Equity & Trusts - Breach of Trust Flashcards
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Boardman v Phipps
- Fiduciary relationship exists between solicitor and client
- T/F may be rewarded for profits made if shows considerable skill (still liable to account)
s12 TA 2000
B may owe fiduciary duty to other Bs if acting as a principal (Boardman v Phipps)
s. 175 Companies Act 2006
Directors owe fiduciary duty to company (Regal (Hastings) Ltd v Gulliver)
Bray v Ford
T/F must not put himself in a position where his duty and personal interests conflict
Foskett
T/F misappropriating funds will hold them on CT
ex p Lacey
T/F may not purchase assists from himself/co-trustees (self-dealing) as there is a presumption of undue influence
Holder v Holder
T/F may rebut self-dealing presumption if:
- He takes steps to renounce his position
- He makes his motives clearly known
Barclays Bank v O’Brien
T may not purchase assists from B as there is a presumption of undue influence
Tito v Waddell
T/F may rebut presumed undue influence if he can show ‘fair dealing’:
- Disclosed all material facts to B
- Not taken advantage of position
- transaction is fair and honest
Re Gates
T/F must not receive remuneration for his actions
Re MacAdam
T/F must not receive remuneration for his appointment as company director
s29(1) TA 2000
Trust corporation may charge reasonable remuneration
Re Pooley
T/F may receive remuneration if authorised under terms of trust instrument
s28(1) TA 2000
T/F may receive remuneration if authorised expressly by trust instrument
s31(1)(a) TA 2000
T may recover incidental expenses, e.g. travel
Re Duke of Norfolk’s ST
T/F may receive remuneration by order of court
Ayliffe v Murray
T/F may receive remuneration with all Bs’ consent, provided:
- Bs are all sui juris
- Obtained in writing (s29(2) TA 2000)
Regal (Hastings) Ltd v Gulliver
Ketch v Sandford
T/F must not earn incidental profits
Queensland Mines v Hudson
T/F may exploit opportunity if:
- Keeps Bs fully informed
- trust cannot take advantage anyway
- T/F is not a company director (s175(2) Companies Act 2006)
A-G for Hong Kong v Reid
T/F has a duty not to accept bribes, and will hold on CT if he does
s4 TA 2000
T has duty to comply with standard investment criteria:
- Consider suitability
- Ensure diversity
- Periodically review for compliance (s4(2) TA 2000)
s5 TA 2000
T has duty to seek and consider advice
s5(3) TA 2000
T does not have to seek advice where it would be unnecessary/inappropriate
s5(4) TA 2000
T must believe advisor is reasonably qualified
Harries v Church Comms of England
- T under a duty to invest in a manner designed to generate maximum return
Cowan v Scargill
T will ignore ethical considerations of Bs unless:
- Ethical investment would be equally as strong
- Bs are all sui juries and would have done likewise (Harries)
s3(1) TA 2000
T has power to invest as if he were absolutely entitled, provided:
- No express provisions to the contrary in trust instrument
Howe v Earl of Dartmouth
T has duty of impartiality, i.e. must balance life interests against those of remaindermen
Styles v Guy
T has duty to monitor and correct actions of fellow Ts
s1(1) TA 2000
T must exercise reasonable skill and care in relation to statutory duties, having regard to:
- special knowledge he holds himself out as having
- special knowledge (as professional T) he could reasonably be expected to have
Sleight v Gaunt
Common law SoC is that of “reasonably prudent man of business”
Bartlett v Barclays Bank
- Professional T owes higher DoC
- Professional T may not rely on provisions of s61 TA 1925
- T may offset profits against losses of a breach IF same transaction
Target Holdings v Redfurns
Causation established through ‘but for’ test
Townley v Sherborne
T will be VL if he has failed to keep property in joint control
Boardman v Mossman
T will be VL if he has concealed a breach of another T
Booth v Booth
T will be VL if he has stood by whilst another T committed breach
ss11 & 12 TA 2000
T may delegate duties of investment and advice to agent
s23 TA 2000
T will not be liable for actions of agent exercising his delegable duty
s25 TA 1925
T is VL for actions of PoA donee
s15 TA 2000
T may only delegate duty in writing
s22 TA 2000
T must review actions of agent from time to time
Armitage v Nurse
Trust instrument may include clause excluding T’s liability
s61 TA 1925
T may avoid liability if he can show he acted honestly and reasonably
Re Pauling’s ST
T may escape liability if he can show he acted with knowledge and consent of all Bs (all must be sui juris); not necessary for Bs to be aware actions constitute a breach
Laches
T may escape liability if:
- B acquiesced to breach
- Acquiescence was for a long period
‘delay defeats equity’
Re Smith
T may be indemnified if co-trustee acted fraudulently
Head v Gould
T may be indemnified if honestly followed advice of solicitor, who is co-trustee, and T relied upon the advice
s62 TA 1925
T may be indemnified if acted upon inducement/request of B
Re Dawson
Ts are personally liable to return trust to state before breach
s2 Civil Liability (Contribution) Act
Ts may be jointly and severally liable for breach if they commit a breach along with another T, but court has power to determine share of contributions
Re Diplock
Personal claims against Ts must be exhausted first before proprietary claim may be brought
s21(3) LA 1980
Personal claims time-barred after 6 years, but proprietary claims are not time-barred
Taylor v Plumer
Tracing I. Common law possible only if original property remains distinctly identifiable
Re Diplock
Tracing in equity must satisfy 3 conditions:
- fiduciary relationship needed
- must be in traceable form
- no inequitable result, e.g, BFPFVWN takes free
Chase Manhattan Bank
Fiduciary relationship can arise subsequently if D’s conscience affected, e.g. mistaken payment gives rise to CT
Borden v Scottish Timber
Dissipated funds are not traceable
Re Hallet
Where TP mixed with D’s own money, D presumed to have spent own money first
Re Oatway
Where Re Hallet produces inequity, D deemed to have spent TP first
Clayton’s Case
Where TP mixed with money from another trust/innocent party, FIFO rule applies
Foskett
Where TP used with other monies to fund purchase, C has two choices:
- May claim proportionate share of asset (if value increased)
- May enforce lien against asset for full value (if value decreased)
Barnes v Addy
Personal claims are permissible against 3rd parties subject to 3 conditions:
- Existence of fiduciary relationship
- Assistance in breach by 3rd party
- Dishonesty on part of 3rd party
Royal Brunei Airlines
Dishonesty is ‘failure to behave as an honest person would in the circumstances’
Barlow Clowes
Dishonesty may simply be acting with conscious impropriety, i.e. w/o actual knowledge of breach
Recipient liability
3 conditions:
- 3rd party received TP as a result of breach
- 3rd party received TP for own benefit
- 3rd party had actual knowledge of breach
Re Montagu’s ST
Only actual knowledge suffices for recipient liability
