I scored 87% in Equity and Trusts and received a Distinction (74%) overall in the GDL at the University of Law using these notes.
These notes are written in the form of step-by-step exam plans. Compared to standard notes, this will save you lots of time. Most people will make notes during worksh...
NOTE: there are no steps in the ‘Trustees’ section of these notes, because
answers on trustees don’t tend to follow a set pattern.
Appointment, retirement and removal of trustees
Appointment of new trustees (s.36, 40, 41 Trustee Act 1925):
Under s.36 TA 1925, (discretionary) powers may be given to:
- the person or persons nominated for the purpose of appointing new trustees by
the trust instrument for appointing trustees (s.36(1)(a)); or
- if there is no nominee, or no such person able and willing to act, then the
surviving or continuing trustees or trustee for the time being, or the personal
representatives of the last surviving or continuing trustee (s.36(1)(b)).
These persons may, acting unanimously by writing…
- Appoint a new trustee in substitution (under s.36(1)), if a trustee is:
- dead, or
- outside of the UK for more than twelve months, or
- desires to be discharged, or
- Refuses to act, or
- Is unfit to act, or
- Is incapable of acting, or
- Is an infant.
- Appoint additional trustees, if there are not more than three trustees s.36(6).
- I.e. the total number can never exceed 4
Under s.40 TA 1925, where by a deed a new trustee is appointed to perform any trust,
property automatically vests in the trustee.
- Further action may be required for the transfer of property, e.g. land, shares.
Under s.41 TA 1925, the court may appoint trustees where it is expedient to do so, and
it is inexpedient, difficult or impracticable to do so without the assistance of the court.
- Trustees and beneficiaries can make the application to the court.
Retirement of trustees (s.39 TA 1925)
Under s.39 TA 1925, a trustee can retire without a new appointment if:
, - After they retire, there are at least two trustees remaining, or a trust corporation;
- They declare their desire to be discharged by deed; and
- The co-trustees, and any other persons empowered to appoint trustees, consent
by deed.
Beneficiaries’ appointment and removal of trustees
S.19 TOLATA applies in the case of a trust where:
- There is no person nominated for the purpose of appointing new trustees (s.19(1)
(a)); and
- Beneficiaries are sui juris (18 or older and of sound mind), in agreement, and
collectively are absolutely entitled to the trust property (s.19(1)(b)).
The trust instrument does / does not contain power to replace trustees.
Then apply s.19(1)(b)
Does it apply? If not - consider s.41 TA 1925 (above).
Under s.19(2), beneficiaries may give either or both of the following:
(a) A written direction to a trustee or trustees to retire from the trust, and
(b) A written direction to the trustee or trustees for the time being (or if there are
none, to the PR of the last person who was a trustee) to appoint by writing to be
a trustee or trustees the person or persons specified in the direction.
Duties of trustees (under the Trustee Act 2000)
Duties are obligations and must be performed. Beneficiaries can sue trustees for
compensation if they can show that:
- 1) the trustees have breached their duties; and
- 2) this has caused loss to the trust.
- The TA 2000 applies to all trusts whether created before or after the Act came
into force (s.10 TA 2000).
Investment duties
An investment is something expected to produce income or capital growth (Harries v
Church of England Commissioners; Cook v Medway Housing Authority).
- An unsecured loan is not an investment (as the Privy Council ruled in Khoo Tek
Keong v Ch’ng Joo Tuan Noah).
, - A depreciating asset is not an investment as it will not yield an income or capital
return.
Investment duties under the general law
Trustees have a general duty to [INSERT RELEVANT ONES FROM BELOW]
- Trustees are under a general duty to act impartially between the beneficiaries;
- Trustees are under fiduciary duties not to place one’s self in a position of conflict
between personal interests and trust obligations, and not to make an
unauthorised profit;
- Trustees must act in the best interests of all the beneficiaries, which means best
financial interests (Cowan v Scargill). However, trustees may take ethical
considerations into account when:
- Ethical investments yield as good a return as other investments (Cowan v
Scargill);
- Beneficiaries are all adults with very strong ethical views against a
particular investment, so that it may not be in their best interests to invest
in that investment;
- It is not appropriate for charitable trustees to invest in a company whose
objects are directly opposed to the purposes of the charity (Harries v
Church of England Commissioners); or
- The settlor has so provided in the trust instrument that trustees must not
invest in certain sectors.
- Trustees are under a duty to watch over and, if necessary, correct the conduct of
their co-trustees, so could be liable as passive trustees (Styles v Guy).
[APPLY RELEVANT ONES]
Statutory powers and limitations (under the Trustee Act 2000)
Powers:
Trustees can make any investment that they would make if they were absolutely entitled
(s.3(1) TA 2000).
- Trustees can purchase freehold or leasehold land in the UK for investment or
other purposes (such as for occupation by a beneficiary) (s.8 TA 2000).
- I.e. any purchase of foreign land by a trustee is a breach of trust
Limitations:
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