In respect of the investment of the property of the unit trust, regulation 7.02.2 spells out clearly that it is not only a duty but also ‘a right’ of the manager to make decisions. Correspondingly, regulation 7.09 is drafted in negative terms so as to leave no doubt that the trustee’s obligation does not extend to a positive consideration on the merits of particular investments. In other words, the trustee has no ‘right’ to make an investment decision as its counterpart in an ordinary private trust. This is also echoed by regulation 7.03.1 which provides that ‘Nile manager may without the specific authority of the trustee give instructions to agents as to the acquisition or disposal of property of the scheme‘. But at the same time, regulation 7.03 requires the manager to restore the trust portfolio to its status quo if the trustee forms the opinion that the manager exceeds its power in a particular transaction.

FundsThus, in an authorized unit trust, both the manager and the trustee cannot be regarded as a subordinate of the other.

The position appears to be the same for other unit trusts. In Parkes Management Ltd. v. Perpetual Trustee Co. Ltd. , the manager of a unit trust sought to challenge the certificate by the trustee that it would be in the interest of the unitholders for the manager to retire. It was argued (inter alia) by the trustee that an injunction should not be granted to continue a personal relationship. This was rejected by Hope JA on the ground that the manager was neither the agent nor employee of the trustee:

It was then submitted that no injunction would be granted in a case such as the present because of the principle that injunctions will not be granted to continue a personal relationship … I do not think that this principle is to be applied to the present case. The Manager is in no sense to be regarded as an employee or agent or in some analogous relationship with the Trustee, or as seeking to ensure the continuance of such a relationship. It is entitled to ensure, in the interests of itself and of the unitholders, that the Trustee properly performs its functions and duties. Its position in the whole scheme was central to that scheme and its removal in a very real sense changed in an important way the character of the scheme.”

The absence of an agency at a general level does not preclude the finding of an agency relationship in some specific transactions of a trust’s operation. The Financial Services (Regulated Schemes) Regulations 1991 clearly contemplates the possibility of the manager of an authorized unit trust selling and buying units as an agent of the trustee, rather than the manager acting as a principal.It also requires the trustee to appoint the manager or the manager’s nominee as an agent in exercising the voting rights of underlying assets.’ These are not the only matters permitted by the Regulations. Under regulation 7.15, delegation between the trustee and the manager is generally permitted, except that the trustee’s functions of oversight and custody cannot be delegated to the manager or its associate. A trust deed may expressly provide that the manager shall be the trustee’s agent on specific matters. Little has been written on the way the day-to-day business of a trust is conducted but it is conceivable that delegation is inevitable in some circumstances and an agency may therefore arise from a course of conduct. For example, in an offshore trust that invests in the share markets, the manager, after making the choices for its portfolio, may simply instruct the broker to buy shares in the name of the trustee. It is simply acting on behalf of the trustee in giving instructions to the broker. Likewise, a manager in a property trust may be collecting rents and paying rates and other outgoings for the trustee as part of its daily management of the properties.’

The possibility of specific agency situations, such as those above discussed, does not undermine the basic proposition that there is no general agency relationship between the trustee and the manager.

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