Law of Trusts: Trustees (Workshop #4)

Trustees

  • trustee = one who is trusted

  • trustess must act in the interest of the beneficiaries

  • they owe beneficiaries 2 types of duty: duty of care and fuduciary duty

Duty of Care

Statutory

  • the statutory duty of trustees is outlined in the Trustee Act 2000 s 1:

  • a trustee must exercise care and skill as is reasonable in the circumstances, having regard in particular –

  • objective test: a) To any special knowledge or experience that he has or holds himself out as having

  • subjective elements: b) If he acts as a trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession

Common Law

  • the common law definition of duty of care comes from Speight v Gaunt (1883): to act in the manner an ‘ordinary prudent man of business would take in managing similar affairs of his own.’

Fudiciary Duty

  • fiduciary duty is the relationship between trustees and beneficiaries 

  • fiduciary duty is outlined by the case Bristol and West Building Society v Mothew [1998] Ch 1: Someone who has undertaken to act for/on behalf of another in circumstances which rise to a relationship of trust and confidence

  • i.e. someone who has agreed to act for/on behalf of another in a particular matter requiring trust and confidence

  • fudiciary duty = obligation of loyalty

No Profit, No Conflict 

  • fiduciaries cannot act in conflict with the person to whom they owe the duty (Tito v Waddell [1977])

  • they cannot profit from their position as fiduciary either (IRC v Cooley [1972])

  • this is know as the ‘No Profit, No Conflict’ rule which was established in  Bray v Ford [1896] AC 44

Breach of Fudiciary Duty

  • ‘positional’ breach = when a fiducuiary put themself in a position of potential conflict of interest and duty

  • ‘transactional’ breach = when the potential conflict is actualised by some transaction

Breach of Duty

  • if a trustee breaches their  duties the can bring 2 types of claims:

  • claim in personam: a claim against the person 

  • claim in rem: a claim against the property 

Claim in Personam

  • claim made against the person 

  • must take the person into account

  • e.g. are the bankrupt, is getting the money from them likely?

Claim in Rem

  • claim made against the property 

  • requires proof of propietary interest in property and proof of a fiduciary relationship

  • this is acquired through tracing 

Tracing

Common Law Tracing

Equitable Tracing 

Conflict of Interest & Duty

The Self-Dealing & Fair-Dealing Rules

The Effect of Retirement

  • in Re Boles [1902] 1 Ch 244the purchase of trust property by the trustee 12 years after his retirement was held to NOT infringe the rule that trustees mustn’t put themselves in a position of conflict

  • a retires trustee may [urchase a trust property if ‘there is nothing to show that at the time of retirement there was any idea of a sale’

Duty & Standard of Care

  1. yellow (section 1)

  2. yellow (she will be held to a higher standard) 

  3. red (Speight v Gaunt, Learoyd v Whitley)

  4. blue (

  5. blue (Bristol and West Building Society v Mothew)

  6. red (Bray v Ford)