7. Trustee's Liabilities

Question 1

What remedies are available for Trustee’s breach of trust?

Answer 1

Specific performance of duties

Enjoin Trustee committing breach

Compel payment/Restore payment

Suspend/Remove Trustee

Constructive trust

Question 2

What damages may beneficiaries be entitled to for Trustee’s breach of trust?

Answer 2

Greater of;

• Restoration amount necessary + Distributions but for breach
• Trustee’s profit from breach

Question 3

How may Trustee be liable to TPs?

Answer 3

As Trustee

• Contract
• Tort

Personally

• Contract (failure to reveal representative capacity + trust identity)
• Tort (personally at fault) (NO respondeat superior)

Question 4

How may Trustee avoid liability?

Answer 4

Reasonable reliance on trust terms

Beneficiary’s consent/ratification/release Trustee from liability

Exculpatory clauses

• NOT relieve Trustee for bad faith/reckless indifference when committing breach
• NOT due to Trustee’s abuse of confidential relationship with Settlor/Trustee’s adequate communication to Settlor

Question 5

How may Trustee be removed by court?

Answer 5

At court’s own motion/Settlor’s request/Beneficiary’s request/Co-Trustee’s request

Serious breach

Lack of cooperation with Trustees

Unfitness/Unwillingness

Substantial change of circumstances