Please enable JavaScript.
Coggle requires JavaScript to display documents.
Delegation - Coggle Diagram
Delegation
Problem Questions
S11(1)
S11(2)
S12
S15
Limits on asset management delegation
Section 15 Trustee Act 2000
(1) The trustees may not authorise a person to exercise any of their asset management functions as their agent except by an agreement which is in or evidenced in writing.
(2) The trustees may not authorise a person to exercise any of their asset management functions as their agent unless—
(a)they have prepared a statement that gives guidance as to how the functions should be exercised (“a policy statement”), and
(b)the agreement under which the agent is to act includes a term to the effect that he will secure compliance with—
(i)the policy statement, or
(ii)if the policy statement is revised or replaced under section 22, the revised or replacement policy statement.
(3) The trustees must formulate any guidance given in the policy statement with a view to ensuring that the functions will be exercised in the best interests of the trust.
(4) The policy statement must be in or evidenced in writing.
(5) The asset management functions of trustees are their functions relating to—
(a)the investment of assets subject to the trust,
(b)the acquisition of property, which is to be subject to the trust, and
(c)managing property, which is subject to the trust and disposing of, or creating or disposing of an interest in, such property.
Before trustees can legitimately delegate they must set forth in writing an investment strategy to be followed by the fund manager and they must regularly review what the fund manager is doing to ensure their written instructions are being followed. Just because they are putting the day to day management of the trust assets into the hands of a fund manager does not mean that the trustees are absolved of a liability to keep them under review and to make sure the trust assets are being properly managed.
Daniel v Tee [2016] EWHC 1538
risky investment made on the advice of a solicitor who was not a direct trustee or executor of the testamentary trust. there had been no lawful delegation to the partner, as the requirements of s15 had no been followed
However, as the losses incurred would have taken place even if the delegation had been properly done and as the trustees had involved their fellow partner in good faith, the trustees were not liable for the impermissible delegation of their investment functions.- para 188-90
In Daniel v Tee,104 in pursuing an investment strategy that was too risky, the trustees were acting on the advice of responsibly chosen investment advisors, and were held not to have acted unreasonably in relying on that advice. The trustees may have a claim in negligence against the advisers, but this may be of little value if the advisers are insolvent. - Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm).
Who is eligible for appointment as as an agent?
Section 12 Trustee Act 2000
(1) Subject to subsection (2), the persons whom the trustees may under section 11 authorise to exercise functions as their agent include one or more of their number.
(2) The trustees may not authorise two (or more) persons to exercise the same function unless they are to exercise the function jointly.
(3) The trustees may not under section 11 authorise a beneficiary to exercise any function as their agent (even if the beneficiary is also a trustee).
(4) The trustees may under section 11 authorise a person to exercise functions as their agent even though he is also appointed to act as their nominee or custodian (whether under section 16, 17 or 18 or any other power).
Delegation
Section 11 Trustee Act 2000
(1) Subject to the provisions of this Part, the trustees of a trust may authorise any person to exercise any or all of their delegable functions as their agent.
(2) In the case of a trust other than a charitable trust, the trustees' delegable functions consist of any function other than-
(a) any function relating to whether or in what way any assets of the trust should be distributed,
(b) any power to decide whether any fees or other payment due to be made out of the trust funds should be made out of income or capital,
(c) any power to appoint a person to be a trustee of the trust, or
(d) any power conferred by any other enactment or the trust instrument which permits the trustees to delegate any of their functions or to appoint a person to act as a nominee or custodian.
S11(2) includes a list (a-d) of functions which cannot be delegated, these powers are only exercisable by the trustees and aren’t delegable. Important as investment in modern world is complicated
Application of the Duty of care
Schedule 1 Application of Duty of Care (3)
(1)The duty of care applies to a trustee—
(a)when entering into arrangements under which a person is authorised under section 11 to exercise functions as an agent;
(e)when carrying out his duties under section 22 (review of agent, nominee or custodian, etc.).
Review of Agents
Section 22 Trustee Act 2000
(1)While the agent, nominee or custodian continues to act for the trust, the trustees—
(a)must keep under review the arrangements under which the agent, nominee or custodian acts and how those arrangements are being put into effect,
(b)if circumstances make it appropriate to do so, must consider whether there is a need to exercise any power of intervention that they have, and
(c)if they consider that there is a need to exercise such a power, must do so.
(2)If the agent has been authorised to exercise asset management functions, the duty under subsection (1) includes, in particular—
(a)a duty to consider whether there is any need to revise or replace the policy statement made for the purposes of section 15,
(b)if they consider that there is a need to revise or replace the policy statement, a duty to do so, and
(c)a duty to assess whether the policy statement (as it has effect for the time being) is being complied with.
(3)Subsections (3) and (4) of section 15 apply to the revision or replacement of a policy statement under this section as they apply to the making of a policy statement under that section.
(4)“Power of intervention” includes—
(a)a power to give directions to the agent, nominee or custodian;
(b)a power to revoke the authorisation or appointment.
Linked Functions
Section 13 Trustee Act 2000
(1)Subject to subsections (2) and (5), a person who is authorised under section 11 to exercise a function is (whatever the terms of the agency) subject to any specific duties or restrictions attached to the function. For example, a person who is authorised under section 11 to exercise the general power of investment is subject to the duties under section 4 in relation to that power.
(2)A person who is authorised under section 11 to exercise a power which is subject to a requirement to obtain advice is not subject to the requirement if he is the kind of person from whom it would have been proper for the trustees, in compliance with the requirement, to obtain advice.
In some circumstances it may be appropriate for the trustees to delegate some or all of their functions to better qualified people