Remedies Against Trustees

Question 1

What is a proprietary claim?

Answer 1

Beneficiary is entitled to call for that property back. Enable them to recover the asset and bring the asset back into trust control

Question 2

What is clean substitution?

Answer 2

If the trustee sold the trust property and purchased another asset with the sale proceedings.

Swap the original with a new asset.

Question 3

What is a mixed asset?

Answer 3

When the trustee buys an asset using partly their own money and partly the trust money

Question 4

What can you do when there is a mixed asset?

Answer 4

You can either claim a proportionate interest in the mixed asset, or sue teh trustee for compensation and take charge over the mixed asset for the amount lost (equitable lien)

Question 5

What is an equitable lien

Answer 5

A charge over the new asset, for the amount that the trust has lost

Question 6

Re Hallet

Answer 6

Trustee is deemed to spend their OWN money first

Question 7

Dissipation

Answer 7

Credit card, etc - money is dissipated, cannot get it back

Question 8

Foskett v McKeown

Answer 8

Beneficiary can take the benefit of any INCREASE in the value int eh asset into which they are tracing

Question 9

Re Oatway

Answer 9

If Re Hallet doesnt work in the beneficiary’s advantage, then use Re Oatway.

States that the beneficiary has a first charge on the mixed fund, or any property that is purchased from that fund (therefore gets the first choice)

Question 10

Roscoe v Winder

Answer 10

If the trustee then puts extra money in the account with the mixed funds, you cannot get this. Cannot be traced beyond the “lowest intermediate balance”

Question 11

What happens if there is a mixture of 2 trust funds in an account?

Answer 11

Claytons Case: if 2 or more innocents, the first money paid in is the first money paid out

Barlow Clowes : depart from Clayto if it is impossible to apply first in first out, or it would result in injustice.

Question 12

What are personal claims?

Answer 12

Claims for monetary compensation brought against a wrongdoing trustee.

Seek personal compensation

Question 13

When is a personal claim not appropriate?

Answer 13

If trustee is insolvent

If the trustee brought property that is appealing to the beneficiaries

If it is time barred - 6 years from wrongdoing.

Question 14

Which trustees can be subject-matter of a personal claim?

Answer 14

Trustee must be in breach.
Trustees are not vicariously, or automatically liable for defaults of co-trustees

However, if trustee has breached trust, that trustee can be named as a defendant to a personal claim

If more than one trustee has breached, their liability is JOINT and SEVERAL, and can either claim against all or one.

Question 15

What is the value of the personal claim?

Answer 15

Compensation equal to the loss to the trust, plus interest from date of breach

Question 16

What are teh 4 defences available to a trustee who is facing a personal claim?

Answer 16

An exemption clause in the trustee deed

Knowledge and consent of the beneficiaries

S 61 TA 1925

Limitation and laches

Question 17

What are exemption clauses and how do they defend a trustee from a personal claim?

Answer 17

Express clause in the trust deed that exempts trustees from liability

Fraudulent breaches aren’t usually included.

Question 18

What is knowledge and consent from beneficiaires and how do they defend a trustee from a personal claim?

Answer 18

If beneficiaires have ALL consented to a court of action, they cannot bring a claim.

Consent must have been FULLY informed and freely given.

Question 19

Can a minor give consent for a breach?

Answer 19

No, must be over 18 and full capacity.

Question 20

If one beneficiary consents and the others cannot, can they bring a personal claim?

Answer 20

Yes. The beneficiary that consented cannot, but the other beneficiaries can.

Question 21

What is s 61 TA 1925 and how do they defend a trustee from a personal claim?

Answer 21

Court has discretion to relieve trustees from liability, if they acted honestly and reasonably, and ought fairly to be excused.

Question 22

What are limitations as a defence for personal claims?

Answer 22

Personal claim for breach of trust is 6 year limitation period. Runs from date of breach.

If I a minor, only starts running when they reach 18.

Question 23

When does the limitation period of 6 years NOT apply?

Answer 23

If minor, it doesn’t start until they are 18.

If fraudulent breach, does not apply

Question 24

What are laches for defence of personal claim?

Answer 24

Equitable doctrine of laches. They prevent a claimant from asserting a personal claim, if the claimant knows the facts that gave rise ot it, the claimant DELAYED taking action, and this deemed to impact the breach.

Question 25

Can a defending trustee f a personal claim seek indemnity?

Answer 25

Yes, defending trsustee may be able to claim the full amount of complesation from a co-trustee under equitable indemnity

Question 26

When can equitable indemnity be used to recover breach from another co-trustee?

Answer 26

If the co-trustee acted fraudulently when the others acted in good faith

If co-rusted is a solicitor who exercised controlling influence

If cotrustees has benefitted personally from breach

If cotrustee is also a beneficiary and benefitted from the breach