Read the summary and the most important questions on WS7. Actions against trustees and fiduciaries

• 1 Introduction

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• Is a personal claim of any use if the trustee is insolvent?

  If the trustee has insufficient personal assets and is insolvent the personal claim will be of little use. 

• 2 Personal claim for compensation against a trustee who is in breach of trust

• 2.2 Identify the breach(es) of trust

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• Explain the trustees' investment duties under s. 3 Trustee Act 2000 and how this ensures that the trust funds are invested properly?

  Trustees have a duty to invest trust funds. The word 'investment' is not defined but it is suggested to mean the purchase of an asset that will generate an income or capital return. A depreciating asset such as a car is a bad investment.

• Explain the standard investment criteria that the trustees must follow under s.4 Trustee Act 2000?

  The trustees must perform the following:
  

  • Consider the standard investment criteria.
  • Occasionally review the investments and whether they should be varied.
  • Suitability of investments.
  • can include unauthorised investments?
  • Diversification of investments.

• Why is it important for the trustee to obtain advice under s.5 Trustee Act 2000 before investing in the trust fund?

  The trustee must obtain and consider proper advice from someone they reasonably believe to be qualified by their ability and practical experience concerning the proposed investment before exercising their powers.

• When exercising his duty of care, what circumstances must the trustee regard in particular under s.1 Trustee Act 2000?

  • Any special knowledge or experience 
    
  • Professionally qualified 

• Does the trustees retirement affect his liability?

  The general rule is that once the trustee has retired from the trust, they are no longer liable for any breaches committed after unless the trustee retired to facilitate the breach.

• Before the trustee can delegate, what must they do under s. 15 Trustee Act 2000?

  The trustee cannot appoint a person to exercise any asset management functions as their agent unless the agreement is in writing and the agent is given guidance through a policy statement.

• Will the inactive trustees be liable if they leave the management of the trust in the hands of one of the trustees?

  The trustees will be liable if the management of the trust is left in the hands of one of the trustees and not all the trustees. 

• What happens is the trustees leave the affairs of the trust in the hands of another trustee without inquiry?

  If the trustees leave the trust in the hands of the other trustees without enquiry, they are liable unless the trust business has been delegated to one of the trustees in writing under ss 11 and 12  Trustee Act 2000. 

• What should the trustee do if they are aware that another trustee is committed a breach of trust?

  The trustees are liable if they are aware of the other trustees breach of trust but fail to do anything.