Breach of Trust Flashcards
When can beneficiaries bring a personal claim against a Trustee?
When there are losses resulting from T’s breach of trust
Who has the burden of proving loss under a personal claim?
Beneficiaries
Is a trustee vicariously liable for acts of their co-trustee?
No - only the co-trustee responsible for the breach and loss is liable
A trustee may breach the duty of failing to ______ ___ ______ of a trustee in breach
supervise the actions
If a B is of full age and mental capacity and _______ to the action giving rise to breach with full _______ of all material _____, they cannot later ___ the trustees for that breach
consent, knowledge, facts, sue
What is the general limitation period for bringing an action against trustees?
6 years
If more than one T committed a breach, they are _______ and __________ liable
jointly, severally
When can a beneficiary make a proprietary claim?
Where trust property/its proceeds can be identified in the hands of a trustee
When is a proprietary claim particularly advantageous and why?
When T is insolvent
Bs can claim the property from them ahead of other creditors
If the value of trust property/its proceeds has increased, what does a proprietary claim enable the beneficiaries to receive?
They can claim the increase
If the original trust property is in the hands of T, what can the Bs do?
Claim it back via a proprietary claim
If T has directly substituted the trust property for another asset, what can the Bs do with that asset (2 options)?
- Claim the asset
- Claim a charge over the asset
If T has combined trust funds with their own to purchase an asset, what can B do (2 options)?
- Claim a proportionate part of the asset
- Claim a charge over the asset for the amount of trust funds used
If T places trust funds into a bank account with their own money, what can Bs do?
Claim a charge over the account
If T had drawn money out of an account with funds of their own and of the Bs, the basic rule is that T is treated as…
withdrawing their own money first
Where T mixes trust funds with their own in a bank account and funds are withdrawn from the account, the trustee is treated as spending his own money first.
However, where this happens and the balance of the fund has been dissipated, what 2 options do the Bs have?
- Claim the asset purchased from the account before the balance was dissipated
- Claim a charge over the asset
If T purchases an assets from the mixed funds of two trusts, what can the Bs of the two trusts do?
Share the asset proportionally
What is the first in first out rule?
Where funds from two trusts are mixed in a current account, the first money into the account is the first money out
What are the three situations where a court would displace the first in first out rule, meaning the assets would be shared proportionately?
(1) Applying the rule is contrary to the express or implied intention of the claimants
(2) Impractical to apply the rule, or
(3) Applying the rule would cause injustice to at least one of the parties.
Name 4 types of people who may be involved in a breach of trust
- Bona fide purchaser
- Innocent volunteer
- Knowing recipient
- Dishonest accessory
(remember: K.I.D.B)
Who is a bona fide purchaser in a breach of trust claim?
Someone who acquires legal title to property for value and without notice of the trust
Can beneficiaries recover property from a bona fide purchaser in a breach of trust claim? Why/why not?
No - the purchaser takes the property free of the beneficiaries interests
Who is an innocent volunteer in a breach of trust claim?
Someone who came into possession of trust property with no knowledge/suspicion of the breach
Can the beneficiaries make a claim in equity against an innocent volunteer in a breach of trust claim?
No
