This means that, usually, there is no one right answer. If that’s the case, you might ask why would I want or need legal input? You might also be surprised that this is one of the aspects of a trustee’s activities where the lawyers are often asked to help.
Here are five reasons why:
- Just because there is no one right answer doesn't mean you don't need to ask the right question.
Your discretion is likely to be subject to limitations. It may be that you can decide whether (or not) to do something, but not to change what the “something” is. For example, you may be limited to determining whether a particular condition or threshold is met (ie where your discretion is as “arbiter of fact”) and once you have made this decision what happens next is automatic. There may be a specific time period in which you can exercise the discretion or conditions which need to be met before the discretion even arises. Your lawyer can help you make sure you are acting within the precise scope of your discretionary powers.
- Just because there is no one right answer doesn't mean there are no wrong ones.
Even if your rules give you complete discretion, you will also need to ensure you exercise your discretionary powers in accordance with what is permissible by law and in line with your duties as a trustee. Your lawyer can help you rule out the things you can’t do, to make sure you are focussing just on the range of possible right answers.
- Just because there is no one right answer doesn't mean there isn't a right process.
When it comes to discretionary decisions, it’s generally far easier to challenge the process than the outcome. This means your process could be your protection or what makes your decision more vulnerable to challenges - so it’s vital to get it right. Your lawyer can help ensure you don’t miss an important step (such as managing a conflict of interest), and that you are undertaking the right investigations, identifying the full range of options, properly assessing the evidence and taking into account all relevant factors (and no irrelevant ones).
- Just because there is no one right answer doesn't mean one answer isn’t better / less risky / more appropriate than another.
In many cases, there will be a range of options, each of which has its own pros and cons. Which is “best” is likely to depend on the circumstances. Identifying which is most appropriate may mean balancing competing interests, duties and risks. It may also mean thinking about what you’ve done in other similar cases and whether this is a one-off decision or something which is likely to have wider implications. Your lawyer can help you look at the bigger picture and take steps to mitigate your risks.
- Just because there is no one right answer doesn't mean your decision couldn't, or wouldn't, be challenged.
Quite the contrary. As discretionary decisions can have a material financial impact for individuals, it is not uncommon for them to be questioned or challenged. Many trustees find themselves having to defend or explain a discretionary decision to a member, potential beneficiary or TPO. Your lawyer can help you document your decision, the reasons for it and any supporting evidence you used so that you have a robust paper trail just in case you ever need it in future.
In other words, although there is no one way to get a discretionary decision right, there are lots of ways you could get it wrong.
So if you are looking at a particularly complex or high value discretionary decision, or if you haven’t reviewed your discretionary decision making processes in a while, could it be time to give your lawyer a call?
Naomi Brown, Senior Counsel at Sackers
