Remedies Against Trustees Flashcards
What is a proprietary claim?
Beneficiary is entitled to call for that property back. Enable them to recover the asset and bring the asset back into trust control
What is clean substitution?
If the trustee sold the trust property and purchased another asset with the sale proceedings.
Swap the original with a new asset.
What is a mixed asset?
When the trustee buys an asset using partly their own money and partly the trust money
What can you do when there is a mixed asset?
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)
What is an equitable lien
A charge over the new asset, for the amount that the trust has lost
Re Hallet
Trustee is deemed to spend their OWN money first
Dissipation
Credit card, etc - money is dissipated, cannot get it back
Foskett v McKeown
Beneficiary can take the benefit of any INCREASE in the value int eh asset into which they are tracing
Re Oatway
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)
Roscoe v Winder
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”
What happens if there is a mixture of 2 trust funds in an account?
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.
What are personal claims?
Claims for monetary compensation brought against a wrongdoing trustee.
Seek personal compensation
When is a personal claim not appropriate?
If trustee is insolvent
If the trustee brought property that is appealing to the beneficiaries
If it is time barred - 6 years from wrongdoing.
Which trustees can be subject-matter of a personal claim?
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.
What is the value of the personal claim?
Compensation equal to the loss to the trust, plus interest from date of breach
What are teh 4 defences available to a trustee who is facing a personal claim?
An exemption clause in the trustee deed
Knowledge and consent of the beneficiaries
S 61 TA 1925
Limitation and laches
What are exemption clauses and how do they defend a trustee from a personal claim?
Express clause in the trust deed that exempts trustees from liability
Fraudulent breaches aren’t usually included.
What is knowledge and consent from beneficiaires and how do they defend a trustee from a personal claim?
If beneficiaires have ALL consented to a court of action, they cannot bring a claim.
Consent must have been FULLY informed and freely given.
Can a minor give consent for a breach?
No, must be over 18 and full capacity.
If one beneficiary consents and the others cannot, can they bring a personal claim?
Yes. The beneficiary that consented cannot, but the other beneficiaries can.
What is s 61 TA 1925 and how do they defend a trustee from a personal claim?
Court has discretion to relieve trustees from liability, if they acted honestly and reasonably, and ought fairly to be excused.
What are limitations as a defence for personal claims?
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.
When does the limitation period of 6 years NOT apply?
If minor, it doesn’t start until they are 18.
If fraudulent breach, does not apply
What are laches for defence of personal claim?
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.
Can a defending trustee f a personal claim seek indemnity?
Yes, defending trsustee may be able to claim the full amount of complesation from a co-trustee under equitable indemnity
When can equitable indemnity be used to recover breach from another co-trustee?
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
