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The Irreducible Cores of Trustee Obligations

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Adam Hofri suggests attempts to define a single mandatory core, applicable to trustees of all express, non-charitable trusts except those statutorily subjected to special trust regimes, tend to be unstable.

Image courtesy of interviewee. June 11, 2024

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This video discusses the legal framework surrounding trustee obligations, particularly the tensions between the default duties imposed by law and the practices often observed in trust instruments that seek to limit or exclude these duties. It describes the fundamental dilemma where trustees are legally bound to uphold significant responsibilities—such as care and loyalty—while many trust agreements include exclusion clauses that can reduce or eliminate these obligations.

The author aims to identify the "irreducible core" of trustee obligations, which refers to the fundamental duties that cannot be waived under any circumstance. This video core is critical for ensuring that beneficiaries maintain some level of protection and understanding regarding their rights and the conduct expected from trustees.

Throughout the text, the author notes that there are discrepancies in how different jurisdictions and legal scholars understand what constitutes this irreducible core. The article posits that there are at least two distinct sets of fundamental trustee duties, depending on the context—one for family trust situations, which often require greater protections for weaker parties, and another for commercial trusts, where the parties typically enter into agreements with more knowledge and bargaining power.

This video suggests that the legal system may be more effective if it acknowledges these differing contexts and adapts the core duties accordingly. The author proposes a blueprint suggesting three categories of trustee obligations, tailored to the specific contexts of family trusts, commercial trusts, and situations where beneficiaries might be vulnerable, advocating for a nuanced approach in the legal interpretation of trustee duties.

Lastly, the author expresses openness to further research and collaboration on these topics, indicating an ongoing interest in exploring the complexities of trust law and the implications for beneficiaries.

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The fundamental dilemma of the law of

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trustees obligations is the following.

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I mean, on the one hand, if you look at the default law

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at the law, that applies in the absence of any stipulation

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to the contrary, trustees owe many

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heavy and significant duties.

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They owe the duties of care, duties of loyalty duties

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to abide by whatever the set law says and trust instrument

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and many other, duties.

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On the other hand though, if you look at trust

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practice at the practice of people using trusts,

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you will find that many trust instruments include, so-called

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exclusion or exemption clauses,

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and sometimes called ex capital terms.

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They have different names in different places.

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So essentially these are trust instrument terms

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or other provisions taking off, reducing,

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eliminating either trustee duties

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or sometimes the duties remain in place,

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but trustee liability

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for breaching them is taking, taken off.

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All trustees are allowed

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to indemnify themselves from the trust fund

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for any liability imposed on them

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for having breaching one or more duties.

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So in any of these three

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strategies in practice reduces the

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burden of duty and liability to which trustees are subject.

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And what's interesting is that many leading jurisdictions,

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many leading legal systems, including English law, very much

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accept this practice of exclusion and exemption.

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So there you have the fundamental dilemma.

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We have a default law that,

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makes trustees subject to a large burden

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of duties and liabilities.

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But at the same time, the law also accepts the practice of

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drafters taking significant parts of that burden away.

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So the law essentially speaks into voices

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regarding trustees duties and language.

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My primary aim was, I had two.

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One was identifying the content

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of what's sometimes called the irreducible core

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of trustee obligations, meaning the part

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of the default burden of trustees duties

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and liabilities that may not be taken away.

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That while people try to eliminate that part

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of trustee duties

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and liabilities, the law would not accept this, right?

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So trusts are stricken down, for example,

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when they include attempt to exempt trustees from

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or exclude, their,

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so-called irreducible call of obligations.

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So one goal was identifying the contents of this call,

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the duties and liabilities.

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You may not exclude in the sense

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that the law will not enforce your trust

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or respect it if you do try to exclude them.

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And then my next goal with this article was

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identifying the proper, the right contents of the core.

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Okay? So it was, it's a very classic piece in terms

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of asking and is question and an oath question.

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And the is question seems blindingly obvious, right?

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Because apparently we're supposed to know

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what the law is, but this is not.

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So, because especially, I mean both,

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if you look at the cases, and if you look at the

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scholarship, different authors say

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what they think the irreducible call

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of trustee obligations includes.

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And very many authors

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and different courts say different things very often

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with the utmost confidence, right?

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So I mean, if everyone's so confident

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and they all hold different opinions,

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so clearly there's some room for clarification here.

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Some people say the idea

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of an irreducible call is super flus.

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Uh, but, but on on reflection, I don't agree.

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And there are actually some good reasons I think, to have

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an area

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or an extent of trustees duties

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and obligations that may not be eliminated.

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Meaning that if you do try to eliminate parts

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of the whole of this call in your trust instrument,

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then courts will not go along with you.

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They will either say that, well, you've not created a trust

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because having tried

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to create some arrangement without imposing these court

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duties, what you've done,

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if you've done anything, is not a trust.

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And so we will not lend our enforcement powers

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to this structure.

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For example, all courts will do other things.

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Courts will, will, will essentially read back into

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your instrument duties

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and liabilities that you've tried to strip away,

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which is a very curious way for calls to proceed.

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But anyway, I'm not answering your question.

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So to answer it, why, why have a call?

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There are two good reasons for this. I name in the article.

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One is that having an agreed

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and well-known core of trustees duties

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and obligations that may not be taken away would mean

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that if you or I

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or someone else are made beneficiaries of the trust,

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we would know that our trustees owe us at least those

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duties and obligations.

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Because in practice, there are many circumstances

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where a person may be beneficiary of a trust

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and they would not have practical access

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to the trust instrument for different reasons, sometimes

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for very good reasons, okay?

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And under such circumstances

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as beneficiaries, we are pretty much left in the top, okay?

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What is the nature of this relationship, right?

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To which we have become parties often without requesting

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this or initiating this in any way, right?

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What duties are owed to us? When can we complain?

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How can we complain to whom?

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And a, a a a calls

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or an irreducible call of trustee obligations, it,

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it contributes to beneficiaries knowing

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where they are, okay?

