#3109 - Administration Of Trusts - GDL Equity and Trusts

Appointment and Removal of Trustees

• matters to consider:

  • 1. capacity to be a trustee

  • 2. no. of trustees required

  • 3. appointment of trustees

  • 4. retirement + removal of trustees.

• sources of rules:

  • 1. trust instrument: usually governs.

  • 2. Trustee Act 1925: provisions often adequate, but overruled by trust instrument.

Capacity: anyone with capacity to hold property, but no children.

• s20 LPA 1925: appointment of infant to be trustee in relation to any settlement void (even personal property).

Number of trustees

• maximum:

  • trust of personalty: no maximum (but in practice, hard to agree if too many).

  • trust of land: 4 (if more appointed, first 4 named willing/able act) – s34 Trustee Act 1925.

• minimum: generally, only 1.

  • but: receipt of capital money from land: 2 trustees, unless sole trustee is trust corporation – s27(2) LPA; s14(2) Trustee Act 1925; ss18(1), 94, 95 Settled Land Act 1925.

• no requirement to maintain same number: unless specified in trust instrument.

Appointment of Trustees

- First trustees:

• 1. by trust instrument: usually appoints first trustees.

  • inter vivos trusts: trustees generally parties to deed (can declare trust + vest property).

• 2. by person nominated in trust instrument: if no trustees named or none able/willing.

• 3. by court: last resort – power: inherent jurisdiction / Judicial Trustees Act 1896 / Trustee Act 1925.

• requirements: notice + acceptance (express/implied) needed – Robinson v Pett [1734].

  • trust by will: if appointed both executor + trustee, person can renounce executorship + take up trusteeship.

  • cannot disclaim after acceptance – Re Sharman’s WT [1942].

  • cannot make partial disclaimer.

    - Additional trustees: s36(6) Trustee Act 1925 – may be appointed as long as no. of trustees not > 4.

    - Replacement trustees:

• s36(1) Trustee Act 1925: new trustees can be appointed if trustee (original or substituted): dead, out of UK for >12 months, desires discharge, refuses/unfit/unable to act, infant.

• s37(1)(c) Trustee Act 1925: at least 2 trustees (or trust corporation) must remain in office (except where only 1 originally appointed + can give valid receipts for capital money).

- Method of appointment of new trustees:

• normal appointment: s36(1) Trustee Act 1925 - must be in writing (+ pref. by deed), by:

  • 1. person nominated by trust instrument (if any - rare). – s36(1)(a).

  • 2. surviving/continuing trustees or PR of last surviving/continuing trustee – s36(1)(b).

    • trustees appoint jointly: but trustee not competent/unwilling to act need not concur.

  • power cannot be delegated: Trustee Act 2000 s11(2)(c).

• appointment by court: s41(1) Trustee Act 1925 – when appointment under s36 impracticable.

  • esp. to substitute incapable trustee: mental disorder (Mental Health Act 1983), bankrupt, corporation in liquidation/dissolved.

Retirement of trustees

• retirement without replacement: s39(1) Trustee Act 1925 – requires:

  • 2 trustees/trust corp. remaining.

  • declaration by deed: by retiring trustee.

  • consent by deed: by remaining trustees/person empowered to appoint.

• retirement and replacement: s36(1) Trustee Act 1925 (see above).

Removal of trustees: s36(1) Trustee Act 1925 (see above).

Appointment/removal of trustees by direction of beneficiaries: s19 Trusts of Land and Appointment of Trustees Act 1996 – beneficiaries can direct trustee(s) to retire or to appoint specified person as trustee.

• conditions – s19(1):

  • s19(1)(a): no person nominated by trust instrument to appoint trustees.

  • s19(1)(b): beneficiaries all sui juris + together absolutely entitled to trust property (all must agree).

    • cf. Saunders v Vautier dissolution: can apply in same situation.

• must be in writing – s19(2).

Vesting in New Trustees

• s40 Trustee Act 1925: automatic vesting of trust property in new trustees appointed by deed.

• exceptions – s40(4):

  • (a) land conveyed by mortgage for securing money subject to trust (except land conveyed on trust for securing debentures/debenture stock).

  • (b) land held under lease prohibiting assignment/disposition without license or consent (unless consent obtained or vesting declaration legally not a breach).

  • (c) share/stock/annuity/property only transferable in books kept by a company/other body or in manner directed by statute.

• registration: point at which title passes in registered land.

Trustees Joint Tenants of Trust Property

• 1. right of survivorship applies.

• 2. office + trust property devolve on survivors.

• 3. new trustees: same powers/duties as original trustees.

• 4. death of last trustee: property vests in his personal representatives until new appointment.

  Delegation by Trustees

- General principle: trustee must act in person + not delegate.

• principle: delegatus non potest delegare – person may not delegate powers which have been delegated to him (by settlor).

• improper delegation: trustee remains liable for what other person does.

- BUT: some delegation allowed.

• original position: administrative vs. decision-making – Speight v Gaunt [1884].

  • ministerial/administrative tasks delegable: e.g. solicitor to do conveyancing, stockbroker to buy/sell shares.

  • decisions + discretions NOT delegable: e.g. investment decisions, distribution of trust assets.

• Trustee Act 2000: delegation of functions relating to investment allowed (see ch.16).

- Trustee Act 2000 (delegation by trustees as a body).

• delegable functions – s11(1): trustee may authorise agent to perform any ‘delegable functions’.

  • s11(2): delegable functions – everything EXCEPT:

    • (a) any function re: distribution of assets (e.g. choosing beneficiaries in discretionary trust; powers of maintenance + advancement.)

    • (b) decision re: whether payments made from capital or income.

    • (c) power to appoint trustee.

    • (d) any power permitting delegation conferred by other enactment or trust instrument.

• agent – s12: may be trustee(s) but not beneficiary (even if also a trustee).

• terms of agency – s14.

  • s14(1): trustees can arrange remuneration for agent.

  • s14(2) + (3): some terms not allowed unless reasonably necessary:

    • s14(3)(a): permitting agent to appoint substitute.

    • s14(3)(b): restricting liability of agent/substitute to trustees/beneficiary.

    • s14(3)(c): permitting agent to act in circs. capable of giving rise to conflict of interest.

• trustee’s duties + liability in respect of delegation.

  • (repealed: s23 + s30 Trustee Act 1925: had been unclear (esp. whether pre-1926 duty to supervise agent (Speight v Gaunt) survived + extent of trustees’ liability for acts of agent).)

  • duty of care – s1 Trustee Act 2000: applies to appointing/reviewing agents.

  • s22: duty to keep agent arrangements under review + intervene if necessary.

  • s23: trustee not liable for act/default of agent unless failed to comply with duty of care (in (a) appointing agent; or (b) keeping arrangements under review under s22).

    • N.B. unauthorised delegation: trustee always liable.

- Trusts of Land and Appointment of Trustees Act 1996 (delegation by trustees as a body).

• s9: trustees of land can delegate functions relating to land by power of attorney...