WS7 - Personal claims

Question 1

Can trustees be sued for breach of trust?

Answer 1

They can only be sued if they breach their own duties.

There is no vicarious liability between trustees.

Question 2

What happens if breach by co-trustees is established?

Answer 2

Joint and several liability applies. Any/all of the trustees in breach can be sued for all/any amount of the money.

Question 3

Breach: the trust fund is worth less

Answer 3

The trustee is only liable if the breach caused loss. There must be evidence to show profit from a particular investment was less than what a reasonable man would have accrued.

Nestlé v NWB

Question 4

The breach has caused both loss and profit

Answer 4

Beneficiaries may keep the profit and sue for the loss.

Question 5

Bartlett v Barclays Bank

Answer 5

If the loss and profit arise from the same breach, the court will allow the profit to offset the loss.

Question 6

Injunction

Answer 6

A court order which can compel/restrain a party from doing a particular act. Granted at the discretion of the court.

Question 7

Failure to comply with an injunction?

Answer 7

Contempt of court and severe penalties apply.

Question 8

Beneficiaries’ consent

Answer 8

Defence for trustee for breach of duty

1) All beneficiaries are sui juris;
2) Have given consent with full knowledge of the relevant facts
3) Beneficiaries must have full understanding but need not know that it’s a breach (Re Pauling).

Question 9

Re Pauling

Answer 9

Beneficiaries must have full understanding of what he is concurring in, but need not know that it’s a breach.

Question 10

Express exclusion clause in trust document

Answer 10

May relieve trustees of liability for negligence or if innocent, but will be void if the breach is fraudulent (Armitage v Nurse)

Question 11

s61 TA 1925

Answer 11

Trustee may be relieved of liability (wholly/in part) if they have acted honestly and reasonably.

Question 12

Bartlett v Barclays Bank

Answer 12

Courts may be reluctant to grant relief (s61 TA) if the trustee is a professional.

Question 13

General Finance

Answer 13

Courts may be reluctant to grant relief (s61 TA) if the trustee is a professional, EVEN IF they have taken advice.

Question 14

s61 TA and passive trustees?

Answer 14

Courts may be reluctant to grant relief if breach was committed by the trustee being passive.

Courts wish to encourage trustees to be active.

Question 15

s21(3) Limitation Act 1980

Answer 15

Statutory limitation period of six years for bringing a claim under breach of trust.

Does not apply:

1) to a proprietary claim (s21(1) LA)
2) for a fraudulent trustee

Question 16

Laches

Answer 16

Courts will not allow a claim to succeed where inequitable.

eg where the claimant has acquiesced in breach for a long period.

Question 17

s2 Civil Liability (Contribution) Act 1978

Answer 17

Court may order contribution as is just and equitable between each trustee’s responsibility for the loss.

Trustees may owe different amounts.

Question 18

Indemnity

Answer 18

In theory, a trustee is entitled to 100% indemnity from co-trustees also in breach. It can be sought where:

1) Co-trustee fraudulently obtained from breach;
2) Co-trustee received trust property and used it for his own benefit (Bahin v Hughes);
3) Trustee blindly followed advice of co-trustee who is a solicitor (Re Partington)

Question 19

Bahin v Hughes

Answer 19

Co-trustee received trust property and used it for his own benefit.

(Indemnity)

Question 20

Re Partington

Answer 20

Trustee blindly followed advice of co-trustee who is a solicitor.

Question 21

Head v Gould

Answer 21

If trustee followed advice of co-trustee who is a solicitor, he must show that the solicitor exerted a controlling influence in that he did not exercise his own judgment.