Power and Duties of Trustees

 Essence of power in trusteeship is the recognition that a trustee has discretion to do or not to do certain acts to
discharge trustee’s duty. (Discretion to exercise power)

 Court will not interfere with a trustee’s decision which are exercised in good faith

 Scope for court to interfere is limited but not excluded

o Halsbury’s Laws of Malaysia: Trustee may not use the powers which the possession of the legal estate in the
trust property confers on him in law except in a proper way for the legitimate purposes of the trust. If he is
about to exercise a power improperly, he may be restrained by injunction.

 Generally, court will interfere if trustees exercise power in mala fide or unreasonableness.

o Re Hastings-Bass, deed

 Held: court may interfere when power exercised in mala fide or if trustee takes into account irrelevant
factors or did not take into account relevant factors.

 Judicial interference justified when it is clear that trustee would not have acted as he did:

 (a) if he had taken into account considerations that he should not have taken into account.

 (b) if he had failed to take into account considerations that he should have taken into account.

 Duties and powers vary according to character of trust

 Some powers are in principle widely available to trustee, but now statutory provisions serve to facilitate the
management of trust

1. Section 2(2) of Trustees Act 1949: powers conferred by the Act on trustees are in addition to those conferred
to by the trust instrument itself. Statutory powers apply, unless otherwise stated, if trust instrument did not
express a contrary intention. (so basically, prioritise terms of trust instrument. And if trust instrument doesn’t
not provide for or against the duty in statute, statute duty applies)

DUTIES

 Certain fundamental duties arising from fiduciary nature of trustee, eg; duty of loyalty & duty not to make
personal profit out of trust property

 Duties may also be modified by the trust instrument

Other type of duties;

Duty to maintain custody of document title Duty to provide information

Duty to invest Duty to maintain equality between

beneficiaries
Duties towards beneficiaries
Duty to make proper distribution
1. Duty to Invest

 Investment: To employ money in the purchase of anything from which interest or profit is expected.

 Re Power

o Involved the purchase of a house for occupation by a beneficiary

o Purchased produce no income

o Held: this purchase cannot amount to an investment

 Profit making activity: Example - purchase shares in a company

 Trustee’s Obligation to invest trust funds in investments authorised for the purpose, through trust
instrument, legislation or by the court.

o Must be fair to the income of all beneficiaries entitled to receive

o Must be honest and avoid risky or speculative investment

o Trustees Act provides a limited range of authorised investments

o Adhere standard of care

 Take such care as an ordinary prudent person would for the benefit of other people for whom
he or she felt morally bound to provide as per Re Whitely

 General Considerations

o 1. Standard of care

 Re Whiteley (Starting basic proposition)

 Duty of trustee if to take such care as an ordinary man would take if he were to make
investment for the benefit of other people for whom he is morally bound to provide.

 Learoyd v Whiteley(Adapted above)

 General Rule: law requires of a trustee no higher degree of diligence in the execution of
his office than a man of ordinary prudence would exercise in the management of his own
affairs

 But, don’t have discretion in investing in monies as if he were dealing with his own
estate.

 Duty of trustee is to confine himself to the class of investment permitted by trust and to
avoid all investment which are attended with hazard (not like businessmen of prudence,
who can invest in riskier ones)

 Thus, standard of care is of ‘ordinary prudence in own affairs’. but ‘prudence’ is given a more
flexible scope
  Re Mulligan

 Prudence provides a flexible standard, one which will change with economic conditions
and in light of contemporary thinking and understanding.

 Thus, if proper prudence is exercised, even if loss was resulted because of trustees’ act to
invest, he will not be liable for it(cause prudent)

o 2. Securing Advice

 Duties of trustee may include seeking appropriate advice(acting solely on good faith may not
be sufficient)

 Lee Tak Suan v Tunku Dato’ Seri Shahabudin bin Tunku Besar Barhanuddin and Ors

 Some committee members of the Selangor Turf Club were alleged to have made a huge
investment without due diligence.

