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SQE – Equity and Trust – Collective Delegation by Trustees
Introduction
Modern trust administration often involves managing complex investments, businesses, real estate portfolios, and other specialised assets. Trustees may not always possess the expertise necessary to carry out every aspect of trust administration personally. Consequently, the law permits trustees to delegate certain functions to agents who possess the required knowledge, skills, or professional qualifications.
The power of collective delegation is one of the most significant reforms introduced by the Trustee Act 2000. Prior to the Act, trustees faced considerable restrictions on delegation, particularly in relation to discretionary and investment functions. The modern statutory framework now provides trustees with greater flexibility while simultaneously imposing duties designed to ensure that delegation is carried out responsibly.
The principal provisions governing collective delegation are found in sections 11–23 of the Trustee Act 2000.
⸻
Historical Position Before the Trustee Act 2000
Before the Trustee Act 2000, the delegation powers of trustees were extremely limited.
Section 23 of the Trustee Act 1925 permitted delegation of administrative functions only. Trustees were generally prohibited from delegating discretionary powers, including the crucial power to make investment decisions.
This restrictive approach was illustrated in Rowland v Witherden (1851) 3 Mac & G 568, where the courts emphasised that trustees were expected personally to exercise their fiduciary responsibilities.
As investment management became increasingly specialised during the twentieth century, these restrictions created practical difficulties for trustees.
The Law Commission criticised the old rules in its Report No 260, describing them as:
“A serious impediment to the administration of trusts.”
The Commission recognised that modern trusteeship frequently requires expertise that lay trustees may not possess.
⸻
Reform Under the Trustee Act 2000
The Trustee Act 2000 fundamentally reformed the law of delegation.
Section 11 now permits trustees of non-charitable trusts to delegate many of their functions to agents.
This reform acknowledges the reality that professional expertise is often necessary for the effective administration of trust assets.
Most importantly, trustees may now delegate investment functions to suitably qualified agents, a power that was previously unavailable under the default statutory rules.
⸻
Functions That May Be Delegated
Section 11(1) allows trustees to delegate a wide range of administrative and management functions.
Examples include:
The ability to delegate these functions enables trustees to obtain professional assistance where specialist knowledge is required.
⸻
Functions That Cannot Be Delegated
Despite the broad power granted by section 11, certain core trustee functions remain non-delegable.
Section 11(2) identifies functions that must continue to be exercised personally by the trustees.
These include:
These restrictions preserve the fundamental fiduciary responsibilities of trustees.
⸻
Delegation of Investment Functions
One of the most significant reforms introduced by the Trustee Act 2000 is the ability to delegate investment management.
Trustees are no longer expected to possess specialist investment expertise.
Instead, they may appoint professional investment managers to make investment decisions on behalf of the trust.
This reflects modern commercial reality and enables trust funds to be managed more effectively.
⸻
Who May Be Appointed as an Agent?
Section 12 of the Trustee Act 2000 specifies who may be appointed as an agent.
Trustees may appoint:
Consequently, if one trustee possesses specialist expertise, that trustee may act as the agent for the others.
However, a beneficiary may not be appointed as an agent.
This restriction helps prevent conflicts of interest and protects the integrity of trust administration.
⸻
Absence of Professional Qualification Requirements
Unlike the provisions relating to nominees and custodians, section 12 does not require agents to possess professional qualifications.
The statute does not state that an agent must:
However, trustees remain subject to the statutory duty of care when selecting agents.
Consequently, appointing an unsuitable individual could expose trustees to liability.
⸻
The Earlier Common Law Approach – Re Vickery
Before the Trustee Act 2000, guidance regarding the selection of agents came largely from Re Vickery [1931] 1 Ch 572.
The case established three key principles:
Under Re Vickery, trustees would only be liable for an agent’s actions where they were guilty of wilful default.
The Trustee Act 2000 replaced this relatively lenient approach with a more demanding statutory framework based upon reasonable care.
⸻
The Statutory Duty of Care
The general duty of care contained in section 1 of the Trustee Act 2000 applies to delegation decisions.
Trustees must exercise such care and skill as is reasonable in the circumstances when:
Professional trustees are expected to satisfy a higher standard because of their specialist expertise.
⸻
Asset Management Functions and Section 15
Special requirements apply when trustees delegate asset management functions.
Section 15 requires trustees to prepare a written policy statement for the agent.
