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Create a 6 page essay paper that discusses EQUITY AND TRUST (LAW).The law requires that a trustee exercises the same degree of diligence that a man of ordinary prudence would exercise in the managemen
Create a 6 page essay paper that discusses EQUITY AND TRUST (LAW).
The law requires that a trustee exercises the same degree of diligence that a man of ordinary prudence would exercise in the management of his affairs. In this report we shall examine the role of the trustees and the standard care he is required to take in some specific instances and also the reasons for the difference in the standards of care in such instances in the light of established case laws and the provisions of the Trustee Act 2000.
" As a general rule, a trustee sufficiently discharges his duty if he takes, in managing he trust affairs, all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own"- this was the court ruling in the appeal case of Speight v. Gaunt as early as in the year 1883. According to this settled law the standard care that a trustee is expected to take is limited to the extent that the trustee takes all precautions in administering the trust assets by taking such care which an ordinary prudent man of business would be taking in his own case. The trustee is exonerated from his liability so long as he proves that he has strictly followed the covenants of the trust deed and there is no willful deviation from the purposes for which the trust properties were put to use. The trustee is not expected to use any special skill or expertise with regard to the investment of the trust properties. As has been decided in the case of Fales v. Canada Permanent Trust Co.(1977) 2 SCR 302 "that of a man of ordinary prudence in managing his own affairs and traditionally the standard has been applied equally to professional and non-professional trustees. The standard has been of general application and objective". Hence traditionally there had been no distinction between professional and non professional trustees in the matter of deciding on the standard care to be exercised by the trustees with regard to the trust properties. This was the legal position at a time when the investment opportunities that were available for the trust properties were limited and hence there was no major problem encountered with the administration of the trust properties. However with the passage of time the possible avenues for investments had increased and this has created additional responsibilities for the trustees to consider the portfolios or assets in which they contemplate to invest the trust properties and decide whether the properties would be safe in such investments.
Case of Learoyd v. Whiteley (1887) 12 App. Cas.727:
"When the trustee serves both a life tenant and a remainderman beneficiary, the trustee must invest impartially and balance the preservation of the property for the remainderman with the need to produce a reasonable income for the life tenant"- this was the observation made in the case of Learoyd v. Whitely (1887) as regards the fiduciary position of the trustees. This ruling altered the degree of the standard care to be exercised by the trustees in that the responsibility of the trustee is extended to ensure that the safety of the investments is also taken into account while investing the trust property, so that the capital is not eroded. The argument of reliance by the trustee on a third person supposed to be an expert on the investments of the sort covered by the case will not exonerate the trustee from his fiduciary liability to the