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The duty of the trustees towards their beneficiaries is paramount. They must, of course, obey the law, but subject to that, they must put the interests of their beneficiaries first. When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their financial interests. Discuss.

Trusteeship has been described as a ‘fiduciary duty par excellence’.1 Although there are other fiduciaries duties, trust is seen as the epitome of fiduciary relations. In fact, so intertwined are the concepts of trust and fiduciary duties, that Prof. Scott has said: “In some relations the fiduciary element is more intense than in others; it is peculiarly intense in the case of a trust.”2 This means that the trustee has a duty in loyalty towards the beneficiary and must ensure that the interest of the beneficiary is the sole consideration in informing all decisions related to trust property. When investing the trust property, the interest of the beneficiary is always paramount, which in general is the financial interest. This means that the trustee has to put the interest of the beneficiary in the trust before every other interest, including his own and also that trustee should always be guided by financial criteria in making investment choices. This puts a question mark on what are known as social investing choices.3 In this paper, the duties of trustees are examined with regard to the financial interests of the beneficiary.


The Law Reform Committee has said: “there is much to be said about the duties and obligations of the trustee, little of his rights”.4 This signifies that the office of the trustee is an onerous one, where the focus is more on the creation of his duties and less on the rights of the trustee. Alastair Hudson has highlighted certain duties of trustees, while admitting that it is a “remarkable feature of the law of trusts that there is no central statement of duties owed by trustees in either a statute or a single case; there is a sense of the obligations borne by trustees which is expressed by the idea that trustees will bear those duties whenever conscience demands that they do.”5 In general the core duties of trustees are: to act even-handedly between beneficiaries; to act with reasonable care and prudence6 ; to avoid conflicts of interest, not to earn unauthorised profits from the fiduciary office, not to deal on one’s own behalf with trust property on pain of such transactions being voidable, and the obligation to deal fairly with the trust property; and duty to take into account relevant considerations and to overlook irrelevant considerations.7

Sometimes, there may be a conflict of interest for the trustee in his personal interest and the duties of the trust. Because a trustee is in a fiduciary position with respect to the beneficiary, there cannot be a conflict of interest and the trustee will have to prioritise the interest of the beneficiary over his own. In Keech v Sandford 8 it was held that the trustees owe a duty of loyalty from which they can never digress and so there can never be a conflict of interest between the trustee’s duties and his personal interest. In Bray v Ford,9 Lord Herschell had stated: “it is an inflexible rule of the Court of Equity that a person in a fiduciary position is not…unless otherwise expressly provided, entitled to make a profit; he is not entitled to put himself in a position where his interest and duty conflict.”

The trustee therefore has to always act in the best interest of the beneficiary and in Cowan v Scargill,10 Megarry VC’s judgement had famously observed: “When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests.” The case is also important because it concerned a conflict between a union policy and the interests of the beneficiaries.

The court held that the trustees could not let their personal ethics and views inform them on the decisions they have to make for the investment of the trust funds. In making such decisions, the trustees have to be guided by their consideration of the beneficiaries’ best interest and not their personal social or political viewpoints. This was the first case that related to trustees and the social investing principle. The ramification of this reasoning was that the trustees were required to put aside their personal considerations when making investments. In other words, if the trustees are against tobacco consumption, they cannot use their personal objections to refuse investments in a tobacco company which would be to the financial benefit of the beneficiary.

There are three exceptions to the position laid down by Magarry VC in the Cowan case. The first is where the beneficiaries themselves hold strict views on such ethical matters and would rather forgo higher profits but not their principles. The second is where the trust deed bars certain kind of investments. For instance, the trust deed may bar investment in tobacco companies. The third situation is where the trust is charitable and there is an incompatibility between the charitable intentions of the trust and the investment. However, even in charitable trusts financial interest of the beneficiary is paramount, although there must be a need to balance this interest with the charitable interests of the trust. In Harries v Church Commissioners for England,11 the commissioners’ investment policy was challenged on the ground that it was incompatible with Christian faith. But the court held in favour of the commissioners holding that they were to take cognisance of non-financial considerations, such as promotion of Christian faith, only to the extent that such considerations are not detrimental to the Trust funds.

Analysing the law on this point, as clarified in Cowan and also Harries v Church Commissioners cases, it can be concluded that the trustee is always under a fiduciary duty to act in the best interest of the beneficiary. Furthermore, when it comes to investing the trust property, best interest is always the financial interest of the beneficiary. In this, the trustee cannot be guided by his personal ethics or morals but has to consider the decision from the perspective of the economic benefit of the trust. There are limited circumstances when social investing may have to be balanced as per the trust provisions, but even in such cases, social factors will be subservient to economic benefits.

List of Cases

    1. Bray v Ford, [1896] AC 44, [51].
    2. Cowan v Scargill, [1985] Ch 270.
    3. Keech v Sandford, (1726) Sel Cas Ch 61.
    4. Harries v Church Commissioners for England, [1992] 1 WLR 1241.


    1. Garton J, Moffat G, Bean G, Probert R, Moffats’ Trust Law (6th ed., Cambridge University Press, 2015)
    2. Hudson A, Equity and Trusts (Routledge, 2014)
    3. Law Reform Committee, 23rd Report, The Powers and Duties of Trustees (Cmnd 8733, 1982), para 1.2.
    4. Scott, ‘The Trustee’s Duties of Loyalty’, (1936 ) 49 Harv LR 521.

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