The policy statement must provide guidance concerning:
The purpose of the statement is to ensure that the agent understands how trust assets should be managed.
⸻
Example of a Policy Statement
A trust may contain elderly beneficiaries who depend upon income distributions.
The trustees could prepare a policy statement instructing the investment manager to:
The agent must then manage the investments consistently with those instructions.
⸻
Duty to Review the Policy Statement
Section 22(2) requires trustees to review the policy statement regularly.
Trustees must:
The trustees cannot simply prepare the statement and then ignore the delegation arrangement.
Active supervision remains essential.
⸻
Monitoring the Agent
Trustees must also ensure that the agent complies with the policy statement.
Delegation does not permit trustees to abandon responsibility for trust administration.
They must monitor:
Failure to supervise adequately may constitute a breach of trust.
⸻
Liability for the Acts of Agents
One of the most important issues concerns trustee liability when an agent makes mistakes.
Unlike individual delegation under section 25 of the Trustee Act 1925, collective delegation under the Trustee Act 2000 does not impose strict liability.
Section 23 provides that trustees are not automatically liable for the acts or defaults of their agents.
This represents a significant protection for trustees.
⸻
When Trustees May Be Liable
Trustees may nevertheless incur liability where they fail to comply with their statutory duties.
Liability may arise where trustees:
The focus is therefore on the conduct of the trustees rather than the conduct of the agent.
⸻
Practical Importance of Policy Agreements
In practice, written policy agreements are essential.
For example, if trustees appoint an estate manager to administer a large rural estate, they should provide written guidance regarding:
Performance should then be reviewed regularly.
The same principle applies to investment management arrangements.
⸻
STEP Guidance
The Society of Trust and Estate Practitioners (STEP) provides guidance and model documents for trustees using delegation arrangements.
These materials assist trustees in preparing suitable policy statements and monitoring performance effectively.
The availability of such guidance reflects the increasing professionalism of modern trust administration.
⸻
Case Study
Facts
A trust worth £20 million contains a diversified investment portfolio.
The trustees lack investment expertise and appoint a professional investment management firm under section 11 of the Trustee Act 2000.
They prepare a detailed policy statement requiring moderate-risk investments and regular income generation for beneficiaries.
The trustees review investment reports quarterly.
Several years later, market conditions result in losses.
Analysis
The trustees exercised reasonable care when selecting the investment manager.
They complied with section 15 by preparing a policy statement and fulfilled their monitoring duties under section 22.
The losses resulted from market fluctuations rather than trustee misconduct.
Outcome
Under section 23, the trustees would not normally be liable because they complied with their statutory duties and exercised reasonable care throughout the delegation process.
⸻
Conclusion
The Trustee Act 2000 transformed the law governing delegation by trustees. Sections 11–23 now permit trustees to delegate a wide range of functions, including investment management, while preserving certain core fiduciary responsibilities that must remain with the trustees themselves. The reforms recognise the increasingly specialised nature of trust administration and enable trustees to obtain professional assistance where necessary. However, delegation does not eliminate trustee responsibility. Trustees remain subject to the statutory duty of care and must carefully select, instruct, and supervise their agents. Through the use of policy statements, ongoing monitoring, and regular review, trustees can delegate effectively while continuing to fulfil their fiduciary obligations.
⸻
References
Rowland v Witherden (1851) 3 Mac & G 568.
Re Vickery [1931] 1 Ch 572.
Trustee Act 1925, s 23.
Trustee Act 2000, ss 1, 11–23.
Law Commission, Trustee Powers and Duties (Law Com No 260, 1999).
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, Oxford University Press 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, Oxford University Press 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).
Introduction
Modern trust administration often involves managing complex investments, businesses, real estate portfolios, and other specialised assets. Trustees may not always possess the expertise necessary to carry out every aspect of trust administration personally. Consequently, the law permits trustees to delegate certain functions to agents who possess the required knowledge, skills, or professional qualifications.
The power of collective delegation is one of the most significant reforms introduced by the Trustee Act 2000. Prior to the Act, trustees faced considerable restrictions on delegation, particularly in relation to discretionary and investment functions. The modern statutory framework now provides trustees with greater flexibility while simultaneously imposing duties designed to ensure that delegation is carried out responsibly.
The principal provisions governing collective delegation are found in sections 11–23 of the Trustee Act 2000.
⸻
Historical Position Before the Trustee Act 2000
Before the Trustee Act 2000, the delegation powers of trustees were extremely limited.
Section 23 of the Trustee Act 1925 permitted delegation of administrative functions only. Trustees were generally prohibited from delegating discretionary powers, including the crucial power to make investment decisions.
This restrictive approach was illustrated in Rowland v Witherden (1851) 3 Mac & G 568, where the courts emphasised that trustees were expected personally to exercise their fiduciary responsibilities.
As investment management became increasingly specialised during the twentieth century, these restrictions created practical difficulties for trustees.
The Law Commission criticised the old rules in its Report No 260, describing them as:
“A serious impediment to the administration of trusts.”
The Commission recognised that modern trusteeship frequently requires expertise that lay trustees may not possess.
⸻
Reform Under the Trustee Act 2000
The Trustee Act 2000 fundamentally reformed the law of delegation.
Section 11 now permits trustees of non-charitable trusts to delegate many of their functions to agents.
This reform acknowledges the reality that professional expertise is often necessary for the effective administration of trust assets.
Most importantly, trustees may now delegate investment functions to suitably qualified agents, a power that was previously unavailable under the default statutory rules.
⸻
Functions That May Be Delegated
Section 11(1) allows trustees to delegate a wide range of administrative and management functions.
Examples include:
- investment management;
- management of trust property;
- acquisition of investments;
- disposal of trust assets;
- administrative functions;
- management of business interests held by the trust.
The ability to delegate these functions enables trustees to obtain professional assistance where specialist knowledge is required.
⸻
Functions That Cannot Be Delegated
Despite the broad power granted by section 11, certain core trustee functions remain non-delegable.
Section 11(2) identifies functions that must continue to be exercised personally by the trustees.
These include:
- decisions concerning the distribution of trust assets to beneficiaries;
- decisions regarding the appointment of new trustees;
- decisions relating to the delegation itself;
- certain powers specifically excluded by statute.
These restrictions preserve the fundamental fiduciary responsibilities of trustees.
⸻
Delegation of Investment Functions
One of the most significant reforms introduced by the Trustee Act 2000 is the ability to delegate investment management.
Trustees are no longer expected to possess specialist investment expertise.
Instead, they may appoint professional investment managers to make investment decisions on behalf of the trust.
This reflects modern commercial reality and enables trust funds to be managed more effectively.
⸻
Who May Be Appointed as an Agent?
Section 12 of the Trustee Act 2000 specifies who may be appointed as an agent.
Trustees may appoint:
- one or more third parties;
- one or more of their own number.
Consequently, if one trustee possesses specialist expertise, that trustee may act as the agent for the others.
However, a beneficiary may not be appointed as an agent.
This restriction helps prevent conflicts of interest and protects the integrity of trust administration.
⸻
Absence of Professional Qualification Requirements
Unlike the provisions relating to nominees and custodians, section 12 does not require agents to possess professional qualifications.
The statute does not state that an agent must:
- act in the course of a business;
- hold professional accreditation;
- possess specific expertise.
However, trustees remain subject to the statutory duty of care when selecting agents.
Consequently, appointing an unsuitable individual could expose trustees to liability.
⸻
The Earlier Common Law Approach – Re Vickery
Before the Trustee Act 2000, guidance regarding the selection of agents came largely from Re Vickery [1931] 1 Ch 572.
The case established three key principles:
- Trustees must act in good faith.
- Trustees must exercise their own discretion when selecting an agent.
- Agents should only be appointed to perform functions within the ordinary course of their business.
Under Re Vickery, trustees would only be liable for an agent’s actions where they were guilty of wilful default.
The Trustee Act 2000 replaced this relatively lenient approach with a more demanding statutory framework based upon reasonable care.
⸻
The Statutory Duty of Care
The general duty of care contained in section 1 of the Trustee Act 2000 applies to delegation decisions.
Trustees must exercise such care and skill as is reasonable in the circumstances when:
- selecting agents;
- negotiating delegation arrangements;
- supervising agents;
- reviewing delegated functions.
Professional trustees are expected to satisfy a higher standard because of their specialist expertise.
⸻
Asset Management Functions and Section 15
Special requirements apply when trustees delegate asset management functions.
Section 15 requires trustees to prepare a written policy statement for the agent.
