TRACING flow
1. Identify the issue:
This discussion would be advising whether the beneficiaries (?) would be able to recover any
assets via tracing or trustees’ personal liabilities or obtain any compensation from third
parties who involved.
Saving account = impossible, impossible to overdraft
Active money bank account = current account
2. Sale of trust property to relative/ self/ fair-dealing rule:
s.3 Trustees Act 2000 gives trustees the general power to invest in such investments as they
think fit. It is clearly suspicious for trustees to sell the trust property to a close relative, and
at an undervalue.
Trustees’ breach:
Trustees have duties to manage the property well, failed to manage constitutes a breach of
trust.
A trustee may not place himself in a position where his fiduciary duty and self-interest may
conflict. (West v Mothew)
Self-Dealing (sell to T’s own company)
It is irrelevant that the trustee is honest and that the sale is at a fair price.
Ex parte Lacey
Tito v Waddell (no.2) – sell the property to themselves: self-dealing = conflict of
interest, as the trustee would be acting as both seller and buyer
- Major shareholder
Re Thompson: = self-dealing
- Minor shareholder
Farrar v Farrar: maybe not necessarily self-dealing, the company bears onus
to prove that reasonable steps are taken are fair price was paid.
- Exception: authorised self-dealing (no breach of trust)
Holder v Holder: property purchased at auction/ beneficiary was fully aware.
Fair Dealing (buy property from the trust)
A trustee may not purchase any interest in the trust property from the beneficiaries
(Trustee cannot buy the beneficiary’s interests under the fair dealing rule) <- no conflict
of interest because seller: B, buyer: trustee.
unless he
• took no advantage of his position as trustee
• made full disclosure to the beneficiary and
• the transaction is fair and honest
• fair price paid
1. Identify the issue:
This discussion would be advising whether the beneficiaries (?) would be able to recover any
assets via tracing or trustees’ personal liabilities or obtain any compensation from third
parties who involved.
Saving account = impossible, impossible to overdraft
Active money bank account = current account
2. Sale of trust property to relative/ self/ fair-dealing rule:
s.3 Trustees Act 2000 gives trustees the general power to invest in such investments as they
think fit. It is clearly suspicious for trustees to sell the trust property to a close relative, and
at an undervalue.
Trustees’ breach:
Trustees have duties to manage the property well, failed to manage constitutes a breach of
trust.
A trustee may not place himself in a position where his fiduciary duty and self-interest may
conflict. (West v Mothew)
Self-Dealing (sell to T’s own company)
It is irrelevant that the trustee is honest and that the sale is at a fair price.
Ex parte Lacey
Tito v Waddell (no.2) – sell the property to themselves: self-dealing = conflict of
interest, as the trustee would be acting as both seller and buyer
- Major shareholder
Re Thompson: = self-dealing
- Minor shareholder
Farrar v Farrar: maybe not necessarily self-dealing, the company bears onus
to prove that reasonable steps are taken are fair price was paid.
- Exception: authorised self-dealing (no breach of trust)
Holder v Holder: property purchased at auction/ beneficiary was fully aware.
Fair Dealing (buy property from the trust)
A trustee may not purchase any interest in the trust property from the beneficiaries
(Trustee cannot buy the beneficiary’s interests under the fair dealing rule) <- no conflict
of interest because seller: B, buyer: trustee.
unless he
• took no advantage of his position as trustee
• made full disclosure to the beneficiary and
• the transaction is fair and honest
• fair price paid
