11.Sections 1 and 2 form Part I of the Act. Together they implement the recommendations in Part III of the Report. The sections create a new precisely defined statutory duty of care applicable to trustees when carrying out their functions under the Act or equivalent functions under the trust instrument.  As in the law generally, the phrase “duty of care” signifies a duty to take care to avoid causing injury or loss. The new duty will bring certainty and consistency to the standard of competence and behaviour expected of trustees.  It will be a safeguard for beneficiaries and thereby balance the wider powers given to trustees elsewhere in the Act.  The duty will take effect in addition to the existing fundamental duties of trustees (for example, to act in the best interests of the beneficiaries and to comply with the terms of the trust) but will exclude any common law duty of care which might otherwise have applied.
The duty is a default provision.  It may be excluded or modified by the terms of the trust.  This new duty will apply to the manner of the exercise by trustees of a discretionary power.  It will not apply to a decision by the trustees as to whether to exercise that discretionary power in the first place.
12.In relation to the investment of trust funds the new duty makes statutorily explicit the present common law duty which measures the behaviour of the trustees against that expected of the ordinary prudent man of business.  This test includes a subjective element to allow for the particular skills and experience of the trustee in question.  The new duty of care puts this beyond doubt.  In relation to collective delegation by the body of trustees the new duty will however replace the unsatisfactory and insufficiently demanding provisions of sections 23 and 30 of the Trustee Act 1925.
Commentary on Sections Part 1: The duty of care