Question 1B Flashcards
deals with trustees' powers & duties, breach of trust/fiduciary duty, remedies/solutions/liability for breach of trust
What is a breach of trust?
Nestle v National Westminster bank: Trustee doing something they ought not to do, or failure to do what they ought to do
Can be deliberate or unintentional
Includes; Misappropriation of trust property misapplication of trust property acting outside powers omission lack of care and skills
what makes a breach of trust actionable ?
▪A breach of trust “will not be actionable and therefore will be immaterial, if it does not cause a loss” (Leggat LJ, Nestle)
▪e.g. Armitage v Nurse > Beneficiary argued she suffered a loss, due to trustee’s behaviour
Liability for breach of trust (breach + actual loss)
▪Sole trustee is liable (personal liability)
examples
▪failing to ask questions = liable (eg hale v adams)
▪aware of breach and does nothing = liable
▪permits co-trustee to control fund = liable (e.g. bahin v hughes)
standard of care:
▪where loss arises from exercise of discretionary powers, general requirement (as set out in Re Speight) is that the duty of trustee is to conduct business of the trust w same care as ordinary prudent man would extend to his own affairs
trustee’s powers and duties:
statutory duty of care
Trustee act 2000
>s.1 the duty of care
>s.2 application of the duty of care
trustee’s duties
▪duty to invest the trust property, Trustee Act 2000
▪duty to act unanimously
▪duty to act personally
▪duty to provide accounts and information to beneficiaries; Schmidt v Rosewood trust LTD. But there are limits to info that has to be provided, e.g in cases where there is conflict between duty to provide info and right of trustee’s not to reveal reasons for their decisions
▪duty to distribute correctly - s.27 trustee act 1925
Trustee’s powers
▪power to give receipts
▪powers over property
▪power to compound liabilities and settle claims
▪power to insure (however there is no duty to insure)
▪power to delegate
▪powers of maintenance
▪power of advancement (to allow capital to be used for the benefit of beneficiaries)
▪powers of investment
In most cases the courts won’t interfere with the trustee’s exercise of discretion but they may set it aside under the rule in Re Hastings-Bass
trustee’s are jointly and severally liable
- Claimant may sue all of them together or only one of them, in which case the one sued may seek a contribution from the others, and the court may determine a division between them as seems just and reasonable
- Individual trustee’s and fiduciaries who have acted honestly may be relieved of liability at the courts discretion. Individual beneficiaries may be unable to sue for breaches to which they have knowingly consented.
claims for breach
claims are subject to statutory time limits, which will apply except where there is fraud or the misuse of trust property
Bartlett v Barclays Bank Trust Co Ltd (Nos 1 and 2): ChD 1980
A claim was made against a trustee for compensation for losses incurred during the administration of the trust
Higher standards may be expected of professional trustees.
Held: Beneficiaries claim allowed as where trustee has the relevant skill/expertise to deal with trust property, duty of care is much higher
The trustee’s failure to be involved in the matters of the trust must be rectified - breach of fiduciary duty
Remedy of restitution - Brightman J
‘The trustee’s obligation is to restore to the trust estate the assets of which he has deprived it.’ and
‘The bank, as trustee, was bound to act in relation to the shares and to the controlling position which they conferred, in the same manner as a prudent man of business.
Cowan v scargill
In the case of a power of investment, as in the present case, the power must be exercised so as to yield the best return for the beneficiaries, judged in relation to the risks of the investments in question; and the prospects of the yield of income and capital appreciation both have to be considered in judging the return from the investment.’
If trustees for social or ethical reasons fail to make an investement which would produce a better result, the would be subject to criticism
Nestle v National Westminster bank
The claimant said that the defendant bank as trustee of her late father’s estate had been negligent in its investment of trust assets.
Held: The claimant had failed to establish either a breach of trust or any loss flowing from it, though there was not much for the bank to be proud of in its administration of the trusts.
Armitage v Nurse
A clause in a trust deed may validly excuse trustees from personal liability for even gross negligence. The trustee was exempted from liability for loss or damage ‘unless such loss or damage shall be caused by his own actual fraud’.
Held: The trustee was under no liability in absence of any dishonest intention
remedies: specific restitution
jnvvghb
breach of fiduciary duty
remedies can be personal or proprietary
Bristol and West building society v Mothew
Held: A claim for damages for a solicitor’s failure to disclose the existence of a 2nd mortgage must show that damage flowed from the failure alleged
Millett LJ said: ‘A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty.’
