Liability of trustees Flashcards
What are examples of breaches of trust?
- Acting outside powers
- Failure to comply with duties
- No conflict/no profit rule
Are trustees always liable for their own breaches?
multiple trustees who have breached trust are jointly and severally liable
How may trustees be protected when making potential breaches?
- trust instrument authorises
- Beneficiaries or court authorises
- statutory defences
- insurance
What questions are asked when considering if there is a breach of trust?
- Did the trustee act in accordance with their powers?
- Did they comply with trustee duties?
Will trustees be liable for a breach of trust before their appointment?
No
What should happen/consequences if a trustee is appointed and discovers a breach of trust?
Commence proceedings, or could result in breach of trust
Will a trustee be liable for breach of trust that occurred during their time as a trustee after retiring?
Yes
When will a trustee be liable for breach of trust after they have retired?
- Trustee retired to facilitate the breach or
- They part with property in retiring without due regard causing loss when transferred to new trustees
Are trustees liable for losses if they have not breached the trust?
No
When is loss assessed?
Date of trial
How is loss taken into account where there has been a misapplication of trust property?
- court falsifies account or
- trustees pay equitable compensation in lieu
How is loss taken into account where there has been a breach other than misapplication?
surcharging (equitable compensation)
How is loss assessed where there has been a breach other than misapplication?
By reference to what a hypothetical prudent body of trustees would have done
What is a bare commercial trust?
Trust only susbists during the course of an underlying commercial transaction
How is loss assessed for bare commercial trusts?
But for
Are trustees generally permitted to offset any losses caused by breach against any profits they made in other investments or transactions?
NO
When will trustees be allowed to offset losses against profits when there has been a breach of trust?
If they arise in the same transaction/course of dealing
What can an exclusion clause in a trust instrument not protect a trustee against?
Fraud
Dishonesty
What can trustees obtain to ensure their action is not a breach of trust?
Fully informed consent of all beneficiaries
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?
Partial defence
What is the defence of acquiescence?
Beneficiaries indicated after a breach that they consent
Does a trustee have a defence against breach of trust where the beneficiary instigates or requests it?
Only against that particular beneficiary
What can a trustee do to protect themselves if a beneficiary has instigated/requested an action which would be a breach of trust?
Impound beneficiary’s interest by using their share to indmenify trustee
What are the requirements for the court to impound a beneficiary’s consent to an action that is a breach of trust?
In writing
What are the requirements for the common law ability of the court to impound a beneficiary’s interest?
Benefit to beneficiary
What is the statutory limitation period for breach of trust?
6 years
Who does the statutory limitation period for breach of trust apply to?
Beneficiaries with interests vested in possession
When does the limitation period start to run if a beneficiary has a future interest?
When interest vests in possession
What does the statutory limitation period not apply to?
Fraudulant breaches
Proprietary claims
What is a proprietary claim?
To recover trust property or traceable proceeds
What is the defence of laches?
beneficiary has unconscionably delayed claim even though limitation period not expired
What is the statutory relief for beneficiaries under section 61 Trustee Act 1925?
Court has discretion to excuse a trustee where they acted
- honestly
- reasonably
- ought fairly to be excused
Who is the s61 relief more likely to apply to?
Lay trustees
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?
Where two or more parties are liable for same damage - court may require one party to make a just and equitable contribution to another
When may the court be likely to award full indemnity to a trustee who has breached the trust?
- a trustee is morally culpable
- trustee is also beneficiary
- trustee acts as a solicitor to the trust and breach committed in reliance on advice
