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Office Of Trustee Notes

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Office Of Trustee Revision

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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 co­trustees.

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

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