Soton Equity and Trusts - alastairhudson.com

(a) to any special knowledge or experience that he has or holds himself out
as having, and
(b) if he acts as trustee in the course of a business or profession, to any
special knowledge or experience that it is reasonable to expect of a person
acting in the course of that kind of business or profession.
(2) In this Act the duty under subsection (1) is called “the duty of care”.’
3) The duty to prepare standard investment criteria.
**Trustee Act 2000, s.4.
‘4(1)… a trustee must have regard to the standard investment criteria.
(3) The standard investment criteria in relation to a trust are –
(a) the suitability to the trust of investments of the same kind as any particular
investment proposed to be made or retained and of that particular investment as an
investment of that kind, and
(b) the need for diversification of investments of the trust, in so far as is appropriate
to the circumstances of the trust.’
4) The duty to take expert advice.
**Trustee Act 2000, s.5.
‘(1) Before exercising any power of investment … a trustee must … obtain and
consider proper advice about the way in which, having regard to the standard
investment criteria, the power should be exercised.
(3) The exception is that a trustee need not obtain such advice if he reasonably
concludes that in all the circumstances it is unnecessary or inappropriate to do so.’
5) General duties regarding protection and investment of trust assets on the case
law.
(i) Seek the highest available return
*Cowan v. Scargill [1985] 2 Ch. 270.
(ii) Act as though a prudent person of business investing on behalf of someone for whom one
feels morally bound to provide
Learoyd v Whiteley (1887) 12 App. Cas. 727 (HL) (the ‘prudent businessman’).
Bartlett v. Barclays Bank Trust Co Ltd. [1980] Ch 515
Nestle v. National Westminster Bank plc [1993] 1 W.L.R. 1260.
*Cowan v. Scargill [1985] 2 Ch. 270, 289, per Megarry V-C:
‘[the trustee’s obligation is to] take such care as an ordinary prudent
man would take if he were minded to make an investment for the
benefit of other people for whom he feels morally bound to provide.
This duty includes the duty to seek advice on matters which the trustee
does not understand, such as the making of investments, and, on
receiving that advice, to act with the same degree of prudence.
Although a trustee who takes advice on investments is not bound to
accept and act on that advice, he is not entitled to reject it merely
because he sincerely disagrees with it, unless in addition he is acting
as an ordinary prudent man would act.’
6) FSA Conduct of Business Sourcebook
Reading: Hudson, section 8.4
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