Week 7: Powers and Trusts Quiz

Week 7: Powers, Trusts, and Fiduciary Duties

• Trusts vs. Powers: Trusts involve legal obligations to act for the benefit of beneficiaries, while powers are discretionary. Breaching a trust allows beneficiaries to sue. Discretionary powers don't obligate action unless specified.

• Trust Definition: Trustees are legally obligated to fulfil duties for beneficiaries' benefit. Examples include annual income distribution to specified beneficiaries.

• Power Definition: Powers are discretionary; there's no obligation to act unless specified. An example includes a trustee allocating funds among beneficiaries.

• Key Case: Re Hay's Settlement Trusts (1982): Trustees with fiduciary powers must consider whether to exercise the power and act within its scope while considering all parties. Failures can lead to judicial intervention.

• Types of Fiduciary Powers: These involve discretion, impacting who/how the trustee can apply the funds or assets.

  • General Power: Allows distribution to anyone, including the trustee themselves.

  • Special Power: Limits distribution to a specific class (e.g., only children).

  • Intermediate Power: Excludes some groups but allows discretion over others.

• Practical Example: A will assigning a trustee power to distribute $10,000 annually to any child gives the trustee a special power limited to children. Mismanagement can lead to challenges.

Week 8: Trustee Duties

• Duty to Invest: Trustees balance risk and return when managing trust property. Statutory basis is the Trustee Act 2000. Historical case Learoyd v Whitely (1886) criticizes trustees for speculative investments.

• Duty of Loyalty: Trustees prioritize beneficiaries' interests above their personal gain. Boardman v Phipps (1967) highlights that profiting from trust information requires returns to the trust.

• Duty of Impartiality: Trustees balance competing interests of beneficiaries (like life tenants vs. remaindermen). Nestlé v National Westminster Bank (1993) illustrates the importance of impartiality in prioritizing different beneficiary needs.

Week 9: Remedies for Breach of Trust

• Compensatory Remedies: These compensate for trust losses or mismanagement. Target Holdings v Redferns (1996) focused on assessing losses at the time of the judgment, emphasizing trustee accountability.

• Disgorgement of Gains: Trustees must return profits acquired through breaches. Murad v Al-Saraj (2005) shows presumed profit gains arising from breaches, requiring returns.

Week 10: Constructive and Resulting Trusts

• Constructive Trusts: Courts impose these to address wrongdoing or prevent unjust enrichment. Gissing v Gissing (1971) demonstrates a constructive trust favoring a spouse contributing to a family home.

• Resulting Trusts:

  • Presumed: When no gifting intention is clear, assets may revert to the original owner under a trust that arises out of the circumstances. Dyer v Dyer (1788) is an example involving contributions to property purchases.

  • Automatic: Property reverts to the settlor when a trust fails, illustrating a reversion to the property's grantor. Vandervell v IRC (1967) exemplifies the automatic return to the original party under a trust failure.

• Practical Application Scenarios: A father paying for a child's house without explicit explanation exemplifies a resulting trust scenario where the presumption defaults to the original grantor.

Week 11: Charitable Trusts

• Public Benefit: Charitable trusts must benefit a significant portion of the public, not private individuals. IRC v Baddeley (1955) supports this with context.

• Exclusively Charitable Purpose: Mixed charitable/non-charitable purposes invalidate a trust. Chichester Diocesan Fund v Simpson (1944) illustrates this.

Week 12: Non-Charitable Purpose Trusts

• General Rule: Non-charitable trusts are typically invalid due to lacking beneficiaries to enforce them.

• Exceptions: Re Denley's Trusts (1969) shows that trusts benefiting identifiable individuals indirectly are valid.

• Equitable Orders: These involve court actions to compel contractual fulfilment (Beswick v Beswick (1968)). Freezing orders prevent asset dissipation (Mareva Compania v International Bulkcarriers (1975)). Search orders allow investigating evidence (Anton Piller KG v Manufacturing Processes Ltd (1976)).

• Personal Remedies (Against Trustees):

  • Compensation for Loss: Reparation for trust fund deficiencies (Magnus v Queensland National Bank (1888)).

  • Equitable Compensation: Applied when restitution is impractical (Swindle v Harrison (1997)).

• Proprietary Remedies:

  • Constructive Trusts: Imposed to recover misused property (Re Hallett's Estate (1880)).

  • Equitable Lien: Creates a security interest over property (Re Diplock's Estate (1948)).

Test your understanding of powers, trusts, and fiduciary duties with this quiz. Learn about the differences between trusts and discretionary powers, obligations of trustees, and key legal cases that shape these concepts. Engage with questions that challenge your knowledge of fiduciary responsibilities.