The duty to act as a trustee is considered a very important one. It carries great responsibly and should not be taken lightly, primarily because the court does not take it lightly. So misconduct on the part of the trustee can attract severe sanction from the court, criminal and civil. Perhaps, the reason for this is the root of trusts, particularly the untrustworthy nature of several early trustees.
The duties that fall upon the trustee are numerous. They may be examined as follows:
Duty to collect and secure the trust assets
This is the first important duty of a trustee. As soon as he is appointed and accepts his appointment, the trustee should inquire about the nature and extent of the trust property, its whereabouts, locate and secure them. He secures them by taking possession and if intangible, or equitable, by giving notice to the legal owner.
If he has any doubt as to the extent of the trust property or his powers in relation to them, he is obligated to seek legal advice. In the case of NESTLE v NATIONAL WESTMINSTER BANK (1993) 1 WLR 1260, the trustee bank had doubts as to the exact nature and extent of its powers as expressed in the trust instrument. The court held that it was inexcusable that the bank to no step at any time to obtain legal advice as to the scope of its powers.
Thus, the trustee must ensure the trust property is properly transferred to him, take inventory and take possession unless the beneficiaries are sui juris (of age) and determine the trust.
Duty to invest
Another primary duty of a trustee is the duty to invest the trust funds, where the trust consists of money or is money producing, in order to grow it. he must invest in such a manner that yields profit and does not erode the trust funds.
The Trustee Investment Act, in s. 3(1), empowers the trustee to invest in any of the securities mentioned under s. 2 of the Act which are:
- Securities created or issued by or on behalf of the federal government
- Securities created or issued by the state government which are gazetted
- Debentures and full paid up shares of any public company incorporated under CAMA
As was held in RE: WHITLEY (1886) 33 Ch. D. 347, the trustee, when making the investments, must exercise such due care as an ordinary prudent man of business would.
Duty to distribute
When the trust instrument empowers him to do so, the trustee has a duty to distribute/disburse/apply the trust property to the named objects, as directed by the trust instrument as and when due. if he fails to do this or does it incorrectly, he may open himself to liability.
According to s. 18 Trustee Law, in order to avoid paying to the wrong persons, the trustee should identify the correct beneficiaries by notice in the state gazette or a newspaper widely read in the area that the trust property is situated.
If there is uncertainty as to the existence or location of a beneficiary i.e. where he cannot be identified, traced or said to be living or dead, the trustee may apply to the court for direction. In such instance, the court can protect the trustee by making a ‘Benjamin Order’, as laid down in RE: BENJAMIN (1900) 1 Ch. 723. This order directs the trustee to make the payment and protects him from personal suits by beneficiaries that have been left out after all reasonable and practical search has been made for them.
Duty not to delegate
Except as provided by the trust instrument, the trustee has a duty to act personally in respect of the trust at all times. This is in consequence of the rule: Delegatus non potest delegare. If he delegates contrary to the trust instrument, he will be responsible for any loss that arises from the actions of the agent.
However, the trustee, where it reasonably necessary or in the ordinary course of affairs, may delegate his duty. He cannot delegate the exercise of his discretion though unless expressly permitted by the trust instrument.
Duty to act gratuitously
By the rules of Equity, a trustee is a volunteer and is expected to act without remuneration, notwithstanding the great tasks placed on him. However, he may be remunerated if in certain circumstances:
- Authorization by the trust instrument
- Authorization by statute e.g. s. 19 Public Trustee Law
- Authorization by the court in appointment of a judicial trustee
- Remuneration to a corporation
- Authorization by all the beneficiaries in agreement
Duty to account
The trustee must account to the beneficiaries for all trust property once such information is required. To this end, he has a duty to keep accurate accounts and allow the beneficiaries access to same when they require it.
If he fails to account, he may be compelled to do so by the court on application by the beneficiary.
Duty to avoid conflict of interest
The trustee must be loyal to the trust. He should not act in his own interest, to the detriment of the trust. This is allied to the rule that a trustee should not purchase trust property because he cannot be expected to sell it to himself at fair price.