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| The law |
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1. What do we mean by "custodian trustee"? |
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1.1 "Custodian" or "custodian trustee"?
1.2 What is a custodian trustee? |
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1.1 "Custodian" or "custodian trustee"?
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It could be easy to confuse the terms "custodian" and "custodian trustee" and it is important to ensure we are talking about the correct term in the correct context. |
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The term "custodian" used in the Trustee Act 2000 does not refer to custodian trustees, which are the subject of this OG. The principal differences are that the powers and duties of "custodian trustees" covered in this OG are exactly prescribed in the Public Trustee Act 1906 - these do not extend to the type of custodian referred to in the Trustee Act 2000. In addition, a custodian trustee covered by this guidance must be a body corporate and may be appointed or removed as described here - different rules apply to custodians covered by the Trustee Act 2000. |
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The Trustee Act 2000 provides new powers to appoint custodians and nominees and this is supported by statutory guidance from the Commission on trustees' duties when appointing them - see CC 42. |
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For further information about "custodians" under the Trustee Act 2000 and information about that Act in general see OG 86. |
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1.2 What is a custodian trustee? |
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The term "custodian trustee" has a precise legal meaning. It was introduced in the Public Trustee Act 1906. It covers all trusts, public and private, and does not apply only to charities. All trusts, whether charitable or not , may appoint a custodian trustee. Charitable companies are not trusts and cannot therefore operate with a custodian trustee (see OG 39 A2). |
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In round terms, the custodian trustee holds the title to all the property of the trust but is not involved in the day to day management of the trust. The powers and duties of a custodian trustee are set out in section 4 of the Public Trustee Act 1906. This is reproduced in OG 39 B2. |
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These powers may not be altered or added to by any provision in a charity's governing document. It is worth bearing in mind, therefore, that a "custodian trustee" whose powers are delineated in the charity's governing document will in fact be a mis-described holding trustee (see OG 38 B1). The only possible exception to this is where the powers granted by the provision in the governing document are precisely those given in s.4 of the 1906 Act, in which case that provision is superfluous. |
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When a custodian trustee is appointed, those who are the charity trustees within the meaning of s.97(1) of the 1993 Act are called managing trustees. |
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Only a corporation can be appointed as a custodian trustee. |
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There are occasions when it appears that an individual is acting as a custodian trustee, but legally this can be only when the office held by that individual has the status in law of a corporation sole. (See below for more details on who can act as a custodian trustee, also the section on the Official Custodian for Charities.) |
 
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2. Which corporations can act as a custodian trustee? |
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Rule 30 of the Public Trustee Rules 1912 (as amended) (SR&O 1912/348) specifies the corporations which may act as custodian trustees under the Public Trustee Act 1906. Rule 30 has been revised at times by six other statutory instruments (and the Coal Industry Act 1987). |
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The details of these statutory instruments and the amendments made by each of these statutes are given in the notes accompanying the text of this rule in Halsbury's Statutory Instruments, Vol 21 (Trusts). The up-to-date version of Rule 30 is reproduced as OG 39 B1 and more explanation is available in OG 38 B1. |
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Examples of corporations which can act as custodian trustees include: |
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- corporations governed by Royal Charter;
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- local authorities (district councils, metropolitan borough councils, and parish councils).
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- Except in the case of the Treasury Solicitor, there are restrictions or limitations affecting the rights of the stated classes to act as custodian trustee. Some members of these classes are excluded generally, and, in some cases, the types of trust for which corporations can act as custodian trustee are limited. Rule 30 gives the complete list of eligible types of corporation.
