Remedies against trustees - personal claims

Question 1

In what situations might a personal claim against a trustee not be appropriate or advantageous to the beneficiary?

Answer 1

1. If the trustee is insolvent (beneficiary will rank as an unsecured creditor in any bankruptcy)
2. Trustee has used trust property to buy property which the beneficiary wants - therefore, best approach would be proprietary claim
3. Trustees wrongdoings happened some time ago

Question 2

What test is relevant in establishing that a loss has been caused by a trustees’ breach of trust?

Answer 2

The “but for” test

Question 3

Can a beneficiary claim interest on any losses reclaimed following a trustee’s breach of trust?

Answer 3

Yes - rate of interest is at discretion of the court

Question 4

What defences are available to a trustee who is facing a personal claim for a breach of trust?

Answer 4

1. Exemption clause in trust deed
2. Knowledge and consent of the beneficiaries
3. S 61 TA 1925
4. Limitation and laches

Question 5

If there is any ambiguity in an exemption clause for a trustee’s liability for breach of trust, how is it interpreted?

Answer 5

Strictly against the trustee

Question 6

What are the requirements for beneficiaries to consent to a course of action that constitutes a breach of trust by a trustee?

Answer 6

They must be adults and of full capacity

Consent must have been fully informed and freely given

Question 7

What happens if one beneficiary consents to a breach of trust but the others do not?

Answer 7

That beneficiary can no longer bring any personal claim against the trustees, but the other non-consenting beneficiaries can

Question 8

In relation to breach of trust, what is the effect of s 61 Trustee Act?

Answer 8

Allows the court discretion to relieve trustees from liability if they acted honestly and reasonably

Question 9

Under s 21 of the Limitation Act, what is the limit for a personal claim for breach of trust?

Answer 9

6 years

Question 10

If a beneficiary is a minor, when does the limitation period begin to run for breach of trust?

Answer 10

When they turn 18

Question 11

If a beneficiary is a remainder beneficiary, when does the limitation period begin to run for breach of trust?

Answer 11

Begins to run when their interest falls into possession (i.e. life tenant dies)

Question 12

Is there a limitation period for bringing a claim for a fraudulent breach of trust?

Answer 12

No

Question 13

What is the equitable doctrine of laches and what are the relevant criteria?

Answer 13

Laches will prevent a claimant from asserting a personal claim against a trustee for fraudulent breach of trust where

1. Claimant knows facts that gave rise to he breach
2. Claimant delays in taking action
3. Delay either deemed to constitute waiver of breach or causes detriment or prejudice to the trustee

Question 14

If one trustee has been sued for the entire loss, what are the two possibilities available for the sharing of this loss with the other trustees in breach?

Answer 14

1. Claim for the full amount of compensation under an equitable remedy
2. Claim for a contribution towards the compensation from a co-trustee under Civil Liability (Contribution) Act 1978

Question 15

In what 4 events can a trustee who is sued for breach of trust recover a full indemnity from a co-trustee?

Answer 15

1. Co-trustee acted fraudulently when the others acted in good faith
2. Co-trustee is a solicitor, who exercised controlling influence
3. Co-trustee personally benefitted from the breach
4. Co-trustee is also a beneficiary and benefitted from the breach (indemnity limited to value of their equitable interest)

Question 16

What can the court order pursuant to s 1 Civil Liability (Contribution) Act 1978 in relation to breach of trust?

Answer 16

A co-trustee make a contribution (up to 100%) towards compensation for breach of trust