trust - liability for breach of trust Flashcards
- Definition and Actionable Breach
Q1. (Article 1(1), Tito v Waddell)
Under Article 1(1) of the Trusts (Jersey) Law 1984, how is a breach of trust defined, and how does this differ from the narrower definition in Tito v Waddell?
A1. The Jersey Law says any breach of a duty imposed by the Law or the trust terms is a “breach of trust.” It’s broader than the English law approach in Tito v Waddell, capturing duties beyond classic trustee obligations.
Q2. (Enforcer of Non-Charitable Purpose Trust)
Who may sue a trustee for breach of trust if the trust is a non-charitable purpose trust?
A2. The enforcer (not a beneficiary), since purpose trusts do not have direct beneficiaries. The enforcer stands in the beneficiary’s place to hold the trustee accountable.
Q3. (Article 30 Reference)
What does Article 30 generally say about the trustee’s personal liability for a breach of trust?
A3. It states a trustee is personally liable for their own breach (or one they concur in). They must compensate the trust for any loss in trust assets or profit missed. Co-trustees can be jointly and severally liable if they’re involved.
Q4. (Article 30(3))
Why can’t a trustee who commits multiple breaches of trust offset gains in one breach against losses in another, per Article 30(3)?
A4. The law views each breach separately. Gains from one breach do not diminish liability for losses in another. The trustee must fully account for each separate breach.
Q5. (Midland Bank Trustee Co Ltd v Federated Pension Services)
Why is the measure of liability for breach of trust more about restitution than compensation?
A5. Trust law focuses on restoring the trust fund to what it would have been without the breach (or making the trustee disgorge gains), rather than applying typical tort “remoteness” or purely compensatory measures.
Q6. (Butler v Axco Trustees Ltd)
When the court orders a trustee to “account” for their administration, what does this entail, as shown in Butler v Axco Trustees Ltd?
A6. The trustee must produce a detailed statement of the trust’s finances (what was received, spent, how assets were used). Beneficiaries can surcharge (show omitted assets) or falsify (challenge improper items) in that account.
Q7. (Glazier v Australian Men’s Health)
What is the difference between an account taken “in common form” and one taken “on the footing of wilful default,” as explained in Glazier v Australian Men’s Health (No.2)?
A7.
Common form: The trustee accounts only for what was actually received and disbursed, and beneficiaries may surcharge or falsify.
Wilful default: The trustee also must account for assets they should have received but didn’t due to a breach. It requires at least one proven instance of misconduct.
Q8. (Article 30(4) & (5))
When can one trustee be liable for a co-trustee’s breach, according to Article 30(4)-(5)?
A8.
Not liable if the breach happened before their appointment (Article 30(4)).
Only liable if they knew or ought to know about their co-trustee’s breach and actively concealed it or failed to stop it (Article 30(5)).
Q9. (Resigning to Facilitate a Breach)
What if a trustee resigns deliberately to let others commit a breach of trust, as per Article 30(3A)?
A9. They’re treated as if they never resigned. They remain personally liable for that breach.
Q10. (Article 33, Re Esteem Settlement)
How does Article 33 define a “constructive trustee,” and how does it relate to knowing receipt or personal liability?
A10. If someone makes or receives a profit from a breach of trust, they’re deemed a constructive trustee of that profit, unless they’re a bona fide purchaser without notice. Re Esteem clarifies it applies to unconscionable behavior, equating them to a trustee for that property.
Q11. (Article 45)
What conditions must be met for the court to relieve a trustee of personal liability under Article 45 of the Trusts (Jersey) Law?
A11.
The trustee is or may be liable.
They acted honestly and reasonably.
They ought fairly to be excused for the breach or for omitting to get the court’s directions.
Q12. (Midland Bank / Federated Pension Services)
Can a grossly negligent trustee be relieved from liability under an exoneration clause or by the court?
A12. Generally no. In Midland Bank v Federated Pension Services, the trustee was found “grossly negligent” – Article 30(10) prohibits exoneration for “fraud, wilful misconduct or gross negligence.” The court also won’t relieve them under Article 45.
Q13. (Article 46)
If a beneficiary actively instigates a breach, what power does Article 46 give the court?
A13. The court may impound all or part of that beneficiary’s interest to indemnify the trustee (or successor) for the loss. This applies even if the beneficiary is a minor or interdict.
Q14. (Article 30(6)-(7))
How can a beneficiary release or indemnify a trustee for breach of trust?
A14. They must have legal capacity, full knowledge of material facts, and not be improperly induced. If so, they can effectively waive the trustee’s liability or indemnify them against it.
- Limitation Periods
Q15. (Article 57)
Under Article 57 of the Law, what is the general limitation for bringing an action for breach of trust, and what exceptions apply?
A15. Generally, 3 years from (1) final accounts or (2) knowledge of the breach, whichever is earlier. But:
No limit if the breach involves fraud or recovering trust property in the trustee’s hands.
Long stop of 21 years after the breach, except in fraud/property-recovery cases.
Q16. (Minors, Interdicts)
How does Article 57 handle limitation when the beneficiary (or enforcer) is a minor or under disability?
A16. The 3-year clock doesn’t start until they cease to be a minor or interdict (or earlier death). This protects persons lacking legal capacity.
