Remedies Against Trustees: Personal Claims Flashcards
When would a personal claim against a trustee not be appropriate?
1) if trustee is insolvent as the beneficiary would rank as an unsecured creditor.
2) If the trustee has stolen money and used it to buy property (eg shares). the shares may have doubled in value (for example) and therefore a proprietary claim would be better as if successful, those shares would belong to the trustee and trust could take advantage of their increase in value.
3) The claim may be statue barred. Personal claims against trustees are often barred six years after the date of the breach.
What is required in order o be able to bring a personal claim against a trustee?
Trustee must have breached their duty (usually referred to as a breach of trust).
Are trustees vicariously liable for the breaches of the other trustees?
No.
When are trustees joint and severally liable for breach of duty under a trust?
Where more than one trustee has breached the trust, their liability is joint and several.
As such, beneficials can choose to bring a claim against either or all of them.
In addition to a breach of trust being established, what further element is required for a successful claim?
Causation.
It must be proven that the breach of trust caused the loss to the trust.
If the loss would have occurred anyway, the personal claim will fail.
What is recoverable for a breach of trust?
The beneficiaries can recover compensation equal to the full loss to the trust, plus interest from the date of the breach, plus interest.
What is the interest rate applied to damages awarded for a successful claim for a breach of trust against a trustee?
The interest rate is at the discretion of the court but is usually the rate allowed on the court’s short-term investment account.
Explain the defence of exemption clauses which can be used by trustees facing personal claims for breach of trust.
Settlor can include express clause in trust deed emptying trustees from liability for breach.
It can relieve trustees from liability for negligent or innocent breaches. However, any attempted exemption for fraudulent breaches will be void.
Professional trustees must ensure settlor understands the meaning and effect of the exemption clause.
List the defences which may be available to a trustee facing a personal claim for breach of trust.
1) Exemption clause in the trust deed;
2) Knowledge and consent of the beneficiaries;
3) s61 TA 1925; or
4) Limitation and laches.
What happens where there is ambiguity in the clause attempting to exempt trustees from liability for breach of trust?
Any ambiguity in the clause will be interpreted strictly against that professional.
What happens where only one of the beneficiaries gives consent to a breach of trust?
That beneficiary cannot give valid consent, but any other beneficiaries who did not consent still have a right t bring a claim.
Explain the defence (to personal claims for breach of trust) of knowledge and consent of the beneficiaries.
where beneficiaries have all consented to course of action which constitutes breach of trust (either before or after the breach) they cannot bring a claim for breach of trust against the trustees.
Consent must have been fully informed and freely given.
Consenting beneficiaries must be adults and of full capacity (a minor cannot give valid consent).
Explain the defence to breach of trust (personal claims) of s61 TA 1925.
Court has discretion to relieve trustees from liability (wholly or partly) if they acted honestly, reasonably, and ought to be fairly excused.
Courts are reluctant to excuse passive trustees for breach of trust as it may encourage others to do the same in the future.
Explain the limitation and laches defence to a breach of trust (personal claim).
Personal claim for breach of trust subject to 6 year limitation period.
Period starts to run from the date of the breach.
For minors, the time only starts t run when they turn 18.
For remainder beneficiaries, this time period starts to run when their interest falls into possession (ie when life tenant dies).
Does the limitation period for brining a personal claim against trustees apply to fraudulent breaches of trust?
No.
