What is the role of trustees at a golf club?

Jenny Yu
By Jenny Yu March 17, 2018 10:07 Updated

This guidance from the National Golf Clubs’ Advisory Association (NGCAA) looks at the role of trustees at a golf club.

Where the club is unincorporated and holds assets and property, it is customary for trustees to be appointed according to the rules and for the assets and property (other than cash) to be vested in trustees on trust for the whole membership.

Where the club owns or leases land, this is an essential requirement because property cannot be conveyed to or registered at the Land Registry in the name of a non-existent person, that is someone who the law does not recognise as a legal entity. Hence, legal title is vested in trustees who hold that title upon trust for the members of the club as a whole beneficially

The trustees will invariably be full members of the club but unless the rules specify, need not be so.

There is said to be a bare trust whenever the trustee holds trust property in trust for an adult beneficiary. Where the club holds valuable property, it is normal for the club to have formally appointed trustees, who will declare that they hold the club property upon trust for the members in accordance with the rules of the club and as directed by the committee.

Under this arrangement the club’s property is vested in the trustees under a bare trust for the members as a whole. The trustees’ control over the trust property is minimal and the beneficiaries’ (members’) control is paramount. This control is exercised by the committee as the body to whom the membership devolves executive decision-making responsibility on its behalf.

The trustees of a bare trust have no active duty to perform; they are merely the repository of the ‘bare’ legal title of the trust property and have at all times to comply with the directions of the beneficiaries acting through the committee and, indeed, the fact that the club property is vested in trustees on trust for the members is a quite separate matter and does not bear upon the contractual relationship as between the members themselves.

A bare trust has to be distinguished from a special or active trust where the trustee is charged with the performance of substantial duties in respect of the control, management and disposition of the trust property, coupled with fiduciary duties owed to the beneficiaries. Charitable trusts are an example of these.

The principal statute relating to trusts is the Trustee Act 1925 modified by the Trustee Act 2000. The powers conferred by this act are in addition to the powers conferred by the instrument creating the trust, if indeed one exists, unless a contrary intention is shown. It is usual to appoint more than one trustee but the maximum number of trustees’ names in which property may be legally vested is four.

The rules of the club should contain provision as to the powers of the trustees to invest the funds of the club. This power is sometimes exercised at the trustees’ own discretion (with or without a cap on the value of the transaction) but more often, and in the context of a golf club, should be exercised at the direction of the committee.

It is essential for the rules to make provision for the trustees to be indemnified against risk and expense out of club funds. This is often coupled with an exclusion (or exculpation) clause which differs from a clause that limits the scope of a trustee’s duty of care. The former will often be worded so as to exclude all liability for any loss except in certain circumstances such as the trustees’ ‘own fraud’ whereas the latter will provide that no duty of care is owed in certain circumstances.

The statutory duty of care only applies to the extent that it is not excluded by the terms of the trust instrument. The same applies as regards the common law duty of care. Accordingly, a clause in a trust document may exclude or limit the trustees’ statutory or common-law duties of care.

However, a clause that seeks to exclude the trustee’s liability in circumstances where a breach of trust has been committed is an exclusion (or exculpation) clause. It is important to appreciate that exclusion clauses are only concerned with excluding the trustees’ personal liability and not with excluding their duties and so justifying the offending conduct. Therefore, despite the existence of an exclusion clause:

  • Beneficiaries can restrain trustees from carrying out acts in breach of their duties.
  • Trustees can be removed for committing such acts.
  • No protection is afforded to third parties.

There is as yet no general statutory restriction on exclusion clauses generally. However, at common law there are restrictions on the scope of exclusion clauses. The leading case on such restrictions is Armitage v. Nurse [1998]. The main points from that case are:

  • Trustees can exclude liability for negligence, including gross negligence, but cannot exclude the trustee’s core duty, which is to perform the trusts honestly and in good faith for the benefit of the beneficiaries.
  • As a result, a trustee cannot exclude liability for fraud, which in this context connotes dishonesty. This means that a trustee can commit a deliberate breach of trust if done in good faith in the honest belief that he is acting in the interests of the beneficiaries. However, his own views as to his honesty are irrelevant. Therefore, if a trustee does something which he believes is in the interests of the beneficiaries, but which objectively viewed is so unreasonable that no trustee could have thought that it was for the benefit of the beneficiaries, he will not be saved by an exclusion clause.

In light of the above, it is clear that a properly worded exclusion clause will be sufficient to exclude a trustee’s personal liability for breach of statutory duties of care.

Insurance is also available and this often provides an additional ‘comfort blanket’ for the trustees. The rules will also deal with the trustee’s tenure of office and make provision in the event of his resignation from the club or his retirement from office or his death. Very commonly the rules will contain a provision that the committee by resolution shall have the power to remove a trustee, and will contain a further provision that the committee is the nominated person under section 36 of the Trustee Act 1925 or any statutory modification thereof to appoint a new trustee.

Unless the rules of the club state otherwise, the trustees should have no active role in the management of the club. Obviously as a matter of courtesy they may be informed where the committee is considering substantial dispositions in the assets and it may be useful to meet with the trustees from time to time to keep them updated.

A formal record, perhaps in a separate book or spread sheet, should be kept recording the details of the name and address of the trustees with details of their death or resignation. There is no requirement to formally change the details on the title deeds as long as a link can be established should the club be required to establish the link – this is much preferable than having to search through endless minutes of past meetings.

If a club has difficulty in finding willing and suitable trustees a trust corporation (usually a bank) could be appointed (if in this day and age any bank is so willing) however this is hugely expensive. Alternatively, the club may consider incorporating a limited company to act as a corporate trustee and in the absence of any special circumstances it is widely felt that a company whose members’ liability is limited by guarantee is the better option.

The NGCAA provides support, advice and guidance – from start to resolution – on all legal matters impacting upon both proprietary and private members’ golf clubs. 

 

Alistair Smith, the chief executive, is based in the office and is on-hand to offer advice and support. 

The National Golf Clubs’ Advisory Association (NGCAA)

The Threshing Barn, Homme Castle Barns,

Shelsley Walsh, Worcestershire, WR6 6RR

Tel: 01886 812943

email info@ngcaa.co.uk

www.ngcaa.co.uk

 

Jenny Yu
By Jenny Yu March 17, 2018 10:07 Updated
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