Breach of Trust

Question 1

What is the extent of trustees’ liability for breach of trust?

Answer 1

** Joint and several **= if one breaches, the others breach too.
* Strictly liable = for all loss flowing from the breach
* Not liable for breaches before appointment and should report these if discovered
* Civil Liability (contributions) Act 1978 applies

Question 1

In what circumstances will there be a breach of trust?

Answer 1

• Trustee acts outside powers (trust deed / statute)
• Trustee fails to comply with duties (again, trust deed or statute)
• Trustee misapplies trust property
• Breach of fiduciary duties

Question 2

What defences to a liability are available to trustees?

Answer 2

Not available for fraudulent breaches
1. Exemption / ouster clause
2. Court discretion to exonerate trustee where they acted honestly, reasonably and ought fairly to be excused
3. Limitation = 6 years from breach has passed unless proprietary claim against trustee (tracing)
4. Equitable limitation period has passed
5. Insurance
6. Fully informed + written consent of the beneficiary
7. Beneficiary instigated breach or acquiesced
* specific beneficiary barred from making a claim but others are not
* Court has discretion to use that beneficiary’s interest to compensate others