 Held: committee secured the advice of an independent financial adviser

 Was also assisted by club’s finance and administration manager whom the court deemed
to have necessary financial experience.

o 3. Professional Trustees

 Generally have higher standard to be expected of them

 Bartlett v Barclays Bank Trust Co Ltd

 Higher degree of care is plainly due from someone like a trust corporation which carries
on a specialised business of trust management.

 Express Powers of Investment

o 1. Trust Instrument

 Trustee may be given wide power by the trust instrument to select investments

 Re Harari’s Settlement Trusts

 Power conferred on the trustees was formulated as being investments “as the trustees may
think fit

 Held: under the plain meaning of words used, investment allowed for which the trustee
honestly think are desirable investment (to decide otherwise would be to read words in
the settlement which are not there)

 Khoo Tek Keong v Ch’ng Joo Tuan Neoh

 Trustees were authorised “to invest all moneys liable to be invested in such investments
as they in their absolute discretion think fit”
  Trustees made first loan and charged interest on the security of jewellery

 Trustee made second loan to chetties but without any securities

 (Note: generally, trustees not allowed to lend moeny. But this case, trust instrument say
can so can)

 Held: wide powers were conferred pursuant to the investment clause to the trustees to
invest.

 As such, first loan was proper(secured loan) and a valid investment

 Second loan was improper and amounted to a breach of trust because of the absence of
security(would have been allowed if provision authorised unsecured personal loan)

o 2. Statutory range of investmen

 Provided for in Part II of Trustees Act 1949 from Section 4 to 15

 Section 4: can invest in securities(immovable property included) of Federal

Government/Parliament, Government of the State of Sabah or the State of Sarawak or the
Republic of Singapore.

 Section 5: securities in section 4 can include a unit trust scheme approved by the Yang di-
Pertuan Agong by notification published in the Gazette

 Section 6: Duty of trustee in choosing investment(Consider diversification of

investments/suitability of trust/seeking proper advice/etc)

 Section 9: discretion to invest conferred to trustee but subject to any consent or durection
required by trust instrument

 Section 12: trustee lending money on the security of property

 Section 13: Liability for loss by reason of improper investment(make good to sum advanced in
excess with interest. Relates to improper advancement of trust monies on the security of
charge)

 Section 14: Powers supplementary to powers of investment(llending money)

 Section 15: power to deposit at banks and to pay calls

 Section 59: enlargement of power of investment authorised by the court in dealing with trust
property(land)

 Lee Brothers Plantation & Realty (M) Sdn Bhd v Lee Yeow Teng

 The directors and subscribers of the plaintiff company had purchased by shares, 61 pieces
of land, by forming a company with their properties converted into shares. Some of the
 lands which were purchased or converted were held by the owners as trustee for their
children.

 The defendant D is a beneficiary under one of the trusts and is the son of F the patriarch
of the family who had all along had actual care and management of the company; as a
result of familial disputes, D's father resigned in February 1989 as executive director,
after 15 years. D fearing that certain lands were to be sold to a third party and would
defeat his interests, lodged caveats on these lands. L applied for removal of these caveats.
The issue to be determined is whether the trustees had the power to sell the said lands
which were trust property.

 Held: As a beneficiary of the trust, D has the right to the lands under the trust for his
benefit. The trustee did not obtain a Court order to sell the trust properties nor was there
consent by D. D therefore has a caveatable interest and can maintain the caveat even
though he had acquired and received the benefit.

 Section 59(1) – Enlargement of powers of investment

 Section 59(2) – Court’s Discretion

 Wilkie v Equity Trustees Executors and Agency Co Ltd

 Those ordinarily recurring repairs which more fully apportion to the enjoyment of the
tenant for life and which last only for a short time- such as papering and painting, will be
borne by incomes.

 Structural repairs, greater and considerable, are to be charged wholly to corpus, as the
advantage obtained from them tells very much more in favour of the remainderman.

