Self-dealing rule Definition

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GLOSSARY

What does Self-dealing rule mean?

If a trustee sells trust property to himself the sale is voidable by any beneficiary however fair the transaction.

A trustee must not put himself in a position where his duty and interest conflict or possibly conflict. Where the rule applies the trustee and his successors in title (other than a bona fide purchaser of the legal estate for value without notice) take a voidable title and a beneficiary is entitled to have the transaction set aside.

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Trustees—self-dealing, unauthorised profits and conflicts of interest

The self-dealing ruleThe self-dealing rule is connected to, but distinct from, the fair dealing rule as well as the genuine transaction rule. There is authority that the rules are not, on a correct analysis, part of the duties or discretions of a trustee; rather they are restrictions which inhibit a trustee from acting in certain ways. This has important consequences in terms of limitation of any action against trustees by beneficiaries.The rule against self-dealing encompasses several slightly different rules which were considered in Right Reverend Hollis (Bishop of Portsmouth) v Rolfe:•a trustee cannot make a contract with themselves (subject to statutory exception) so any attempt to do so is ineffective—this was described in Right Reverend Hollis (Bishop of Portsmouth) v Rolfe as the primitive self-dealing rule, although it has also been described as the two-party rule•a trustee's power of sale cannot validly be exercised in their own favour (subject to any contrary provision in the trust instrument)—this was described in Right Reverend Hollis (Bishop of Portsmouth) v Rolfe as the...

Personal representatives and trustees—power of appropriation

Appropriation is a process by which a personal representative (PR) or a trustee uses a specific asset in the estate or trust fund to meet, in full or in part, a beneficiary’s entitlement or interest.Personal representatives' common law and statutory power of appropriationPRs have a power of appropriation under the common law over any part of the residuary estate (but not a fund) which may be exercised with the consent of the beneficiary, in or towards satisfaction of a vested legacy or a share of residue, even if payable at a future time. This does not extend to a contingent legacy unless it carries the right to the intermediate income. The power extends to both real and personal property whether or not that property is subject to a trust for conversion. The common law power does not extend to PRs appropriating unauthorised investments.PRs have a statutory power of appropriation under section 41 of the Administration of Estates Act 1925 (AEA 1925) which allows PRs to appropriate any part of the...

Discover our 2 Practice Notes on Self-dealing rule