Trustee Duty of Care UK (2026): The Statutory Standard, Investment Obligations, and Breach of Duty

The statutory duty of care is the baseline standard of competence and diligence that every trustee must meet when exercising certain powers and functions under a trust: (1) THE STATUTORY PROVISION (TA 2000 s.1): the Trustee Act 2000 s.1(1) provides that whenever the statutory duty of care applies, the trustee must exercise 'such care and skill as is reasonable in the circumstances, having regard in particular — (a) to any special knowledge or experience that he has or holds himself out as having, and (b) if he acts as trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession'; (2) THE TWO-LIMBED TEST: the duty is objective but calibrated. (a) OBJECTIVE MINIMUM: the starting point is what a person of ordinary prudence would do in managing their own affairs — the classic Speight v Gaunt (1883) 9 App Cas 1 standard; (b) ELEVATED BY SPECIAL SKILL: if the trustee has 'special knowledge or experience' — whether actually held or held out — the standard rises accordingly. A trustee who claims to be an investment specialist is held to that specialist standard; (c) PROFESSIONAL TRUSTEE: if the trustee is acting in the course of a BUSINESS OR PROFESSION (a solicitor, accountant, bank, trust corporation), the standard is automatically elevated to what would reasonably be expected of a professional in that field — even if the individual trustee claims no special skill. The professional context sets the floor for professional trustees; (3) WHEN THE DUTY APPLIES (SCHEDULE 1 TA 2000): the duty is not universal — it applies only to specific functions listed in Schedule 1 to the Act: (a) the exercise of the statutory power of investment (ss.3-7); (b) the acquisition of land under ss.8-9; (c) appointing and reviewing agents, nominees, and custodians (ss.11-22); (d) the statutory power to insure trust property (s.19); (e) the power to deal with reversionary interests (s.22); (4) FUNCTIONS NOT COVERED: the statutory duty of care does not apply to all trustee decisions. For example, the exercise of a discretionary power to distribute trust assets to beneficiaries is governed by the general fiduciary duty and equitable duty of prudence — not the TA 2000 s.1 statutory duty. Trustees must still act in good faith and in the interests of the beneficiaries in all functions — even where TA 2000 s.1 does not formally apply.

The investment duty is the most practically important application of the statutory duty of care. Under TA 2000 ss.3-7, trustees have a general power of investment but must exercise it in accordance with the standard investment criteria: (1) GENERAL POWER OF INVESTMENT (TA 2000 s.3): trustees have power to make any kind of investment that they could make if they were absolutely entitled to the trust assets — the same breadth of investment power as an individual owner. This replaces the former 'Trustee Investments Act 1961' list of authorised investments; (2) STANDARD INVESTMENT CRITERIA (TA 2000 s.4): before making or reviewing investments, trustees must have regard to: (a) the SUITABILITY of the investment to the trust — the nature of the trust, its purposes, the identity and circumstances of the beneficiaries (e.g. the investment mix appropriate for a long-term charitable trust differs from a trust for an elderly surviving spouse needing income); (b) the need to DIVERSIFY — spreading risk across different types of asset, sectors, and geographies where appropriate; (3) DUTY TO REVIEW (TA 2000 s.4(2)): trustees must from time to time REVIEW the investments of the trust and consider whether, having regard to the standard investment criteria, they should be varied. There is no prescribed frequency but an annual review is generally considered adequate for a typical portfolio. Failing to review — simply leaving investments as they were when the trust was created — is a breach of duty; (4) DUTY TO OBTAIN PROPER ADVICE (TA 2000 s.5): before making or reviewing investments, trustees must obtain and consider proper advice unless it is 'reasonably concluded that in all the circumstances it is unnecessary or inappropriate to do so.' Proper advice is the advice of someone who the trustee reasonably believes to be qualified to give it — typically a regulated financial adviser or fund manager authorised by the FCA. A trustee who manages investments without seeking any professional advice — and the portfolio performs poorly — is exposed to personal liability; (5) WHO CAN BE EXCUSED: obtaining professional advice is not always required. A trustee who is professionally qualified in investment management does not need to seek advice from themselves — their own expertise suffices. For a small trust fund held in cash pending distribution, formal investment advice may be unnecessary.