2. Duty to Convert
 Duty to convert forms the basis of the specific rules of conversion and apportionment. It is to deal with
under-productive property. The trustee owes a duty to the beneficiary to convert or re-investment the
property into securities produce higher rate of earning.
 The law requires the trustees to act impartially in dealing with beneficiaries. A trustee must thus act
impartiality between life tenant and remainderman.
 Remainderman is:
o Persons who inherits or is entitled to inherit property upon the termination of the estate of the
former
o Usually this occurs due to the death or termination of the former owner’s estate, but this can also
occur die to a specific notation in a trust passing ownership from one person to another.
o Example: to John for life, and then to Jane. Jane is the remainderman.
o holds an interest in the remainder and will become its possessor at some future time.
  For example, if the owner of property gives a piece of his real property to "to A for life, and
then to B," B is entitled to a future interest, called a remainder, and B is termed a
remainderman. B’s interest becomes possessory only on A’s death.
o May exercise the right to hold and use the property in the trust only after the trust has been
completely dissolved.
o S/he will inherit the property upon the death or termination of the former owner’s estate.
o The property may also be inherited when there is a specific notation of the same in the trust.
 The rules governing investment by trustees are an attempt to strike a balance between the provision of
income for the life tenant and the preservation of the capital for the remainderman.
 Nestle v Westminster Bank Plc [1994] 1 All ER 118
o Nestle (a man, NOT the company Nestlé) left money under his will for his granddaughter. She was
expecting a lot more money to be left for her as he was a rich man. She subsequently found out that
the bank did not use the full scope of its investment powers → it had left the money in safe trustee
stock when in fact the trust instrument had given them the power to invest in potentially more
profitable investment
o Held: No breach of trust. The trustee (bank) should have familiarised itself with the trust
instrument; if they did they would have known scope of its investment power. However, as she was
unable to prove loss - because she was unable to say that if the bank had invested less
conservatively she would have made more money or come up with a reasonable figure of what the
property should be worth. Hence, her claim failed.
 This duty forms the basis of the specific rules of conversion and apportionment.
 Duty to convert – to deal with under-productive property, the trustee owes a duty to the beneficiary to
convert or re-investment the property into securities produce higher rate of earning.
 Howe v Earl of Dartmouth
o There may be duty to convert and reinvest authorized investments in the trust fund to maintain
fairness between the life tenant and the remainderman.
o Trustees have the duty to investment and apportionment
3. Duty to Apportion
 Where there is a duty to convert, there is, in the absence of an intention that life tenant shall enjoy the
income until sale, a duty also to apportion fairly between the life tenant and the remainderman the
original property pending conversion.
 Howe v Earl of Dartmouth
o Where there is a duty to convert under the rule in Howe v Earl of Dartmouth, there is, in the
absence of an intention that the life tenant shall enjoy the income until sale, the second limb of the
rule is that the trustee is under a duty also to apportion the property fairly between the life tenant
and the remainderman until conversion.
4. Duty to distribute
 A failure on the part of a trustee to distribute the trust property to those entitled under the terms of the
trust instrument amounts to a breach of trust.
 There is a high degree of care on the part of the trustees to ascertain the correct beneficiaries
 Eaves v Hickson
o A trust was set up for the benefit of a man's children, who could not benefit from the trust as they
were illegitimate (i.e. born out of wedlock). He forged a marriage certificate so they could benefit
from the trust.
o Held: The father was to be personally liable for the loss occasion. The children had to give the
money back.
o It is also clear from this case that dishonesty/fraudulence of the trustees was not necessary for this
liability (despite what Lord Selbourne said in Barnes v Addy)
 Barnes v Addy
 Strangers of a trust will not usually be liable, unless “those agents receive and become
chargeable with some part of the trust property” (i.e. knowing receipt) or “unless they
assist with knowledge in a dishonest and fraudulent design on the part of the trustees”
(i.e. dishonest assistance)
 But, Section 32 of Trustees Act provides a protection for trustees to distribute
