24 Questions
What is the consequence of a trustee's refusal to act or disclaimer?
The trust remains valid and a new trustee can be appointed
In what circumstances can a minor have a beneficial interest in a trust?
Only if they are an express or land trust beneficiary
What is the consequence of a trustee's wilful default?
The trustee is liable for any losses incurred by the trust
Who can appoint a new trustee to replace an existing one?
The current trustee or any other person specified in the trust deed
What is the effect of a trustee's delegation of their duties?
The trustee remains liable for the trust and the delegated person acts as their agent
In what circumstances can a trustee be removed from their position?
In any of the above circumstances or if they are unfit to act
What is the effect of a trustee's advance of trust funds to a beneficiary?
The beneficiary's interest in the trust is reduced by the amount advanced
Who is entitled to the remuneration of a trustee?
Only the trustee
What is the condition for a trustee to retire with replacement according to Section 40(1)?
Done in writing, get approval from co-trustees or court, find replacement
What happens to the trust property if the last surviving trustee dies according to Section 40(8)?
The trust property passes to the trustee's personal representative but they don't have to take their duty
What is one of the grounds for removal of a trustee by the court?
Dishonesty or incompetence
When is a trustee entitled to receive remuneration for their work?
Only if explicitly authorized in the trust instrument
What is the effect of a trustee's disclaimer before acceptance?
The trustee is not liable for any breach of trust
What is the difference between a duty and a power of a trustee?
A duty is a legal obligation, while a power is not mandatory
Under what circumstances can a court relieve a trustee from liability for a breach of trust?
If the trustee acted honestly and reasonably
Under what section can a trustee apply to court to retire without getting consent from co-trustees?
Section 45
What is the purpose of tracing in trust law?
To recover trust property or its equivalent
What is the consequence of a minor breach of trust?
The trustee fails to follow directions to appoint a new trustee
What is the effect of a breach of trust by a passive trustee?
The passive trustee is liable for the breach if they did not take reasonable steps to prevent it
When can a trustee delegate their powers?
In certain circumstances, such as when it is impracticable or necessary for the proper administration of the trust
What is one of the factors that the court considers when removing a trustee?
Conflict of interest
What is the effect of a wilful default by a trustee?
The trustee is personally liable for the breach
Can a trustee claim remuneration for their work if it was not expressly authorized?
No, never
What happens to the trust property if the personal representative of the last surviving trustee holds it until the court appoints a new trustee?
The personal representative holds the trust property until the court appoints a new trustee
Study Notes
Trustee's Appointment and Removal
- A trustee can be removed if they are unfit to act, e.g. due to bankruptcy (Re Barker and Re Roche)
- A trustee can be removed if they are incapable of acting, e.g. due to mental illness (Re Lemann)
- A trustee can be removed if they are a minor (Re Vindargoff)
- A trustee can be removed by the court if they are dishonest, incompetent, or in breach of trust (Re Smirthwaite)
- A new trustee can be appointed by the court, settlor, or another trustee (S40, S45)
- A trustee's appointment can be made through a trust deed, will, or other documents (I)
Effects of Appointment
- The legal title of the trust property goes to the trustee (Sec 44)
- The trustee's name is recorded on the land title, share certificates, and bank books (Sec 44)
Remuneration of Trustees
- A trustee is not entitled to remuneration unless it is authorized in the instrument, by the court, or by statute (S46)
- A trustee can be entitled to remuneration if they have made a profit while managing the trust (Re Duke)
- A trustee's remuneration must be fair and reasonable (Re Duke)
Breach of Trust
- A breach of trust can occur before, during, or after the trust (E)
- A breach of trust can be serious, e.g. leaving the trust fund, or minor, e.g. failing to follow directions (E)
- A trustee can be liable for a breach of trust if they did not take reasonable steps to prevent it (Re Haji Ali)
Defenses
- The court can relieve a trustee wholly or partly if they acted honestly, fairly, and reasonably (S63)
- A trustee can get compensation if the breach occurred with the consent and request of the beneficiary (S64)
Remedies
- Tracing: following the trust property to claim it back (G)
- Acceptance of trusteeship: a trustee can accept or disclaim their appointment (G)
Termination of Trusteeship
- A trustee can retire with a replacement (S40)
- A trustee can retire without a replacement if they have the consent of the co-trustees or the court (S43)
- A trustee can apply to the court to retire if they did not get consent from the co-trustees (S45)
- If the last surviving trustee dies, the trust property passes to their personal representative (S40)
Duties of Trustees
- A trustee has a legal obligation to act in the best interests of the beneficiary (A)
- A trustee has the power to manage the trust property, but it is not mandatory (A)
- A trustee must act honestly, fairly, and reasonably (B)
This quiz tests your understanding of trust laws, obligations, and related concepts. It covers scenarios involving trustees, settlers, and disclaimers.
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