Trusts - Head 3

Office of Trustee & Administration of Trust

nature of the office of trustee - fiduciary duties

• Think only of the interests of the beneficiaries and the fulfilment of the trust’s purposes

• Owes a duty of loyalty as a fiduciary.

nature of the office of trustee - unrenumerated by default

Fegan v Thomson (1855) per Lord Cowan

Though in reality, often a clause in trust deed providing for payment of remuneration

• “It is quite settled that a trustee is not entitled to any renumeration for his trouble in the management of a trust, beyond his actual outlay

unrenumerated by default - charging clause

Dale v IRC [1954] - per Lord Normand

• “The rule is the same for all: it is not that reward for services is repugnant to the fiduciary duty, but that he who has the dduty hall not take any secret renumeration or any financial benefit not authorised by the trust deed under which he acts”

nature of office of trustee - no auctor in rem suam

Lord kames

• No buying or selling trust property for won interest, and no lending or borrowing from trust funds

• “it prohibits a trustee from making any profit by his management directly or indirectly.. nature may be in itself innocent; but it is poisonous with respect to consequences;.. he will soon lose sight of his duty and direct his management cheifly for making profit to himself”

nature of office of trustee - no auctor in rem suam

Aitken v Huter (1871) 9 M 756, at 762 per Lord Neaves

• “It appears to me that from the first to last the rule of the law of Scotland has been that anyone holding a fiduciary character, whether that of guardian or trustee, cannot lawfully become auctor in rem suam”

nature of office of trustee - no auctor in rem suam

Wright v Morgan [1926] per Lord Dunedin

“It would be profitless to quote the many cases which have arisen to illustrate the doctrine. They may all be referred to the same root idea, that equity will not allow a person, who is in a position of trust, to carry out a transaction where there is a conflict between his duty and his interest”

duty to give effect to a trust

• trustee must act in accordance with the trust purposes in order to meet them and comply with the provision of benefits to identified beneficiaries

uncertainty in giving effect - Campbell’s Trs v Campbell 1922

• truster purported to create a trust the residue of his estate in the following terms of the purposes of the trust

  • to apply the same for behoof of such charitable or other deserving institutions in connexion with the city of Glasgow as my said trustees shall think fit

• court held this to be too vague - the use of “or” meant that the trust’s purposes essentially amounted to using the residue to do anything in Glasgow.

• if the word And had been used instead, this would have been certain enough.

uncertainty in giving effect - Salvesen’s Trs v Wye 1954 SC 440

• Residue case, this time in favour of “shall be disposed of by my trustees among any poor relations, friends, or acqaintances of mine”

• Held that “acquaintances” was too vague

• Per Lord Russel at 446: “the field of selection presents so much uncertainty that it would be impossible for the trustees to determine from which individuals their power of selection was to be exercised”

purposes, certainty test - Hood v Macodnald’s Trs 1949 SC 24, at 28 Per the Lord Justice-Clerk Thomson

• “the test is whether a trustee, approaching the matter with proper care and properly advised, would be able to carry such an instruction out”

• implies one should seek out legal advice when met with uncertainty

purposes of trust - contrary to public policy

Wemyss v Wemyss’s Trs 1921 SC 30

• Condition that a beneficiary must not allow his mother to live on his estate; held a valid condition 

• Mother had separated from the father and that there was nothing against her visiting

purposes of trust - public policy

Fraser v Rose (1849) 11 D 1466

• Trust deed by father providing that daughter should be removed from mother’s household in order to be a beneficiary 

• Held invalid condition treated pro non scripto (as if the condition wasn’t there)

• At 1469 per the Lord President

“I hold that such a condition as this, whatever equivalent may be held out as its reward, is directly contra bonos mores, and contrary to the best interests of society”

purposes of trust - public policy

Fraser v Rose (1849) 11 D 1466

Lord Ordinary

• “He rejects instantly the condition attached to the pursuer’s provision by her father as absurd and indecent, arising solely from bad temper, or groundless prejudice, or distempered fancy. Every man is under a legal and natural obligation to provide for his children, but he is not entitled to attach an improper or immoral condition to the grant; and if he does so, the law ascribes it to error or delusion, and enforces the provision, but rejects the condition, holding it pro non scripto”

human benefit necessary requirement?

