMust act in the sole interest Bristol and West Building Society v Mothew 1998 Ch 1 at p.18Someone who has undertaken to act for or on behalf of another…in circumstances which give rise to a relationship of trust and confidenceThe distinguishing obligation is loyaltyThe principal is entitled to the single-minded loyalty of his fiduciary The facets of such a duty: a. Must act in good faith b. Must not make a profit out of his trust c. Must not place himself in a position where his duty and his interest may conflict d. May not act for his own benefit or the benefit of a third person without the informed consent of his principalNot exhaustive, but the 'defining characteristics of the fiduciary' APPOINTMENTTrust will never fail for want of a trustee CEASING TO BE A TRUSTEE A. DISCLAIMERAt commencement by deed or conduct Cunningham v Cunningham A was appointed trustee by a will but never expressly accepted the position. The subject matter was the rents of a plantation in Scotland. A acted as the agent for the plantation and received the rents in doing so as they came inBy receiving the rents, A accepted position as trusteeCan be impliedDoes not require positive action - idle action w/out positive action to the contrary which would indicate repudiation of trustee position will amount to acceptance B. RETIREMENT ➢ Can be by express clause ➢ Consent of beneficiaries TRUSTEE ACT 1983 S 11 1. Where there are more than two trustees If one of the by deed desires to be discharged and the co-trustees and any other person that is empowered to appoint trustees: consent to the discharge and to the vesting in the cotrustees of the trust propertyShall be discharged and deemed to have retired. Unless contrary provision in instrument C. REMOVAL Either by: a. Express clause in the deed setting out circumstances for removal b. Inherent jurisdiction of the court General principleThis jurisdiction should be exercised if the welfare of the beneficiaries so demand Spencer v Kinsella [1996] 2 ILRM 401Primary consideration will always be the welfare of the beneficiaries Will be exercised when: Arnott v Arnott [1924] 58 ILTR 145Act dishonestly, incompetently or are seen to be wilfully obstructing the administration of the trust Kirby v Barden High Court Caroll J 12 March 1999Where there is conflict of interest between the trustee's personal interests and the interests of the trust MK v JB unrep High Court 26 February 1999The court will refuse to remove a trustee where the applicant is merely dissatisfied with how a sale is being conductedWill only grant removal where it can be shown that the sale would be contrary to the welfare of the Bs D. SUBSTITUTION TRUSTEE ACT 1983 S 25Inherent power of the court to appoint a trustee S 10Where a trustee is dead, remains out of the UK for more than a year or desires to be discharged from all or any of the trusts or powers reposed in or conferred on him or Refuses/ is unfit to act Incapable of action Another person can be appointed - various people can appoint under s 10 or court under 25 - default is that the last surviving trustee or personal representative will take over OR if there is a nominated person in the trust deed then they will RIGHTS OF BENEFICIARIES • The rights of beneficiaries are often considered through the lens of the duties owed. Fixed trust Saunders v Vautier [1841] 4 Beav 115Where the beneficiaries are sui juris and are entitled to the entire beneficial interest absolutely, they may demand a transfer of the trust property to them, bringing the trust to an end Discretionary Distribution is mandatory within a reasonable time - trustees discretion limited to choice of recipients and shares of TP each gets. Re Smith 1928 Ch 915A beneficiary's rights under a discretionary trust are no more than an assignable or transmissible interest akin to that of the object of a mere power - DUTIES GENERAL: ➢ Acquaintance with trust terms and ensure they understand the nature of their powers, rights and duties as well as the scope of their discretion and their limitations by having to apply to court ➢ Inspect documents ➢ Must ensure that the property is vested ➢ Investigate previous breaches to avoid being held liable for a former trustee's malafides conduct or negligence - If these transpire to result in loss to the trust - contemporary trustee will be held personally liable :O 1. TRUSTEES MAY NOT PROFIT FROM THEIR TRUST • • Cannot make unauthorised profits due to their duty of care and duty of loyalty This can arise in relation to profiting from the trust itself or acquiring trust property or trust opportunities. Rationale? Armstrong v Armstrong [1880] 7 LR Ir 207 218A trustee, so making a commodity of his position and gaining a profit which but for it (his position) he would not have secured, must be held, on general principles and for the safety of cestuis que trusts , to retain that benefit for the benefit of the trust estate.Implies that there is a mitigatory defence if he can prove that he acquired it while trustee but did not secure it because of or by way of that position. The effect? Gabbett v Lawder [1883] 11 LR Ir 295Any such profit made will be held upon constructive trust for the beneficiaries The fundamental position: - 'no person in a fiduciary capacity shall be allowed to retain any advantage gained by him in his character as a trustee' Moore v M'Glynn [1894] 1 IR 74 Testamentary trust left a grocery business to brother as trustee. Trustee applied to become the new postmaster and upon succeeding, continued the post office inside the grocery store for a few years. He then moved it to a new competing business down the road. Can he keep the salary?He earned the job based on merit - not automatically deceptive/ unauthorised/ conflict.Won't be guilty for breach of trust for setting themselves up in a similar line of business 'provided that he does not resort to deception, or solicitation of custom from the person dealing with the old shop.'Removed for potential of conflict of interest in futureA potential beneficiary under a discretionary trust is entitled to copies of the trust accounts and to details of the investments representing the trust funds Keech v Sanford [1726] Sel Cas Ch 613 Market lease was held by the trustee on