In this case it would be suggested that Flora aged 24 would not be able to receive the money as she is over the age of majority. It would also be suggested that under section 31 Hotspur could be entitled to the money as it is for the maintenance of his education, however under section 31(3) it would appear that it could be refused. The trustees would have to be unanimous on any decision regardless of whether Geraldine or Paul showed their approval.
The power of advancement allows trustees to pay capital sums to, or on behalf of the beneficiaries, sometime before he is able to claim the fund. This power is given either by the trust instrument or section 32 of the TA 1925. Under advancement the trustees have wide powers of application, up to 1/2 of the beneficiaries share of the trust may be advanced. The trustees must use their discretion when deciding whether or not to advance capital, it must be for the benefit and advancement of the beneficiary, Re Pauling’s ST (1964). Therefore advancement is the power to apply capital, unlike maintenance, which deals with income.
Advancement means making a permanent provision for a beneficiary, Re Williams WT (1953). It would be suggested that Paul's son Hotspur, may benefit under advancement, it would appear that Flora would also get the money required to set up her own practice, this is based on the discussion of the trustees who may or may not allow it. Another problem is that Geraldine, who also has life interest, may feel prejudiced, thus not give her written consent.
So advancement is given a wide meaning as it assumes the money will be used to benefit the beneficiary, in Paul's case it would. However the trust upon giving Paul the money must continue to monitor the situation, making sure the money is used for the purpose it was given.
Geraldine who has three children aged six; seven and eight wants to move the family to Spain in order to avoid paying UK tax. Geraldine is asking Dermot for a variation of the rules of the trust. In Stephenson v Barclays Bank Trust Co Ltd [1975], the court followed the view that if conditions of the trust were allowed to vary, then the beneficiaries could force the trustees to do duties different to those they had originally accepted. In Re New [1901] the court gave the view, to alter the terms of the trust had to be for emergency reasons. This decision was followed by the Court of Appeal in Chapman v Chapman [1954].
Under the SLA 1925 and the TA 1925 section 57(1) there was a possibility to vary trusts for certain reasons. However under section 1 of the VTA 1958, which overlaps the SLA 1925 and the TA 1925 the courts increased the power, to allow variation of the terms of a trust. In Re Cohen [1965] the court said that a variation must benefit individuals. The court will adopt the test of what a reasonable sui iuris adult benefiting would have done.
In Re Weston’s Settlements [1969] the court refused to vary the trust for a family to move to Jersey for tax purposes. Lord Denning said,
“The moral and social benefits of an English upbringing were not out weighed by tax savings”.
In Re Seale’s Marriage Settlement [1961] the court allowed the family to resettle in Canada, because their family had lived there for many years. In Re Windeatt’s WT [1969] the court followed the same principle in Re Seale’s, the family wanted to move to Jersey, the court took the view that; as they had relatives living on Jersey for nineteen years it would be appropriate to want to settle nearby.
It would therefore be suggested under the Re Weston’s Settlement [1969] decision that Geraldine would be refused. If Paul and Geraldine both agree in writing it may alter the decision of Dermott and the trustees, the decision however, is left entirely up to the trustees, who do not have to give any reasons why they came to that decision, Re Beloved Wilkes’s Charity (1851).
The beneficiaries may not be happy with the decision granted by Dermot and the trustees, they may wish to end the trust under the rule in Saunders v Vautier (1841), this can be achieved by both the life beneficiaries in the case (Geraldine and Paul) deciding they wish to terminate the trust. Both Paul and Geraldine need to be in agreement before this rule can be achieved, after dissolving the trust beneficiaries can resettle on any terms they wish.
As we have previously mentioned the trustees must make themselves familiar with the contents and terms of the trust, making sure that the funds are invested properly, Re Brogan (1888). The TIA 1961, which replaced and repealed section 1 of the TA 1925, gave guidelines for investment by trustees. In May 1996 HMT issued a consultation document, Investment Power of Trustees, this proposed that the TIA 1961 should be replaced with an order under section 1 of the DCOA 1994. The standard of care was to be found in Re Whiteley (1886) where Lindley MR said,
“ It is the case required for that the ordinary prudent man would it take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide”.
This was approved in Bartlett v Barclays Bank Trust Co Ltd (No1) (1980).
The old laws on investment have now been repealed and modernised by section 3(1) of the TA 2000. The act modernises investment, acquisition of land, and appointment of agents, nominees and custodians and trustees remuneration. The trustees must manage the trust properly, thus promoting capital and producing income. In Gowan v Scargill [1985] the court required that the trustees must not refrain from acting in the best interests of the beneficiaries.
As Dermot is a fiduciary, he must have no personal interest and must at all times benefit the trust, not himself. Therefore any investments Dermot makes must be with the thoughts of the beneficiaries and the original wishes of the testator.
Remuneration is another issue regarding implementation of a trust, under the old laws it was not possible for a trustee to take any profits from the trust. The general rule was that payments should not be made if it affects the manner in which the trustees perform their duty. All money acquired by the trustees acting in their capacity as trustees belongs to the trust. Under old laws it was not possible for a trustee to gain payment by way of salary, even if they had done a job, which was both rewarding to the trustee, benefited the beneficiaries and had no question of mistrust, Boardman v Phipps [1967].