McCaig v Uni of Glasgow 1907 SC 231:

• Deceased left instructions for the creation of a trust with the following purposes

  • Erecting monuments of himself and various family members

  • Creating artistic towers at prominent parts of his estate

• Held that no trust was created because no beneficial interest was conferred upon any person of class of persons

• But other dicta in the case suggested that there might be some public policy reason concerned with wastefulness

• Sister was the one to challenge this and won and got the estate, when she died she tried to do the same thing but the court enforced the previous case but case reading suggests it came much closer to something like a public policy reason concerned with wastefulness and lack of useful public purpose

human or public benefit?

• Common law is unclear about whether such cases are about a public policy agaisnt wasteful or eccentric uses of property after death; or whether it was necessary for private trusts to have an identifiable beneficiary if there was a public benefit no need for a beneficiary as a public trust 

• Trusts & Succession (s) Act 2024, ss 46-52

  • S.46 - no need for a beneficiary is clarified and private purpose trusts are valid but

S.48 - execution is impossible/impracticable; unlawful or contrary to public policy, or innappropriate due to changed circumstances, the trust might be reformed or ended.

usual way to confer trust powers

the trust deed

trustee powers - default rules

T&S(S)Act 224 chapter 3 - powers are granted to the trustees

• Default

  • S.15

    • In relation to the trust property all the powers of a natural person beneficially entitled to the property

  • S.17

    • Power to take out insurance for their own actions (misstakes) 

  • S.18

    • Power to make any kind of investment 

  • S.22

    • Appoint an agent

  • S.24

    • Power of advancement 

  • S.25

    • Power of apportionment

non-default statutoroy powers of trustee

• S.16

  • Ask the court for powers e.g which the trust deed may have excluded

trust powers - decision making, trust deed

Might set out rules for taking decision and the number of trustees required to reach each decisions etc

trust powers - decision making,

Delholm, Petr 1954

A majority of the trustees accepting, surviving and acting resident in great britain or ireland for the time being always a quorum

trustee powers, decision making - default rules

• T&S(S)Act 2024 - default rules

  • S.13 - all trustees to receive adequate notice of binding decisions and opportunity to express opinion on matter

  • S.14 - binding decision reached by majority of those trustees for the time being able to make it 

good practise for decision making

• Good practise but not required is to take a note of the decision and whether it was reached by majority and who reached the decision 

• Sedurent book, record of decisions

conveyancing

New trustees automatically take joint ownership of all the trust property with any other trustees upon appointment s.4 T&S(S)Act 2024

resignation - Freen v Beveridge (1833) Per Lord Gillies

• when a party once accepts and acts as a trustee, it is not a light matter to lay the character down again

resignation - generally allowed?

• Generally permitted - s.5(1) T&S(S)Act 2024

• s5(2)&(3) - If a trustee seeking to resign is the sole trustee or sole trustee who is both capable and traceable - can only resign after another trustee has been appointed 

• s.5(4) - resignation breaching sole trustee rule has no effect

s.5(5) - must be intimated to all trustees

removal of a trustee

S.7 T&S(S)Act 2024 - May be removed from office by the court at its discretion in appliation by trustees or beneficiaries or any other person with an interest to the trut property

removal of a trustee - 5 grounds

1. unfit to carry out the duties of a trustee

2. purports to carry out those duties but does so in a way whic his inconsistent with, or might be inconsistent with, a trustee’s fiduciary duty

3. has neglected the trustee’s duties

4. is incapable, or

5. is untraceable.