Remedies for Breach of Trust

Question 1

Give some examples of a breach of trustee/fiduciary duties:

Answer 1

1. Not acting in utmost good faith.
2. Not preventing breaches seen occurring.
3. Not acting as reasonable prudent man of business - Speight v Gaunt.
4. Being a passive trustee - Styles v Guy.
5. Allowing a conflict of interests - Bray v Ford/s175(1) Companies Act 2006.
6. Breaches under TA 2000/1925.

Question 2

What are the criteria to establish accessory liability?

Answer 2

1. Assist a breach of trust/fiduciary duty.

2. Dishonesty.

Question 3

How was dishonesty defined originally defined? Case.

Answer 3

Royal Brunei Airlines v Tan, based on facts known by defendant, what would ordinary honest person have done?

Question 4

What requirement was briefly introduced to the concept of dishonesty? Case.

Answer 4

Twinsectra v Yardley - requirement that claimant appreciated that their behaviour was dishonest by the standards of ordinary honest people.

Question 5

Which case confirmed the original definition of dishonesty?

Answer 5

Barlow Clowes v Eurotrust.

Question 6

What are the criteria to establish recipient liability? 1 case.

Answer 6

1. Receive property for own benefit in breach of trust/fiduciary duty.
2. Have knowledge sufficient to make it unconscionable to retain the property - BCCI v Akindele.

Question 7

What is intermeddling? What will the defendant be? Case.

Answer 7

A third party who is not a trustee acting as if they were a trustee. They will be a ‘trustee de son tort’ - Mara v Browne.

Question 8

How can an agent intermeddle? Case.

Answer 8

By acting beyond their powers - Lyell v Kennedy.

Question 9

Can an innocent third party intermeddle?

Answer 9

Yes - strict liability.

Question 10

What will a third party who is guilty of accessory liability, recipient liability or intermeddling be?

Answer 10

A constructive trustee.

Question 11

Can an innocent volunteer be personally liable to compensate a trust?

Answer 11

No.

Question 12

What is an equitable personal claim? Against whom can such a claim be made?

Answer 12

Claim to compensate the trust for the losses caused. Trustee/fiduciary; accessory; recipient and intermeddler can all be sued in this way.

Question 13

What is an equitable proprietary claim? Against whom can it be made?

Answer 13

Enables the claimant to recover the property (or its replacement) which has been misappropriated, subject to equitable tracing rules. Available against a third party who has received property (i.e. recipient liability, intermeddling, an innocent volunteer).

Question 14

Tracing rules where property still in original form?

Answer 14

Simply follow the property.

Question 15

Tracing rules where clean substitution? Case.

Answer 15

Re Hallett:

1. Claim ownership of asset.
2. Secure equitable lien over asset for amount taken (or as close as possible if depreciated).

Question 16

Tracing rules where mixed asset purchase? Case. Where defendant is innocent volunteer?

Answer 16

Foskett v McKeown:
1. Claim proportionate share of new asset.
2. Secure equitable lien over asset for amount taken.
Lien not available where defendant is innocent volunteer.

Question 17

Tracing rules where trust money mixed in bank account with defendant’s money and withdrawals made? What about where all trust money dissipated? Cases.

Answer 17

Re Hallett - defendant’s money spent first.
Re Oatway - all losses attributed to wrongdoer.
Where trust money dissipated, subsequent money paid in by defendant will not replace it - Roscoe v Winder.

Question 18

Tracing rules where trust money mixed in bank account with defendant’s money, where defendant is an innocent volunteer? Case. Exception? Case.

Answer 18

First In, First Out rule - Clayton’s Case. Except where leads to an inequitable result - Re Diplock - e.g. spent on improving defendant’s land, as claim would require order for sale, and both parties are innocent.

Question 19

Tracing rules where 2 trusts mixed in 1 bank account? Exception? Case.

Answer 19

First In, First Out rule - Clayton’s Case.
Except where inequitable, such as where nature of trust indicates beneficiaries intended to share profit and loss equally, e.g. collective investment scheme - Barlow Clowes v Vaughan.

Question 20

Tracing rules where 2 trusts mixed with defendant’s own money?

Answer 20

1. Re Hallett/Re Oatway to withdrawals.

2. Clayton’s Case to balance.

Question 21

When can claimant make a claim under common law restitution?

Answer 21

When they are the legal owner of the property that has been misappropriated.

Question 22

What must the claimant show to make claim for common law restitution? Case.

Answer 22

Lipkin-Gorman v Karpnale:

1. They are legal owner of property.
2. 3rd party has been unjustly enriched (strict liability).
3. Property can be traced at common law.

Question 23

What are the common law tracing rules?

Answer 23

Property must not be mixed before receipt by defendant. Any subsequent mixing is ok.

Question 24

What 2 defences are there to a claim for common law restitution? 1 case.

Answer 24

1. Bona fide purchaser for value - as no unjust enrichment.

2. Change of position, where expenditure is exceptional and irretrievable - Lipkin-Gorman v Karpnale.

Question 25

For the defence of change of position to apply, must the defendant spend innocently? Case.

Answer 25

Yes, they must spend in good faith, without knowledge that they are not entitled to the money - Abou Rahman.