There is a general rule of equity that trustees, just like all other fiduciaries, must not:
- Place themselves in positions; or
- Enter into transactions…
…where there may be a conflict between their duty as a trustee and their personal interests and other duties.
This is a rule of general application, affecting all actions of and transactions with fiduciaries. Given how wide the impact of this could be in relation to pension schemes, where trustees are often members, Parliament has intervened by statute under section 39 of the Pensions Act 1995, which effectively excludes the rule from applying to the exercises of powers "merely because their exercise in that manner benefits, or may benefit, him as a member of the scheme".
The general rule also has a number of sub-rules that apply in specific situations, including:
- The rule against self-dealing: a trustee must not purchase trust property from himself.
- The rule of fair-dealing: when and how a trustee may purchase a beneficial interest from a beneficiary.
- The rule in Keech v Sandford  EWHC Ch J76: trustees are not allowed to take a new lease of property originally let by trust.
- The rule against exercising a dispositive power in the trustee's own favour.
- The rule against unauthorised or "secret" profits.
Clearly this can be a mine field for Pension Trustees and we are able to advise on any issues that may arise.
Generally, the consequences of a conflict is that a trustee is unable to act. There are exceptions to the rules, or the rules may not apply in certain circumstances, including:
- Where there is express or implied authorisation in the terms of the trust or appointment itself.
- Where the court authorises trustees to act.
- Where all the beneficiaries give fully informed consent.
Once a conflict has been identified, there are a number of possible ways of dealing with it. These include:
- Application to the court for declaration that there is an express or implied permission to so act.
- Application to the court for permission to, and directions on how to act.
- Surrender of the discretion to the court.
- Amendment of the trust deed to expressly permit the action.
- Appointment of new trustees for a portion of the trust fund.
For more information contact Ben Wilson in our SIPP & SSAS department
via email or phone on 0333 207 1130.
Alternatively send any question through to Forbes Solicitors via our online Contact Form.