TRUSTEE ACT 2000
STATUTORY DUTY OF CARE
OG 86 B6 - 14 March 2012
Purpose: This guidance explains what the statutory duty of care is and the way it should be applied.
Please note: throughout this OG series, "the Act" refers to the Trustee Act 2000, not the Charities Act 2011.
1. The statutory duty of care and its application
2. The areas in which the statutory duty of care applies
3. How the statutory duty of care sits with other legislation or duties
Index to further related information
This statutory duty of care applies to a trustee in the circumstances set out in schedule 1 of the Act (see section 2 below).
The statutory duty of care will take effect in addition to the existing fundamental duties of trustees, for example, to act in the best interests of the charity and comply with the terms of the trust. However, it will exclude any common law duty of care which might otherwise have applied.
The statutory duty of care does not normally apply if and in so far as it appears from the trust instrument that the duty is not meant to apply. Trustee indemnity clauses in the governing documents of charities are quite common in practice, though the common law imposes a limit on the possible scope of such clauses and the Law Commission are examining whether there should be statutory intervention here (company law generally forbids such provisions). The duty applies to the manner in which the trustees carry out a discretionary power and not the decision whether to exercise the discretionary power in the first place (although it does cover the requirement that trustees must review the investments of the trust from time to time).
To discharge the duty, a trustee will need to show such skill and care as is reasonable in the circumstances of the case, making allowance for his or her special knowledge, experience or professional status. Thus, in relation to the purchase of stocks and shares, a higher standard may be expected of a trustee who is an investment banker, specialising in equities, than of a trustee who is, for instance, a librarian. This example would be particularly relevant where the investment banker is acting as trustee in the course of his or her investment banking business (for remuneration - assuming this is permitted), where an examination of the skills normally possessed by such persons would also be material.
The statutory duty of care applies to a trustee in the circumstances set out in schedule 1 to the Act, which specifies a range of powers and duties primarily in the following areas:
It also applies to the exercise of the powers in section 6 of Trusts of Land and Appointment of Trustees Act 1996 (see OG 86 B2).
The statutory duty of care also applies to trustees who are exercising specified powers under sections 15 and 22 of the Trustee Act 1925. The powers in section 22 are of no real relevance to charity trustees and are to do with the handling of reversionary interests and with valuation of trust property. However section 15 is frequently relied upon by charity and other trustees, for example, in relation to the compromising of claims. The existing required duty of care is merely one of honesty; the new statutory duty of care does, of course, go beyond this.
Section 2 above sets out when the statutory duty of care applies in terms of this Act. It is, however, important to see this legislation in the context of other legislation and common law principles that affect charity trustees and their duties to manage charities and look after their assets.
It is important to remember therefore that the statutory duty of care extends to the provisions stipulated within this Act and similar provisions contained within governing documents. It will not extend to all functions carried out by all charities.
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