 Section 32(1): for conveyance/distribution among persons entitled to any property, trustees may give
notice by advertisement in the Gazette, of their intention to make such conveyance or distribution and
requiring any person interested to send to the trustees within the time(not less than two months) a notice
with particulars of his claim in respect of the property.
 Section 32(2): trustee may convey/distribute having regard to claims of which the trustee had notice,
and shall not be liable to any person who claims from the trustee after expiry of time(without giving
prior notice)
 Section 32(3): all shall apply notwithstanding anything to the contrary in the trust instrument.
 Trustee may also use “Benjamin Order” to enjoy protection in distributing according to the terms of
the order
o The Benjamin order is an English law order made by the court for the distribution of assets on
death when it is uncertain whether or not a beneficiary is alive.
o An issue sometimes faced by a plaintiff when one is establishing the identity or whereabouts of
persons to whom the deceased’s estate or part of the estate should be distributed and the inability,
despite adducing all available evidence, of ruling out the possibility that a person exists or that
person had descendants who might still be alive.
o Where this is so, they can seek BO and will enjoy protection where they distribute in accordance
with the terms of the order.
o Used when trustee knows of the existence of a beneficiary but are not certain as to the beneficiary’s
whereabouts
o Order made in pursuant to the court’s power to authorise the distribution of the assets even if not
all beneficiaries are known.
o Court must be satisfied before making the order, that all practicable inquiries had been undertaken.
 o Benjamin Orders are rare, and not easy to obtain. The court will consider the “sufficiency” of the
inquiries made by the estate trustee. In considering this, the court will look for information about:
 How much time has elapsed since the death of the testator?
 What specific steps have been taken to locate the missing person, and over what period of
time?
 Who has made the inquiries? Are they appropriately qualified?
 Do the inquiries take into account consideration of the possible location of the missing person?
 Are further inquiries likely to produce any more information?
 What is the amount at state?
 Re Aldhous
o Where no beneficiaries responded to the advertisement. The executor then paid estate money to the
Crown.
o Held: Executor not liable.
 Re Benjamin
o David Benjamin left his residuary estate to all 12 children equally. However, a year before he died,
one of his children had disappeared in France.
o Held: In the absence of contrary evidence, the court presumed that Benjamin’s beneficiary had
died. His share was to be allocated accordingly
o Benjamin Order: A Court Order which presumes that a beneficiary had pre-deceased the settlor. If
so, trustees can then allocate trust fund as if the beneficiary has died. The order is used in cases
where the beneficiaries’ whereabouts are unknown.
o If he eventually turned up, then he may trace his share from the recipients. The trustees would not
be liable for breach of trust when they distributed after the court order.
o However, before the order is made, the court must be satisfied that all possible / reasonable
inquiries have been made to locate the beneficiaries.
 Re Green’s Will Trust (1985)
o T left estate to son, who was missing in bombing mission in Berlin.
o Held: T’s estate to be distributed on the footing that son has died in the mission.
o Emphasised that Benjamin’s Order does not vary or destroy beneficial interests. Merely enables
trust property to be distributed in accordance with the practical probabilities. If missing beneficiary
reappeared, he may reclaim his interest.
5. Duty to provide account and information
 A trustee is required to maintain accurate accounts which ought to be made available on demand for
inspection by the beneficiaries.
 Pearse v Green
o Only beneficiaries with a right to the income of the trust are entitled to see all the accounts while,
strictly speaking, a person with a remainder interest is only entitled to see accounts relating to their
interest in the trust.
 Section 27(4): trustee may from time to time cause the accounts of the trust property to be
examined/audited by an independent accountant, but not more than once in every year (UNLESS nature
of trust/trust property requires more frequent checks)
 Right to information also depends on position of beneficiaries. Income beneficiaries are entitled to
examine the full set of accounts. Capital beneficiaries are restricted to accounts relation to capital
transactions
 Legal Foundation = beneficiaries are beneficial owner of trust property and thus are equitable owners of
relevant trust documents