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Because they would know, even if not given access

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to the specific trust instrument

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that governs the trust in their case, they would know

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that whatever the instrument says, the law puts a limit

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around the practice of, exclusion and exemption

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and demands

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that trustees owe their beneficiaries at least this more

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restricted set of duties.

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So that's one reason to have a call.

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The other reason is that if you have a trust

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or a supposed trust

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where trustees don't owe their beneficiaries any duties

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or nearly any duties, well, if the duty

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of loyalty was taken away, okay, to use the American term,

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the, the duty of trustees to exercise their powers,

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thinking of the interests of their beneficiaries alone, if

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that's taken away in a trust instrument, right?

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Then what's labeled a trust

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is not necessarily a trust, right?

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The fundamental idea of having trust is

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that people are given property

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or powers over property in order that they use this property

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to benefit certain other people or purposes.

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If in a trust instrument, the duties of trustees

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to exercise their powers in good faith, all the duties to

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exercise their powers in order

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to benefit their beneficiaries,

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and with those beneficiaries interests in mind

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as the exclusive consideration trustees may take into

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account, if that's taken away, then what's

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labeled the trust is not necessarily a trust

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because beneficiaries may very well not be benefited, right?

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So something else is going on.

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So people are using or maybe using the form of a trust

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as a disguise or some other transaction

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or disposition, so that this is an,

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arguably an abusive use of, of trust law

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and of the state's willingness

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to provide an enforcement mechanism called courts that

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applies for trusts.

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And, and this, should not necessarily be allowed.

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So those are two reasons to have an irreducible court

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of trustee obligations.

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This would admit of a lengthy answer

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because as I've already said,

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different authors have different opinions

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and also different courts and different legislatures,

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because there are some countries, not the, not England,

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but in some countries, there's actually legislation now

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saying what the irreducible core is.

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So one approach to this question would be

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to stop going country by country, essentially.

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But also as, as you may know, there's a certain fiction

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or approach that holds the common law at least

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to be something of a uniform or partly uniform tradition.

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So that we expect the law of English speaking countries

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where trusts are used

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to be at least somewhat similar in many authors anyway, in,

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in, in scholarship, do expect this.

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So most, most published work on this topic doesn't speak

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of the irreducible core

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of trustee obligations under English law or, or Scottish law

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or, or the law of New South Wales, right?

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It speaks of, of the irreducible call, generally speaking.

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So there's an an expectations, there's an expectation

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that different countries views of what counts

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as the irreducible call of trustee obligations cohere,

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and they don't quite right.

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But, but, I've, I've gone through a large collection of

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views regarding what the reproducible call

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of trustee obligations includes,

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and I've found that there is

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what could be called a common call that's treated

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as irreducible by a large collection

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of English speaking countries.

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And that's,

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this largely agreed call includes trustees duty to know

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what the trust instrument says, to perform the trust terms,

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to act in good faith, and to act

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and use the powers for the benefit of the beneficiaries.

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That's the agreed call.

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At more

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or less as it stands,

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why do different calls offer different views?

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Well, that, that's one of the key

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research questions underlying this article,

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and it was very hard to figure out, I must say,

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because quotes don't expressly say this, right?

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Eh, they don't, you know, they just come out

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with different views of the call.

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And when those views, when those views don't coheed,

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which they don't, you are left to wonder what's going on

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and why, eh, are we left with this

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confused state of the law?

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So eventually I figured that in

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Having and applying different views of

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what the irreducible core of trustee obligations includes,

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calls are reacting to the factual context of each case,

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and trust cases

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have different factual contexts.

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And when I looked at the, the, the cases were the issue

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of the extent the particular contents

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of the irreducible court trustee obligations,

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it played a major role.

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I found that those cases could roughly

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be divided into two groups.

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A one group is essentially

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family disputes with, one party being stronger

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and the other being weaker with weak,

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meaning having less control of assets.

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And under these, under such circumstances,

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the courts insisted on a relatively,

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and this is very relative,

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relatively larger irreducible call, so as

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to essentially protect the weaker side

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to the family dispute.

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And sometimes following a divorce,

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sometimes in other family circumstances,

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there could be a dispute between siblings.

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The courts try to protect the weaker family party.

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And one way to do this is

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to restrict the extent of permissible exclusion of exemption

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of trustee duties, right?

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And the, and the trust that's controlling some of all

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of the family property, right?

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If you don't allow trustees duties

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and obligations to be reduced to the bone,

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then the stronger parties in these families

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that often appoint themselves trustees or protectors

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and give themselves plenty of powers, remain subject

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to more obligations

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and duties in exercising the allowed powers,

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which then protects the weaker parties to the family.

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So that's one group of cases.

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The other group of cases involved commercial trust

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situations, right?

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Where the so-called beneficiaries,

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in fact gave some sort of qui pro quo to

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what they're getting out of the trust, as you know, I mean,

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there's a, those a trust model that's often taught

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that law schools all around the world that has

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a trust be donative,

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meaning the beneficiaries don't

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give anything in return, right?

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They're getting a windfall.

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But many trusts in practice are not like this at all, right?

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Trusts evolve out of more transactional,

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often more commercial situations.

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And in these circumstances,

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especially, well, the people

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who are made beneficiaries were also in some way involved

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in the putting together of the commercial arrangement

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of which the trust is a part.

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In these circumstances, courts tend to

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defer to whatever arrangement the contracting

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or transacting parties put in place,

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even if this arrangement features something entitled trust.

15:17.535 --> 15:20.265
Well, the duties and liabilities to which the people

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or organizations make trustees are subject have been reduced

15:25.045 --> 15:28.305
all the way down to something like in the,

15:28.305 --> 15:30.425
in the most extreme example, good faith

15:30.965 --> 15:35.385
and having some duties somewhere, the instrument

15:35.555 --> 15:38.705
where the, the trustee is not subjected in using them

15:38.705 --> 15:41.305
to the binding directions of someone else, right?

