Remedies (Personal Claims)

Question 1

What is the difference between a personal and proprietary claim?

Answer 1

After a breach of duty by a trustee, the trust can elect either to bring a personal claim or a proprietary claim

1) Personal claim = monetary compensation from the wrongdoer

• They must be financially solvent, as the wrongdoer satisfies the claim from their own pockets

2) Proprietary claim = reclaiming trust property or substitute property

• Wrongdoer must have the property or substitute property

Question 2

What is the main requirement before bringing a personal claim?

Answer 2

The trustee must have committed a breach of trust

Question 3

Are trustees liable for breaches of their co-trustees?

Answer 3

1) Trustees are not vicariously/automatically liable for the acts or omissions of their co-trustees, so each trustee must have breached a duty in the running of the trust

• Where T1 has actively defrauded the trust, T2 may be in breach for being passive in letting fraud occur – not supervising/course-correcting + being passive is often an example of breach

2) If T1 and T2 are in breach and caused the loss, they are jointly and severally liable for the full loss (plus interest (rate at court discretion))

• It must be established, via but for test, that the trustees’ breach caused the loss – loss would not have occurred but for breach of trust

Question 4

What is the limitation period for bringing a personal claim against a trustee in breach?

Answer 4

Personal claim for breach of trust must be brought within six years of breach (limitation period)

• Time starts from date of breach

For minors, time starts when they reach 18 and for remainder beneficiaries when their interest falls into possession on death of life tenant

No statutory limitation period for fraudulent breaches of trust

Question 5

What are the 3 potential defences for a trustee in breach?

Answer 5

1) Valid exemption clause in the declaration of trust that excludes or limits trustee liability

2) All beneficiaries are adults and have full capacity, were fully informed of the circumstances and all consented

• If one consents, the non-consenting beneficiaries can bring a person claim, but the consenting one cannot

3) The court can excuse trustees from liability if they acted honestly and reasonably and ought fairly to be excused (s61 TA)

• Difficult to satisfy; if T2 permits T1 to withdraw money from the trust which they steal, T2 may be in breach for failing to supervise actions of co-trustee
• Court reluctant to excuse this, as they want trustees to be active, not passive in running of trusts

Question 6

What is a contribution and when may a trustee in breach claim one?

Answer 6

If the trust brings a claim against one trustee where others have also breached trust, defending trustee can claim an indemnity or contribution against other breaching trustees

• Contribution usually comes as part payment
• Courts will order other trustees to contribute what is just and equitable with regards to the extent of their responsibility for breach

Question 7

When will a trustee in breach seek an indemnity?

Answer 7

Indemnity is full recovery from another breaching trustee

Usually granted:

• Where T1 acted in good faith and T2 acted fraudulently
• Where trustee was a professional who exercised such a controlling influence that the other trustees blindly followed that advice
• Where T1 is sued for full loss, but T2 benefitted personally from breach