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GDL Law Notes GDL Equity and Trusts Notes

Investment Notes

Updated Investment Notes

GDL Equity and Trusts Notes

GDL Equity and Trusts

Approximately 631 pages

A collection of the best GDL notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through many applications from mostly first class students and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of GDL notes available in the UK this year. You'll notice that we include several different authors' worth of notes. The first is our 2017 author...

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  • Introduction

    - Trustees under duty to invest trust fund for benefit of beneficiaries – source of power to invest:

    • 1. trust instrument.

    • 2. statute: Trustee Act 2000 – applies where trust instrument silent.

      • came into force 1 Feb 2001: repealed Trustee Investments Act 1961.

      • applies to all trusts (whenever created).

    - TA 2000: fixes problems with old law.

    • 1. new statutory duty of care.

      • old law: common law duty of prudence (Speight v Gaunt [1883]; Re Whitely; Whitely v Learoyd [1886]).

      • but common law duty still relevant: statutory duty only applies to some aspects of work.

    • 2. widens range of investments.

      • old law: extremely limited options.

      • but still limited – s8 TA 2000: equitable interests in land + overseas land not authorised investments.

    • 3. remuneration for professional trustees allowed.

      • old law: trustees could not charge unless express charging clause in instrument.

    • 4. allows delegation of investment decisions.

      • old law: no delegation unless authorised by trust instrument could not invest in discretionary portfolios.

    - Structure of TA 2000: 6 parts.

    • Part I: new statutory duty of care.

    • Part II: trustee investment powers (other than land).

    • Part III: trustee investment powers over land.

    • Part IV: agents/nominees and delegation.

    • Part V: remuneration.

    • Part VI: miscellaneous.

    Part I TA 2000: Statutory Duty of Care

    • s1(1): whenever duty applies, t. must exercise care + skill reasonable in circs., having regard to:

      • (a): any special knowledge or experience t. has or holds himself out as having; and

        • partially subjective test: t. judged by higher standard if holds self out as expert.

      • (b): professional trustee – any special knowledge or experience that it is reasonable to expect of person acting in course of that kind of business/profession.

        • objective test: always applies to professional trustee.

    • s2: Schedule 1 – provisions about when duty of care applies.

    • Schedule 1: application of duty of care.

      • para 1: investment.

      • para 2: acquisition of land.

      • para 3: agents, nominees and custodians (inc. selection, determining terms, policy statement).

      • para 7: duty can be wholly/partly excluded by trust instrument.

    - When does duty apply?

    • only those functions listed in Schedule 1: conferred by trust instrument or TA 2000; whenever created.

    • poss. only active performance, NOT omissions of exercise of power/duty.

    - Interaction with common law ‘duty of prudence’ – Re Whiteley [1886].

    • high standard: t. must ‘take such care as a reasonably prudent man would take if he were minded to make an investment for benefit of others for whom he felt morally obliged to provide’.

      • but content dep. on circs: e.g. size of fund, t’s expertise, circs. of beneficiaries (inc. tax status).

    • avoiding risk: more liberal attitude recently.

      • historically: t. must avoid all investments attended with risk – Learoyd v Whiteley.

      • more recently: t. must ensure fund as whole not put at risk – Nestle v Nat West Bank plc [1993].

        • [Hoffman J]: standard of care – current portfolio theory: emphasises risk to entire portfolio, not each investment taken in isolation.

    • duty to review investments + buy/sell as necessary: but low standard of care?

      • breach: c. must prove ts. decisions/lapses resulted in loss to fund – Nestle v Nat West Bank plc.

        • facts: bank misinterpreted investment clause, failed to seek advice, neglected to conduct reviews of investments 1927-1959 CoA: not liable.

        • [Leggatt LJ]: performance judged by absence of proven default, not by success.

      • TA 2000: standard of care for review unclear – result uncertain.

    • interaction with statutory duty unclear:

      • common law duty objective duty: sets different standard of care from TA 2000 –

      • common law duty still applies where statutory duty does not: e.g. exercise of powers of maintenance + advancement; possibly omitting to act.

      • where statutory duty applies: in addition to or instead of common law duty?

    - Outstanding issues – future case law needed to clarify:

    • 1. interaction between 2 limbs of statutory duty (objective + subjective).

    • 2. scope of ‘business/profession’.

    • 3. interaction with common law duty.

    • 4. whether omission to exercise power in Sch. 1 governed by statutory duty.

    Parts II + III TA 2000: Trustee Investment Powers

    - General power of investment – s3 TA 2000.

    • s3(1): t. can make any investment that he could make if he were absolutely entitled to assets.

    • s3(3): t. CANNOT invest in land under s3 (except loans secured on land) – see s8.

    • trust instrument overrides – s6.

    - investments in land – s8 TA 2000.

    • s8(1): t. can acquire legal estate (s8(2)) in freehold/leasehold land in UK – (a) as investment; (b) for b. to occupy; or (c) for any other reason.

    • apparent exclusions: equitable interests in land + land overseas.

    • trust instrument overrides – s9.

    - Contrast with old law: no general power – closed list of assets set out in Schedules to TIA 1961.

    • 3 types of assets:

      • 1. narrower range investments: min. of trust assets.

      • 2. wider range investments.

      • 3. excluded investments: 1. land; 2. shared in unquoted company; 3. shares in quoted company which did not fulfil conditions (inc. paying dividend in each of last 5 years).

    • problematic: restrictions on investments + no power to delegate investment decisions.

      • ts. could not get best returns: could not invest in land or modern discretionary portfolios.

      • ts. could not purchase land for b. to occupy: did not count as investment.

      • trust instruments routinely extended powers.

    • new law: s3 + s8 + power to delegate v. broad: solves problems:

      • 1. t. may invest in land.

      • 2. t. may purchase property for b. to occupy.

      • 3. t. may invest in discretionary portfolio.

      • 4. t. not restricted by risk averse schedule can invest for greater returns.

      • in future, trust instruments may narrow powers.

    - What is an investment?

    • old law: property purchased in order to be held for sake of income it will yield – Re Wragg [1919].

      • not property held for capital appreciation alone: inc. house bought for b. to...

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