These are notes on trustees created in 2019. They follow a structured format which condenses the relevant case law, statutory provisions and academic opinion that are relevant to the topic to aid with exam revision.
Equitable remedies Summary notes- Equity and Trusts
Fiduciary Duties Summary Notes- Equity and Trusts
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Brunel University (BU)
Brunel University
Law of Trusts (LX2083)
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Trustees:
Who can be a trustee: Duty to invest:
Anyone with capacity to own/hold property can be a Not defined in Trustee Act 2002 but was defined in Re
trustee Wragg to employ money in the purchase of anything
There is no general maximum or minimum number of from which investment or profit is expected
trustees. In land, usually no more than 4 because legal Nestle v National Westminster Bank- Portfolio theory-
estates only vests in the first four names risk is spread out across the portfolio of investments
without looking at the performance of a particular
Appointment of trustees: investment in isolation
Trustees can be appointed by settlor in trust instrument. Higher risk is accepted- trustee needs to carry out
The gift will not fail merely because there is none, the diversification and suitability (s.4 Trustee Act 2000)
court will appoint trustees in that case Power of investment under Trustee Act 2000
Trustees cannot act until the trust property is vested in S.3 (1) – Basic investment power, a trustee must make
them. For land. s.40 LPA 1925 saes the need for formal any kind of investment that he could make if he were
transfer. Property is automatically vested whenever absolutely entitled to the assets of the trust
appointment is made by deed S.4 – standard investment criteria, must be followed
Termination of trusteeship- can occur by disclaimer, when exercising investment powers
death, retirement or removal s.4 (3) (a) - Suitability to the trust of investments
s.4 (3) (b) – The need for diversification of the trusts
Standard of care expected of trustees: (Trustees should review investments from time to time
and in light of standard investment criteria, consider
Speight v Gaunt - Traditionally the standard was that of whether or not they are appropriate or should be varied
the ordinary prudent businessman managing his own Trustees should also take into account the portfolio
affairs theory
Re Waterman’s Trustees- Courts recognized that the Duty of care owed to all trustees formerly set out by
standard must be higher for professional trustees common law
Learoyd v Whiteley- Duty to take care as an ordinary
Current law:
prudent man of business would
S.1 Trustees Act 2000: Barlett v Barclays Bank – Duty to act fairly between all
Must exercise such skill and care as is reasonable in all beneficiaries
circumstances having regard in particular
Breach of duty:
To any special knowledge or experience that he has or
holds himself as having General rule is that if there is a breach of trust then
If he acts as trustee in the course if a business or there is liability for the loss suffered by the beneficiary
profession to any special knowledge or experience that Liability is personal, and trustees are deemed to act
is reasonable to expect of a person acting in the course together when decisions are made, they are jointly and
of that kind of business or profession severally liable (Re Butlin’s Settlement trusts)
Standard applies to various functions exercised by the The beneficiary can sue all the trustees together or just
trustee namely investment one of them and then the trustee can seek contribution
S.61 Trustees Act 1925- Trustee not liable if acting from the others
honestly and reasonably Saunders v Vautier- It laid down the rule of equity which
Sch 1, para 7 Trustees Act 2000- Statutory duty does not provides that, if all of the beneficiaries in the trust are of
apply if it appears from the trust instrument that the adult age and under no disability, the beneficiaries may
duty is not meant to apply, exclusion clauses require the trustee to transfer the legal estate to them
Even express exemption will not protect a trustee in and thereby terminate the trust.
cases of bad faith, recklessness or deliberate breach of 3 ways to avoid liability:
duty as to allow exemption in such cases would offend 1. S.61 Trustee Act 1925- liability can be excused by the
public policy court if the trustee acted honestly and reasonably in the
Armitage v Nurse – An exemption clause will exempt circumstances
trustees from liability for any breach unless it arises Nestles v Nationals Westminister Bank- Clam
through dishonesty. Dishonesty = when a trustee acts in failed because trustee was acting as a prudent
a way which they do not honestly believe in the businessman
beneficiaries’ interest and is nonetheless dishonest even Re Chapman- A trustee who is honestly and
though he does not intend to benefit himself reasonably competent is not to be held
Walker v Stones- Held that there was must be an responsible for a mere error in judgement
objective standard in assessing what the trustee could 2. Consent- If all beneficiaries consent to the breach of the
have generally believed. Reasonable man test trust, then consent can be used as a defence by trustees
(Re Paulin’s Settlement Trusts)
The duties of the trustees:
3. Trustee exemption clauses
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