Duties of Trustees (Outline)

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This article provides an extremely short outline of the Duties of Trustees Due to the complexity of this area of the law, it is highly recommended that one reads the detailed explanation. This outline, however, seeks to provide a succinct account of what are the legal principles and tests pertaining to the the duties of trustees which could be used for exam purposes (after one is already familiar with the more detailed notes).


  • Duty of loyalty - to adhere to all terms of the trust and not go against it. This involves the core fiduciary duty of placing the interests of the beneficiary (especially financial ones) ahead of the personal interests of the trustee: Cowan v Scargill.[1]
  • Duty to preserve trust property - ensure that the property does not fall into disrepair and includes:
    • Taking steps to collect all debts owed to the trust: Re Brogden; Billing v Brogden[2]
    • Duty to insure the property as a would prudent man would: Pateman v Heyen.[3]
    • Duty to invest properly - specifics involve:
      • Discretions to invest are often unfettered: s 14.
      • 'Properly' encompasses(:s 14B):
        • All existing rules of equity.
        • Act in the best interests of the beneficiaries.
        • Not engage in speculative/hazardous investments.
        • Act impartially toward beneficiaries.
        • Take advice, the reasonable costs of which can come out of the trust fund.
      • General, commonsense considerations are listed in s 14C.
      • In determining whether the trustee has breached this duty:
        • Standard of care is how a normal, prudent person would invest. In the case of a professional trustee, standard of care is that of a prudent professional trustee: s 14A.
        • Trustee's actions are not judged in hindsight: Nestle v National Westminster Bank.[4]
        • Trustees who acted prudently but nonetheless made a reasonable mistake or error of judgment will not be in breach: Re Chapman.[5]
        • Courts use the portfolio theory in evaluating investments - the entire investment portfolio is looked at, and losses can be offset by other gains: ss 90 - 90A.
  • Duty to act gratuitously - the trustee is not to receive remuneration for his services unless:
    1. If the trust instrument expressly or impliedly allows it: Re Thorley.[6]
    2. If an agreement to that effect has been reached between the beneficiaries and the trustee. The beneficiaries must be legally capable of entering a contract to do this (eg, not a child).
    3. If the court allows it: Re Duke of Norfolk Settlement Trusts.[7]
  • Duty to keep proper accounts and provide information - keep accounts and evidence of the trust property and give it to the beneficiaries upon request.


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End

This is the end of this topic. Click here to go back to the main subject page for Property, Equity and Trusts 1.

References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. [1985] Ch 270
  2. (1888) 38 Ch D 546; Partridge v Equity Trustees Executors and Agency Co Ltd
  3. (1993) 33 NSWLR 188.
  4. [1994] 1 All ER 118, 134.
  5. [1896] Ch 763, 768.
  6. [1891] 2 Ch 613.
  7. [1982] Ch 61.
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