15:41.385 --> 15:43.785
I mean, the, the, the most extreme case was that, right?

15:43.785 --> 15:47.465
Where that was held to be a sufficient duty for a trust

15:47.525 --> 15:48.705
to be valid.

15:48.725 --> 15:52.335
And enforceful, I think I've actually already answered this,

15:52.505 --> 15:56.855
there are two, two normative tendencies in family cases,

15:57.595 --> 16:00.855
and the courts try to support the weaker part.

16:01.845 --> 16:04.065
And so they'll, they're shooting for some sort of

16:05.835 --> 16:07.815
family justice, right?

16:07.815 --> 16:10.215
Especially where, where you've got a family situation where

16:10.905 --> 16:13.535
there is money or assets somewhere else,

16:13.595 --> 16:15.775
but those assets are controlled by one party,

16:16.115 --> 16:20.295
making the other party often quite dependent on the formal.

16:20.995 --> 16:25.875
So I mean, trust laws should not, so-called,

16:26.105 --> 16:30.115
seem to believe, should not be used as an instrument

16:30.255 --> 16:34.555
to increase this sort of control in a family.

16:34.875 --> 16:37.755
I mean, there are a, a, a, of course, many cases

16:38.365 --> 16:41.915
where people separate or divorce a couple separate

16:42.095 --> 16:43.435
or, or divorces.

16:43.695 --> 16:48.115
And then the, the, the law of many countries, including,

16:48.115 --> 16:49.835
British Columbia, including England,

16:49.835 --> 16:52.395
including many other places, says

16:52.395 --> 16:54.315
that when a couple divorces

16:54.315 --> 16:57.555
or separates, the, their property

16:57.555 --> 16:59.795
or much of their property needs to be divided equally

16:59.855 --> 17:03.315
or sometimes equitably, between them.

17:03.655 --> 17:06.315
So then the, the question comes to be, okay, so

17:06.465 --> 17:09.555
what property is subject to this equal

17:09.655 --> 17:13.675
or equitable, redistribution norm?

17:14.095 --> 17:17.955
And so in, in many cases, the answer would be very little

17:18.225 --> 17:20.075
because the, the people holding,

17:20.775 --> 17:25.675
the person holding the purse strengths took care to, to,

17:25.695 --> 17:29.835
essentially divest themselves of most of this property

17:29.835 --> 17:33.035
that would've been subject to the redistribution norm

17:33.495 --> 17:35.555
by settling it on trust somewhere.

17:36.285 --> 17:39.945
And in these, in such situations,

17:41.155 --> 17:45.015
well, those trusts also include,

17:46.155 --> 17:50.925
far reaching exemption or exclusion of trustees duties.

17:51.825 --> 17:55.865
The courts have been known to say, no, no, no.

17:56.015 --> 17:58.665
Okay, if you want to create this trust,

17:58.665 --> 18:00.065
you may be able to do this.

18:00.405 --> 18:03.865
But you as the person creating the trust who is very,

18:04.325 --> 18:06.305
who then very often allocates themselves

18:07.585 --> 18:09.745
powerful roles in the trust, okay?

18:09.745 --> 18:11.305
So they may have settled the trust,

18:11.305 --> 18:13.345
but they would often also be as trustee,

18:13.525 --> 18:15.065
and sometimes the trust protector

18:15.065 --> 18:16.785
or the person directing the trustee

18:17.285 --> 18:20.145
and investment advisors to the trustees.

18:20.145 --> 18:22.585
And there are endless drafting options.

18:23.005 --> 18:26.795
So the calls say you want to create this trust, you want

18:26.795 --> 18:28.595
to fund it with most of the property that would

18:28.595 --> 18:30.235
otherwise have been subject to the

18:30.795 --> 18:33.115
redistribution norm in the applicable system

18:33.135 --> 18:34.555
of family property law.

18:35.335 --> 18:40.095
At least you should owe certain duties,

18:40.515 --> 18:41.895
in your role as trustee.

18:41.955 --> 18:43.135
And if you don't owe them,

18:43.405 --> 18:46.975
then we're not gonna recognize the entire planning effort,

18:47.355 --> 18:52.335
and we're gonna treat the property apparently subjected

18:52.335 --> 18:56.215
to the trust as still subject to the redistribution

18:57.235 --> 18:59.335
regime under family property law.

18:59.335 --> 19:00.815
So I hope this was clear. So essentially,

19:00.815 --> 19:02.335
one normative tendency here is,

19:02.515 --> 19:06.455
is protecting relatively weaker parties

19:06.635 --> 19:10.735
to family disputes from the, the, the planning shenanigans

19:10.735 --> 19:13.095
of of the stronger family members.

19:13.555 --> 19:16.495
And the other, the other, normative tendency

19:16.495 --> 19:19.695
that's apparent in the cases, is applicable

19:19.695 --> 19:23.575
to more commercial cases, especially,

19:24.445 --> 19:29.095
well, the persons made beneficiaries were also

19:29.285 --> 19:32.335
part of the planning process of this structure.

19:33.495 --> 19:36.875
Uh, well, the,

19:38.355 --> 19:41.015
the people who planned the structure clearly knew

19:41.015 --> 19:42.015
what they were doing.

19:42.515 --> 19:46.815
And the, the, the structure that we have is a result of

19:47.385 --> 19:51.175
bargaining between equals something resembling a contractual

19:51.575 --> 19:55.935
situation or what is surprisingly common where courts find

19:56.365 --> 20:00.135
that interest instruments, trustees are made subject

20:00.275 --> 20:02.255
to the directions of others.

20:02.645 --> 20:05.455
Okay? So trustees are not independent in exercising their

20:05.455 --> 20:07.455
powers under such circumstances.

20:07.795 --> 20:11.535
It starts making sense to take away some

20:11.535 --> 20:15.855
of trustees also burden of duty and liability, right?

