Commentary on Sections Part 1 – Trusts Application in respect of defective exercise of fiduciary power etc.
119.Section 68 of the Act provides a statutory court power, exercisable by the Court of Session, to grant a remedy, if considered appropriate, where the exercise of a fiduciary power by a trustee is challenged as being defective, that is, the power is exercised in error such that the effect is different from what is intended. This implements recommendation 101.
120.Subsection (1) sets out the basic conditions for an application to be made, namely that a relevant person (as defined in subsection (7)(b)) either considers that a trustee has already taken a decision which amounts to a defective exercise of the trustee’s fiduciary power or reasonably apprehends that such a decision is about to be taken. Subsection (2) provides the power to apply to court (which, under section 81(1) means the Court of Session).
121.The grounds on which the court may grant a remedy derive from the common law and are set out in subsection (3), which implements recommendations 102 to 104 (with recommendation 103 relating to the inclusion of paragraph (c), and recommendation 104 to paragraph (g)). For example, the ground at subsection (3)(a) (where the trustees have considered the wrong question) applies where the trustees decide to act in a particular way in response to a question which arises under the trust (for example where the payment of a legacy is subject to the trustees being satisfied that a particular condition has been met). Subsections (4) and (5) are consequential on two of the paragraphs in subsection (3), and they implement, in part, recommendations 102 and 104 respectively. Paragraph (g) of subsection (3) allows a challenge on the ground that the trustee has made an error as to fact or law and subsection (5)(b) provides that the error need not be as to the effect or consequence of the decision, thus avoiding certain difficulties which can arise under the current law.
122.Subsection (6) makes clear that the section does not interfere with the existing power of the court to take into account the purpose (or, in the view of the court, the likely purpose) of making the application. This may be relevant where the application is made to avoid tax as part of a failed tax avoidance scheme or where the motivation for making the application is otherwise inappropriate for some reason.
123.Subsection (7)(a), in implementation of recommendation 105, specifies the available remedies: reduction (either partial or full), rectification, declarator and interdict. Subsection (7)(b) implements recommendation 106 and lists those who, by virtue of being a “relevant person”, may make an application under subsection (2). By subsection (8) the power applies in respect of all trusts, whenever created, but only as regards a decision taken, or reasonably apprehended as being about to be taken, after commencement of section 68.
124.Section 69 of the Act reaffirms the ability for applications to be made to the Court of Session for trustees, protectors or supervisors to obtain directions in respect to the exercise of their powers (as described in subsection (1)) and for executors to obtain directions in respect of the exercise of their powers (described in subsection (2)).