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Breach of Trust & Trustee Liability

kazzasingh's version from 2018-05-03 14:21


Question Answer
Nestle caseBreach will only lead to liability if the breach produced an unauthorized gain for the trustee or caused a loss to the trust. HELD: the trustee was not liable to compensate because it had not been proved that its breach had caused a loss.
Bartlett v. Barclays Bank Trust Co Ltd (Nos 1 and 2)Provided that the remainder beneficiary is a competent adult, the trustee is no longer under a duty to reconstitute the trust fund in the event of a breach of trust causing loss; instead, he is under a duty to compensate the beneficiary directly for the loss. HELD: by the date of judgement, some of the interests settled by the trust deed had become absolutely vested in possession, with the result that compensation was payable directly to the beneficiaries, rather than indirectly via the fund.
Target HoldingsA finance company entered into an arrangement to advance a loan secured by way of mortgage on a commercial property. The House of Lords held that the rule applicable to traditional settlement trusts, which requires trustees fully to reconstitute the trust fund to its original state, has no application to bare trusts arising in commercial contexts.
Nationwide v Various SolicitorsRecent decisions demonstrate that there is growing judicial acceptance of common law concepts (or language) in the determination of the extent to which a trustee is liable for losses of which his breach was a contributory cause.
WestdeutscheIn the absence of fraud or a fiduciary relationship, the proper award was of simple interest only.
Sempra Metals LtdAn award of compound interest was ‘necessary to achieve full restitution’
Essay Q ThoughtThis system of Trustee Liability is strongly in favour of the beneficiary. E.g. When the value of a trust fund is reduced because of a trustee’s breach of trust, it will very often follow that the tax liability of the beneficiaries will also be reduced. E.g. a life tenant receives less income due to the trustee’s breach, she will pay less income tax. For this reason, a B may actually encourage a T to commit a breach (in order to reduce their tax liability).
Limitation Act 1623The general limitation period for a breach of trust has been 6 YEARS.
Thorne v HeardIf a trustee deliberately conceals any fact relevant to a right of action against him, the period of limitation will not begin to run until the claimant becomes aware of the concealment. To be ‘deliberate’, concealment must be intentional, but need not be dishonest. Concealment by another party is not sufficient to disapply the limitation period
Re HowlettThe claimant was not subject to the usual limitation period, because the trustee’s estate was still in possession of ‘notional /trust property.
AcquiescenceFor acquiescence, there must be delay combined with knowledge of the facts on which the breach of trust is based, such that it would be inequitable as between the parties for the claimant to bring an action for breach after such a long time.
Armitage v. NurseExemption clauses --> a clause of a traditional settlement trust provided that the trustee would not be ‘liable for any loss or damage which may happen from any cause whatsoever unless such damage shall be caused by his own actual fraud.’ HELD: no ambiguity in the wording of the clause in this case so the court simply had to determine whether it was proper, as a matter of law, principle and policy, that such a wide exemption clause should be permitted to operate according to its natural construction.
Trustee Act 1925 s61The courts may relieve a trustee of some, or all, of his liability for breach of trust if he acted honestly and reasonably, and ought fairly to be excused. If these three requirements are met, the award of relief is in the discretion of the court. ⇒ Reasonably ⇒ Ought to be fairly excused
Re DawsonEquitable compensation is not limited to common law principles governing remoteness of damage.