Breach Of Trusts

Question 0

Target holdings v Redferns

Answer 0

Trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost or compensation for such loss

Question 1

Caffrey v Darby

Answer 1

Once trustees had committed a breach of trust they were responsible for compensating the estate in respect of any loss whether consequential on the breach or not

Question 2

Equity - in personam

Answer 2

In this remedy you may order the trustee to account for all the funds that have been lost by the trust.

Question 3

Fry v fry

Answer 3

Directed trustees to sell house as soon as convenient (after his death) for the most omens that could be obtained – property remained unsold and started to depreciate

A trustee who improperly retains an unauthorized investment will be liable to pay the difference between the price at which it is sold and what it would have been fetched if it had been sold at the appropriate time

Question 4

Re Massingberds ST
Re Bells indenture
Jaffray v Marshall

Answer 4

Re Massingberd– Held that the value of the authorized investment should be determined by reference to the replacement cost at the date the writ was issued

Re Bell– it should be replacement cost at judgement day

Jaffray– court held that it should be the highest intermediate value of the asset between the date if the breach and the judgement day

Question 5

Chillingworth v Chambers

Answer 5

Where the trustee is also a beneficiary it was held that he is required to indemnify his co trustee to the extent of his beneficial interest - if loss exceeds beneficial interest the trustees will share the surplus loss equally in so far as it exceeds the beneficial interest

Question 6

Bahin v Hughes

Answer 6

Where a trustee has fraudulently obtained a benefit from a breach of trust

Question 7

Re Partington

Answer 7

Where a breach of trust was committed on the advice of a solicitor/trustee

Question 8

Dimes v Scott

Answer 8

Trustees cannot offset the loss from one transaction again the profit from another entered into under a breach of trust

Question 9

Bartlett v Barclays Bank

Answer 9

Can offset if the loss and profit came from the same transaction

Question 10

Main defences

Answer 10

Beneficiary’s participation– (holder v holder) - b must act out of own free will

S.61 TA 1925- relief of liability – at courts discretion but committed breach but has acted honestly and reasonably - fair to excuse him from liability

Acquiescence of beneficiary – (Re Garnett)

Exemption clauses – express provisions in trusts that exonerate trustees from acts that would constitute as breach of trust (Armitage v nurse)

Where claim is statute barred– 21(3) limitation act cannot bring action after 6 years however few exceptions: a) fraud or fraudulent breach of trust b) the action is to recover trust property or it’s proceeds in the trustees hands or previously received by him and converted to his use

Order to impound beneficiary’s interest– breach committed at instigation of Ben interest should be impounded and applied towards repairing the breach in jurisdiction or under s 62 of TA1925 – (Chillingworth v Chambers – breach requested by Ben; where Ben merely consented)

Question 11

Re Somerset

Answer 11

Bens interest will not be impounded if he asks the trustees to perform an act which is not in itself a breach but the act is carried out by them in a manner which gives rise to a breach

Question 12

Issue of exemption clauses

Answer 12

Framed in very wide terms (Armitage v nurse)

• trustees should not be liable for any loss or damage that might occur to the trust at any time from any cause unless caused from his own actual fraud
• source of contention among academics and in recent cases brought forward to the courts
• little agreement on the fact that it cannot exclude a trustees liability for a breach involving fraud or dishonesty – Hayton and L Millett – trustees duty to act in good faith is a core obligation fundamental to the trust and this duty cannot be excluded by a clause which purports to exempt the trustee from liability for dishonesty or fraud
• negligence – even though not looked upon as being favourable to the beneficiary where the trustee is negligence in “Armitage” the exemption clause framed in such large terms is capable of exonerating a trustee even where he is guilty of gross negligence.
• most of these judgements predate TA 2000 - courts still recognize core obligations and contractual obligation in relation to trustee’s duties
• law commission report - against legislation because of little support for it but proposed that professional or regulatory bodies should provide statements of best practice under which their members would be required to bring any exclusion clause inserted in the trust instrument - settlor aware of the effect of the exclusion clause