Office Of Trustee - Irish Equity

The Office of Trustee

Appointment of trustees

• Named in the instrument or court appointed.

Retirement of trustees

• Quite difficult to retire – disclaiming at start is easier.

• Trust instrument may provide for a trustee retiring.

• They may also retire if they have the permission of all beneficiaries, provided they are of full age and capacity and between them entitled to the entire beneficial interest

• s. 11 1893 Act – Along as there will be at least 2 trustees left, a trustee may by deed retire with the consent of his co-trustees.

• s. 25 1893 Act – An application to the court may be made to retire, but it is unlikely to be accepted.

• LRC Report

  • 2- 141: Trustees should not be allowed to retire unless at least two trustees remain.

Removal of trustees

• Arnott v Arnott

  • The court has inherent jurisdiction to remove trustees where they act dishonestly or incompetently or where their conduct is deliberately obstructive.

• Moore v McGlynn

  • The defendant set up a business which competed with one in respect of which he held the benefit for his brother's family.

  • Held that, it would be improper for the brother to continue in a position where his personal interests and his duty to the beneficiaries might conflict.

• Spencer v Kinsella (HC)

  • Land was to be held on trust for clubs and organisations to use as a sports field etc.

  • The trust instrument provided that the land could be used for grazing in order to raise income but that this was not to interfere with the primary purpose set out above.

  • The plaintiffs sought the removal of trustees on the basis that they allowed the land to be damaged through grazing and refused to act when called upon.

  • Held that, in order to determine whether a trustee should be removed from their position it must be determined whether their continuation in that position would be detrimental to the welfare of the benficiaries.

  • As these problems arise from a conflict of interests on the part of the trustees which is detrimental to the welfare of the beneficiaries, they should step down.

  • However an order will not be made until the parties have had six months to try and sort out the matter.

Duties of a trustee

Investment

• Re O'Connor (CA)

  • However unlimited the power of investment in the trust instrument, the trustee remains subject to the jurisdiction of the court – they have no power to act dishonestly, negligently or in breach of trust to invest on insufficient security.

• Learoyd v Whiteley (CA)

  • A trustee would have to take the same level of care as an ordinary prudent man would take if he were making investments for the benefit of those whom he felt morally bound to provide.

  • (HL) – must confine himself to the class of investments that are permitted by the trust and avoid all instruments of that class which are attended by hazard.

• Bartlett v Barclay's Bank (Ch Div)

  • The trustee allowed trust property to be invested contrary to financial advice in disregard of the counsel of his financial advisors.

  • Held that, Learoyd v Whiteley upheld – a prudent degree of risk will attract no liability.

  • The fact that the risk was taken by a company in which the trustee was a controlling shareholder did not mean that he would escape liability – it had a duty to take appropriate action once it received knowledge that the company's affairs were not being conducted as they should be or information that would put them on inquiry.

  • A professional trustee corporation, holding itself out to performing to a higher standard than ordinary mortals, should accordingly be held to a higher duty than the ordinary trustee.

• Nestle v National Westminster Bank (CA)

  • The trustee bank misinterpreted the trust instrument to limiting its powers of investment and failed to regularly review the balance of the investments between equities and gilts.

  • Dillon LJ

    • the trustee had failed in its duty to obtain legal advice as to the meaning of the relevant clause.

    • In this case however, no evidence had been adduced that the plaintiff would have been better off nor had it been established that there would be a chance that she would be better off – thus the claim must fail.

  • Staughton LJ

    • Trustees are not allowed to make mistakes at law and the failure of periodic reviews were breaches of trust – however no evidence was adduced as to loss arising from this.

    • The trustees behaviour must not be judged with hindsight and account must be taken of the prevailing investment policy of the time.

    • They must strive to maintain an equitable balance between those presently entitled to the trust property and those who will be entitled in the future.

  • Legatt LJ

    • The bank's duty is to take such care as an ordinary prudent man would if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide, having regard to the interests of those beneficiaries presently entitled to the trust property and those who would become entitled in the future, striking an equitable balance between risk and return on the investment.

    • A breach of duty is only actionable if it causes loss – a loss will be incurred by a trust fund when it makes a gain less than would be made by a prudent businessman.

    • Although no testator would have chosen the bank for the effective management of his estate in light of its failure to take steps to avoid estate duty – however in light of the investment policy of the time and the 'undemanding' standard of prudence, the bank had not committed any breach of trust resulting in loss.

• Stacey v Branch (HC)

  • The trustee maintained a house on trust for the plaintiff and was later sued for failing to take greater steps to generate income from it.

  • Held that, a trustee has a duty to invest in those securities authorised by the trust instrument and statute, while taking such care as a reasonably cautious man, having regard to the interests of those both presently entitled to the property and those who will become so entitled in the future.

  • A trustee must act honestly and in exercising his discretion he must take as much care as a prudent man would in dealing with his own private affairs.

  • In making an investment, he must act as a prudent man making arrangements for the benefit of persons for whom he felt morally bound to provide.

  • Words such as 'absolute discretion' do not relieve a trustee of his duty to act honestly and prudently.

  • Leasing of the property in this case was to be done as the trustee saw fit and sale and investment only if necessary – under the principles above and the conditions of the trust, there has been no breach of duty in this case.

• Harries v Church Commissioners

  • The plaintiffs sought declarations that the commissioners were obliged to have regard to the object of promoting the Christian faith and not to act in a manner which would be incompatible with that object.

  • Held that, it was axiomatic that charity trustees were concerned to further the purposes of the trust of which they had accepted the office of trustee – if the purpose is to make money they were bound to make choices according to established investment criteria.

  • The circumstances where they would be bound to make a financially disadvantageous decision for ethical are extremely limited.

Duty to convert trust property

• Howe v Earl of Dartmouth – where residuary personalty is settled by will in favour of persons who are to enjoy it in succession, all assets of a wasting, future or reversionary nature or which consist of unauthorised securities, should be converted into property of a permanent or income bearing character.

Duty to distribute

• Re Benjamin

  • The testator's son disappeared and under the will of his father, who died the following year, he was entitled to a share in the latter's estate if he survived the testator.

  • Held that, if the whereabouts or continued existence of a beneficiary are unknown, the court may authorise distribution of the trust property after a certain period of time (in this case seven years)

• Re Green's Will Trusts

  • The testatrix's son went missing during war time and was certified as being presumed dead.

  • She bequeathed the residue of her estate to trustee's for her son' benefit and directed that if he had not come forward to claim the property by the year 2020, the trustees were to use it otherwise.

  • A Benjamin order was granted on the basis that the son had predeceased the testatrix and the trustee's were allowed to apply the estate.

• Re Evans

  • The defendant was a trustee and beneficiary and took out an insurance policy against the possibility of a missing beneficiary reappearing.

  • The court stated that this policy “was to the advantage of all and is to some extent more effective than the limited protection provided by the more costly application to court for a Benjamin order”

  • Held that, although the policy only yielded sufficient funds to cover the capital sum to which the plaintiff was entitled, the plaintiff should receive interest to the extent to which it was capable of being realised out of the property from the deceased's estate still at the defendant's disposal.

Duty to keep accounts and provide information

• Chaine-Nickson v Bank of Ireland (HC)

  • The plaintiff sought an order directing the defendants, who were trustees of a settlement in respect of which the plaintiff was a member of the class of persons from whom the defendants were to chose the beneficiaries, to give him particulars of certain matters relating to the administration of...