Week 7 Powers, Trusts, and Fiduciary Duties PDF

Wednesday, 4 December 2024 16:54 Week 7: Powers, Trusts, and Fiduciary Duties Key Concepts What is the Difference Between a Trust and a Power? 1. Trusts: ○ Definition: Trustees are legally obligated to carry out duties for the benefit of be ○ Example: A trustee must distribute inc...

Wednesday, 4 December 2024 16:54 Week 7: Powers, Trusts, and Fiduciary Duties Key Concepts What is the Difference Between a Trust and a Power? 1. Trusts: ○ Definition: Trustees are legally obligated to carry out duties for the benefit of be ○ Example: A trustee must distribute income annually to specified beneficiaries un ○ Consequence of Breach: A beneficiary can sue for breach of trust. 2. Powers: ○ Definition: Powers are discretionary—there is no obligation to act unless the po ○ Example: A trustee may have the power to allocate funds among a class of bene distribution. Key Case: Re Hay’s Settlement Trusts (1982) Trustees with fiduciary powers must: 1. Consider whether to exercise the power. 2. Act in good faith and within the scope of the power. Failure to do so may result in judicial intervention. Types of Fiduciary Powers 1. General Power: ○ Allows the fiduciary to distribute property to anyone, including themselves. 2. Special Power: ○ Limits the class of beneficiaries (e.g., only children or employees). 3. Intermediate Power: ○ Excludes certain groups but allows discretion over others. Practical Example Imagine a will that says: “My trustee has the power to distribute $10,000 annually to any of my children.” Here: The trustee has special power (limited to children). If they fail to consider this power, beneficiaries may challenge their conduct. Week 8: Trustee Duties 1. Duty to Invest eneficiaries. nder the trust terms. ower is exercised improperly. eficiaries without a set  If they fail to consider this power, beneficiaries may challenge their conduct. Week 8: Trustee Duties 1. Duty to Invest Trustees must balance risk and return when managing trust property. Statutory Basis: Trustee Act 2000. Case Example: Learoyd v Whitely (1886): ○ Trustees were criticized for making speculative investments that jeopardized the 2. Duty of Loyalty Trustees must prioritize the interests of beneficiaries over personal gain. Case Example: Boardman v Phipps (1967): ○ A trustee profited from using trust information and was required to return those good faith. 3. Duty of Impartiality Trustees must balance competing interests between: ○ Life tenants (who receive income). ○ Remaindermen (who receive capital later). Case Example: Nestlé v National Westminster Bank (1993): ○ Trustees failed to maintain impartiality, prioritizing income beneficiaries over ca Practical Scenarios 1. Neglecting Capital Growth: ○ Beneficiaries of the remainder may sue if the trustee invests too conservatively t beneficiaries. 2. Speculative Investments: ○ Life tenants can sue if risky investments reduce income yields. Week 9: Remedies for Breach of Trust Types of Remedies 1. Compensatory Remedies Definition: Trustees must compensate for trust losses. Case Example: Target Holdings v Redferns (1996): ○ The court assessed the loss at the time of judgment, emphasizing trustees' respo mismanagement. 2. Disgorgement of Gains Definition: Trustees must return profits gained through breach. Case Example: Murad v Al-Saraj (2005): ○ Any profits made from improper actions were presumed to arise from the breac Practical Applications e trust fund. e profits despite acting in apital growth. to prioritize income onsibility for ch unless proven otherwise.  Definition: Trustees must return profits gained through breach. Case Example: Murad v Al-Saraj (2005): ○ Any profits made from improper actions were presumed to arise from the breac Practical Applications 1. If a trustee sells trust property and profits personally, the beneficiary can claim: ○ Loss-based remedies: Compensation for the trust's diminished value. ○ Gain-based remedies: Disgorgement of the trustee’s profit. Week 10: Constructive and Resulting Trusts Constructive Trusts Definition: Imposed by the court to address wrongdoing or prevent unjust enrichment Case Example: Gissing v Gissing (1971): ○ A constructive trust arose in favor of a spouse contributing to the family home. Resulting Trusts 1. Presumed Resulting Trust: ○ When there’s no evidence of intention to gift property, it results back to the tran ○ Case Example: Dyer v Dyer (1788): § Contributions to property purchase created a presumed resulting trust. 2. Automatic Resulting Trust: ○ When a trust fails, property reverts to the settlor. ○ Case Example: Vandervell v IRC (1967). Understanding Resulting Trusts with a Scenario Scenario: A father pays for a house in his child’s name without explanation. ○ Presumption: The child holds the property on a resulting trust for the father. ○ The child must prove it was intended as a gift to rebut this presumption. Week 11: Charitable Trusts Key Principles 1. Public Benefit: ○ Must benefit a significant portion of the public, not private individuals. ○ Case Example: IRC v Baddeley (1955): § A trust for specific community members failed to meet the public benefit r 2. Exclusively Charitable Purpose: ○ Mixed charitable and non-charitable purposes invalidate the trust. ○ Case Example: Chichester Diocesan Fund v Simpson (1944). Categories of Charitable Purposes 1. Advancement of Education: ○ Scholarships, research, and teaching resources. ○ Case Example: Re Mariette (1915). ch unless proven otherwise. t. nsferor. requirement.  ○ Case Example: Chichester Diocesan Fund v Simpson (1944). Categories of Charitable Purposes 1. Advancement of Education: ○ Scholarships, research, and teaching resources. ○ Case Example: Re Mariette (1915). 2. Relief of Poverty: ○ Provision of housing, food, or financial aid. ○ Case Example: Re Coulthurst (1951). Week 12: Non-Charitable Purpose Trusts General Rule These trusts are typically invalid due to the lack of beneficiaries to enforce them. Exceptions: ○ Re Denley’s Trusts (1969): § A trust benefiting identifiable individuals indirectly may be valid. Equitable Orders Specific Performance Definition: Court compels fulfillment of contractual obligations. Case Example: Beswick v Beswick (1968). Freezing Orders Purpose: Prevent dissipation of assets. Case Example: Mareva Compania v International Bulkcarriers (1975). Search Orders Definition: Allow entry to search for evidence. Case Example: Anton Piller KG v Manufacturing Processes Ltd (1976). Personal Remedies Against Trustees 1. Compensation for Loss: ○ Reparation for trust fund deficiencies. ○ Case Example: Magnus v Queensland National Bank (1888). 2. Equitable Compensation: ○ Applied when restitution is impractical. ○ Case Example: 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)). 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)).