Personal Remedies: Against Trustees

[Flash Card 1 of 4]

• breach of trust: if trustee fails to comply with duty or improperly exercises power Armitage v Nurse
• personal claims: seek make T personally liable / to replace loss (caused by their breach of trust)
• T not vicariously liable for co-trustee / Ts duty to act unanimously when exercising powers & discretions / often all liable
• passive T liable for loss caused by their inactivity Townley v Sherborn / T's duty watch over & if necessary correct the conduct of each other Styles v Guy
• Ts guilty of breaches of trust are jointly & severally liable / new T not liable for past breaches but if discover must act to recover loss or guilty of own breach / retired Ts liable for breaches when in office but not after retirement unless retired to enable breach

Compensation

• breach of trust: Bs seek compensation / restore trust fund to what properly due / required causal connection between breach & loss (but for the breach the loss would not have occurred) Target Holdings v Redfern
• not need to be sole or main cause of loss: (exchange rates) Re Dawson / (slump property prices) Target Holdings v Redfern
• if causation established: T liable for all loss which flows from breach / principle of remoteness of damage not applied
• loss assessed at date of judgement /aim: restore trust fund to level would have been at date of judgement but for breach / to assess equitable compensation: loss actually caused directly or indirectly by breach not reasonably foreseeable loss at time of breach Canson Enterprises v Boughton
• if T breaches duty of care remoteness may apply Bristol & West Building Society v Mothew

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Personal Remedies: Against Trustees

[Flash Card 2 of 4]

Compensation

• investment duties (under Trustee Act 2000): exercise reasonable care / consider the suitability of the investment & diversification / review investments / take advice when investing & reviewing
• if T breach investment duties / loss incurred by trust fund if makes a gain less than would have been made by a prudent businessman / C must show prudent T (knowing scope T's investment power & carrying out proper reviews) would have made more profit than that achieved / standard undemanding taking into account: aim of minimising tax / balancing interests of Bs / avoiding speculative investments Nestle v National Westminster Bank
• restoring amount of trust capital lost / often not fully compensate Bs / compensation include sum for income or interest Wallersteiner v Moir / interest rate: court's special account for funds invested with the court or 1% above base rate / higher rate applied if trustees actually received a higher rate or used money for own purposes Bartlett v Barclays Bank
• if more than 1 breach / some make profit others loss / if separate transaction: set off not permitted Dimes v Scott / if gain & loss arise out of same breach: set off permitted Bartlett v Barclays Bank

Defence: s.61 Trustee Act 1925

• Trustee Act 1925 s.61: court discretion relieve T wholly or partly from liability if: T acted honestly & reasonably / & ought fairly to be excused for the breach of trust & for omitting to obtain directions of the court in the matter
• acted reasonably: exercised same degree of care & skill as reasonable man / dispense with directions if trust terms unclear but too costly to apply for directions
• court balance interests of Bs, Ts & anyone else affected / reluctant to relieve paid professional trustees

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Personal Remedies: Against Trustees

[Flash Card 3 of 4]

Defence: knowledge & consent of beneficiaries

• if B (claiming breach of trust) consented to T's actions / valid consent: freely given without undue influence & with full knowledge of the facts / whether fair & equitable for beneficiary to sue Re Pauling's ST
• if non-consenting B sues: T can ask court to impound equitable interest of consenting B & use it to pay compensation / if B instigated, requested or consented in writing to the breach Trustee Act 1925 s.62 / court consider if consenting B benefitted or was intended to benefit from breach

Defence: Limitation Act 1980 & laches

• s.21(1) LA 1980: no period of limitation / fraudulent breaches of trust / actions to recover trust property wrongly taken by T/ if T has purchased trust property or beneficial interest
• s.21(3) LA 1980: other breach of trust / 6 yrs from date right action / time not run until B interest fall into possession / s.28(1): if infant once reaches 18 / s.32(1): if relevant fact to claim deliberately concealed by T / time not start running until B has discovered or with reasonable diligence could have discovered
• if no prescribed limit / equitable doctrine of laches applies / not unjust to allow action (lapse & delay relevant) Lindsay Petroleum v Hurd

Defence: exclusion clauses

• S may confer defence by clause in trust instrument or will / certain types of breach / exclusion or exemption clause must be valid
• valid: to exempt trustees from liability for all breaches of trust apart from those committed dishonestly / invalid: remove liability for any breach (no enforceable duties & no trust) Armitage v Nurse

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Personal Remedies: Against Trustees

[Flash Card 4 of 4]

Contribution from other trustees

• trustees in breach of trust are jointly & severally liable / T1 & T2 both guilty of breach of trust / B sues T1 for entire loss / can T1 recover contribution from T2 or even indemnity of 100% of compensation claimed?
• equitable rule of indemnity applies if: co-T wrongfully misapplied trust property to his own use / co-T acted fraudulently when others acted in good faith / co-T also beneficiary & benefited from breach of trust (indemnity limited to value of his equitable interest which will be impounded)
• may claim full indemnity from solicitor Re Partington / if T blindly followed advice & did not actively participate in breach Head v Gould
• if indemnity not applicable / Civil Liability (Contribution) Act 1978 / s.1 T may sue for contribution / s.2 court will order just & equitable contribution proportionate to responsibility for loss

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