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Trusts > Liability of trustees > Flashcards

Liability of trustees Flashcards

1
Q

What are examples of breaches of trust?

A
  • Acting outside powers
  • Failure to comply with duties
  • No conflict/no profit rule
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2
Q

Are trustees always liable for their own breaches?

A

multiple trustees who have breached trust are jointly and severally liable

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3
Q

How may trustees be protected when making potential breaches?

A
  • trust instrument authorises
  • Beneficiaries or court authorises
  • statutory defences
  • insurance
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4
Q

What questions are asked when considering if there is a breach of trust?

A
  1. Did the trustee act in accordance with their powers?
  2. Did they comply with trustee duties?
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5
Q

Will trustees be liable for a breach of trust before their appointment?

A

No

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6
Q

What should happen/consequences if a trustee is appointed and discovers a breach of trust?

A

Commence proceedings, or could result in breach of trust

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7
Q

Will a trustee be liable for breach of trust that occurred during their time as a trustee after retiring?

A

Yes

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8
Q

When will a trustee be liable for breach of trust after they have retired?

A
  • Trustee retired to facilitate the breach or
  • They part with property in retiring without due regard causing loss when transferred to new trustees
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9
Q

Are trustees liable for losses if they have not breached the trust?

A

No

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10
Q

When is loss assessed?

A

Date of trial

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11
Q

How is loss taken into account where there has been a misapplication of trust property?

A
  • court falsifies account or
  • trustees pay equitable compensation in lieu
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12
Q

How is loss taken into account where there has been a breach other than misapplication?

A

surcharging (equitable compensation)

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13
Q

How is loss assessed where there has been a breach other than misapplication?

A

By reference to what a hypothetical prudent body of trustees would have done

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14
Q

What is a bare commercial trust?

A

Trust only susbists during the course of an underlying commercial transaction

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15
Q

How is loss assessed for bare commercial trusts?

A

But for

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16
Q

Are trustees generally permitted to offset any losses caused by breach against any profits they made in other investments or transactions?

A

NO

17
Q

When will trustees be allowed to offset losses against profits when there has been a breach of trust?

A

If they arise in the same transaction/course of dealing

18
Q

What can an exclusion clause in a trust instrument not protect a trustee against?

A

Fraud
Dishonesty

19
Q

What can trustees obtain to ensure their action is not a breach of trust?

A

Fully informed consent of all beneficiaries

20
Q

If only some of the beneficiaries have consented to an action which would otherwise be a breach of trust, will the trustee have a defence?

A

Partial defence

21
Q

What is the defence of acquiescence?

A

Beneficiaries indicated after a breach that they consent

22
Q

Does a trustee have a defence against breach of trust where the beneficiary instigates or requests it?

A

Only against that particular beneficiary

23
Q

What can a trustee do to protect themselves if a beneficiary has instigated/requested an action which would be a breach of trust?

A

Impound beneficiary’s interest by using their share to indmenify trustee

24
Q

What are the requirements for the court to impound a beneficiary’s consent to an action that is a breach of trust?

A

In writing

25
Q

What are the requirements for the common law ability of the court to impound a beneficiary’s interest?

A

Benefit to beneficiary

26
Q

What is the statutory limitation period for breach of trust?

A

6 years

27
Q

Who does the statutory limitation period for breach of trust apply to?

A

Beneficiaries with interests vested in possession

28
Q

When does the limitation period start to run if a beneficiary has a future interest?

A

When interest vests in possession

29
Q

What does the statutory limitation period not apply to?

A

Fraudulant breaches
Proprietary claims

30
Q

What is a proprietary claim?

A

To recover trust property or traceable proceeds

31
Q

What is the defence of laches?

A

beneficiary has unconscionably delayed claim even though limitation period not expired

32
Q

What is the statutory relief for beneficiaries under section 61 Trustee Act 1925?

A

Court has discretion to excuse a trustee where they acted
- honestly
- reasonably
- ought fairly to be excused

33
Q

Who is the s61 relief more likely to apply to?

A

Lay trustees

34
Q

How may trustees seek a contribution from another trustee if they have been found liable for breach of trust under the Civil Liability Contribution Act?

A

Where two or more parties are liable for same damage - court may require one party to make a just and equitable contribution to another

35
Q

When may the court be likely to award full indemnity to a trustee who has breached the trust?

A
  • a trustee is morally culpable
  • trustee is also beneficiary
  • trustee acts as a solicitor to the trust and breach committed in reliance on advice

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