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Ch 9 Ts duties when running a trust - Coggle Diagram
Ch 9 Ts duties when running a trust
difference between powers/ duties
Bs can compel Ts to perform duties - Bs have very little control over the exercise of powers.
DOC
A T must take 'all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own' - objective standard but can be raised for professional Ts.
duties when starting out as T?
T newly appointed must: 1. ensure they have been properly appointed; 2. ascertain what the trust property consists of and take all reasonable and proper measures to obtain control of the trust property- if the transfer of trust property to the new T is outstanding, the new T must press for that transfer to take place; 3. review the trust document and associated paperwork to familiarise themselves with the trust and how it works- other Ts must produce papers relating to the administration of the trust; 4. enquire into the past business of the trust to ensure there have been no past breaches of trust, and take appropriate action to remedy any breaches; and 5. where there are chattels held on trust, ensure that a proper inventory is drawn up.
Duty to act impartially between Bs
T must act impartially in the interests of each B. This does not mean Bs must be given equal treatment, nor does it mean Ts must consult either or both Bs, nor give either side a 'fair hearing'. However, a T must not benefit one B at the expense of another and may find themselves in breach of trust if they continually prefer the interests of one B over the other
Duty to act personally and unanimously
co-Ts must generally take decisions unanimously (unless trust doc says otherwise).
must act personally - outside of statutory powers to delegate decision-making to others, Ts cannot sit back and allow others to take decisions on their behalf. If a T: 1. leaves matters in the hands of a co-T without enquiry; 2. allows trust funds to remain in the sole control of a co-T; 3. fails to watch over and, if necessary, correct the conduct of their co-Ts; or 4. fails to take action knowing a co-T was committing, or about to commit, a breach of trust; this passive T may be liable to make good any loss Bs suffer. cannot allow experts to make decisions for them.
duty to exercise discretions properly
whilst Bs cannot compel Ts to exercise discretionary powers in a particular way, they can intervene if Ts exercise those powers improperly. having decided to exercise a power, Ts must exercise that power: 1. in good faith, 2. rationally; 3. for the purpose for which it was created, 4. with regard to relevant matters and without regard to irrelevant ones; 5. with regard to all relevant facts and 6. with regard to any legitimate expectation that a B might have that the power be exercised in a particular way.
Ts do not generally need to give reasons for their decisions (but if they do give reasons, Bs and court can enquire into soundness of them). However, where a particular B has a legitimate expectation that a discretion will be exercised in their favour, the Ts may be obliged to give reasons and advance warning if they are thinking of exercising their discretion differently.
disclosure of info
Bs are entitled to see the following docs: 1. the trust doc or will that created the trust; 2. the trust accounts and 3. a schedule of investments or other docs showing how trust property is invested.
what can Bs not demand?
documents recording Ts deliberations on a discretion or power.
if Bs want to see docs that record reasons Ts took for exercising or not exercising a power, they can apply to court for disclosure. court will consider application under its inherent jurisdiction to supervise the administration of the trust. in considering whether to order disclosure, court starts with presumption such docs should not be disclosed. unless such disclosure is in interest of the sound administration of trust. court may refuse disclosure where it would cause family members to fall out, or if it were to reveal confidential information about the finances or state of health of individual B.