Trustees’ Liability

Question 1

Breach of Trust

Answer 1

There is no doctrine of men’s rea; the intention of trustee is not relevant
A breach of trust can occur by an act or omission
Actions against a trustee may be personal or proprietary
The beneficiary must prove there has been a breach of trust and they have suffered a loss due to the breach

Question 2

Trustee Liability

Answer 2

A trustee is liable for their own breaches and not of their co-trustees. However they may have committed a breach by omission for neglecting their duties if they should have known what others were up to.
A trustee is not liable for breaches committed before they were appointed. However failure to take action against a known breach will amount to a breach by omission.
A trustee is not liable for breaches committed after their retirement, unless their retirement was to facilitate a breach.
A trustee’s liability is joint and several
The court has discretion to determine contributions each defendant trustee must make according to what is just and equitable

Question 3

Indemnity

Answer 3

Trustee can claim indemnity from a fellow trustee or even beneficiary where:
- the co-trustee was fraudulent
- co-trustee is a solicitor who exercised a controlling interest;
- beneficiary who is also a trustee has exclusively benefitted
- where beneficiary has instigated the breach or even consented to it

Question 4

Measure of damages

Answer 4

Compensation for loss - trustee is personally liable for the breach and must restore the trust fund to the position it was before the breach.

Question 5

Exemption clause

Answer 5

A trust instrument may contain an exemption clause which excludes or limits a trustees liability. Any ambiguity would be construed against the trustee seeking to rely on it.
Cannot exempt the trustee from dishonest or fraudulent acts

Question 6

The court’s discretion

Answer 6

The court can excuse a trustee who acted honestly and reasonably. Both lay and professional trustees may claim but court is less likely to excuse a professional trustee.

Question 7

Beneficiary Involvement

Answer 7

It is a defence where the beneficiary:
- instigated the breach or consented to the breach before the trustee committed it
- acquiesced to the breach (after discovering it) thus releasing the trustee by waiving their right to sue.

Question 8

Limitation

Answer 8

Action must be brought within six years of the date on which the right to take action accrued (when a beneficiaries interest comes into possession), except where:
- where the trustee was party to a fraud
- in an action to recover trust property (or it’s proceeds) from a trustee
- where the beneficiary was under a disability
- where there was fraud, concealment or mistake.

Remember beneficiary must be adult and of no disability to take action. Time starts running when beneficiary is of no disability.