POWERS OF TRUSTEES

CONTENTS

1.0    Introduction

2.0    Objectives

• Main Content
• Powers of Trustees

4.0    Conclusion

5.0    Summary

6.0    Tutor-Marked Assignment (TMA)

7.0    References/Further Readings

INTRODUCTION

The trustee, as a result of the numerous duties his post is saddled with, it will be unconscionable if he were to  perform such duties like a  robot without any power of discretion to exercise in the administration of the estate. It is in cognizance of this that the trustee is endowed with some powers for the effective and successful performance of his duties. It can therefore be said that the exercise of discretion may in fact be of great advance to the beneficiaries in some cases where such is exercised in their favour.

OBJECTIVES

In this Unit, you will  essentially learn about the powers of trustees in relation to  the performance of his duties and the extent or limitation of these  powers. You  will further learn that even where a trustee have discretion with respect of a certain issue, the requirements or duty of his office may nevertheless make such issue imperative for him to perform. You will be exposed to the specific issues of the power of the trustee to insure and duty not to delegate, but you will be exposed to the exceptions of these rules. At the end of this Unit, you should be able to:

• State what the powers of a trustee are and their limitations
• Explain why some of these powers are germane to the performance of the duties of trustees
• Give practical examples of when the exercise of discretion is beneficial to beneficiaries whose interests are contingent or yet to mature
• Explain the rationale underpinnings the court’s non interference with the exercise of discretion by trustees.

MAIN CONTENT

Powers of Trustees

In order for the trustee to be able to perform his numerous duties, it is necessary to clothe him with some powers for the efficient administration of the trust property and discharge of his duties. The exercise of power may be contained in the trust instrument or may be conferred by statute. Given the fact that the exercise  of power is discretionary, the courts do not usually disturb the issues relating to the exercise of discretion except when power was exercised in mala fide (in bad faith). In consequence of his various duties, trustees generally have the following powers:

 Power to Insure

Trustees generally are not obliged to insure the trust property except where there is a specific provision in the trust instrument requesting the trustee to insure. See Bailey v. Gould (1840) 54 E.R. 479. The trustee’s duty of care and management however makes it imperative on him to give serious consideration to insurance but where the trustee after such consideration decides not to insure he will not  be  liable for any loss or damage resulting to the trust property.

Statutory powers of the trustee to insure is however reserved by Section 11(1) of the Trustee Law, Laws of Western Nigeria, 1959 by which they are required to insure trust property against loss or damage by fire to any amount not exceeding three-fourth parts of the full value of the building or property.

Power to Delegate

As treated under the duty not to delegate above, although a  trustee  generally cannot delegate his duties, he is permitted to delegate if the trust instrument allows it or when it is reasonably necessary or when the agent is engaged in the ordinary course of affairs. See Exp. Belchier (supra). It is also allowed that trustees can delegate their duty where what is being delegated was for a third party to merely carry out things already agreed by the trustees. It is important to note however that a trustee cannot delegate the exercise of his discretion except if this is expressly permitted by the trust instrument. See Robson v. Flight (supra)

A trustee is required to be prudent in his choice and supervision of an agent and must exercise the care of a prudent man of business in his choice of agent, and should not employ an agent to perform act outside the scope of the agent’s business. See Fry v. Tapson (supra).

Apart from express authorization by the trust instrument, statute can also confer on a trustee the right to delegate by appointing agents to perform specialised or professional duties. See Section 17 of the Trustee Act 1893; Section 2(4)(C) of the Trustee Investment Act, 1990 and Section 14(3) and (4) of the Trustee Law.

Power of Sale

Trustees can exercise the power to sell the trust property if such power is expressly stated by the trust instrument or by statute, as it is with the trustee for sale. Where the trust makes it imperative for the trustee to sell, then trustee has an obligation to sell the trust property and in that case, he has more than mere power to do so. Irrespective of whether the trust instrument makes it obligatory for the trustee to sell, he can nonetheless exercise discretion to postpone sale and adopt the usual means of sale. A trustee for sale however has power to sell by auction.

