Equity supervision 4

Was a decision made Re Hays Settlement trust

"Normally the trustee is not bound to exercise it, and the court will not compel him to do so. That, however, does not mean that he can simply fold [his] hands and ignore it, for normally he must from time to time consider whether or not to exercise the power, and the court may direct him to do this."

Duty of skills and care learoyd v Whitel

"The duty of a trustee is not to take such care only as a prudent man would take if he had only himself to consider; the duty rather is to take such care as an ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide...."

Deference the general attitude, see Tempest v Lord Camoys (1882) 21 ChD 571 (CA).

"[I]t is to the discretion of the trustees that the execution of the trust is confided, that discretion being exercised with an entire absence of indirect motive, with honesty of intention, and with a fair consideration of the subject. The duty of supervision on the part of this Court will thus be CONFINED TO THE QUESTION OF of the honesty, integrity, and fairness with which the deliberation has been conducted, and will not be extended to the accuracy of the conclusion arrived at, except in particular cases."

Cloutee v Storey

Power of Appointment—Fraud on Power—Appointment (not operating so as to pass the legal estate or interest) void—Bona fide Purchaser for Value without Notice (assignee's of that LEGAL TITLE might be able to make out a defence) Held, therefore, the beneficiaries in default of appointment could bring an action to set aside the fraudulent appointment.

Inadequate deliberation Futter v HMCR

The rule is not concerned with the exercise of a power outside its terms, in bad faith, or for improper purposes: such an exercise of power is void. An exercise of the power within its terms will be prima facie voidable if the trustees' inadequate deliberation amounts to a "breach of fiduciary duty". Such a prima facie voidable exercise of power will not in fact be voidable if the trustees' deliberations were based on professional advice obtained with due care and skill - even if the advice later proves to have been wrong. Where trustees have deliberated so poorly that they breach their fiduciary duties, their exercise of a dispositive power may be set aside. The relief sought is equitable rescission: if there is a recognised ground for denying rescission, it will not be ordered. But the ability to award relief on condition - the person who seeks equity must do equity - makes equitable rescission more available. Remaining questions: what types of breach of duty fall in the category "breach of fiduciary duty" for the purpose of the Hastings-Bass "rule"? (Cross-refer to Professor Worthington's lectures on fiduciary duties.)

Fry v Fry

the value of the inn fell as the operation of railway drew business away from the inn. T failed in: duty to sell asset within a reasonable time. [Should have accepted one of the tenders because of good price] Consequences was that they were ordered to pay into the trust the difference between the value of the inn at the date of the hearing and the value of the inn at the time they could have sold it.

Re Londonderrys settlement

f the beneficiary had a paramount proprietary right in the trust documents, disclosure might cause infinite trouble in the family, out of all proportion to the benefit which might be received from the inspection of the seem: at 935 per Danckwerts LJ Salmon LJ expressly adopted the proprietary right theory of the beneficiaries right to access the documents

Duty to keep accounts Eglin v Sanderson

if trustees did not owe anything but failed to provide accounts -coerced beneficiaries into suing them to get court order. Court would order costs against trustees.

Duty to be properly informed Scott v National Trust

matters which are relevant to the decision it is however for advisors to advice and for trustees to decide: trustees may not (except in so far as they are authorised to do so) delegate the exercise of their discretion, even to experts' Question: Whether this is a freestanding duty. Simply an application of trustee equitable duty of care. Trustees careful, skillful and diligent - mean that they need to be informed about what they should do.

Schmidt v Rosewood Trust Ltd

The case replaces the old test of proprietary right to disclosure of trust documents with a judicial discretion to disclose. No right to disclosure as of right balance the competing interests of different beneficiaries, the trustees themselves, and the third parties. An applicant with no more than a theoretical possibility of benefit ought not to be granted any relief. Clearer and more principled because the court is no longer required to speculate whether a particular document is or is not a trust document. the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts." Schmidt v Rosewood Trust Ltd

What is an investment Re Wragg 1919

Investment: meanings 'to apply money in the purchase of some property from which interest or profit is expected and which property is purchased in order to be held for the sake of the income which it will yield'; whilst the noun 'investment' when used in such a clause may safely be said to include as one of its meanings 'the property in the purchase of which the money has been so applied'."

A Manx development

"[N]o beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief."

Duty relating to investment Speight v Gaunt

"a trustee must not choose investments other than those which the terms of his trust permit, though they may be such as an ordinary prudent man of business would select for his own money" The company's current activities were relevant but so were the circumstances in which its assets were obtained, the objects set out in the formal documents and the company's future plans. The issue was whether the company held assets to make profit from the business which it carried on or whether they were merely incidental to carrying on another business.

Duty of skills and care

...