20:15.855 --> 20:18.975
Because trustees are not, if they're not independent, if

20:18.975 --> 20:20.775
what they do with their power is essentially

20:20.815 --> 20:22.335
dictated to them by someone else.

20:22.595 --> 20:25.415
And if this entire structure was created by people

20:25.435 --> 20:27.455
who understood precisely what they were doing,

20:27.475 --> 20:28.855
and indeed in many cases the,

20:28.875 --> 20:31.655
the the people creating the structure, all those

20:32.035 --> 20:33.455
who left themselves power

20:33.555 --> 20:36.455
to direct the trustees handle such circumstances,

20:36.595 --> 20:40.135
the courts often take hands off attitude, right?

20:40.135 --> 20:42.255
Because they, they, they recognize that there's no,

20:42.795 --> 20:44.815
the trust terms odd as they are.

20:45.115 --> 20:47.095
And the duty exclusion or exemption

20:47.465 --> 20:51.405
or liability exemption deep as it is, is not being

20:51.965 --> 20:55.645
imposed on someone with no involvement from them.

20:56.305 --> 20:59.485
The people on which this is being imposed are the people

20:59.485 --> 21:02.365
who came up with it, and this structure is what they want.

21:03.065 --> 21:06.765
So fine. What I say in the article is the following.

21:07.085 --> 21:11.335
I say that the cases

21:11.985 --> 21:15.495
where the issue of the i core is discussed feature,

21:17.105 --> 21:20.285
if you insist on conforming them together,

21:20.335 --> 21:21.965
which is a difficult exercise,

21:22.355 --> 21:25.415
they feature two, two calls.

21:25.535 --> 21:29.255
First, they feature the largely agreed core I've

21:29.255 --> 21:30.895
mentioned before, right?

21:31.095 --> 21:33.455
A core including trustees duties to know

21:33.475 --> 21:36.855
and perform the trust terms, to act in good faith

21:36.915 --> 21:41.195
and to use the powers for the benefit of the beneficiaries,

21:41.195 --> 21:42.635
and only in this way.

21:42.775 --> 21:47.755
So that's a, the core applicable to what I've described

21:47.755 --> 21:48.915
as family situations.

21:49.255 --> 21:53.315
In more commercial trust situations, there's a,

21:53.895 --> 21:55.635
an even smaller call, right?

21:55.635 --> 21:58.595
Because the core I've just described is already small,

21:58.595 --> 22:02.315
especially when compared to the vast panel plea of duties

22:02.655 --> 22:05.275
and liabilities that apply to trustees

22:05.275 --> 22:06.915
as a default matter, right?

22:07.175 --> 22:11.555
But in so-called commercial cases, the courts tend to

22:12.065 --> 22:15.715
live with, eh, and they'll buy uphold

22:15.815 --> 22:19.355
and even thinner coal, including in the

22:20.525 --> 22:25.495
most extreme case, merely the duty of good faith

22:26.195 --> 22:30.225
and some sort of power

22:30.685 --> 22:35.425
to exercise some of trustees powers independently

22:35.485 --> 22:36.745
of direction by others.

22:37.755 --> 22:42.395
So what the article says is that the cases

22:44.275 --> 22:46.445
show us two calls rather than one,

22:46.445 --> 22:48.805
which is then one reason why scholarship is

22:48.805 --> 22:50.245
so confused, right?

22:50.245 --> 22:52.405
Because everyone, including quotes,

22:52.405 --> 22:54.645
including many scholars all around the world,

22:55.025 --> 22:58.805
has been trying to identify a single irreducible call

22:58.805 --> 23:01.645
trustee obligations, but that's not what we have, right?

23:01.645 --> 23:04.285
We have at least two. And,

23:04.665 --> 23:09.125
the two calls are each applied based on the factual

23:09.715 --> 23:11.325
context of each case

23:11.385 --> 23:15.085
and the normative tendencies that calls then applied

23:15.665 --> 23:19.245
in each case based on that factual context.

23:19.345 --> 23:21.205
So that's what I've said more or less.

23:21.395 --> 23:23.885
Then at the end of the article, I say that

23:25.705 --> 23:29.025
potentially this reality

23:29.125 --> 23:32.305
of having more than one irreducible call

23:32.305 --> 23:35.815
of trustee obligations with different calls applying

23:36.035 --> 23:40.405
to different factual situations in different types

23:40.425 --> 23:43.525
of trust cases, this reality should not only be acknowledged

23:43.985 --> 23:45.005
rather than ignored,

23:45.365 --> 23:47.265
but also perhaps seen

23:47.365 --> 23:51.065
as appropriate since trust are used in such diverse

23:52.755 --> 23:55.465
cases and circumstances that perhaps it's unrealistic

23:55.485 --> 23:57.545
and maybe improper to insist

23:57.545 --> 23:59.825
that there will be one irreducible call

23:59.825 --> 24:02.785
of trustee obligations applicable to every situation

24:02.785 --> 24:05.145
where someone somewhere uses a trust in

24:05.345 --> 24:06.825
whatever circumstances.

24:07.445 --> 24:09.865
And so what I say at the end is

24:09.865 --> 24:14.425
that potentially we might want to extend this reality

24:14.445 --> 24:15.745
of having multiple calls,

24:16.085 --> 24:19.985
and perhaps as a very preliminary idea, go from two quotes,

24:19.985 --> 24:22.185
which is more or less what the current law says,

24:22.565 --> 24:24.105
two three, right?

24:24.285 --> 24:29.145
Uh, because, you can see in the case law as well

24:29.145 --> 24:33.025
as in trust practice that trusts are used in

24:33.695 --> 24:34.945
very many contexts.

24:35.135 --> 24:38.425
Well, the, the, the extent of permissible exclusion

24:38.425 --> 24:41.185
and exemption of trustees duties

24:41.285 --> 24:44.665
and liabilities should be different in each

24:44.665 --> 24:46.065
of these several contexts.

