Exam (elaborations)
FBE2604 Assignment 2 Semester 2 2023
- Institution
- University Of South Africa
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FBE2604 Assignment 2Semester 2 2023
QUESTIONS AND
ELABORATE
ANSWERS
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, Question: 1
Paul is a trustee of a business involved in the retail of computer equipment. Although the trust deed
makes no provision for it Paul buys a delivery vehicle to transport the computer equipment.
1.1 Given the requirement that a trustee must preserve trust assets, indicate whether Paul has acted
unlawfully. (5)
Title: The Legality of Paul's Purchase: Trustee's Duty to Preserve Trust Assets
Introduction:
In the context of a trust, a trustee holds the fiduciary duty to act in the best interests of
the beneficiaries and to preserve the trust assets. However, what happens when a
trustee takes an action that is not explicitly stated in the trust deed? This essay examines
the case of Paul, a trustee of a business involved in retailing computer equipment, who
purchases a delivery vehicle to transport the computer equipment, even though the
trust deed makes no provision for such an acquisition. We will analyze the legal
principles surrounding a trustee's duties, the concept of preserving trust assets, and
determine whether Paul's actions can be considered unlawful.
1. The Duty of a Trustee to Preserve Trust Assets:
The fundamental duty of a trustee is to preserve the trust assets for the benefit of the
beneficiaries. This duty arises from the fiduciary relationship between the trustee and
the beneficiaries, requiring the trustee to act with utmost good faith, loyalty, and
prudence. Trustees must adhere to the trust instrument's terms and exercise their
powers in a manner consistent with the trust's purpose.
2. Analyzing Paul's Actions:
In the given scenario, the trust deed does not specifically authorize Paul to purchase a
delivery vehicle. Therefore, the critical question is whether this purchase aligns with the
duty to preserve trust assets.
2.1. Preservation of Trust Assets:
Preservation entails ensuring that the trust assets are maintained, protected, and, if
possible, enhanced for the beneficiaries' benefit. The acquisition of a delivery vehicle
could potentially aid the efficient transport of computer equipment, leading to
improved sales and profits. Thus, Paul might argue that the purchase benefits the trust
in the long run.
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