 A beneficiary is generally entitled to inspect all documents relating to the affairs of the trust.
 O’Rourke v Darbishire (the English House of Lords referred to a beneficiary's right to access to
documents on the basis of a "proprietary right")
o A beneficiary will normally be permitted to inspect and take copies of essential trust documents on
the basis of the proprietary right he holds over them.
o That normal right does not extend to detailed information about the affairs of companies owned by
the trust. To obtain information of that kind, the beneficiary must make out a special case.
o In order to make out a special case, the beneficiary must specify the documents that he or she
wishes to see.
o There must be no valid objection by the trustees or directors, or (in special circumstances),
beneficiaries whom the trustees consider should properly be consulted upon the matter.
o The beneficiary seeking disclosure must give proper assurances that he or she will not disclose the
documents to anybody but his or her own legal or other advisers and will not make copies save as
may be properly advised by his or her legal or other advisers.
 Limitation & Exceptions:
i. The right does not extend to documents which the beneficiaries have no beneficial interest.
ii. It also does not apply to documents which belong to the trustees.
iii. It also does not apply to documents which records the reasons for the trustees’ decisions eg in
relation to the exercise of trustee’s discretions.
o Hartigan Nominees Pty Ltd v Rydge
 Decision of court specified three scenarios where there is no duty to disclose information
 Beneficiaries’ right does not extend to notes made for or by a trustee of discussions with other
beneficiaries despite they are made in order to assist the trustee in deciding how to exercise a
discretionary power under which Plaintiff beneficiary may have possible benefit
 Possible to envisage documents communicated to a trustee which are confidential and should
not be disclosed to the beneficiary (provision of trust instrument expressly/impliedly
established terms of confidentiality)
 In Discretionary Trust because such is not a mere commercial document, but a private
transaction where trustee may dispose settlor’s property in manner which he is entitled to
choose (because settlor placed confidence in his trustee)
 Re Marquess of Londonderry’s Settlement – Categories of trust documents
 o A beneficiary did not like the small sums proposed to be distributed to her. She wanted information
about the reasons for the decision.
o The Court however held and made clear that in some cases it is appropriate to withhold documents
from beneficiaries on the grounds of confidentiality. The Court set out categories of documents that
trustees are not normally bound to disclose, on the basis of protecting the well-established principle
that in the exercise of discretionary powers trustees are not required to provide reasons.
o The Court of Appeal held that there was no need for disclosure of reasons, because it could cause
family strife, fruitless litigation or make the trustees’ role impossible.
 Re Gulbenkian’s Settlement Trusts
o Trustees were given discretion to pay or not pay income to certain beneficiaries.
o Lord Reid: “They are given an absolute discretion. So if they decide in good faith at appropriate
times to give none of the income to any of the beneficiaries the court cannot pronounce their
reasons to be bad. And similarly if they decide to give some or all of the income to a particular
beneficiary the court will not review their decision.”
 Schmidt v Rosewood Trust Ltd
o Held: issue of access to trust documents is to be viewed as an aspect of the court’s supervisory
control over the administration of trusts
o No beneficairy is entitled to right of disclosure in issues that are of personal or commercial
confidentiality
o Court has to balance the competing interests of different beneficiaries, the trustees and the third
parties
 Chan Chin Cheung v Chan Chak Cheung & Anor
o The plaintiff was one of the beneficiaries of an estate. The defendants were the trustees. At all
material times the defendants resided in Singapore. The plaintiff was not satisfied with the
defendants ' conduct of the affairs of the estate. So he filed an action in the KL High Court to
obtain an order for an investigative audit of the accounts of the estate.
o H: A trustee is obliged to render accounts of the trust property to a beneficiary.
 There is no duty to have the accounts audited, unless there is a specific requirement under the trust
instrument.
o However, Section 27(4) of the TA stated that trustee may from time to time cause the accounts of
the trust property to be examined/audited by an independent accountant, but not more than once in
every year (UNLESS nature of trust/trust property requires more frequent checks)
 Current position: Although trustees have a duty to provide information to beneficiaries arising from the
