4.The Act will implement, with minor modification, the changes in relation to the law of England and Wales recommended in the report by the Law Commission and the Scottish Law Commission Trustees’ Powers and Duties (1999) Law Com No 260 Scot Law Com No 172. The principal change will be the creation of a new wider statutory power of investment to replace the present limited power under the Trustee Investments Act 1961. This new power of investment will be supported by a range of new powers to appoint agents, nominees and custodians; to insure trust property; and to pay professional trustees. These measures will facilitate the better administration of trusts and enable trustees to take full advantage of the wider investment opportunities now open to them, whilst protecting the interests of beneficiaries against abuse of the new powers. As under the present law the new powers will only apply to the extent that the trust instrument permits.
5.The sections in the Act are divided into 6 parts:
Part I (sections 1-2) of the Act introduces a new safeguard for beneficiaries in the form of a statutory duty of care which will apply to trustees in the exercise of their new wider powers under the Act. The circumstances in which the duty will apply are listed in Schedule 1.
Part II (sections 3-7) sets out the new general trustee power of investment which gives trustees the same powers of investment as an absolute owner other than in land subject, however, to appropriate safeguards. The new power will replace the power in the Trustee Investments Act 1961.
Part III (sections 8-10) introduces a new power that will allow trustees to acquire freehold and leasehold land for any purpose.
Part IV (sections 11-27) contains a wide range of measures relating to collective delegation by trustees.
Sections 11-15 provide trustees with a wide power to delegate their functions in the absence of an express power, or where an express power does not provide to the contrary. Not all functions may be delegated but the new law will permit the delegation of discretionary functions that do not relate to the distribution of the trust assets.
Sections 16-20 provide trustees with a power to appoint nominees and custodians in the absence of an express power, or where an express power does not provide to the contrary.
Sections 21-22 impose a duty on trustees to keep any delegation under review and to take appropriate action.
Section 23 defines the extent of the liability of a trustee for the acts and omissions of an agent, nominee or custodian and his or her permitted substitute.
Sections 24-27 contain supplementary provisions.
Part V (sections 28-33) aims to create a better regime for the payment of professional trustees and the reimbursement of trustees’ expenses and those of their agents, nominees and custodians.
Part VI (sections 34-40) deals with several matters including the creation of a new power to insure trust property in place of the present section 19 of the Trustee Act 1925; the extension of the reforms in the Act to personal representatives; the limited application of the Act to occupational pension scheme trusts, authorised unit trusts and certain schemes under the Charities Act 1993; consequential amendments; transitional provisions, commencement and other supplementary matters.