Personal Claims Against Trustees

Question 1

When can beneficiaries sue a trustee and seek compensation?

Answer 1

If the trustee’s wrongdoing causes the trust to suffer a loss, the beneficiaries can sue.

Question 2

What are the limitations to personal claims?

Answer 2

(i) Only effective if the trustee can personally satisfy the claim;

(ii) Not as effective if the trustee has purchased something (proprietary claim more appropriate);

(iii) Limitation period of 6-years from the breach (or 6-years from when a beneficiary turned 18)

Question 3

Which trustee is the subject matter of the personal claim?

Answer 3

The trustee themself must have breached the trust; trustees are not vicariously liable for defaults of other trustees.

Question 4

What is the nature of liability when multiple trustees have breached trust?

Answer 4

The liability is joint and several.

Question 5

What is the test for causation when establishing a breach of trust?

Answer 5

‘But for’ the breach, the loss wouldn’t have occurred

Question 6

What are the four defences to a personal claim?

Answer 6

(i) Exemption clause in the trust deed;

(ii) If the trustee acted honestly and reasonably;

(iii) If all beneficiaries (only if all adults) consented to the breach;

(iv) That 6 years have passed or there was undue delay in bringing the claim

Question 7

Can trustees be indemnified?

Answer 7

Yes, if a co-trustee:

• was fraudulent;
• was a solicitor exercising controlling influence;
• has benefitted personally from the breach; or
• is a beneficiary and benefitted from the breach

Question 8

What is a contribution?

Answer 8

The court can order a co-trustee to contribute to the damages that is just and equitable having regard to their responsibility for the loss.