24:46.165 --> 24:48.745
So of course, the next question would then be, okay, so

24:48.745 --> 24:50.465
how thin do you wanna slice it?

24:50.565 --> 24:52.305
Do you want to have 13 different calls?

24:52.695 --> 24:54.905
Well, the the answer should probably be no,

24:54.905 --> 24:56.225
because law being what it is,

24:56.225 --> 24:57.505
and practice being what it is,

24:57.505 --> 24:58.625
once you have different calls,

24:58.625 --> 25:01.785
you will have litigation about the boundaries, right?

25:01.785 --> 25:03.265
With someone saying that no, our,

25:03.325 --> 25:05.665
our case belongs in this group.

25:05.685 --> 25:08.265
And so the, the applicable call should be larger

25:08.365 --> 25:10.785
or smaller depending on where their interests lie.

25:11.005 --> 25:14.625
So what I've preliminary suggested is having three calls

25:14.975 --> 25:18.905
with one call, applicable to

25:19.715 --> 25:23.065
those family trusts that are in fact controlled

25:23.125 --> 25:25.185
by those set laws, right?

25:25.185 --> 25:27.385
Well, set laws don't,

25:27.385 --> 25:30.265
give up all control over the trust assets when

25:30.525 --> 25:32.185
trusts are settled.

25:32.685 --> 25:34.905
So with this type of situation, I suggested

25:34.905 --> 25:38.265
that a very small call might be applicable, right?

25:38.265 --> 25:40.025
Because the set law essentially hasn't,

25:41.355 --> 25:44.535
hasn't given away control, meaning that,

25:44.875 --> 25:49.715
the trust property is still very close to being theirs

25:50.055 --> 25:51.595
or under their control, okay?

25:51.595 --> 25:55.995
So under such circumstances, given that

25:57.625 --> 26:02.035
private law generally lets people deal with their property

26:02.215 --> 26:03.955
as they like, given that they,

26:04.295 --> 26:06.475
the set laws haven't given up control, it's still

26:07.265 --> 26:10.635
substantively very close to being their property.

26:11.485 --> 26:13.065
So, you know, they want to have a trustee

26:13.095 --> 26:15.545
with no liabilities and, and no duties.

26:15.775 --> 26:19.265
Good luck to them. And there's no reason for, for a law

26:19.285 --> 26:21.305
to stop this if this is what people really want.

26:21.965 --> 26:23.465
Uh, so that's one core I propose.

26:23.575 --> 26:27.185
Another core I suggest is that applicable

26:27.185 --> 26:28.905
to commercial trust situations,

26:29.155 --> 26:31.945
which is very slightly larger than the core, I suggest

26:32.045 --> 26:33.985
for the first context,

26:34.525 --> 26:38.585
and then I do suggest a somewhat larger core,

26:39.325 --> 26:42.745
for family trusts that are not subject

26:42.805 --> 26:45.805
to ongoing set law control, right?

26:45.825 --> 26:46.845
So family trusts

26:46.845 --> 26:49.925
where the set law has in fact given up control over the

26:49.925 --> 26:51.245
assets and the trustees

26:51.505 --> 26:53.965
and where the trustees are remunerated.

26:54.145 --> 26:57.085
So it's not the uncle, it's some firm somewhere,

26:57.705 --> 27:00.885
and some of the beneficiaries, at least some

27:00.885 --> 27:04.565
of them are either minors or otherwise vulnerable.

27:04.985 --> 27:06.765
So this would be the classic situation

27:06.765 --> 27:10.245
where beneficiaries need some sort of protection and,

27:10.425 --> 27:14.325
and, well, we, we, we should be slower with, with,

27:14.345 --> 27:17.845
permitting, large scale erosion

27:18.145 --> 27:19.805
of trustees duties and liabilities.

27:19.865 --> 27:21.565
And so to speak somewhat more concretely

27:21.675 --> 27:25.965
regarding this third context of trust use, I suggested

27:25.965 --> 27:29.765
that the irreducible core should include a trustee's duty

27:29.945 --> 27:33.045
of care, which is not currently part

27:33.045 --> 27:35.205
of the irreducible core under English law.

27:35.225 --> 27:38.535
As you may know, my conclusion that I think I stated,

27:39.995 --> 27:44.135
and they are, that the, the first reality is

27:44.135 --> 27:46.135
that we don't have a single irreducible call,

27:46.135 --> 27:49.375
which everyone has a, a different opinion of, right?

27:49.435 --> 27:51.655
We, we, it's just not one, it's at least two.

27:52.975 --> 27:56.195
Secondly, that's fine.

27:56.725 --> 27:58.115
There are good reasons not

27:58.395 --> 28:01.355
to have a single uniform irreducible call.

28:01.985 --> 28:04.315
Thirdly, I propose a sort of blueprint

28:04.335 --> 28:05.475
for further development

28:05.475 --> 28:08.555
of this legal reality outlining three different calls

28:08.615 --> 28:09.675
for the three different types

28:09.675 --> 28:12.355
of trust situations I've, outlined.

28:13.245 --> 28:17.465
And then as to future implications

28:17.525 --> 28:18.585
and future research.

28:18.735 --> 28:20.265
Well, I don't know, you know, I mean,

28:20.265 --> 28:23.305
because this interview will be online, I am inviting people

28:23.405 --> 28:24.465
to contact me

28:24.765 --> 28:25.945
and come up with ideas

28:26.445 --> 28:28.265
for further research along these lines.

28:28.295 --> 28:31.865
I've actually done a bit of research along,

28:34.015 --> 28:37.835
not identical, but adjacent lines earlier in my career.

28:37.895 --> 28:39.835
And I, I keep getting back to this topic

28:39.835 --> 28:42.115
because it is, it's curious, right?

