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Administrative Powers - Power to Invest - Duties in relation to Investments

Q: Cowan v Scargill

The trustee is not required to follow the advice obtained , but it must be reasonable to decide not to do so.

5 important questions on Administrative Powers - Power to Invest - Duties in relation to Investments

Standard Investment Criteria: Diversification

'The need for diversification of investments of the trust, in so far as appropriate to the circumstances of the trust'

The trustee must consider the relative risk of loss and gain and the desirability of investing in competing sectors (so that, if one sector is doing less well, another sector might do much better and give a better return).

Cowan v Scargill, Megarry VC

The circumstances of the trust for these purposes include the size of the trust fund, since the degree of diversification that is practicable and desirable for a large fund may be impracticable and undesirable for a small fund.

Cowan v Scargill

The trustee is not required to follow the advice obtained, but it must be reasonable to decide not to do so.

Duty #5: Duty to take a proper interest in the company's affairs

Where trustees hold a controlling interest in a private company, they have a duty to take a proper interest in the company’s affairs. This is because, through their majority control, they are able to become actively involved in the management of the company.

Cowan v Scargill

There will be circumstances under which trustees may even have to act dishonourably for the benefit of the trust.

So, even when trustees have accepted an offer to sell property, if they subsequently receive a better offer, they should typically renege on the first and accept the second. In other words, there is a duty to 'gazump'.

The question on the page originate from the summary of the following study material:

The Principles of Equity and Trusts | 9780199570041 | Graham Virgo

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