Tutorial 4- trusts
Trust- ownership and management function is with the trustees- they make decisions of investment-
set of beneficiaries who enjoy the value of the trust patrimony- risk of trustees serving their own
interest- rules of trust law devised to avoid these problems e.g. avoid agency problems
1. a) 2 types of objections- objection to grant the lease itself- is this the type of act where the
trust has the power to make the decision- look at the trust deed, which could set out the
powers of the trustees- where the trust is silent then look at s4 of Trust (S) Act 1921- default
powers which can be countered by express provisions in the deed- the law allows them to
grant a lease- s4(1)(c)- decisions can be made- and second the execution of the lease i.e.
grant the lease- is the decision valid- requirements to make a valid decision- the decision has
to be made by a quorum i.e. by majority who are in existence not just the presence at the
meeting- so here 3/5- they need to consult all trustees (Yires case?)- thus 4 trustees need to
be consulted as Ursula died and which automatically removes the trustees- object on
consultation as Tony has not been consulted- the effect of this renders the decision invalid-
though he cannot be reached – so the rule would be waived (malcom v goldie) thus we
probably do not need to be consult Tony and all other trustees have been consulted- thus
consultation requirement is probably met- move to majority vote- 2 trustees agree to the
decision- potentially we have 4 trustees at the moment- Tony is still a trustee- thus 2 people
voting for the decision is not a majority- though we don’t know if Susan has resigned- if her
resignation is valid then we have 3 trustees and this would mean that we hav a quorum- So
the validity of the decision turns to the validity of Susan’s resignation- thus her resignation is
probably not valid- section 3(2) of the 1921 Act as she is a remunerated trustee and thus
cannot resign other than when the court lets them- even if we ignore s3(2) we have an issue
of whether the method of resignation (various ways in which a trustee can resign- specific
forms of writing section 19 of the 1921 Act- but this is not the only method due to the word
‘may resign’- some formality and signature is seemingly needed - rafique case- thus here
even she was not a remunerated trustee her method of resignation is not valid- probably
cannot verbally resign and there is no signature- the effect of her invalid resignation is that
we have 4 trustees and thus we don’t have a quorum and they cannot thus make a decision
as to the lease. Who needs to sign in order for the trust to execute a deed? Perhaps a
majority of them Harrold Engineering case- at common law it is sufficient for the majority of
the trustees to sign but they court above expressed disagreement to this but their
comments were obiter- section 7 of the 1921 Act allows majority in some circumstances as
well- but this section would not apply in this case as he is a beneficiary of the trust and this
section does not apply to beneficiaries- and thus we fall back on common law and having
said that Susan;’s resignation is not valid would mean that we also don’t have a majority
here.
b) section 4 (1) (g)- go to court- section 3(2) applies so we need to go to court to have her
removed as she is a remunerated trustee- this would lead to the decision becoming valid ot
grant the lease as we have a majority- also section 23 allows application to the court to
remove Tony if he was out of the UK for more than 6 months, which would lead to us having
3 trustees and thus we get a majority.
Trust- ownership and management function is with the trustees- they make decisions of investment-
set of beneficiaries who enjoy the value of the trust patrimony- risk of trustees serving their own
interest- rules of trust law devised to avoid these problems e.g. avoid agency problems
1. a) 2 types of objections- objection to grant the lease itself- is this the type of act where the
trust has the power to make the decision- look at the trust deed, which could set out the
powers of the trustees- where the trust is silent then look at s4 of Trust (S) Act 1921- default
powers which can be countered by express provisions in the deed- the law allows them to
grant a lease- s4(1)(c)- decisions can be made- and second the execution of the lease i.e.
grant the lease- is the decision valid- requirements to make a valid decision- the decision has
to be made by a quorum i.e. by majority who are in existence not just the presence at the
meeting- so here 3/5- they need to consult all trustees (Yires case?)- thus 4 trustees need to
be consulted as Ursula died and which automatically removes the trustees- object on
consultation as Tony has not been consulted- the effect of this renders the decision invalid-
though he cannot be reached – so the rule would be waived (malcom v goldie) thus we
probably do not need to be consult Tony and all other trustees have been consulted- thus
consultation requirement is probably met- move to majority vote- 2 trustees agree to the
decision- potentially we have 4 trustees at the moment- Tony is still a trustee- thus 2 people
voting for the decision is not a majority- though we don’t know if Susan has resigned- if her
resignation is valid then we have 3 trustees and this would mean that we hav a quorum- So
the validity of the decision turns to the validity of Susan’s resignation- thus her resignation is
probably not valid- section 3(2) of the 1921 Act as she is a remunerated trustee and thus
cannot resign other than when the court lets them- even if we ignore s3(2) we have an issue
of whether the method of resignation (various ways in which a trustee can resign- specific
forms of writing section 19 of the 1921 Act- but this is not the only method due to the word
‘may resign’- some formality and signature is seemingly needed - rafique case- thus here
even she was not a remunerated trustee her method of resignation is not valid- probably
cannot verbally resign and there is no signature- the effect of her invalid resignation is that
we have 4 trustees and thus we don’t have a quorum and they cannot thus make a decision
as to the lease. Who needs to sign in order for the trust to execute a deed? Perhaps a
majority of them Harrold Engineering case- at common law it is sufficient for the majority of
the trustees to sign but they court above expressed disagreement to this but their
comments were obiter- section 7 of the 1921 Act allows majority in some circumstances as
well- but this section would not apply in this case as he is a beneficiary of the trust and this
section does not apply to beneficiaries- and thus we fall back on common law and having
said that Susan;’s resignation is not valid would mean that we also don’t have a majority
here.
b) section 4 (1) (g)- go to court- section 3(2) applies so we need to go to court to have her
removed as she is a remunerated trustee- this would lead to the decision becoming valid ot
grant the lease as we have a majority- also section 23 allows application to the court to
remove Tony if he was out of the UK for more than 6 months, which would lead to us having
3 trustees and thus we get a majority.
