There are four Trustees managing a trust on behalf of fourteen beneficiaries. Two of the Trustees (A and B) would like to call a meeting to consult the beneficiaries regarding a possible advantageous sale of the land held in the trust. If the other 2 Trustees (C and D) do not attend the meeting, what is the position? Can A and B force through the majority Beneficiaries’ wishes, even if they are against the wishes of C and D? (A&B would prefer not to take legal action to force C & D to comply.)
s.11 Trusts of Land and Appointment of Trustees Act 1996 requires trustees of land (created on or after 1 January 1997) to consult the beneficiaries and “so far as consistent with the general interest of the trust, give effect to the wishes of those beneficiaries, or (in the case of dispute) of the majority (according to the value of their combined interests)”.
Accordingly, even if all the beneficiaries have made a fully informed decision and agree with A & B, C and/or D could refuse to comply if they believe that the proposed action is not consistent with the general interest of the trust – which in such circumstances may be a very high bar to cross.
Where there is any dispute, an application to court may be made under s.14 TLATA 1996, by any interested party, whether a trustee or a beneficiary.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
S.11 of TLATA is often expressly excluded in Wills and Trust documents so there may be no obligation to consult with beneficiaries. A colleague advised me that the STEP special provisions also exclude the duty to consult but I cannot see that it does. If anyone could point me to the clause it would be appreciated.
I think you are thinking of Special Condition 19 which provides:
19 Absolute discretion clause The Trustees are not under any duty to consult with any Beneficiaries or to give effect to the wishes of any Beneficiaries. The powers of the Trustees may be exercised: 19.1 at their absolute discretion, and 19.2 from time to time as occasion requires.
I remember that James Kessler came to a meeting of STEP Central Southern some years ago to talk about the 2nd edition of the STEP provisions, which were in preparation at the time. Someone suggested that there should be a specific exclusion of TLATA section 11, although others disagreed and I don’t think this is in the final version.
I have found it a most useful statutory provision in a case where there were genuine disagreements among the beneficiaries of a bare trust owning land with development potential. It led to open discussion of the issues but, in the end, justified the trustees in following the wishes of those with a majority of the beneficial interests.
In response to Frances’s original post in this thread, I would question why two of the trustees do not want to engage with the beneficiaries’ discussion. It is surely their duty to do so. If not, they should be invited to stand down and, if necessary, the active trustees need to apply to the court to remove them. Even if they don’t want to apply to court it is their duty to do so if the non-actions of the other trustees are preventing proper administration of the trust.
In the original version of the STEP Standard Provisions, published in 1992, provision 10 does not, I believe, negate the duty to consult. I recall that once TLATA 1996 has been passed, precedents incorporating that version generally included the option of including words to exclude the operation of s.11 TLATA.
With regard to the STEP Standard Provisions, 2nd Edition, if Special Provision 19 (SP19) is not considered clear in itself states, the guidance note to it states:
“For the avoidance of doubt, and to disapply Trust (sic) of Land and Appointment of Trustees Act 1996, section 11, this provision allows Trustees to exercise their discretion freely and without supervision by the Beneficiaries.”
HOWEVER, the mere incorporation of the second edition of the Standard Provisions does not cause SP19 to be incorporated. It must be specifically referred to either in its own right, or by the inclusion of all of the Special Provisions.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals