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SQE – Equity and Trust – Individual Delegation by Trustees
Introduction
While the Trustee Act 2000 introduced extensive powers of collective delegation, trustees may also delegate their functions individually under a separate statutory mechanism. Individual delegation is governed by section 25 of the Trustee Act 1925, as amended by the Trustee Delegation Act 1999. Unlike collective delegation, which involves all trustees acting together to appoint an agent, individual delegation allows a single trustee to appoint another person to act on their behalf through a power of attorney.
This form of delegation is intended to address temporary situations where a trustee is unable to perform their duties personally. However, despite its practical utility, individual delegation carries a significant disadvantage because the trustee remains strictly liable for the acts and defaults of the appointed attorney. Consequently, it is generally used only where absolutely necessary.
Statutory Basis
Section 25 of the Trustee Act 1925 permits an individual trustee to delegate all of their trustee functions to another person by executing a power of attorney.
The provision was substantially modernised by the Trustee Delegation Act 1999, although it was not amended by the Trustee Act 2000.
The delegation operates by granting legal authority to another person, known as the attorney, to perform trustee functions on behalf of the delegating trustee.
The arrangement allows trust administration to continue uninterrupted during periods when the trustee is temporarily unavailable.
Duration of Delegation
A delegation under section 25 is temporary.
The maximum period for which the power of attorney may operate is 12 months.
After this period expires, the delegation automatically ceases unless a new power of attorney is executed in accordance with the statutory requirements.
The temporary nature of the power reflects Parliament’s intention that trustees should ordinarily perform their duties personally rather than permanently transferring responsibility to others.
Purpose of Individual Delegation
Individual delegation is designed to accommodate situations where a trustee is temporarily unable to participate in trust administration.
Common examples include:
Example – Trustee Hospitalisation
Suppose a trust is engaged in the sale of a valuable property requiring the signatures of all trustees.
One trustee is unexpectedly admitted to hospital and is unable to participate in the transaction for several months.
The trustee may execute a power of attorney under section 25 appointing another individual to act on their behalf.
The attorney can then sign documents and carry out trustee functions during the trustee’s absence.
This enables the transaction to proceed without delay.
Example – Temporary Overseas Travel
A trustee plans to spend six months abroad undertaking a work assignment.
During this period, the trust is expected to make several investment decisions and complete a property transaction.
Rather than disrupting trust administration, the trustee may delegate their functions through a power of attorney.
The attorney can then participate in trustee decision-making while the trustee remains overseas.
The Major Disadvantage – Strict Liability
The principal disadvantage of individual delegation is that the delegating trustee remains strictly liable for the acts and defaults of the attorney.
This is a much harsher rule than the position under collective delegation in the Trustee Act 2000.
Under section 25, liability arises regardless of whether the trustee acted reasonably when selecting the attorney.
The trustee cannot avoid responsibility simply by demonstrating that they exercised care in making the appointment.
Consequently, the trustee effectively bears the risk of any mistakes, negligence, or misconduct committed by the attorney.
Comparison with Collective Delegation
The distinction between individual and collective delegation is significant.
Under collective delegation governed by sections 11–23 of the Trustee Act 2000, trustees are not automatically liable for the acts of agents.
Instead, liability generally arises only if trustees fail to:
This makes individual delegation considerably less attractive.
Why Strict Liability Exists
The rationale for strict liability is that the delegation is made solely for the personal convenience or circumstances of the individual trustee.
Since the trustee voluntarily chooses to appoint an attorney to act in their place, it is considered appropriate that they bear the consequences of the attorney’s actions.
The beneficiaries should not suffer losses because a trustee chose to delegate responsibilities due to personal circumstances.
This approach reinforces the fundamental principle that trustees remain personally responsible for the administration of the trust.
Practical Consequences
Because of the strict liability imposed by section 25, trustees are generally reluctant to rely upon individual delegation.
A prudent trustee will carefully consider:
Long-Term Absence and Retirement
Where a trustee intends to be absent for an extended period, the use of a power of attorney may be inappropriate.
For example, if a trustee intends to:
This ensures that the trust is administered by individuals who are available to fulfil their responsibilities directly.
Continued reliance upon a temporary power of attorney in such circumstances may expose both the trust and the trustee to unnecessary risks.
Trustee Retirement as an Alternative
Retirement is often the preferred option where a trustee’s absence is likely to be prolonged.
Retirement allows a replacement trustee to be appointed and ensures that the trust benefits from active supervision and participation.
It also eliminates the strict liability risks associated with section 25 delegation.
For this reason, professional advisers frequently recommend retirement rather than long-term delegation where a trustee is unlikely to return to active administration.
Case Study
Facts
A trust owns several investment properties and is in the process of purchasing additional commercial premises.
One of the trustees is required to undergo major surgery and is expected to spend nine months recovering.
The trustee executes a power of attorney under section 25 appointing a trusted solicitor to act on their behalf.
During the recovery period, the solicitor negligently fails to complete essential due diligence, causing the trust to suffer substantial financial losses.
Analysis
The solicitor acted as the trustee’s attorney under section 25.
Although the trustee selected the solicitor carefully and acted reasonably, section 25 imposes strict liability for the attorney’s defaults.
The trustee remains responsible for the losses caused by the attorney.
Outcome
The beneficiaries may pursue the trustee for compensation arising from the attorney’s negligence. The trustee may then seek recovery from the attorney separately, but liability to the beneficiaries remains.
Practical Guidance for Trustees
Before using a section 25 power of attorney, trustees should:
Conclusion
Individual delegation under section 25 of the Trustee Act 1925 provides a useful mechanism for trustees who are temporarily unable to perform their duties. Through a power of attorney, a trustee may delegate all trustee functions for a period of up to 12 months. However, unlike collective delegation under the Trustee Act 2000, individual delegation carries the significant disadvantage of strict liability. The delegating trustee remains responsible for the acts and defaults of the attorney regardless of the care exercised in making the appointment. As a result, section 25 is generally regarded as a measure of last resort, appropriate only for temporary absences or emergencies. Where a trustee’s absence is likely to be long-term or permanent, retirement from the trusteeship is usually the preferable course of action.
References
Trustee Act 1925, s 25.
Trustee Delegation Act 1999.
Trustee Act 2000, ss 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
While the Trustee Act 2000 introduced extensive powers of collective delegation, trustees may also delegate their functions individually under a separate statutory mechanism. Individual delegation is governed by section 25 of the Trustee Act 1925, as amended by the Trustee Delegation Act 1999. Unlike collective delegation, which involves all trustees acting together to appoint an agent, individual delegation allows a single trustee to appoint another person to act on their behalf through a power of attorney.
This form of delegation is intended to address temporary situations where a trustee is unable to perform their duties personally. However, despite its practical utility, individual delegation carries a significant disadvantage because the trustee remains strictly liable for the acts and defaults of the appointed attorney. Consequently, it is generally used only where absolutely necessary.
Statutory Basis
Section 25 of the Trustee Act 1925 permits an individual trustee to delegate all of their trustee functions to another person by executing a power of attorney.
The provision was substantially modernised by the Trustee Delegation Act 1999, although it was not amended by the Trustee Act 2000.
The delegation operates by granting legal authority to another person, known as the attorney, to perform trustee functions on behalf of the delegating trustee.
The arrangement allows trust administration to continue uninterrupted during periods when the trustee is temporarily unavailable.
Duration of Delegation
A delegation under section 25 is temporary.
The maximum period for which the power of attorney may operate is 12 months.
After this period expires, the delegation automatically ceases unless a new power of attorney is executed in accordance with the statutory requirements.
The temporary nature of the power reflects Parliament’s intention that trustees should ordinarily perform their duties personally rather than permanently transferring responsibility to others.
Purpose of Individual Delegation
Individual delegation is designed to accommodate situations where a trustee is temporarily unable to participate in trust administration.
Common examples include:
- serious illness;
- hospitalisation;
- temporary incapacity;
- extended holidays;
- short-term overseas travel;
- family emergencies.
Example – Trustee Hospitalisation
Suppose a trust is engaged in the sale of a valuable property requiring the signatures of all trustees.
One trustee is unexpectedly admitted to hospital and is unable to participate in the transaction for several months.
The trustee may execute a power of attorney under section 25 appointing another individual to act on their behalf.
The attorney can then sign documents and carry out trustee functions during the trustee’s absence.
This enables the transaction to proceed without delay.
Example – Temporary Overseas Travel
A trustee plans to spend six months abroad undertaking a work assignment.
During this period, the trust is expected to make several investment decisions and complete a property transaction.
Rather than disrupting trust administration, the trustee may delegate their functions through a power of attorney.
The attorney can then participate in trustee decision-making while the trustee remains overseas.
