Briefing

Dealings between trustees and beneficiaries

The relationship between trustee and beneficiary is one which gives rise to a presumption of undue influence, at any rate in relation to the purchase of the beneficiary’s interest in the trust fund (see Coles v Trecothick (`804) 9 Ves 234). Such a transaction will not necessarily be invalid, but it will be necessary to show that, for example, the beneficiary received independent advice. A much stricter rule applies where the trustee seeks to acquire property that is held in the trust fund. The rule is that a trustee must not buy from himself. This applies even if the trustee is buying at market value, and is not profiting from the office of trustee. The trust instrument may, of course, permit dealings between trustee and trust fund, and specify a procedure to be followed (for example, approval by trustees not personally interested in the transaction). However, a relatively modern case shows how strictly the Courts, even now, apply the rule and how restrictively they will interpret any relaxation in the trust instrument (Re Thompson 1985 2AER 720).