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In the case of charities, a body corporate can be a custodian trustee only if it is empowered to act as such under Rule 30. |
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Any company authorised by the Lord Chancellor to act in relation to charitable, ecclesiastical or public trusts as a trust corporation (see Rule 30(1)(d)(ii)) is entitled to act in relation to such business as a custodian trustee. It follows that the Lord Chancellor's certificate, besides conferring status as a trust corporation, entitles the corporation to act as a custodian trustee. |
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3. Powers and duties of a custodian trustee |
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Section 4(2) of the Public Trustee Act 1906 sets out a number of powers and duties for a custodian trustee where one has been appointed. These are explained in detail in the following sections. |
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3.1 Holding the trust property
3.2 Assisting the managing trustees
3.3 Appointing new trustees
3.4 Charging for their services |
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3.1 Holding the trust property |
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The custodian trustee has transferred to it, by way of vesting orders where necessary, all securities and documents of title relating to the trust property (eg share certificates and title deeds to land owned by the charity), subject to any rights of a third party (eg in the case of borrowing secured on a property, the title deeds will be held by the lender). The managing trustees have rights of free access, for study and to take copies, to the documents held by the custodian trustee. |
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3.2 Assisting the managing trustees |
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The managing trustees retain the management of the trust property and the exercise of any powers under the trust. The custodian trustee has a duty to concur in and perform all lawful acts necessary to enable the managing trustees to administer the charity efficiently. This would include sales from, and purchases to add to, the trust property, but may also include other matters. In practical terms, however, it is the managing trustees who should execute a transfer document in the name and on behalf of the custodian trustee in whom the legal title to the property is vested (Trusts of Land and Appointment of Trustees Act 1996, Sch 1, para 4(3) although this Act applies only to land). |
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The watchword here is "assistance". The custodian trustee can only assist the managing trustees - it cannot have any management responsibilities itself, no matter how convinced individual members of the corporate body may be that it does. |
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The custodian trustee should not, however, act if the matter in which it is requested to concur is a breach of trust, or involves it incurring personal liability. If the managing trustees do commit a breach of trust, the custodian trustee is not liable for any act or default on the part of the managing trustees or any of them, unless it has concurred with the breach of trust. |
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This inevitably means that the custodian trustee will have to exercise judgement in some investment and other cases as to whether an act involves a breach of trust or not. |
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All sums payable to or out of the income or capital of the trust property should be paid to or by the custodian trustee. It may, however, allow the dividends and other income derived from the trust property to be paid to the managing trustees (or to such person, directly or by credit to their bank account, as they may direct). If this is allowed, then the responsibility for ensuring the proper application of those funds falls to the managing trustees, and the custodian trustee is not answerable for any loss or misapplication of them. |
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The custodian trustee, if it acts in good faith, is not liable for accepting as correct, and acting upon, any written statement by the managing trustees relating to any matter of fact upon which the title to any or all of the trust property may depend. It is also not liable for acting upon any legal advice obtained by the managing trustees independently of it. |
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3.3 Appointing new managing trustees |
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The power of appointing new managing trustees themselves, either under a provision in the charity's governing document or under Part III of the Trustee Act 1925 remains with the persons otherwise entitled to exercise it: the custodian trustee cannot participate unless the governing document of the charity gives it the right to do so. Although the custodian trustee shares with them the power of applying to the Court under Part III of the 1925 Act for the appointment of a new managing trustee it is not reckoned as a trustee in determining the number of trustees for the purposes of Part III of that Act. |
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3.4 Charging for their services |
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Custodian trustees can properly charge charities for their services, and some routinely do so. The power to charge fees is conferred by section 4(3) of the Public Trustee Act 1906; the permitted level of fees cannot be exceeded. |
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4. The Official Custodian for Charities |
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The Official Custodian for Charities (OCC) is, strictly speaking, not a custodian trustee, although he has all the powers, duties and liabilities of one, except the power to charge fees. |
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In s.2 of the 1993 Act the OCC is stated as being "a corporation sole with perpetual succession", while s.22 of that Act confers on the Official Custodian "the same powers, duties, and liabilities .... as a corporation appointed custodian trustee." |
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A custodian trustee, however, is necessarily appointed to be the custodian trustee of a trust in its entirety. The OCC is, instead, merely the trustee of items of property vested in him, which may or may not constitute the whole of the property of the charity concerned. |
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His general investment-holding function was abolished by the Charities Act 1992. The one exception to this is that he may still hold personal property (ie securities and investments) vested in him as a result of an investigation into a charity's affairs and an Order protecting that property under s. 18 of the 1993 Act. He still retains the land-holding function inherited from the Official Trustee for Charity Lands under the Charities Act 1960. |
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Further information on the OCC is in booklet CC13. |
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5. Corporations as managing trustees |
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Staff should be aware that not every corporation appointed as a trustee will be a custodian trustee - there are numerous cases of a corporation having been appointed as a (sole) managing trustee (see OG 38 B1 for details). Obviously, these will need to be treated differently from a custodian trustee; virtually the only thing they have in common is that they are all corporations. |
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In such cases there would not be a need for a custodian trustee, as the corporate managing trustee can also hold all securities, investments and land in its name for the charity. It is thus a "trustee for all purposes", a phrase which caseworkers will see crop up regularly in Schemes or Orders relating to charities with corporate trustees. This guidance, however, deals only with the cases where the corporation is solely a custodian trustee. |
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