28:42.115 --> 28:45.515
It's very strange. I mean, when someone studies trust

28:46.055 --> 28:49.515
at university, what they are taught are,

28:50.835 --> 28:55.805
very often bold cliches penned by, well-meaning judges about

28:55.805 --> 28:58.925
how trustees owe the heaviest burdens of all.

28:59.265 --> 29:01.965
And then you look at the, the practice in some

29:01.965 --> 29:05.125
of the more recent case law, and this is just wrong, right?

29:05.485 --> 29:08.845
Trustees often owe, owe very little deities.

29:09.065 --> 29:12.605
So this is, to me, an endlessly baffling situation.

29:13.105 --> 29:14.805
And, and, and that's why I've returned

29:14.805 --> 29:18.685
to it in this relatively, recent article

29:18.715 --> 29:20.525
that you've taken an interest in.

29:21.225 --> 29:23.325
And I am very much

29:25.125 --> 29:28.635
interested in people contacting me with ideas

29:28.935 --> 29:30.635
for further research in this field.

29:30.695 --> 29:34.955
And if appropriate, I would be happy to supervise thesis

29:35.135 --> 29:37.995
and dissertations on relevant topics.

"Navigating the Dichotomy of Trustee Obligations: The Tension Between Default Law and Exemptions"

00:00:00 - The fundamental dilemma of the law of trustees obligations is the following. I mean, on the one hand, if you look at the default law at the law, that applies in the absence of any stipulation to the contrary, trustees owe many heavy and significant duties. They owe the duties of care, duties of loyalty duties to abide by whatever the set law says and trust instrument and many other, duties. On the other hand though, if you look at trust
00:00:46 - you will find that many trust instruments include, so-called exclusion or exemption clauses, and sometimes called ex capital terms. They have different names in different places. So essentially these are trust instrument terms or other provisions taking off, reducing, eliminating either trustee duties or sometimes the duties remain in place, but trustee liability for breaching them is taking, taken off. All trustees are allowed to indemnify themselves from the trust fund for any liability imposed on them
00:01:29 - So in any of these three strategies in practice reduces the burden of duty and liability to which trustees are subject. And what's interesting is that many leading jurisdictions, many leading legal systems, including English law, very much accept this practice of exclusion and exemption. So there you have the fundamental dilemma. We have a default law that, makes trustees subject to a large burden
00:02:11 - But at the same time, the law also accepts the practice of drafters taking significant parts of that burden away. So the law essentially speaks into voices regarding trustees duties and language. My primary aim was, I had two. One was identifying the content of what's sometimes called the irreducible core of trustee obligations, meaning the part of the default burden of trustees duties and liabilities that may not be taken away. That while people try to eliminate that part
00:02:53 - and liabilities, the law would not accept this, right? So trusts are stricken down, for example, when they include attempt to exempt trustees from or exclude, their, so-called irreducible call of obligations. So one goal was identifying the contents of this call, the duties and liabilities. You may not exclude in the sense that the law will not enforce your trust or respect it if you do try to exclude them. And then my next goal with this article was identifying the proper, the right contents of the core.
00:03:34 - of asking and is question and an oath question. And the is question seems blindingly obvious, right? Because apparently we're supposed to know what the law is, but this is not. So, because especially, I mean both, if you look at the cases, and if you look at the scholarship, different authors say what they think the irreducible call of trustee obligations includes. And very many authors and different courts say different things very often with the utmost confidence, right? So I mean, if everyone's so confident and they all hold different opinions,

"The Necessity and Implications of Irreducible Trustee Obligations"

00:04:16 - Some people say the idea of an irreducible call is super flus. but, but on on reflection, I don't agree. And there are actually some good reasons I think, to have an area or an extent of trustees duties and obligations that may not be eliminated. Meaning that if you do try to eliminate parts of the whole of this call in your trust instrument, then courts will not go along with you. They will either say that, well, you've not created a trust because having tried
00:04:57 - duties, what you've done, if you've done anything, is not a trust. And so we will not lend our enforcement powers to this structure. For example, all courts will do other things. Courts will, will, will essentially read back into your instrument duties and liabilities that you've tried to strip away, which is a very curious way for calls to proceed. But anyway, I'm not answering your question. So to answer it, why, why have a call? There are two good reasons for this. I name in the article.
00:05:39 - and well-known core of trustees duties and obligations that may not be taken away would mean that if you or I or someone else are made beneficiaries of the trust, we would know that our trustees owe us at least those duties and obligations. Because in practice, there are many circumstances where a person may be beneficiary of a trust and they would not have practical access to the trust instrument for different reasons, sometimes for very good reasons, okay? And under such circumstances
00:06:19 - What is the nature of this relationship, right? To which we have become parties often without requesting this or initiating this in any way, right? What duties are owed to us? When can we complain? How can we complain to whom? And a, a a a calls or an irreducible call of trustee obligations, it, it contributes to beneficiaries knowing where they are, okay? Because they would know, even if not given access to the specific trust instrument that governs the trust in their case, they would know that whatever the instrument says, the law puts a limit
00:07:03 - and demands that trustees owe their beneficiaries at least this more restricted set of duties. So that's one reason to have a call. The other reason is that if you have a trust or a supposed trust where trustees don't owe their beneficiaries any duties or nearly any duties, well, if the duty of loyalty was taken away, okay, to use the American term, the, the duty of trustees to exercise their powers, thinking of the interests of their beneficiaries alone, if that's taken away in a trust instrument, right?
00:07:44 - is not necessarily a trust, right? The fundamental idea of having trust is that people are given property or powers over property in order that they use this property to benefit certain other people or purposes. If in a trust instrument, the duties of trustees to exercise their powers in good faith, all the duties to exercise their powers in order to benefit their beneficiaries, and with those beneficiaries interests in mind as the exclusive consideration trustees may take into account, if that's taken away, then what's

