In their report the Law Commissioners accepted that the abolition of the strict settlement under the Settled Land Act 1925 would have some disadvantages. The tenant for life of such a settlement has full powers to manage the settled property and it was felt that this Act should confer on the trustees of land power to delegate management and other powers to beneficiaries, this achieving, in their view, much the same result^[1].

Sub-section 1 provides that the trustees of land may, by power of attorney, delegate to --

any beneficiary or beneficiaries of full age and beneficially entitled to an interest in possession in land subject to the trust any of their functions which relate to the land.

The section only gives the trustees power to delegate such of their functions as relate to the land subject to the trust. The section does not, for example, permit them to delegate any of their investment powers (other than the power to invest in the purchase of land) even if the money in question is the proceeds of sale of land.

Although a "beneficiary" normally in this Act includes a person who has an interest in the trust property in his capacity as a trustee or personal representative, for the purposes of this section a rather more limited definition of the expression is used -- Section 22(2) -- and a person who has an interest in the property solely as a trustee or personal representative is not a beneficiary. So if land is held on trust for A, B and C, and C dies, his personal representatives are not "beneficiaries" for the purposes of this Section (although this does not prevent A and B being beneficiaries if they are also C's personal representatives). Similarly an annuitant is not a beneficiary for this purpose.

The expression "beneficially entitled to an interest in possession" occurs in the Inheritance Tax Act 1984 and its predecessors and in Pearson v IRC [1981] AC 753 it was held that in that context it meant that the beneficiary in question had a present right to present enjoyment of the property. If trustees had power to accumulate income and so prevent the beneficiary receiving the entire income he did not have such a right and so did not have a beneficial interest in possession. Whether the legislature intended the power of delegation conferred by this Section to be limited in this way is debatable. (The expression is also used in Sections 11, 12, 15 and 22 below.)

The power is to be delegated by a power of attorney and so the provisions of the Powers of Attorney Act 1971 will apply. Certain of those provisions are inconsistent with those set out in this Section and it would seem that the latter would take precedence. The position would appear to be as follows --

• The power must be given by all the trustees jointly -- subsection (2).
• The instrument creating the power must be a deed signed and sealed by, or at the direction of all the trustees, in the latter case in the presence of two witnesses who shall attest the instrument -- Section 1 of the 1971 Act.
• The power may be irrevocable or may be granted for a definite or indefinite period -- sub-sections (3) and (5).
• The instrument may be proved by a copy which is certified by the trustees or by a solicitor as being a true copy -- Section 3 of the 1971 Act.
• The trustees may grant an irrevocable power of attorney by way of security -- sub-section (3). If they do it would seem that it cannot be revoked without the consent of the donee -- Section 4 of the 1971 Act. (This does not entirely fit with sub-section (3).)
• A revocable power of attorney may be revoked by any of the trustees -- sub-section (3).
• The death or retirement of a trustee will not revoke the power -- sub-section (3).
• The appointment of a new trustee will revoke the power, even if the power is expressed to be irrevocable -- sub-section (3).
• A power of attorney granted to a single person is revoked if that person ceases to be beneficially entitled to an interest in possession in land subject to the trust -- sub-section (4).
• A power of attorney granted to more than one beneficiary is revoked so far as regards any of them if he ceases to be beneficially entitled to an interest in possession but continues in relation to the others of them -- sub-section (4).
• Where --
  • trustees purport to grant to the donee of the power functions relating to any land and
  • a third party deals in good faith with the donee,
  the donee shall be presumed in favour of the third party to have been eligible to be a donee of the power unless the third party knows this not to be the case -- sub-section (2).
• It shall be conclusively presumed in favour of a purchaser whose title depends on the validity of the transaction between the donee and the third party mentioned in the previous paragraph that the third party dealt in good faith and did not have any such knowledge if the third party makes a statutory declaration to that effect before or within three months after the completion of the purchase -- the proviso to sub-section (2). For this purpose "purchaser" has the same meaning as in Part 1 of the Law of Property Act 1925 -- Section 23(1).
• Where a valid power of attorney has been revoked and a person, without knowledge of the revocation, deals with the donee, the transaction shall be as valid as if the power had not been revoked -- section 5(2) of the 1971 Act.
• Where the interest of a purchaser depends upon whether the transaction between the donee and a third party was valid by virtue of section 5(2) of the 1971 Act it shall be conclusively presumed in favour of such purchaser that the third person did not know of the revocation of the power if --
  • the transaction between the donee and the third party was completed within twelve months of the date of the grant of the power of attorney; or
  • the third party makes a statutory declaration, before or within three months after the completion of the purchase, that he did not at the material time know of the revocation of the power
  -- Section 5(4) of the 1971 Act.
• Even if there are two or more donees of the power, they will not, it seems, be trustees for the purpose of receiving the purchase money on a sale -- Sub-section (7). See further below.
• The donee of the power may, if authorised to do so, execute any instrument in his own name. (This however merely means that Mr Smith can sign as Mr Smith. The instrument must make it clear that he is executing it as attorney for the trustees.) -- Section 7 of the 1971 Act.

It was proposed by the Law Commission that the trustees should remain fully liable for the acts and defaults of the donees of the power but the provisions of the Bill which provided for this were amended during its passage through Parliament. It is now provided that the trustees shall only be liable if, and only if, the trustees did not exercise reasonable care in deciding to delegate the particular function to the beneficiary or beneficiaries -- subsection (8). It would seem that the requisite care would be in deciding which functions should be delegated and to whom they should be delegated.

It will be interesting to see how the Courts interpret this provision. On the face of it the Trustees if they use reasonable care (whatever that may mean in this context) in choosing the beneficiary to whom their functions are to be delegated and in selecting the appropriate functions are absolved from any further duty to supervise the acts of the beneficiary. Presumably if the power is revocable they are under a duty to revoke it if the beneficiary appears to be acting improperly.

Sub-section (7) provides that beneficiaries to whom powers have been delegated --

are, in relation to the exercise of the functions, in the same position as trustees (with the same duties and liabilities);

This does not mean that they take the place of the trustees: they are the attorneys for the trustees. But it imposes on them the same duties and liabilities that they would have if they were trustees. It is to be noted that the sub-clause uses the words "as trustees" rather than "as the trustees". This would appear to make it doubtful whether the donees of the power are entitled to the benefit of any provision in the trust instrument indemnifying "the trustees" against liability for wrongdoing.

The second half of sub-section (7) provides that the donees of the power shall not be regarded as trustees for any other purposes, including, in particular --

• the purposes of any enactment permitting the delegation of functions by trustees; or
• imposing requirements relating to the payment of purchase moneys)

The first of these provisions means that the donees of the power cannot themselves delegate the power which has been delegated to them. The second is presumably intended to relate to provisions such as Section 27 of the Law of Property Act 1925 which require the proceeds of sale of land to be paid to not fewer than two trustees or a trust corporation. Although "capital moneys" in the 1925 legislation normally refers to money held on the trusts of a SLA settlement it would seem that in this context the expression refers to money held on the trusts of a trust of land.

Sub-section (6) provides that a power of attorney granted under this Section cannot be and enduring power within the Enduring Powers of Attorney Act 1985. However the provisions of Section 3(3) of that Act to the effect that --

Subject to any conditions or restrictions contained in the instrument, an attorney under an enduring power, whether general or limited, may (without obtaining any consent) execute or exercise all or any of the trusts, powers or discretions vested in the donor as trustee and may (without the concurrence of any other person) give a valid receipt for capital or other money paid.

The provisions of Section 25 of the Trustee Act (which confers on trustees power to delegate trusts during absence abroad) are also unaffected.