trustees' fiduciary obligation to account for their dealings with the trust property, no beneficiary is
entitled as of right to disclosure of trust documents or trust information. Indeed, there may be
compelling reasons for refusing disclosure, but each case will depend on its own facts.
 Court has general discretion to supervise trusts and so to order access to info in favour of an applicant
whenever it sees fit.
6. Delegation by trustees: employment of agent
 General Rule: trustee cannot delegate in respect to the management of trust, and if they employ agents
for the purpose, they remain liable to the beneficiaries.
 Exception: agent may be employed in ministerial matters and that trustees are not to be made liable for
loss attributable to acts or defaults of agents if they exercise care of reasonable man of business in
respect of both selection and supervision. If fail this standard, will still be personally liable.
 Wroe v Seed
o A trustee who was illiterate and therefore could not keep accounts himself was justified in
employing an agent to keep the accounts.
 Section 28 of Trustees Act:
o trustee may instead act personally, employ and pay an agent (solicitor/banker/stockbroker/person)
to transact any business or do any act required to be done in the execution of the trust, AND shall
not be responsible for default of any such agent if employed in good faith.
 Re Vickery
o Delegation is allowed regardless of whether “there is any real necessity for the employment”
o Trustee should use his discretion when choosing an agent.
o Agent should be employed only to do acts within the scope of the usual business of the agent.
o If any loss occurs due to the employment of agent, the trustee will not be liable “unless he has been
guilty of willful misconduct.”
o The court referred to Re City Equitable Fire Insurance Co [1925] and said that willful conduct
means “either a consciousness of negligence or a breach of duty, or a recklessness in the
performance of a duty.”
o Courts have accepted that delegation may be necessary for commercial practicality.
 Section 30 of Trustees Act (Power to delegate trusts during absence abroad):
o (1) trustee intending to remain out of Malaysia for a period more than 14 days, may by power of
attorney delegate to any person the execution of trusts during his absence from Malaysia
o (2) donor of power of attorney shall e liable for acts or defaults of the donee as if it was the default
of the donor
o (3) power of attorney starts from absence from Malaysia and revoked by his return to Malaysia
 Section 35(1) of Trustees Act:
o trustee shall be chargeable only for monies and securities actually received by him and shall be
answerable and accountable only for his own acts, neglects or defaults, and NOT for those of other
trustees/agents with whom the money may be deposited UNLESS it happens through his own
wilful default
 Section 23 Trustees Act:
o Devolution of powers or trust
 Learoyd v Whiteley
o Lord Watson “...whilst trustees cannot delegate the execution of the trust, they may ... avail
themselves of the service of others wherever such employment is according to the usual course of
business.”
  Re City Equitable Fire Insurance Co
o During the winding up of the company it was discovered that there was a substantial shortfall of
funds, largely attributable to the fraud of the managing director.
o On a misfeasance summons, the liquidator sought to make other directors liable for negligence in
respect of losses occasioned by investments and loans.
o It was accepted that they had acted honestly, although not necessarily non-negligently, throughout.
Article 150 of the company’s AOA provided that directors were not to be liable for acts and
defaults leading to loss or damage that “might happen in the execution of their respective offices or
trusts … unless the same [should] happen by or through their own wilful neglect or default
respectively”.
o Held: An act or omission to do an act on the part of a director was wilful where the person who acts
or omits to act, knows what he is doing and intends to do what he is doing, but if that act or
omission amounts to a breach of that person’s duty, and therefore to negligence, he is not guilty of
wilful neglect or default unless he knows that he is committing , and intends to commit, a breach of
his duty, or is recklessly careless in the sense of not caring whether his act or omission is or is not a
breach of his duty.
7. Maintenance
 Section 36 of the Trustees Act 1949.
o The power to apply income for maintenance and to accumulate surplus income during a minority
8. Advancement
 Establishment in life of the beneficiary who was the object of the power or at any rate some step that
would contribute to the furtherance of his establishment.
 It means any use of the money which will improve the material situation of the beneficiary.

