Class notes
Trustees Duties/Fiduciary Duties and Breach
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Lecture notes of 22 pages for the course Equity And Trusts at UoS (.)
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Trustees Duties/Fiduciary Duties and BreachTrustees’ Duties
Trustees/Fiduciaries
A trustee is a trustee, but it also always a fiduciary.
Trustees have trustee duties, and also always fiduciary duties.
Some people can be fiduciaries, but not trustees.
Due to the nature of the relationship.
Solicitor-client.
Doctor-patient.
Only fiduciary duty.
Express trustee – a person who knows they are a trustee, and
volunteered to do so.
Constructive trustee – a person who is placed in the position of a
trustee by equity.
Knight v Earl of Plymouth.
Lord Hardwick - ‘A trust is an office necessary in the concerns between man
and man…if faithfully discharged, attended with no small degree of trouble
and anxiety…’.
An onerous job – a great deal of responsibility/duties.
Look after and manage the money.
Do what the testator said the trust should do.
Many obligations and rules that they must follow.
It is a great act of kindness that anyone would ever agree to be a
trustee.
All the way that these things are discharged are governed by cases
and statute.
Armitage v Nurse.
Lord Justice Millet – ‘There is an irreducible core of obligations owed by the
trustees to the beneficiaries and enforceable by them which if fundamental
to the concept of a trust. If the beneficiaries have no rights enforceable
against the trustees, there are no trusts. The duty of trustees to perform the
trust honestly and in good faith for the benefit of the beneficiaries is the
minimum necessary to give substance to the trust. The duty to perform
honestly and in good faith refers to the fiduciary element of the trustees’
duties and responsibilities’.
Bristol and West Building Society v Mothew.
Lord Justice Millet - ‘A fiduciary is someone who has undertaken to act for or
on behalf of another in a particular manner in circumstances which give rise
to a relationship of trust and confidence’.
A trusting relationship with confidence between them and the
beneficiary.
Trustee-beneficiary.
Solicitor-client.
Doctor-patient.
Obligation of loyalty.
, Trustee owes duty to beneficiary.
Fiduciary owes duty to principal.
Lord Justice Millet – ‘he is not subject to fiduciary obligations because he is a
fiduciary, it is because he is subject to those obligations that he is a fiduciary’.
Fiduciary obligations arise bottom up because you’re in a relationship
of trust and confidence that you’re a fiduciary.
You can find yourself in a fiduciary relationship without knowing it.
Appointment of Trustees
There can’t be a trust without trustee(s).
If the means of appointing the trustees is laid out in the trust instrument, the trust
instrument will always prevail primarily.
Only in the absence of something it would be necessary to have a look at
other rules.
If there’s more than one sole trustee, all the trustees hold the property as joint
tenants if one of them dies.
On the death of a sole trustee, his personal representatives become trustees.
By the settlor.
If they have very detailed and specific procedures for the lifetime of the trust,
this will always prevail.
By the testator.
By the court.
Inherent jurisdiction of the court to step in if the details of the trust are not
followed, or if there is lack of clarity and specification.
By legislation.
Trustee Act 1925.
Where the trust instrument does identify particular individuals as
having the power to appoint trustees, this act regulates how this is to
be done.
Trusts of Land and Appointment of Trustees Act 1996 s19(5).
Enables the beneficiaries to direct the existing trustees to appoint a
particular person as a trustee.
Trustee Act 1925 s41.
Court may whenever it is expedient to appoint a new trustee or new
trustees as it is found in expedient, difficult or impractical to do so
without assistance of the court. The court may then make an order
appointing a new trustee or trustees.
Law of Property Miscellaneous Provisions Act section 14.
If the sole trustee dies intestate (without leaving a will), the statute
steps in and the property will vest in a public trustee.
By case law.
, Saunders v Vautier.
The beneficiaries under a trust also have certain powers depending on
the nature of the trust.
Where beneficiaries are adult and of sound mind, and are absolutely
entitled to the beneficial interest, then they may so long as they are
all agreed, direct the trustees to terminate the trust and transfer the
trust property to them absolutely.
Beneficiaries can either keep the property and do what they
want with it, or terminate the existing trust and create a new
one, appointing new trustees.
Re Tempest.
The people who had the power to appoint a new trustee (one of the
trustees appointed by the testator had died), couldn’t agree.
They came to court and there was opposition from one of the
beneficiaries as to the appointment of one particular person.
Other beneficiaries petitioned the court to sanction this
person’s appointment.
Trustee Act used.
Court identified 3 key concerns that any court should have in mind
when exercising its discretion under the act to appoint a new trustee:
Where possible, the court should have regard to the wishes of
the settler or testator.
o If there is something in the trust instrument that
should prevail.
Where there’s disagreement amongst the beneficiaries over
the appointment of a particular person as trustee, they should
not be appointed.
o Job of the trustees is to look after all the beneficiaries’
interests equally and without favour.
Court must consider the appointment of a particular person in
the context of the other trustees and the smooth
administration of the trust.
Removal/Retirement of Trustees
Re Chetwynd’s ST.
Justice Barrel - No trustee accepts the responsibility for the term of his
natural life, or for more than a reasonable period.
Even if you do take on the role of a trustee, if you then decide it’s too
onerous and would like to step down, you can.
Trustee Act 1925 s39(1).
A trustee can step down voluntarily so long as the conditions are met:
The conditions state that the remaining trustees must consent to the
retirement of a trustee, and there must be at least 2 remaining
trustees.
If these conditions are not met, this legislation can’t be used to retire.
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