The Complexity of Irreducible Trustee Obligations and the Abuse of Trust Law**

00:08:27 - because beneficiaries may very well not be benefited, right? So something else is going on. So people are using or maybe using the form of a trust as a disguise or some other transaction or disposition, so that this is an, arguably an abusive use of, of trust law and of the state's willingness to provide an enforcement mechanism called courts that applies for trusts. And, and this, should not necessarily be allowed. So those are two reasons to have an irreducible court of trustee obligations.
00:09:07 - because as I've already said, different authors have different opinions and also different courts and different legislatures, because there are some countries, not the, not England, but in some countries, there's actually legislation now saying what the irreducible core is. So one approach to this question would be to stop going country by country, essentially. But also as, as you may know, there's a certain fiction or approach that holds the common law at least
00:09:49 - So that we expect the law of English speaking countries where trusts are used to be at least somewhat similar in many authors anyway, in, in, in scholarship, do expect this. So most, most published work on this topic doesn't speak of the irreducible core of trustee obligations under English law or, or Scottish law or, or the law of New South Wales, right? It speaks of, of the irreducible call, generally speaking. So there's an an expectations, there's an expectation that different countries views of what counts
00:10:30 - and they don't quite right. But, but, I've, I've gone through a large collection of views regarding what the reproducible call of trustee obligations includes, and I've found that there is what could be called a common call that's treated as irreducible by a large collection of English speaking countries. And that's, this largely agreed call includes trustees duty to know what the trust instrument says, to perform the trust terms,
00:11:09 - and use the powers for the benefit of the beneficiaries. That's the agreed call. At more or less as it stands, why do different calls offer different views? Well, that, that's one of the key research questions underlying this article, and it was very hard to figure out, I must say, because quotes don't expressly say this, right? Eh, they don't, you know, they just come out with different views of the call. And when those views, when those views don't coheed, which they don't, you are left to wonder what's going on and why, eh, are we left with this
00:11:48 - So eventually I figured that in Having and applying different views of what the irreducible core of trustee obligations includes, calls are reacting to the factual context of each case, and trust cases have different factual contexts. And when I looked at the, the, the cases were the issue of the extent the particular contents of the irreducible court trustee obligations, it played a major role.

"Balancing Power Dynamics in Trust Law: Navigating Family Disputes and Commercial Arrangements"

00:12:31 - be divided into two groups. A one group is essentially family disputes with, one party being stronger and the other being weaker with weak, meaning having less control of assets. And under these, under such circumstances, the courts insisted on a relatively, and this is very relative, relatively larger irreducible call, so as to essentially protect the weaker side to the family dispute. And sometimes following a divorce,
00:13:12 - there could be a dispute between siblings. The courts try to protect the weaker family party. And one way to do this is to restrict the extent of permissible exclusion of exemption of trustee duties, right? And the, and the trust that's controlling some of all of the family property, right? If you don't allow trustees duties and obligations to be reduced to the bone, then the stronger parties in these families that often appoint themselves trustees or protectors and give themselves plenty of powers, remain subject
00:13:53 - and duties in exercising the allowed powers, which then protects the weaker parties to the family. So that's one group of cases. The other group of cases involved commercial trust situations, right? Where the so-called beneficiaries, in fact gave some sort of qui pro quo to what they're getting out of the trust, as you know, I mean, there's a, those a trust model that's often taught that law schools all around the world that has a trust be donative, meaning the beneficiaries don't give anything in return, right? They're getting a windfall. But many trusts in practice are not like this at all, right?
00:14:38 - often more commercial situations. And in these circumstances, especially, well, the people who are made beneficiaries were also in some way involved in the putting together of the commercial arrangement of which the trust is a part. In these circumstances, courts tend to defer to whatever arrangement the contracting or transacting parties put in place, even if this arrangement features something entitled trust.
00:15:20 - or organizations make trustees are subject have been reduced all the way down to something like in the, in the most extreme example, good faith and having some duties somewhere, the instrument where the, the trustee is not subjected in using them to the binding directions of someone else, right? I mean, the, the, the most extreme case was that, right? Where that was held to be a sufficient duty for a trust to be valid. And enforceful, I think I've actually already answered this, there are two, two normative tendencies in family cases,
00:16:01 - And so they'll, they're shooting for some sort of family justice, right? Especially where, where you've got a family situation where there is money or assets somewhere else, but those assets are controlled by one party, making the other party often quite dependent on the formal. So I mean, trust laws should not, so-called, seem to believe, should not be used as an instrument to increase this sort of control in a family. I mean, there are a, a, a, of course, many cases

"Trust Law and Property Redistribution: Balancing Equity and Control in Family Disputes"

00:16:42 - or, or divorces. And then the, the, the law of many countries, including, British Columbia, including England, including many other places, says that when a couple divorces or separates, the, their property or much of their property needs to be divided equally or sometimes equitably, between them. So then the, the question comes to be, okay, so what property is subject to this equal or equitable, redistribution norm? And so in, in many cases, the answer would be very little because the, the people holding,
00:17:25 - essentially divest themselves of most of this property that would've been subject to the redistribution norm by settling it on trust somewhere. And in these, in such situations, well, those trusts also include, far reaching exemption or exclusion of trustees duties. The courts have been known to say, no, no, no. Okay, if you want to create this trust, you may be able to do this. But you as the person creating the trust who is very,
00:18:07 - powerful roles in the trust, okay? So they may have settled the trust, but they would often also be as trustee, and sometimes the trust protector or the person directing the trustee and investment advisors to the trustees. And there are endless drafting options. So the calls say you want to create this trust, you want to fund it with most of the property that would otherwise have been subject to the redistribution norm in the applicable system of family property law. At least you should owe certain duties, in your role as trustee. And if you don't owe them, then we're not gonna recognize the entire planning effort,
00:18:52 - to the trust as still subject to the redistribution regime under family property law. So I hope this was clear. So essentially, one normative tendency here is, is protecting relatively weaker parties to family disputes from the, the, the planning shenanigans of of the stronger family members. And the other, the other, normative tendency that's apparent in the cases, is applicable to more commercial cases, especially, well, the persons made beneficiaries were also
00:19:33 - well, the, the people who planned the structure clearly knew what they were doing. And the, the, the structure that we have is a result of bargaining between equals something resembling a contractual situation or what is surprisingly common where courts find that interest instruments, trustees are made subject to the directions of others. Okay? So trustees are not independent in exercising their powers under such circumstances. It starts making sense to take away some
00:20:15 - Because trustees are not, if they're not independent, if what they do with their power is essentially dictated to them by someone else. And if this entire structure was created by people who understood precisely what they were doing, and indeed in many cases the, the the people creating the structure, all those who left themselves power to direct the trustees handle such circumstances, the courts often take hands off attitude, right? Because they, they, they recognize that there's no, the trust terms odd as they are. And the duty exclusion or exemption or liability exemption deep as it is, is not being

