Fiduciary duty:

Remunerations
In Robinson v Pett, it was held that until Trustee Act 2000, the general rule was
that the role of trustee had to be perform without remuneration or profit. The
underlying notion was that trustee might undertake unnecessary work in order to
receive payment and hence, provide a potential conflict between interest and
duty. Traditionally, the onus was upon the trustee to show that there was an
express charging clause or some other legal validation for remuneration.
Prior to Trustee Act 2000, justification might come from a variety of sources.:

1. By virtue of contract
This operate when trustees has entered into a contract allowing payment
directly with all the beneficiaries when all are of full age and capacity. This
need for unanimity reduces the potential for exploitation and unfairness. Of
course the contract can be set aside if it is induced either by undue influence,
misrepresentation or duress.
Indeed, this occurred in OSullivan v Management Agency & Music Ltd
where a contract between a singer and his agent was avoided on the basis of
undue influence.
2. By order of court
The court might award payment to a trustee. This occur only when the service
of the trustee are regarded as being of exceptional benefit to the trust. As Fox
LJ acknowledge in Re Duke of Norfolks Settlement Trust, in exercising
jurisdiction the court has to balance two influences which are to some extent
in conflict. The first is that the office of trustee is, as such, gratuitous, the court
will accordingly be careful to protect the interest of the beneficiaries against
claims by trustees. The second is that it is of great importance to the
beneficiaries that the trust should be well administered.
In Foster v Spencer, two trustees sought remuneration for past and future
services designed to enhanced greatly the development value of the trust
property. Paul Baker QC sitting in the High Court allowed payment for the
past (but not future because they did not call for any expertise) on the basis
that otherwise the beneficiaries would be unjustly enriched.
Moreover, even when a charging clause has been inserted into the trust
instrument, the court can employ its inherent power to vary or increase the
amount that can be charged. This can be seen in Re Duke of Norfolks
Settlement Trust, a trust corporation accepted the administration of the trust
for a low annual fee. As trustee, it subsequently became involved in an
extensive redevelopment project and was allowed an increase in
remuneration because the duties became unexpected onerous. As Fox LJ
reasoned, if the court has jurisdiction upon the application of a trustee to
authorise remuneration though no such power exist in the trust instrument,
there is no reason why the court should not have the power to increase the
remuneration given by the instrument.
3. Special treatment of solicitors profit costs in litigation work
A solicitor-trustees costs of litigation are subject of special treatment.
According to Cradock v Piper, a solicitor is entitled to profit costs (solicitors
charges that involve a profit element) in litigation where he acts as solicitor on
behalf of himself and a co-trustee or beneficiary in relation to trust affairs.
This is provided that the costs are no more than they would have been had he
acted for the co-trustee alone.
***the rule does not apply when a solicitor trustee employs his firm to do non-
litigious work.
4. Overseas Property
If the trust is located abroad, and the law of the country where it is situated
permits the remuneration of trustees, it appears that the trustees are entitled
to keep any payments made.
In Re Northcotes WT, a testator left property both in England and US. The
executor was obliged to obtain probate in US relating to the assets located
there. Harman J held that the executor could charge for those costs because
there was no conflict of interest and duty.
5. Statutory Authority
Remuneration is payable in those circumstances where parliament has
authorised its payment.
Remuneration is specifically catered for in ss28-29 2000Act which is operate
in 2 situation:
Firstly, s28 operates when there is an express charging clause in the trust
deed. As regards trust corporations or trustees acting in a professional
capacity, s28 enable these trustees to claim remuneration under such a
clause. This rule relaxes the strict construction previously given to charging
clauses and applies even if a lay trustee could have effectively provided those
service. Although s28 applies to trust whenever created, it only covers
services provided after the commencement date of the 2000Act.
S29 operates when there is no express provision made for remuneration.
Subsection 1-2 provide that a trust corporation ad trustees who act in a
professional capacity for a private trust are entitled to received reasonable
remuneration. Whereas, trust corporation is automatically entitled to such
remuneration, other trustees who act in a professional capacity are entitled to
received reasonable remuneration only with the written agreement of all other
trustees.
As with 28, this provision applies to trusts whenever created and to services
that could otherwise have been provided by a lay trustee. Despite the
improvements offered by s29, it remains best practice for the settlor to insert a
comprehensive charging clause in the trust deed or to specify clearly what the
trustee may charge in the letter of engagement.
Directors fees
Trustee will obtain remuneration as a director of a company connected with trust.
As shown in Re Macadam, when the directorship was acquired because of his
position as a trustee, the trustee is accountable to the trust for fees received.
This rule will now apply when the directorship was obtained independently of the
trust. In Re Gee, the trustee became director without any reliance upon trust
votes and was able to retain the remuneration received. Similarly, in Re Dover
Coalfield Extension Ltd, payments may be kept when the directorship was
obtained before assuming the office of trustee.
Out of pocket expenses
Under s31(1) Trustee Act 2000, a trustee is entitled to be reimbursed for out of
pocket expenses properly incurred.
In Wood v Garbunova, Morgan J disallowed 15 percent of the cost claimed by
court appointed receivers because they had acted unwisely in applying without
notice for the delivery-up of documents from the deceaseds former solicitors.
The trustee is not, moreover, able to claim interest in respect of any outlay.
Reimbursement extend to both to money spent and liabilities to pay that may
arise. Any expenses claim must be reasonable and appropriate in the
circumstances. Hence, in Malcom v OCallaghan, trustees claim for expenses for
frequent trips to Paris on trust business was disallowed because his presence
there was not necessary.
A trustee will be allowed his litigation cost if all the beneficiaries approve the
action or the High Court grant leave to sue or defend. The latter is known as a
Beddoe Order and derives its name from the decision of the CA in Re Beddoe.
Application for Beddoe Order should be made in separate preliminary
proceedings. For instance, directions are particular appropriate when defendant
to possible proceedings is a beneficiary and other beneficiaries have a different
interest in their outcome.
Where a Beddoe is not sought, trustee will obtain cost only if the action was
properly brought or defended for the benefit of the trustee estate. In other words,
trustee will be shielded where a beddoe order would have been made had the
trustee applied for it.
As in Beddoe, trustee who act without the approval of the beneficiaries or the
court run the risk that they may have to pay their own costs themselves.
Hence, the normal rule is that, absent improper conduct, the cost of trustee will
be indemnified from the trust fund. The failure to apply for a Beddoe Order does
not amount to a breach of trust.
Purchase of trust property
Traditionally, the prevention of trustee from purchasing trust property was
classified as merely one aspect of trustees duty not to profit from his position.
The modern approach now is to view this type pf purchase as being the subject
of two distinct rule, namely :self-dealing rule and fair-dealing rule.
Self-dealing rule
When a trustee purchase trust property, the beneficiaries can subsequently set
the transaction aside. The notion is that trustee should not profit from his office
and it reflects the possibility that the trustee might not give the best price
obtainable.
***the self-dealing rule cannot apply when there is no trust relationship with the
property.
This self-dealing rule apply to all types of property and the transaction can be set
aside as against the trustee as well as against any purchaser from the trustee
who has notice of the breach of trust.
The rule will be invoked when, for example, a co-trustee buys trust property from
himself and other trustees. This is different when it is a sole trustee who purport
to sell. In this instance, the transaction is necessarily void ab initio. The trustee
cannot intelligibly be said to buy property from himself.
Yet, this rule will give way when the purchased is authorized by parliament or
trust instrument. In Sargeant v National Westminster Bank Plc, the sale of certain
farms to the trustees was expressly permitted by the settlor and the transactions
were upheld.