Re Brogden 1888

It is the duty of trustees to press for the payment of the trust funds to them, and if they are not paid within a reasonable time to enforce payment by legal proceedings. And it is especially their duty to take action promptly if by the terms of the trust payment has been deferred to the expiration of a specified time.

Hollows v Lloyd

Settlement—New Trustees not fixed with notice of incumbrances affecting the trust estate where Non—disclosure of Incumbrances by retiring Trustee/no notice in trust document [marriage settlement]

Turner v Turner

T may not know that they had discretion and so will not be considered have exercised it, because to exercise a power to appoint property, need to consciously exercise. Signed trust documents without even reading them: void

Harries v Church Commissioners of England

The Church Commissioners are entitled to take ethical considerations into account in forming their investment policy provided that that does not risk financial detriment to the trust . The proper object of the funds held by the Church Commissioners was the provision of financial assistance to the clergy, and their policy of excluding certain investments which were likely to be morally offensive was a proper one since there remained open an adequate width of alternative investments. However, they were right to refuse to be more restrictive in their policy to an extent that might give rise to a risk of financial detriment to the proper object of the trusts.

What is an investment Cooke v Medway Housing Society

The housing amounted to an investment because it was run with the intention of realising a profit. The object of providing social housing at affordable rents was not incompatible with the intention of making profits. The company's current activities were relevant but so were the circumstances in which its assets were obtained, the objects set out in the formal documents and the company's future plans. The issue was whether the company held assets to make profit from the business which it carried on or whether they were merely incidental to carrying on another business.

Was the discretion exercised Turner v Turner

This vitiated the exercise of the power of appointment and so the purported appointment was a nullity.

Re Hays Settlement 1982

Trustees have a right to be indemnified out of the trust fund for expenses properly incurred by them on behalf of the trust. Although they are personally liable on obligations that they enter into as trustees, they can look to the trust fund for reimbursement. If they become insolvent, the creditors of the trust are subrogated to the trustees' personal rights of recourse to the fund.As those rights of recourse can be enforced only if the trustees could have exercised them, they will not be available to a creditor if the transaction was unauthorised or if the trustees were acting in some way in breach of trust. By giving trustees powers which many consider to be necessary if they are to act in the best interests of the beneficiaries, the risk that the transaction may be in breach of trust will be commensurately reduced.

Re Strahan

Upon appointment -duty to sue for prior breaches; 1) if knew of breach 2) nothing to lead to a suspicion that any default had been made by the old trustees- entitled to assume everything had been duly attended to by the old trustees.

Extra financial considerations - best interests of beneficiaries Cowan v Scargill

best interests of the present and future beneficiaries of the trust, holding the scales impartially between different trustees paramount the best interests of the beneficiaries are normally their best financial interests trustees must exercise their powers in the best interest of the beneficiaries without regard to their own personal interests or views; (2) where the trust is required to provide financial benefits maximising the beneficiaries' financial benefit is, subject to rare exceptions, normally the paramount concern of the trustees; trustees must act exclusively in the best interests of the beneficiaries, best interests usually meaning 'their best financial interests' (per Megarry V-C in Cowan v Scargill [1984] 2 All ER 750 at 760). Trustees are therefore generally not permitted, at least in the context of family trusts, to subordinate considerations of financial return to non-financial criteria, be they ethical or moral or political.

Bad faith Re Smith

power to invest "in such stocks, funds, and securities as [the trustees] should think fit". Kekewich J held that the power was to be read as: "as they should honestly think fit" s to trustee who had taken bribe, although his decision was in literal terms of power given to him, he acted in bad faith. His exercise of power, though literally correct, was inequitable. Therefore, he had to replace the value that the wrongful investment depleted on the trust fund. Restore trust fund to original level. Co-trustee not liable for anything, had not breached duty of good faith. If the trustees act in bad faith, that takes their action outside the scope of power given. Trustees action would therefore be void rather than voidable. If the exercise of power, beneficiary entitled as a right to have consequences undone. If voidable, cannot be entitlted as right, discretion from court to decide whether to grant you relief.

Breakspear v Ackland 2008

schmidt does not require or justify a departure from the londonderry principle that namely that the process of the exercise of discretionary dispositive powers by trustees is Inherently confidential, and this confidentially exists for the benefit of beneficiaries rather than merely for the protection of the trustees Wish letters are prima facie confidential, but the letter in this case should nevertheless be disclosed schmidt is confined to discretionary trust I can content to limit myself to wish letters arising in the context of family discretionary trusts rather than employee trusts, pension trusts or other business trusts, leaving for another occasion the manner in which the londonderry principle in applicable to them. was Briggd J correct to say that trustees have a discretionary power to decide whether to allow inspection of a wish letter, and that the exercise of this power may be reviewed in the same way as any other discretionary power of trustees.