 Power to Compound Liabilities

By law, personal representatives or two or more trustees acting together can or a trust corporation has power to accept any real or personal property before the time the same is payable or transferable. They also have powers to sever and apportion any blended trust funds or property, to pay or allow any debt or claim on evidence he or they think sufficient, accept any composition or any security real or personal for any debt or property claimed and to compromise, compound or abandon or submit to arbitration any debt or claim relating to the trust or estate. See Section 7 of the Trustee Law, Cap. 125, Laws of Western Nigeria. The trustee must however ensure that a compromise is not detrimental to the trust. See De Cordon (1879) 4 App. Cas. 692.

Power to Give Receipts

Formerly, the rule was that a trustee has power to receive money but has  no implied power to give receipts for the same. The position has been changed by statutory provisions which empower trustees to give receipts in writing and such receipt shall be a sufficient discharge to the person paying, transferring or delivering any money,  securities or other personal property. See Section 6(1) of  the Trustee Law, Cap 125, Laws of Western Nigeria.

A single trustee can validly give receipts for money received while at least two trustees or a sole corporation can validly give receipts for capital moneys (i.e. proceeds of mortgage or sale of land).

 Power of Maintenance and Advancement

Trustees have powers of maintenance to make necessary provisions for the benefit of beneficiaries whose interests under the trust property are yet to mature. For instance, under a discretionary trust, a trustee can entertain claims brought by a beneficiary by exercising his discretion in favour of the beneficiary although the beneficiary is not as of right entitled to a fixed or any income from the trust property. A trustee can in exercise of his power of maintenance make provisions  for beneficiaries’ necessaries, such as food, accommodation, etc.

The power is also useful in cases where beneficiaries’ interest in the trust property is contingent upon certain conditions, such as attaining a certain age, etc. The trustee can therefore make provisions for the beneficiary’s welfare pending the  time such condition is fulfilled.

Apart from maintenance, a trustee can make advancement from the trust property for the benefit of the beneficiaries by applying a capital sum to make permanent provision for the beneficiary. See Hardy v. Slow [1975] 2 All E.R. 1057.

SELF ASSESSMENT EXERCISE (SAE) 1

It can hardly be far from the truth that a trustee cannot successfully and efficiently perform his duties under a trust without the right to exercise discretions. Discuss.

CONCLUSION

Powers are crucial to the effective performance of the trustees’ duties and except trustees can exercise discretions to some margins in appropriate cases may render the duties of a trustee almost an impossible task. Although the court have adopted the policy of not disturbing the trustee’s exercise of discretion, a trustee should however need to guard against exercising discretion in bad faith.

SUMMARY

In this Unit, you have learnt about the powers of trustees and how the exercise of discretion is instrumental to the successful performance of the  trustee’s  duties. You also learnt that the exercise of discretion cannot be delegated and that the  court will usually not interfere with a trustee’s exercise of discretion. You were familiarized with the practical benefits of granting of the trustees having to exercise discretion in respect of the trust property and his duties generally. An example of the trustee exercising his discretion to benefit a beneficiary who or ordinarily not entitled to income in a discretional trust was given and other cases where the interests of the beneficiary is contingent or yet to mature. In the next Unit, you will learn about breach of trust.

 TUTOR-MARKED ASSIGNMENT (TMA)

1. Mention and discuss two of the powers exercisable by the trustee and how these are fundamental to the performance of his duties
2. The trustee’s power of maintenance and advancement portends great value only in hands of a benevolent trustee and nothing in the hands of a trustee who is a stickler for rules. Discuss

 REFERENCES/FURTHER READINGS

Banire, Muiz. (2002). The Nigerian Law of Trusts. Lagos: Excel Publications. Hayton, D.J. (2001). Hayton & Marshall Commentary and Cases on The Law of

Trusts and Equitable Remedies. London: Sweet & Maxwell.

Jegede, M.I. (1999). Law of Trusts, Bankruptcy and Administration of Estate.

Lagos: MIJ Professional Publishers Limited.

Trustee Act 1893.

Trustee Law, Laws of Western Nigeria, 1959.

The Trustee Investment Act, Cap. 449 Laws of the Federation of Nigeria, 1990.