The policy statement must provide guidance concerning:
- investment objectives;
- risk tolerance;
- income requirements;
- capital growth objectives;
- restrictions contained in the trust deed.
The purpose of the statement is to ensure that the agent understands how trust assets should be managed.
⸻
Example of a Policy Statement
A trust may contain elderly beneficiaries who depend upon income distributions.
The trustees could prepare a policy statement instructing the investment manager to:
- prioritise income generation;
- avoid highly speculative investments;
- maintain a diversified portfolio;
- preserve capital where possible.
The agent must then manage the investments consistently with those instructions.
⸻
Duty to Review the Policy Statement
Section 22(2) requires trustees to review the policy statement regularly.
Trustees must:
- monitor changing circumstances;
- revise objectives where necessary;
- replace outdated instructions.
The trustees cannot simply prepare the statement and then ignore the delegation arrangement.
Active supervision remains essential.
⸻
Monitoring the Agent
Trustees must also ensure that the agent complies with the policy statement.
Delegation does not permit trustees to abandon responsibility for trust administration.
They must monitor:
- investment performance;
- compliance with restrictions;
- adherence to trust objectives;
- the continuing suitability of the agent.
Failure to supervise adequately may constitute a breach of trust.
⸻
Liability for the Acts of Agents
One of the most important issues concerns trustee liability when an agent makes mistakes.
Unlike individual delegation under section 25 of the Trustee Act 1925, collective delegation under the Trustee Act 2000 does not impose strict liability.
Section 23 provides that trustees are not automatically liable for the acts or defaults of their agents.
This represents a significant protection for trustees.
⸻
When Trustees May Be Liable
Trustees may nevertheless incur liability where they fail to comply with their statutory duties.
Liability may arise where trustees:
- appoint an unsuitable agent;
- fail to exercise reasonable care during selection;
- fail to prepare an appropriate policy statement;
- neglect to monitor performance;
- ignore warning signs of misconduct or incompetence.
The focus is therefore on the conduct of the trustees rather than the conduct of the agent.
⸻
Practical Importance of Policy Agreements
In practice, written policy agreements are essential.
For example, if trustees appoint an estate manager to administer a large rural estate, they should provide written guidance regarding:
- maintenance responsibilities;
- expenditure limits;
- reporting requirements;
- strategic objectives.
Performance should then be reviewed regularly.
The same principle applies to investment management arrangements.
⸻
STEP Guidance
The Society of Trust and Estate Practitioners (STEP) provides guidance and model documents for trustees using delegation arrangements.
These materials assist trustees in preparing suitable policy statements and monitoring performance effectively.
The availability of such guidance reflects the increasing professionalism of modern trust administration.
⸻
Case Study
Facts
A trust worth £20 million contains a diversified investment portfolio.
The trustees lack investment expertise and appoint a professional investment management firm under section 11 of the Trustee Act 2000.
They prepare a detailed policy statement requiring moderate-risk investments and regular income generation for beneficiaries.
The trustees review investment reports quarterly.
Several years later, market conditions result in losses.
Analysis
The trustees exercised reasonable care when selecting the investment manager.
They complied with section 15 by preparing a policy statement and fulfilled their monitoring duties under section 22.
The losses resulted from market fluctuations rather than trustee misconduct.
Outcome
Under section 23, the trustees would not normally be liable because they complied with their statutory duties and exercised reasonable care throughout the delegation process.
⸻
Conclusion
The Trustee Act 2000 transformed the law governing delegation by trustees. Sections 11–23 now permit trustees to delegate a wide range of functions, including investment management, while preserving certain core fiduciary responsibilities that must remain with the trustees themselves. The reforms recognise the increasingly specialised nature of trust administration and enable trustees to obtain professional assistance where necessary. However, delegation does not eliminate trustee responsibility. Trustees remain subject to the statutory duty of care and must carefully select, instruct, and supervise their agents. Through the use of policy statements, ongoing monitoring, and regular review, trustees can delegate effectively while continuing to fulfil their fiduciary obligations.
⸻
References
Rowland v Witherden (1851) 3 Mac & G 568.
Re Vickery [1931] 1 Ch 572.
Trustee Act 1925, s 23.
Trustee Act 2000, ss 1, 11–23.
Law Commission, Trustee Powers and Duties (Law Com No 260, 1999).
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, Oxford University Press 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, Oxford University Press 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).
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