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E- seminar Trustees Duties (1)
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This is the first of three trustees duties seminar prep questions and answers.
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Seminar 13- Week 24 Duties and powers of Trustees.Reading
Virgo: chapter 13 & 15
Ramjohn: chapter 14
Hanbury & Martin: chapter 19 & 20
For Q4, consider the various powers given in ss. 12-19 of the Trustee Act 1925.
ForQ4 b and c, consider Man Yip, ‘Trust-owned companies: understanding the trustee’sduties’
(2017) 31 TLI 185-201
1. What duty of care does a trustee have? Differentiate between the general duty of care (see
Speight v Gaunt (1883) 9 App Cas 1) and the statutory duty of care in the Trustee Act 2000,
s.1.
The duty of care of a trustee involved the obligation to manage the trust property with a
reasonable degree of care, skill and diligence. They must act in good faith and in accordance
of the terms of the trust deed.
Speight v Gaunt- Sir George Jessel MR said “it seems to me that on general principles a
trustee ought to conduct the business of the trust in the same manner that an ordinary
prudent man of business would conduct his own, and that beyond that there is no liability or
obligation on the trustee.” The duty of care required of the trustee when dealing with the
trust property is that of an ordinary man of business.
The Trustees Act 2001 s 1.
(1)Whenever the duty under this subsection applies to a trustee, he must exercise such care
and skill as is reasonable in the circumstances, having regard in particular—
(a)to any special knowledge or experience that he has or holds himself out as having, and
(b)if he acts as 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.
This statute requires a higher standard of duty of care than what is shown in Speight v
Gaunt. There must be care and skill that’s reasonably expected from a trustee in their
profession or knowledge and this should be applied to when managing the property.
This test is subjective in the sense that it is reactive to the trustees own knowledge and
experience, and the standard of care that is required will be a standard which is reasonable
for someone with that knowledge or experience. The principle effect of the TA 2000 has
been to shift the ordinary obligations of trustees from a requirement that they act prudently
to a requirement that they act reasonably. Prudence requires caution whereas
reasonableness may not.
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