Trusts - Head 4

Performative Obligations

Standard of Performance or Duty of Care

S.31 TS(S)A 2024

• the standard of care expected varies according to the nature of the trustee, in particular their character and renumeration status

Standard of Performance or Duty of Care

S.31 TS(S)A 2024 - basic standard

• a trustee, in managing the affairs of the trust, is required to exercise such care and diligence as any person of ordinary prudence would exercise in managing the affairs of another person

Standard of Performance or Duty of Care

S.31 TS(S)A 2024 - paid professional standard

• paid professional course of business trustee standard is required to exercise such skill, care and diligence as it is reasonable to expect from a member of profession in question

Standard of Performance or Duty of Care

S.31 TS(S)A 2024 - unpaid profession standard

• Expressly instructed to provide profession services or advice = skill care and diligence in providing those services or that advice as it is reasonable to expect from a member of the profession in question 

  • As a trustee who happens to have another profession being asked to give advice from their expertise

No express instruction = the basic standard.

delegation powers - TS(S)A 2024 s.22 

trust deed may also permit

• Trustees may delegate the exercise of any of their powers and in particular may appoint an agent or authorise a person to execute deeds or documents on behalf of the trustees and such delegation can be to one of the trustees (s.22(3))

powers excluded from delegation

• Powers relating to whether or in what way assets of the trust should be distributed, 

• Powers relating to whether any fee or other payment due to be made out of the trust funds should be made out of capital or income

• Powers to appoint a person to be a trustee of the trust, or 

• Powers conferred by any other enactment or by the trust deed and permits to the trustees to delegate any of their functions or to appoint a person to act as a nominee in relation to the trust property

Considered inappropriate to allow the trustees to delegate all aspects of their office, particularly any discretionary judgments about distribution of the trust assets to beneficiaries

delegation - Scott v Occidental Petroleum 1990 Per Lord President Hope

“"it is a fundamental rule that a trustee cannot delegate his trust, on the other hand it is equally clear that a trustee is entitled to employ persons to that which an ordinary man of business would employ and agent to do, since he is not bound to perform the whole duties of the trust personally to this extent. therefore, delegation is not seen as being in conflict with the fundamental rule. The dividing line between these two propositions is that the trustee must never surrender his own judgment in matters committed to his discretion.”

holding the estate - ferguson v Paterson (1990) per Lord Davey

• the first duty of the trustees was to preserve the trust fund under the control the trustees might properly employe their law agent to receive the money from the mortgages but it was their duty to see that the money, when received was immediately re-invsted or placed on deposit in their own names and under their own control.

• duty to oversee and monitor that an agent is doing their job.

trust deed - performative powers

quite ofte, especially in professionally drafted trusts, investment powers are specified

which may restrict or permit investment, if not, then default rules apply.

performative powers - default

• TS(S)A 2024

• S.18

  • Power to make any investment

• S.19

  • Must have regard to the suitability of the prosed investment and need for diversification of investments; must also obtain and consider proper advice regarding investments - though s.19(3)

• S.20

  • Ethical investments 

  • Unless authorised by trust deed, trustees must make environmentally conscious? decisions

• S.23

  • Nominees

  • Trustees can transfer assets to nominees who can then invest

breach of care from failure to perform

Clarke v Clarke’s Trs 1925 SC 693, at 711

• investments not overseen and had essentially become worthless, trustee defence was that they had been invested already prior to the trustee’s appointment

• held that it is the plain and undoubted duty of trustees who continue to hold shares of such nature, or other kinds of assets, to keep a prudent and business like eye upon them. instead of holding blind confidence or without giving any such consideration to the matter as an ordinarily prudent man would give.

record keeping and information - common law

• Unclear, but seems to be established beneficiaries could demand to see details of the trust accounts 

• Tod v tod’s trs 1842

record keeping and information - statute

• TS(S)A 2024 s.30 - trustees may be under a duty to disclose information requested by a beneficiary 

  • (1) unless trustees consider it would be inappropriate in all the circumstances to make the disclosure.

  • (2)(a) subject to the express terms of the trust deed

  • (8) trustees can ask the court for direction

  • (9) beneficiary can ask court to order disclosure