Chapter 11: Trustees Liability

Question 1

what constitutes a breach of trust?

Answer 1

loss of trust assets

failed to carry out duties in relation to trust property/ beneficiaries.

Question 2

when will a trustee only be liable?

Answer 2

the breach lead to a loss in the trust or unauthorised gain to the trustee

Question 3

what kind of claim can a beneficiary make against a liable trustee?

Answer 3

personal or proprietary claim

Question 4

what must a beneficiary prove to claim against a trustee in breach?

Answer 4

beneficiaries must prove they suffered loss as a result of the trustee’s breach.

Question 5

when could a trustee be liable why by way of omission?

Answer 5

neglected duties

if they should have known what other trustees were doing in breach.

if they failed to take action against another trustee in breach

Question 6

when will a trustee still be liable after retirement?

Answer 6

If they retired to facilitate the breach

remain liable for actions whilst acting as a trustee

Question 7

what kind of liability are trustees subject to?

Answer 7

joint and several

Question 8

what is the discretion of the court when determining compensation for liability of trustees

Answer 8

The court can choose contributions of each trustee to pay based on extent of liability

Question 9

how must trustees pay for loss?

Answer 9

pay from personal funds

Question 10

who can trustees claim indemnity from?

Answer 10

another trustee or beneficiary

Question 11

when can a trustee claim indemnity from a trustee?

Answer 11

Co-trustee was fraudulent

Co-trustee was a solicitor (exercised controlling influence)

Question 12

when can a trustee claim indemnity from a beneficiary?

Answer 12

beneficiary exclusively benefitted from breach

beneficiary instigated/ consented

Question 13

What does impound beneficiary interest mean?

Answer 13

seize/ take control of beneficiary’s entitlement. Also stop beneficiary suing trustee for breach.

can use this amount to pay trustee’s indemnity

Question 14

why is interest awarded on damages?

Answer 14

Compensation for how the money could have been used if the trustee has not caused loss to the trust fund - loss of use

Question 15

what are the types of interest in damages?

Answer 15

simple interest

compound interest

Question 16

how is a fiduciary breach different from a breach of trust?

Answer 16

trustee used their position to make unauthorised profits

must account for the profits (regardless of whether the beneficiaries suffered loss).

Allow personal interest to conflict with their duty to the trust e.g use knowledge to go into completion with the trust.

Question 17

What exceptions to liability over protection to trustees?

Answer 17

exemption clauses

courts powers to relieve liability

defence of beneficiary involvement

limitation period

doctrine of laches

acquiescence

Question 18

what can a deed NOT exempt liability from?

Answer 18

trustee cannot be exempt from acting fraudulently

Question 19

what would the court exclude liability?

Answer 19

they think the trustee acted honestly and reasonably and fairly should be excused.

Question 20

What should a trustee prove under defence of beneficiary involvement?

Answer 20

consent/ instigation by the beneficiary

Question 21

what is acquiescence?

Answer 21

beneficiary knew about the breach but decides to take no action against the trustee. A delay in taking action can suffice - determined by court.

Question 22

what is the effect of acquiescence?

Answer 22

Beneficiary waives their right to sue = excuses the trustee.

Question 23

What is the limitation period to bring a claim against a trustee in breach?

Answer 23

6 years from the date the right to action accrued

Question 24

when is the right to action accrued by a beneficiary?

Answer 24

when the interest comes into possession

Question 25

what remedies does the limitation period apply and not apply to?

Answer 25

applies to equitable remedy e.g compensation/ damages not apply to specific performance/ injunctions

Question 26

what are the exceptions to the 6 year limitation period?

Answer 26

To bring actions against a fraudulent trustee To recover trust property or proceeds from a trustee

Question 27

If a beneficiary is underage or disabled when will the 6 year period start running?

Answer 27

turn 18 no longer disabled on death - the estate can make a claim

Question 28

if a trust is liable of concealment/ mistake/ fraud when will the time start running?

Answer 28

after discovery or after it could have reasonably been discovered.

Question 29

What is the doctrine of laches?

Answer 29

defendant must show delay to bring action. Means no longer entitled to remedy and would be unjust to D to enforce these rights…

Question 30

what is at the sole discretion of the court?

Answer 30

The grant of equitable remedy