Bartlett v Barclays Bank Trust Co Ltd [1980] Ch 515 is the leading case on the trustee's duty to monitor trust company investments and the distinction between the professional and lay trustee standard: (1) THE FACTS: Barclays Bank Trust Company held 99% of the shares in Bartlett Trust Ltd as trustees. The trust company had a board of directors that undertook speculative property developments. The bank, as trustee/shareholder, did not attend board meetings, did not request information about the company's activities, and took no steps to monitor or control the company's policy. When the property ventures failed, the trust fund sustained substantial losses; (2) THE HOLDINGS: Brightman J held that: (a) Barclays Bank, as a professional corporate trustee holding a controlling shareholding, had a duty to keep itself informed about the trust company's affairs and to take positive steps to prevent the company's assets from being dissipated; (b) the bank's failure to monitor the company's activities, request information, or attend board meetings — while 'sitting passively by' — was a breach of its duty as trustee; (c) the bank was ordered to repay the losses sustained by the trust fund; (3) THE PROFESSIONAL TRUSTEE STANDARD: Brightman J drew an explicit distinction between a lay trustee (a family friend or relative acting unpaid) and a professional trustee (a bank trust corporation). A lay trustee, acting honestly and reasonably, would have been excused under what is now TA 1925 s.61 (court's power to relieve an honest and reasonable trustee). The bank, as a professional charging fees for its services, could not be excused — the professional standard demanded more than passive inaction; (4) THE DUTY TO MONITOR: the case established that a trustee holding a controlling interest in a company cannot simply delegate all decisions to the directors. The trustee must: (a) keep informed of the company's affairs (request information; attend meetings; obtain accounts); (b) intervene if the company's policy threatens trust assets; (c) use the controlling shareholding to remove directors or change policy if necessary; (5) RELEVANCE TODAY: Bartlett applies wherever trustees hold a controlling stake in a private company — very common in family trust and estate planning contexts. A trustee who holds shares in a family business must actively engage with the company's management, not simply collect dividends and look away.

The statutory duty of care under TA 2000 s.1 can be excluded or modified by the trust instrument — but there are limits: (1) STATUTORY EXCLUSION (TA 2000 Schedule 1, para 7): Schedule 1 to the TA 2000 expressly provides that the statutory duty of care applies 'except in so far as it is excluded or restricted by the trust instrument.' A well-drafted trust deed can therefore exclude the s.1 duty entirely or in part; (2) COMMON EXCLUSION CLAUSES: most professionally drafted trust instruments include exclusion or limitation clauses. Common forms: (a) 'The trustees shall not be liable for any loss to the trust fund unless arising from their own FRAUD or wilful default'; (b) or more broadly: 'The trustees shall not be responsible for any act, omission, default, or neglect unless the same constitutes a fraudulent act or omission on the part of the trustee committing the same'; (3) THE ARMITAGE v NURSE LIMIT [1998] Ch 241 — THE IRREDUCIBLE CORE: the Court of Appeal in Armitage v Nurse held that a trustee cannot exclude liability for: (a) fraud — dishonesty in the equitable sense; (b) wilful default — intentional or reckless breach of trust; any exclusion clause purporting to do so would deprive the trust of the 'irreducible core' of a trust and render it not a trust at all. Beyond these limits, the courts have generally upheld exclusion clauses as valid; (4) PROFESSIONAL TRUSTEE EXCLUSION CLAUSES — LAW COMMISSION 2006: the Law Commission (LC292, 2006) expressed concern about trust corporations including extremely broad exclusion clauses that effectively absolve them of all liability for negligence. The Law Commission recommended that professional trustees should not be permitted to exclude liability for breach of the duty of care — but this recommendation has not been implemented by legislation. Professional trust corporations continue to use broad exclusion clauses in practice; (5) COURT'S POWER TO RELIEVE (TA 1925 s.61): even where an exclusion clause does not apply, the court may relieve a trustee from liability if the trustee acted honestly, reasonably, and it is fair to excuse them. This discretion is more readily applied to lay (unpaid) trustees than to professional trustees.

Delegation is a powerful tool for modern trust administration — but it comes with ongoing supervisory obligations that cannot be fully discharged even after delegation: (1) THE STATUTORY POWER TO DELEGATE (TA 2000 ss.11-23): the TA 2000 gives trustees a broad power to delegate 'asset management functions' — including investment management, buying and selling trust assets, and managing trust property — to an agent. The agent must be authorised by a written agreement; (2) THE POLICY STATEMENT (TA 2000 s.15): before or when appointing an investment manager, trustees must prepare (or ensure there is) a written statement of policy ('investment policy statement' or IPS) — setting out how the investment manager is to exercise the delegated functions. The IPS must be given to the agent. It typically specifies: (a) investment objectives; (b) risk tolerance; (c) asset allocation ranges; (d) benchmark return expectations; (e) ethical or social restrictions; (3) THE DUTY TO REVIEW THE AGENT (TA 2000 s.22): delegation does NOT discharge the trustees' ongoing responsibility. After delegation, the trustees MUST: (a) keep under review the arrangements under which the agent acts; (b) keep under review whether it is appropriate to continue to use the agent; (c) consider whether the agent is acting in accordance with the policy statement; (d) intervene if the agent departs from the IPS or acts in a way inconsistent with the trust's best interests; (4) WHAT CANNOT BE DELEGATED: trustees cannot delegate their core discretionary functions — in particular, their duty to consider how to exercise a discretion to pay income or capital to beneficiaries. This is personal to the trustee. They can appoint agents to carry out actions (investment management; property management) but cannot hand over their fiduciary judgment; (5) LIABILITY FOR DELEGATE'S ACTS: if the trustees comply with the TA 2000 requirements (proper appointment; written IPS; regular review) they are NOT liable for the agent's default (TA 2000 s.23(1)). But if the trustees fail to review — and the agent acts negligently without being caught or corrected — the trustees remain liable for their own failure to supervise.