trust for an infant. Trustee applied for its renewal. The lessor refused to renew it in favour for the beneficiary due to lack of capacity as they were an infant. Trustee took the lease off the market for his own benefit - in his own personal capacity.The trustee still held that on trust for the beneficiary. The institutional CT arose from the circumstances WhyThe trustee who is a fiduciary cannot exploit the trust for their own gain'the trustee should rather have let the lease run out, than to have had it to himself.'It may seem hard that the trustee is the only person of all mankind who might not have the lease, but it is very proper that rules should be strictly pursued Otherwise trustees could just refuse to renew leases and take them for themselves - flood gates argument. Regal Hastings v Gulliver 1942 2 All ER 378 Directors of a cinema company provided the extra share money needed to complete a deal which was very beneficial for the companyProceeds were held on constructive trust for the company even though they were acting bona fides Advantage that the company otherwise would be interested in but was unable to take that advantageThey made the profits 'by reason of the fact that they were directors…and in the course of the execution of that office' Exceptions?If the profit is authorised. Boardman v Phipps [1967] 2 AC 46 Two defendants: 1. Boardman - the solicitor of the Phipps family trust who was acted for the trustees 2. Tom Phipps - a beneficiary The trust held a significant holding of shares in a private company which was ailing. Boardman and Phipps decided that, with new and effective management of the company - significant profits could be generated for shareholders. They sought informed consent from two co-trustees - Boardman and Phipps as proxy holders the trust shares, tried to get Phipps elected to the board. They failed. They then attempted to negotiate a splitting up of the business between the Phipps holding and the other major bloc of shareholders. The two active trustees made it clear that they would not buy any more shares for the trust. Finally, with their own money, B & P - solicitor for the trustees, and beneficiary bought enough shares to enable them to obtain control over the company. They were now in a position to sell certain company assets, pay out large dividends and simultaneously maintained a high share price - in effect, they assumed the role of effective management which they anticipated would generate significant profits. Tom's Brother - another beneficiary - John > then sued Boardman and Phipps and called on them to account for the profits earned on the shares they'd purchased. Contended that the profits earned were acquired via their fiduciary position and in conflict with the trust. The issue however, was the boardman was not a trustee - no conflict of solicitor with a trust amounts to the same fiduciary breach - was not a fiduciary to John the beneficiary. He was only a fiduciary to the trustees.Boardman found liable Lord Guest'the knowledge and information obtained by Mr Boardman was obtained in the course of the fiduciary position in which he had placed himself. The only defence available to a person in such a fiduciary position is that he made the profits with the knowledge and assent of the trustees.'Because the info was acquired via the dealing with the trust - he was a fiduciary 'to the trust' broadly - not to a particular beneficiary.Thus, just as beneficiaries must authorise profits that trustees make, trustees must authorise profits that solicitor's make if they got the info via the trust. Commented [ki1]: https://books.google.ie/books?id=xlBjB AAAQBAJ&pg=PA471&lpg=PA471&dq=bryan+boardman+v+ phipps+doing+equity+inequitably&source=bl&ots=YyGBN6T g5m&sig=ACfU3U0pOBpaZpm8YXveYWMVmCbe_cjiWw&hl= en&sa=X&ved=2ahUKEwjJseHcpOroAhWZSBUIHTmyCuIQ6A EwBHoECAwQMw#v=onepage&q=%20boardman%20v%20p hipps&f=false It was found (perhaps erroneously) that Boardman was liable to the beneficiaries, even though the duty was owed to the trustees because that is who he was required to get consent off. Lord HodsonSimply, any profit obtained by a fiduciary made possible by his fiduciary position was to be accounted for unless consented to - by the complaining beneficiaryApplied Keech on the basis that the beneficiary there could not have acquired the disputed assets himself and it was irrelevant that the trustees decided not to buy sharesNot strict fiduciary but by acting as one and assuming the close relationship they were purporting to be one basically - they stepped in and took control when they went in for second negotiations and acquired a significant volume of informationAbsolute rule Could've gotten consent from courtMust get consent of all parties and give full disclosure before doing this. Lord Cohen Slightly different approach - didn't wholly rely on Keech (that the profits were only possible by the conduct of the fiduciary and that the beneficiary in any other event would not have had access to them). Instead he relied on conflict of interest arising from the information'Mr Boardman would not have been able to give unprejudiced advice if he had been consulted by the trustees and was at the same time negotiating for the purchase of the shares on behalf of himself and Mr Tom Phipps. In other words, there was….a conflict between his interest and his duty.'The fact an agent acquires info and opportunities acting in fiduciary capacity doesn't automatically mean he is accountable for profits as a result of making use of that information'liability to account must depend on the facts of the case.'Given his personal intention to acquire the shares, counselling the trust to acquire the rest of them would conflict with his own interests Conjunction of an intention to acquire a personal interest over property that the trust is concerned with - conflict of interest and any interest acquired then held on CT Guinness v Saunders [1990] 2 AC 663Reasonable remuneration for services i.e. quantum meruit can only be made 'where it cannot have the effect of encouraging trustees in any way to put themselves in a position where their interests' conflict with their duties as trustees.'

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