Contractual Liability To Third Parties

Question 1

How do you know if only personally liable?

Answer 1

Depends on what kind of transaction eg if their name is on shares, will be personally liable. This happened on Glasgow bank cases, only personal or company!
Also circumstances of case

Not just ‘trustee’

Question 2

Will all trustees be liable?

Answer 2

Only those who contracted but those who later acquiesce also (Torchetti v Glasgow Bank)

Question 3

Do trustees have right of relief?

Answer 3

Yes, trust patrimony can shelter them from personal liability and allow them to exercise right to recompense (Cuningham v Montgomerie)

Question 4

Depends on circumstances of case (Lumsden v Buchanan)

Answer 4

Partnerships have unlimited personal liability, doesn’t matter if didn’t mean to contract personally

Question 5

Cuningham v Montgomerie

Answer 5

Could seek redress from trust patrimony first, shield. Only where patrimony exhausted

Question 6

Can all trustees be liable for transaction where only carried out by some?

Answer 6

Yes, if you later acquiesce (Roberts v City of Glasgow Bank)

Question 7

Is it unfair to impose personal liability on intra vires contracts?

Answer 7

Yes, trustees don’t share gains, why share pains?
Trustee chill
Confusing for 3rd parties, contracting with trust, not 3rd parties
Won’t be helped by professional indemnity as not at fault

Question 8

Why is personal liability desirable?

Answer 8

3rd party cannot know extent of estate, further safety net if funds not met
Imposes v high standard of care
Trustees owe duty to beneficiaries to stipulate, if don’t then there a shame

Question 9

Approach in Guernsey, UTC, SA

Answer 9

Disclosure principle

If you tell someone you are acting as trustee, shouldn’t be liable

Question 10

Anglo-American

Answer 10

Trustees personally liable, not just trust assets
If breach of trust, no right to reimburse
But suffer if trustee insolvent

Question 11

Ultra vires ?

Answer 11

See s4 1921 act - any power listed therein
Voidable by beneficiaries if gratuitous or 3rd party in bad faith
Now s2 - acts nor challengeable if contrary to trust purposes or terms

Question 12

SLC proposal

Answer 12

If disclose, no personal liability!!!

Question 13

Advantages of no personal liability unless not disclosed

Answer 13

Much clearer
Less emphasis on as trustee - bit silly
Removed trustee chill
Not punishing trustees excessively

Question 14

In which case was it ultra vires to invest in company rather than bank?

Answer 14

Sanders v Sanders

Question 15

Are trustees personally liable at first instance?

Answer 15

Yes, but can exclude by saying ‘as trustee’