Commentary on Sections Part 1 – Trusts Chapter 2 – Decision-making by trustees
27.Section 13 implements recommendation 13 in the Report on Trust Law. It regulates the administrative procedure to be followed before a valid decision can be taken by trustees. It is a default provision which applies to a trust unless the trust deed provides otherwise. There was a degree of uncertainty in the law as to whether trustees are required to take decisions at face-to-face meetings, or whether alternatives are permitted. Subsection (2) confirms that trustees must be given an opportunity to express an opinion before decisions are taken, but that this does not require to be done at a meeting of the trustees. Alternative means of obtaining the opinions of trustees will therefore be permitted, such as telephone conversations, written communications, or video conferencing. Subsection (2) also confirms that trustees must be given adequate notice of matters to be decided in advance of the decision to be made. (An exception is made for cases in which the prescribed procedures are not reasonably practicable.) Subsection (3) permits a trustee to homologate (that is, agree or ratify) a decision which would otherwise be invalid for non-compliance with subsection (2).
28.Section 14 of the Act implements recommendation 14 in the Report on Trust Law. It provides that a decision is binding on the trustees as a whole if made by a majority of those who are able to make it. The provision is a default one which applies to a trust unless the trust deed provides otherwise, but only as regards a decision taken after the section comes into force. Section 14 updates and clarifies the present law. Scots law currently allows majority decisions to be binding (unlike other legal systems, such as in England and Wales, where unanimity is the norm). However, both “majority” and “quorum” are found in the present legislation, whereas the Act uses only the former. In addition, the current rules about which trustees are eligible to take part in a particular decision are not always clear; on that, subsection (2) sets out the three situations in which a trustee may not be counted when calculating the majority. Paragraphs (b) and (c) – relating to a trustee who is incapable or untraceable – are explained in sections 83 and 84 respectively; the notion of personal interest, in paragraph (a), is to be read with subsection (3) which sets out two situations in which a personal interest may be discounted in the calculation of the majority.
29.However, subsection (4) provides that subsection (2)(a) does not apply where the trust is a public trust and the decision is intended to benefit the public, or a section of the public of which a trustee is a member. In those circumstances, the trustee is not to be disqualified from participating in the decision making process solely by reason of being a member of the public, or section of the public which the decision is intended to benefit. For example, a trustee of a public trust for the children of parents from a particular area or profession would not automatically be ruled out of making decisions as part of the trust which may involve funding being allocated to the area or profession of the trustee.
30.This is to be distinguished from where such a trustee has a particular interest, specific to them as an individual (rather than in their capacity as a member of the section of the general public, or a section of the public which the decision is intended to benefit). That is, where the trustee’s personal interest in the decision is greater than, or goes beyond, the trustee’s general interest in the decision as a member of the public, or section of the public which the decision is intended to benefit, the trustee is to be discounted in the calculation of what constitutes the majority. To return to the example above, if the trustee has a child which will directly benefit from the allocation of funding, then the trustee should not participate in the decision.