 Section 37 of Trustees Act:

o trustee may pay or apply money for advancement for benefit in such manner in their absolute
discretion, think fit. Provided that the money paid or applied shall not exceed RM 10,000
 Pilkington v Inland Revenue Commissioners

o Set out principles of law governing advancement:

 Advancement means any use of the money which will improve the material situation
of beneficiary (improve situation. Not really to change it) (material situation = status
of life of the beneficiary)
 A distinction has to be made between advancement in the sense of improving
beneficiary situation and advancing money out of beneficiary’s expectant interest.
 Re Gerbich
o Advancement refers to payment to Beneficiary a portion of the capital of bequest, before the time it
is due.
o thus a loan or debt to be repaid does not constitute an advancement.
o Advancement of a person refers to setting up in life of a young person.
9. Powers of Sale of Trust Property
 Power to sell some or all trust property is usually given by the trust instrument.
 In exercising their power of sale, trustee duty is obtained the best price on behalf of
beneficiaries
 Fry v Fry
o a house should have been sold for 1000 pound in 1836; the trustee refused an offer for 900
pound in 1837; then railway was built where the value of the house was then reduced
o house still not sold by 1856 when trustees dies
o H:
o trustees’ estate liable for the difference between 900 and the value when finally sold
o The liability is strict, liable to compensate for the difference between the actual value at the
trial or trial and the offer received.
o The trustees are liable to make up, out of their own pocket money, the difference between
selling price and the offer price
10. Power of Trustees for Sale To Sell By Auction
 Section 16 of Trustee Act: power of trustees for sale to sell by auction, etc
o (1) when vested with power of sale, trustee may sell property subject to conditions trustee
thinks fit, with power to vary or rescind any contract for sale, without being answerable for
any loss.
o (2) A trust or power to sell or dispose of land includes a trust or power to sell or dispose of
part thereof, whether the division is horizontal, vertical, or made in any other way.
 Section 17: power to sell subject to depreciatory conditions (not answerable for depreciation of
property)
11. Power to Insure
 Trustees are under no duty to insure the trust property unless the power to insure is stated in
any express provision in the trust instrument.
 Section 24 of Trustee Act:
o (1) A trustee may insure against loss or damage by fire any building or other insurable
property to any amount, including the amount of any insurance already on foot.
o (2) this does not apply to property which trustee is bound to give to beneficiary
immediately upon beneficiary’s request
 Re McEacharn, Gambles v McEacharn
o Eve J expressed the view that trustees are under no obligation to insure even in
circumstances where a reasonable prudent person would do so.
 o The phrase ‘may insure’ in section 24(1) does not impose a duty to insure against loss or
damage by fire, so that if the trustees differ as to the necessity of, or as to the amount of,
the insurance nothing can be done and they are not responsible for loss if a fire ensues
o However, failure to insure trust property may, in some circumstances, be a breach of the
trustees' duty of care.
12. Power to Compound Liabilities
 Trustees are given a wide discretion in settling claims which may be made by third persons
against the trust estate or by the trust estate against third persons.
 Re Brogden
o A wide power of this nature is of great practical importance in enabling the trustee to make
reasonable compromise instead of being obliged to litigate in respect of every possible
claim, or risk liability for breach of trust if he fails to do so.
o Trustees have a duty to enforce collection of sums due to the trusts, and if necessary by
litigation.
 Re Ridsdel, Ridsdel v Rawlinson
o to authorise a judicial trustee to make payment in compromise of a claim by purchasers of
trust property for loss through delay in completion of the sale
 Re Shenton
o Trustee may be allowed to the extension of the repayment of debt.