Trust 13 Liability of Trustees Flashcards
What different ways can a trustee commit a breach?
- acting outside powers
- failing to act in accordance with their duties
- Acting in breach of fiduciary duties
Are trustees liable for breaches committed before their appointment?
No
But if they discover a breach, must commence proceedings otherwise could become liable
Are trustees liable for breaches once they retire?
They are liable for breaches committed before they retired
Only liable for breaches that occur after where:
- trustee retired to facilitate breach
- trustee parts with property in retiring without due regard
Can trustees offset gains from a breach against losses?
- Generally no
- can do if losses and gains arise from same failure
What remedies are there for breaches?
- Where trustee misapplied TP, can seek to recover property/TP
- If not possible to recover property or results in loss in trust value, seek compensation
- Trustees only liable for losses where their breach is a ‘but for ‘ cause
What defences are there?
- fully informed consent
- if some Bs have fully informed consent have a defence against those Bs
- defence against Bs who instigate or request breach
- Bs consented after the fact by their words or actions
What further action may be available to trustees in respect of Bs who instigated the breeech?
May be able to ‘impound’ use that B’s share of the trust fund to indemnify the trustees against claims by the other Bs
Discretion where
- instigated with no need to show benefited
- consented to the breach in writing with no need to show benefited
- consented to the breach not in writing BUT need to show benefited
How can trustees avoid liability for breaches/wrongful distribution?
- Advertising for claimants in national newspaper (after 2 months, they can distribute)
- Retaining fund or paying money into court
- Seeking court directions
- Benjamin order
- Taking out insurance against wrongful distribution
What’s the default position for trustee liability where there is a breach of trustee duties
Joint and several
What’s the default position for trustee liability where there is a breach of fiduciary duties
more likely to be the one trustee
Is it an excuse for a trustee to say that they weren’t involved in the trust
No - Co-trustees must act together. Not playing an active role is a breach in itself.
How can trustee liability be excluded or limited?
- Can have exclusion clause in instrument (not where breach is fraudulent)
- Can rely on s61 TA 1925: gives court discretion to excuse trustee where they acted honestly and reasonably, and ought fairly to be excused
- If they show they obtained fully informed consent or Bs acquiesced, operates as partial defence
What limitation period is there for bringing a claim for breach of trustee duties?
6 years (for beneficiaries vested in possession)
Doesn’t apply for fraudulent breaches or proprietary claims
What is the limitation period for bringing a claim
- 6 years from breach if B’s interest is vested
- 6 years from vesting if B’s interest is contingent
- Does not apply to fraud
What is the statutory defence to all breaches?
Trust shows they:
- acted honestly
- reasonably
- ought to be fairly excused