The Major Disadvantage – Strict Liability
The principal disadvantage of individual delegation is that the delegating trustee remains strictly liable for the acts and defaults of the attorney.
This is a much harsher rule than the position under collective delegation in the Trustee Act 2000.
Under section 25, liability arises regardless of whether the trustee acted reasonably when selecting the attorney.
The trustee cannot avoid responsibility simply by demonstrating that they exercised care in making the appointment.
Consequently, the trustee effectively bears the risk of any mistakes, negligence, or misconduct committed by the attorney.
Comparison with Collective Delegation
The distinction between individual and collective delegation is significant.
Under collective delegation governed by sections 11–23 of the Trustee Act 2000, trustees are not automatically liable for the acts of agents.
Instead, liability generally arises only if trustees fail to:
- exercise reasonable care in selecting the agent;
- prepare appropriate policy statements;
- monitor the agent adequately.
This makes individual delegation considerably less attractive.
Why Strict Liability Exists
The rationale for strict liability is that the delegation is made solely for the personal convenience or circumstances of the individual trustee.
Since the trustee voluntarily chooses to appoint an attorney to act in their place, it is considered appropriate that they bear the consequences of the attorney’s actions.
The beneficiaries should not suffer losses because a trustee chose to delegate responsibilities due to personal circumstances.
This approach reinforces the fundamental principle that trustees remain personally responsible for the administration of the trust.
Practical Consequences
Because of the strict liability imposed by section 25, trustees are generally reluctant to rely upon individual delegation.
A prudent trustee will carefully consider:
- the reliability of the proposed attorney;
- the complexity of the trust administration;
- the duration of the delegation;
- alternative options available.
Long-Term Absence and Retirement
Where a trustee intends to be absent for an extended period, the use of a power of attorney may be inappropriate.
For example, if a trustee intends to:
- emigrate permanently;
- work abroad indefinitely;
- cease active involvement in trust administration;
This ensures that the trust is administered by individuals who are available to fulfil their responsibilities directly.
Continued reliance upon a temporary power of attorney in such circumstances may expose both the trust and the trustee to unnecessary risks.
Trustee Retirement as an Alternative
Retirement is often the preferred option where a trustee’s absence is likely to be prolonged.
Retirement allows a replacement trustee to be appointed and ensures that the trust benefits from active supervision and participation.
It also eliminates the strict liability risks associated with section 25 delegation.
For this reason, professional advisers frequently recommend retirement rather than long-term delegation where a trustee is unlikely to return to active administration.
Case Study
Facts
A trust owns several investment properties and is in the process of purchasing additional commercial premises.
One of the trustees is required to undergo major surgery and is expected to spend nine months recovering.
The trustee executes a power of attorney under section 25 appointing a trusted solicitor to act on their behalf.
During the recovery period, the solicitor negligently fails to complete essential due diligence, causing the trust to suffer substantial financial losses.
Analysis
The solicitor acted as the trustee’s attorney under section 25.
Although the trustee selected the solicitor carefully and acted reasonably, section 25 imposes strict liability for the attorney’s defaults.
The trustee remains responsible for the losses caused by the attorney.
Outcome
The beneficiaries may pursue the trustee for compensation arising from the attorney’s negligence. The trustee may then seek recovery from the attorney separately, but liability to the beneficiaries remains.
Practical Guidance for Trustees
Before using a section 25 power of attorney, trustees should:
- consider whether delegation is genuinely necessary;
- appoint a trustworthy and competent attorney;
- limit the duration of the delegation where possible;
- monitor the attorney’s activities;
- obtain professional advice regarding the risks involved.
Conclusion
Individual delegation under section 25 of the Trustee Act 1925 provides a useful mechanism for trustees who are temporarily unable to perform their duties. Through a power of attorney, a trustee may delegate all trustee functions for a period of up to 12 months. However, unlike collective delegation under the Trustee Act 2000, individual delegation carries the significant disadvantage of strict liability. The delegating trustee remains responsible for the acts and defaults of the attorney regardless of the care exercised in making the appointment. As a result, section 25 is generally regarded as a measure of last resort, appropriate only for temporary absences or emergencies. Where a trustee’s absence is likely to be long-term or permanent, retirement from the trusteeship is usually the preferable course of action.
References
Trustee Act 1925, s 25.
Trustee Delegation Act 1999.
Trustee Act 2000, ss 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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