The court will look to the trustees gain, not the loss to the trust. Under section 30(2) of the TA 1925 remuneration could be fixed by contract or expressly stated in the terms of the trust, it allowed the reimbursement of expenses if directly concerned with the business of the trust. The court could authorise reimbursement if it felt that it was fitting. Alternatively a trustee could be remunerated under the common law method of quantum meruiti, whereby the trustee can claim an allowance, if it can be shown that they have done a good job and put a lot of hours into the work. In O'Sullivan v Management Agency and Music Ltd [1985] the court looked at the whole situation surrounding the case. The court expressed, that they had to use their discretion when calculating profit made by a trustee where he/ she has put in hard work. The trustee must show that he/ she has acted in good faith and have no causal link between his position and any profit made by him.
Under the Law Commission's (1997) recommendations for reform in Trustees Power and Duties (Law Com 146), it was recommended that trustees, in the absence of express terms should be entitled to charge, as long as charges are reasonable and do not exceed the amount the trustee would charge in the reasonable course of his/ her business.
Delegation is also an important point to discuss with effect to remuneration, the ability of a trustee to find an agent who can do a professional job is governed by section 23(1) of the TA 1925. Therefore the trustee can employ and pay an agent, to do the work that a trustee could have done himself, with more benefit to the trust
The TA 2000 has now updated the position of remuneration, section 28 (a) gives provision in the trust instrument, sections 28(5), 29(2) a and b of part five all give reasons for the right to reimbursement and remuneration.
The trustee is also under a duty to make sure there is no conflict of interest between themselves and the trust, Re Macadam [1946] contrasted with Re Dover Coalfields Extension [1908].
Upon the retirement of the managing director from a small private company, which belongs to the trust, Dermott has undertaken the role for himself. It could be said that there is a conflict of interest. Dermot is a trustee accepting a salary and a share of the profits. However since Dermot has taken over, company profits have risen and his business acumen has greatly improved the value, thus the benefit to the beneficiaries has improved. Dermot has undertaken the job and acted in good faith, there is no question that he has not put the trust first, or that anything underhand has occurred. It would therefore be suggested that Dermott has used his discretion and expertise to enable the trust to increase its profits, therefore benefiting the beneficiaries. Under the TA 2000 it would be assumed that Dermot has acted in good faith and put a lot of time and energy into the business.
As one can see the law relating to a trustee's duties and powers are widespread, the courts prefer to leave the trust to the trustees. It seems the court will use their powers only in cases where there has been a breach. The Law Commission realised the need to re-modernise the old laws with updated ones, the TA 2000 has now replaced the TOLATA 1996 and other acts mentioned with regard to Investment’s, remuneration and delegation.
BIBLIOGRAPHY
Hayton D.J, The Law of Trusts and Equitable Remedies, 11th Ed; (Sweet and Maxwell, London. 2001)
Martin J.E, Modern Equity, 15th Ed; (Sweet and Maxwell, London. 1997)
Todd P, Cases and Materials on Equity and Trusts, 3rd Ed; (Blackstone Press, London. 2000)
Todd P, Lowrie S, Textbook on Trusts, 5th Ed; (Blackstone Press, London. 2000)
TABLE OF STATUTES
Deregulation and Contracting Out Act 1994
Settled Land Act 1925
Trustees Act 1925
Trustees Act 2000
Trustees Investment Act 1961
Trusts of Land and Appointment of Trustees Act 1996
Variation of Trusts Act 1958
TABLE OF CASES
Bartlett v Barclays Bank Trust Co Ltd (No 1) (1980) CH 515
Boardman v Phipps [1967] 2 AC 46 H/L
Chapman v Chapman [1954] AC 429
Gowan v Scargill [1985] CH 270
O`Sullivan v Management Agency and Music Ltd [1985] QB 428
Re Beloved Wilkes’s Charity (1851) 3 Mac and G440
Re Brogan (1888) 38 ChD 546
Re Cohen [1965] 1 WLR 1229
Re Dover Coalfields Extension [1908] 1 CH 65
Re Macadam [1946] CH 73
Re New [1901] 2 CH 534
Re Pauling’s ST (1964) CH 303
Re Seale’s Marriage Settlement [1961] CH 574
Re Weston’s Settlements [1969] 1 CH 223
Re Whiteley (1886) 33 ChD 347
Re Williams WT (1953) 2 WLR 365
TABLE OF CASES CONTINUED
Re Windeatt’s WT [1969] 1 WLR 692
Saunders v Vautier (1841) 10 LJ CH 354
Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 88
Turner v Turner [1984] CH 100.
INTERNET RESOURSES
ARTICLES
Thirsk, David. The Development of the Trust within the Trustees Act 2000. [2001] 1 WLR 475.
Trustees Investment Act 1961
turner v turner [1984] CH 100.
Re Pauling’s Settlement Trusts[1964] CH 303.
Re Williams WT (1953) 2 WLR 365
Variation of Trusts Act 1958.
Todd, P. Lowrie, S. Textbook on Trusts, 5th Ed. (Blackstone Press: London. 2002) at page 402.
Deregulation and Contracting Out Act 1994.
Re Whiteley (1886) 33 ChD 347
Trust of Land and Appointment of Trustees Act 1996.