Breach of Trust Flashcards
Are trustees liable for the breaches of co-trustees?
A trustee is liable for their own breaches and NOT vicariously liable for those of their co-trustees. However, a trustee may be liable for a breach by omission/neglecting their duties, if they failed to review the actions of co-trustees e.g.
Liability for a breach of fiduciary duty where the trustee makes an unauthorised profit?
The remedy is restitution - the trustee must account for any profits made. Profit held by trustee on constructive trust for the beneficiaries.
What is the difference between a breach of trust and a breach of a fiduciary duty?
A breach of fiduciary duty is where the trustee used their position to make unauthorised profits.
A breach of trust is where a trustee makes investment which are expressly forbidden by the trust instrument.
Liability when multiple trustees are found to have breached the trust?
Where multiple trustees are found to have breached the trust, they will be jointly and severally liable. The beneficiaries can sue all or some of anyone of those liable and claim the whole sum against any one trustee.
Liability for breaches occurring from trustees’ unanimous action?
Trustees are jointly and severally liable for breaches occurring because of unanimous action.
What happens when one trustee acts unilaterally in breach of the trust?
The other trustees are not liable for the breach.
In what situations may a trustee found in breach of trust be able to claim an indemnity from a fellow trustee/beneficiary??
Where the co-trustee was fraudulent.
Where the co-trustee is a solicitor-trustee who exercised a controlling influence over the other.
Beneficiary (and trustee) benefits from breach of trust.
Where a beneficiary has instigated the breach/consented to it in writing.
Scope of exemption/exclusion clauses to exclude trustee liability?
It is possible for the liability of trustees for breach of trust to be excluded/limited by an exemption clause (other than where the breach is fraudulent).
What is the equitable defence of laches?
An equitable defence raised by a defendant. C’s undue delay in asserting their rights means it would be inequitable to enforce their rights against D.
Scope of trustee indemnity insurance?
Protects trustees in cases of breach where there is no dishonest intent/recklessness.
What is the limitation period for a non-fraudulent breach of trust action?
Six years from the date on which the right of action accrued.
The countdown only begins once a beneficiary’s interest comes into possession - i.e. life interest followed by a remainder interest, limitation period for the remainderman starts on the death of the life tenant.
Beneficiary’s entitlement contingent upon reaching a certain age? The six-year period runs from the date the beneficiary’s interest has vested.
Time for minor beneficiaries begins when they reach 18.
What is accessory liability?
Dishonest assistance. A stranger who never received trust property may be liable to the trust it they dishonestly assisted the trustee in breach of the trust.
What are the 4 requirements to establish dishonest assistance?
- The existence of a trust. Formal trust/trust implied by virtue of a fiduciary.
- Breach of trust/breach of fiduciary duty.
- Assistance by a stranger in that breach.
- Stranger’s dishonesty in providing assistance - an objective test.
What are the 3 requirements for establishing recipient liability?
- Disposal of trust property in breach of fiduciary duty.
- Beneficial receipt by the stranger or assets which are traceable as representing the assets of the trust; and
- Knowledge (either actual/constructive) on the part of the stranger that the assets received are traceable to a breach of fiduciary duty.