Exploring the Duality of Irreducible Trustee Obligations in Diverse Contexts**

00:20:56 - The people on which this is being imposed are the people who came up with it, and this structure is what they want. So fine. What I say in the article is the following. I say that the cases where the issue of the i core is discussed feature, if you insist on conforming them together, which is a difficult exercise, they feature two, two calls. First, they feature the largely agreed core I've mentioned before, right? A core including trustees duties to know
00:21:36 - and to use the powers for the benefit of the beneficiaries, and only in this way. So that's a, the core applicable to what I've described as family situations. In more commercial trust situations, there's a, an even smaller call, right? Because the core I've just described is already small, especially when compared to the vast panel plea of duties and liabilities that apply to trustees as a default matter, right? But in so-called commercial cases, the courts tend to live with, eh, and they'll buy uphold
00:22:20 - most extreme case, merely the duty of good faith and some sort of power to exercise some of trustees powers independently of direction by others. So what the article says is that the cases show us two calls rather than one, which is then one reason why scholarship is so confused, right? Because everyone, including quotes, including many scholars all around the world, has been trying to identify a single irreducible call
00:23:01 - We have at least two. And, the two calls are each applied based on the factual context of each case and the normative tendencies that calls then applied in each case based on that factual context. So that's what I've said more or less. Then at the end of the article, I say that potentially this reality of having more than one irreducible call of trustee obligations with different calls applying to different factual situations in different types
00:23:43 - rather than ignored, but also perhaps seen as appropriate since trust are used in such diverse cases and circumstances that perhaps it's unrealistic and maybe improper to insist that there will be one irreducible call of trustee obligations applicable to every situation where someone somewhere uses a trust in whatever circumstances. And so what I say at the end is that potentially we might want to extend this reality of having multiple calls, and perhaps as a very preliminary idea, go from two quotes, which is more or less what the current law says,
00:24:24 - because, you can see in the case law as well as in trust practice that trusts are used in very many contexts. Well, the, the, the extent of permissible exclusion and exemption of trustees duties and liabilities should be different in each of these several contexts. So of course, the next question would then be, okay, so how thin do you wanna slice it? Do you want to have 13 different calls? Well, the the answer should probably be no, because law being what it is, and practice being what it is, once you have different calls, you will have litigation about the boundaries, right? With someone saying that no, our,

"Exploring the Irreducible Core of Trustee Obligations: Proposals for Contextual Variability in Family Trusts"

00:25:05 - And so the, the applicable call should be larger or smaller depending on where their interests lie. So what I've preliminary suggested is having three calls with one call, applicable to those family trusts that are in fact controlled by those set laws, right? Well, set laws don't, give up all control over the trust assets when trusts are settled. So with this type of situation, I suggested that a very small call might be applicable, right? Because the set law essentially hasn't, hasn't given away control, meaning that,
00:25:50 - or under their control, okay? So under such circumstances, given that private law generally lets people deal with their property as they like, given that they, the set laws haven't given up control, it's still substantively very close to being their property. So, you know, they want to have a trustee with no liabilities and, and no duties. Good luck to them. And there's no reason for, for a law to stop this if this is what people really want. so that's one core I propose. Another core I suggest is that applicable
00:26:29 - which is very slightly larger than the core, I suggest for the first context, and then I do suggest a somewhat larger core, for family trusts that are not subject to ongoing set law control, right? So family trusts where the set law has in fact given up control over the assets and the trustees and where the trustees are remunerated. So it's not the uncle, it's some firm somewhere, and some of the beneficiaries, at least some of them are either minors or otherwise vulnerable. So this would be the classic situation where beneficiaries need some sort of protection and,
00:27:14 - permitting, large scale erosion of trustees duties and liabilities. And so to speak somewhat more concretely regarding this third context of trust use, I suggested that the irreducible core should include a trustee's duty of care, which is not currently part of the irreducible core under English law. As you may know, my conclusion that I think I stated, and they are, that the, the first reality is that we don't have a single irreducible call, which everyone has a, a different opinion of, right? We, we, it's just not one, it's at least two.
00:27:56 - There are good reasons not to have a single uniform irreducible call. Thirdly, I propose a sort of blueprint for further development of this legal reality outlining three different calls for the three different types of trust situations I've, outlined. And then as to future implications and future research. Well, I don't know, you know, I mean, because this interview will be online, I am inviting people to contact me and come up with ideas for further research along these lines. I've actually done a bit of research along,
00:28:37 - And I, I keep getting back to this topic because it is, it's curious, right? It's very strange. I mean, when someone studies trust at university, what they are taught are, very often bold cliches penned by, well-meaning judges about how trustees owe the heaviest burdens of all. And then you look at the, the practice in some of the more recent case law, and this is just wrong, right? Trustees often owe, owe very little deities. So this is, to me, an endlessly baffling situation. And, and, and that's why I've returned

"Invitation for Collaboration: Seeking Ideas and Supervisions in Trust Law Research"

00:29:35 - that you've taken an interest in. And I am very much interested in people contacting me with ideas for further research in this field. And if appropriate, I would be happy to supervise thesis and dissertations on relevant topics.

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