Express trustees

Trustee Act 2000, ss 1-8 and Schedule 1

armitage v nurse

facts: clause provided that the trustees should not be liable for loss or damage unless it was through his own fraud

principle:

1. schedule 1 (7), trustees act—provides exclusion of statutory duty of care.

   1. HOWEVER, in cases of bad faith, recklessness or deliberate breach of duty, such an exemption clause would not protect D.

2. “irreducible core of obligations”

   1. included the duty to act honestly and in good faith

   2. but not duty of skill or care— not repugnant to their duties, nor contrary to public policy, to allow exemption from liability for gross negligence, which differed only in degree from ordinary negligence.

schmidt v rosewood trust

Can an unnamed discretionary beneficiary or a power object require disclosure of trust documents? 

gen rule: A discretionary beneficiary or an object of a mere power of appointment might be entitled, although the nature of their protection would depend on the court’s discretion on a set of factors.

facts: father created a trust but did not put down the name of his son as the beneficiary, instead put a company → son applied to trustees for disclosure of trust documents, but he was not named as a beneficiary in the trust deed, so there was no capacity to entitlement of trust information

principle: a discretionary B or an object of a mere power may be entitled. However, the court looks at 3 areas:

1. whether a discretionary B or a B with a remote or wholly defeasible interest should be granted any relief [is there practical purpose and is B within the class of Beneficiaries to start w?]

2. what classes of documents must be disclosed—totally or partially

3. what safeguards should be imposed to limit the use of the documents. Where issues of confidentiality arose, the court might have to balance the competing interests of the beneficiaries, the trustees and third parties

cowan v scargill

principle: The trustees must exercise their investment powers so as to yield the best return, putting aside personal interests and social and political views.

facts: mineworkers PF with wide powers of investment managed by 10 trustees—appointed by the National Union of Mineworkers → assisted in investment decisions by an advisory panel → investment plan was rejected by union; demanded that it be amended to exclude any energy companies in competition w coal and no overseas investment

held: trustees in breach of duty if they refuse to adopt the investment strategy -→ must excercise their powers in the best interests of present and future Bs

Grand View Private Trust Co Ltd v Wong (Bermuda)

the proper purpose rule:

facts: trust was set up by 2 brothers to benefit a few generations of the family → invested property and added/removed beneficiaries within their powers → however, they removed beneficiaries who were a part of the family → C argued that it no longer benefitted the objects the settlor intended.

held: in favour of C—T had entirely contradicted the reason why the power was given to T in the first place

principle: proper purpose rule = any case where a fiduciary power is used for a purpose not falling within the purpose for which the power has been conferred

Pitt v Holt; Futter v Futter

pitt v holt: Pitt won damages from employer; claimed by C (wife) → unexpected tax occurred due to inaccurate legal advice → tried to void the trust

held: trust not voidable

principle

• voidable only if:

  • If trustees act on irrelevant matter or disregard relevant matter (sloppy thinking is NOT enough)

  • AND this is so serious as to amount to breach of duty, this is voidable by the beneficiary 

• Alternatively, if the trustees took the advice responsibly but it was incorrect, this is not voidable. Instead, trustees should sue advisors for negligence because the fault lies w the advisor, not the trustee.

Re Brogden

facts: A testator directed that certain legacies and trust payments be deferred for five years after his death. The trustees included the testator’s sons and one independent trustee. Upon expiration of the five-year period, the testator’s business, which held much of the estate’s value, remained under the sons’ control. The independent trustee failed to take timely and effective steps to recover the funds on behalf of the trust. The business ultimately failed, and the security received proved inadequate. The claimant beneficiaries sued the trustees for breach of trust.

held: independent trustee had committed a breach of trust and was liable for the full loss.

principle:

• A trustee must act as a prudent person managing another’s affairs: not merely as a person managing their own money.

• Where a trustee fails to act and causes loss, they bear the burden of proving that the loss would have occurred even with proper diligence.

Charities Act 2011, ss 292A-292C

Speight v Gaunt

Defines duty: Trustees must act honestly; and must take, in managing trust affairs, “all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own.

Bartlett v Barclays Bank Trust Co Ltd

• A higher duty of care is due from someone like a trust corporation which carries on a specialised business of trust management [i.e., if you are being paid to be a trustee/are a professional one—higher standard of care owed]

• facts: Trust was short on money.  Trust directors bought land to fulfill shortfalls. 

Nestle v National Westminster Bank

1. There is a duty to main even-handedness, with the exception of a trustee having good reasons to favour a beneficiary—Circumstances may warrant the favouring of one beneficiary, i.e. if one is poor but the other is rich 

2. no hindsight duties regarding investment 

R (Palestine Solidarity Campaign Ltd) v Secretary of State for Housing, Communities and Local Government

Ultimately, trustees may consider factors separate from finance so long as it doesn’t not risk financial detriment to the fund and all members share that view

facts: SoS issued guidance pursuant to a statutory power in respect of how local gov pension schemes should approach investment strategy→ sought to rule out pursuing boycotts, divestment and sanctions against foreign nations and UK defence industries,

Trustees must prioritise financial returns, can consider ESG factors if financially material, and may consider non-financial factors if members share that view and there is no significant financial detriment — but the government cannot use guidance to restrict trustees beyond those limits.

Bahin v Hughes

1. A trustee who concurs/agrees with her co-trustees has as much “acted” as those others, and thus will be equally liable with them to beneficiaries who suffer loss if a breach results.

2. non-active trustees may be liable if they have neglected to take the steps necessary to have prevented such a breach

Re Londonderry’s Settlement

facts: discretionary Trust was coming to an end and B believed that she has been treated harshly by the trustees → she claimed that T should have appointed larger sums to her name and sough disclosure of docus such as minutes of the meeting, accounts, correspondence etc

held:

1. trustees NOT obliged to disclose the reasons for exercising their discretionary power unless there is evidence of bad faith or other imropirety

2. not good for B as a whole

3. would make T’s life intolerable and cannot be an obligation

principle: distinction bw requesting documents that relate to the management of a trust asset and those that relate to the excercise of discretion

1. what documents can be shown to B?

   1. docus in possession trustees due to their role

   2. contains info abt the trust that B is entitled to know

   3. B has a proprietary interest in these docus and is entitled to see the

Harries v Church Commissioners for England

Charitable trustees are under a duty to maximise financial return when exercising their investment powers. However, unlike private trustees, they may lawfully exclude investments which conflict with the charity’s core purposes or risk alienating beneficiaries or donors. Beyond this, general moral objections cannot override the trustees’ obligations.

facts: The Church Commissioners ran a charitable, religious trust. The claimants challenged their investment policy on the basis that it gave undue weight to financial return and insufficient consideration to the promotion of Christian ethics. They argued that the commissioners were legally obliged to avoid investments incompatible with Christian principles, even if doing so resulted in financial detriment.

Re Hay’s Settlement Trusts

The exercise of power is optional, especially in the case of a dispositive power, you do not need to exercise it but you do have a to consider it from time to time

The duties of a trustee which are specific to a mere power [of appointment] seem to be threefold. Apart from the obvious duty of obeying the trust instrument, and in particular of making no appointment that is not authorised by it, the trustee must:

1. consider periodically whether or not he should exercise the power

2. consider the range of objects of that power

3. consider the appropriateness of indv appointments

Re Beloved Wilkes’ Charity

Trustees cannot be compelled to disclose reasons for their discretionary decisions