(6) Breach of Trust and Remedies
(6) Breach of Trust and Remedies
T JOINT LIABILITY
Trustees are jointly and severally liable for breaches committed together
Beneficiaries can ‘pick and choose’ which trustee to pursue
Consider mechanisms for trustees to recover monies from other trustees:
REMEMBER: NO vicarious liab
Civil Liability (Contribution) Act 1978 - enable T to make application to ct demanding fellow T make contribution towards amt paid out to beneficiaries
Trustee who has paid out to beneficiaries makes application to court seeking contribution from the other trustees involved in the breach.
Such contribution as the court considers ‘just and equitable’ s2(1)
Must meet two requirements s1(1)
The claimant trustee must be liable for ‘any damage suffered by another’ and
The defendant trustee(s) must be liable for that same damage
Inherent jurisdiction of the court
Allows claimant trustee to seek full indemnity from other trustee
Requires one of three situations:
defendant trustee has obtained the benefit arising from the breach -> T B misappropriated trust funds. T A is liable bc they dgafed. A is wealthier so ben ask A to pay more. Ct would make an order of indemnity for A …
Where a relationship exists between the trustees resulting in one being viewed as solely responsible for breach
Usually professional advisors
Re Partington (1887) 57 LT 654 - 2 trustees. 1 solicitor 1 widow of testator. W relied on advice of S. W's reliance on his skill was perfectly reasonable. S made an unauth investment and did not inform her, she would not have known its not authorised. Ct said the breach is due to his advice n control. She was entitled to full indemnity from him
Where the defendant trustee is also a beneficiary (who has benefitted from the breach)
Indemnity limited to interest in the trust
Chillingworth v Chambers  1 Ch 685 - claimant who was the trustee and beneficiary (?). He was claiming indemnity from the other trustees. Cts recognised where we have a T who is a ben who has profited from the breach, that person is liable to the other trsutees to the extent of his interest in the trust.
Rule in Re Dacre  1 Ch -
Beneficiary will receive no further benefit until the loss is made good. Intrest in trust is frozen
Liability for actions
T liable for: BOTH breaches of fiduciary and non-fiduciary duties / Liable for his own breach of trust/ Following retirement, liable for actions during his period of office
NO vicarious liability for co-trustees [A and B… and A did all they could do. But B still appropriates trust funds, A will not be liable for B's breach / not automatically liable]
Townley v Sherborne (1633) Bridge 35
BUT remember trustees’ duty of care
Bahin v Hughes (1886) LR Ch D 390 - 3 sisters appointed as trustees. One did all the work the other 2 dgaf. Breach wrt investments. No VL: the 2 that were not involved did not show duty of care req. they themselves are in breach (not responsible for actual action, but bc they dgaf)
Generally not liable for breaches prior to his own appointment
T responsibility for acts of a delegatee?
Duty to act personally BUT power to delegate
S11 Trustee Act 2000 governs what can be delegated:
NOT distribution of trust assets or appointment of trustees.
Acts of delegation must meet statutory standard of care in relation to:
Ongoing appointment (s22) - creates obligation of an ongoing appointment
(s23) Trustee only liable for agent’s breach IF the trustee has not complied with these requirements -> the ben has to go after Agent directly.
causation: does breach have to cause the loss?
must be a causal link between breach and loss
Target Holdings Ltd v Redferns : Crowngate contract to purchase property for £775k. C fraudulently apply to Target for mortgage of £1.5m, valuing the property at £2m. Redferns are solicitors acting for T and C.Mortgage advance sent by T to R in advance. Solicitors HELD ON TRUST FOR T. Money released to the vendor before completion – BREACH OF TRUST
WERE REDFERNS LIABLE TO TARGET FOR THE LOSS SUFFERED?
The loss was not caused by the breach. It would still have occurred . Redferns were found to be NOT liable
types of claim
trustee must make good the loss suffered by the trust
:star: proprietary: Seeking to gain a security interest in the defendant’s property or recover property from the defendant [ trustee has to put back what they took ]
monetary remedy amounting to the value of the claim. Can take a number of forms: [taking trustee personal assets - GOING AFTER TRUSTEE PERSONALLY]
Reconstitution of the Trust Fund
Reparation of the Trust fund
Account of profits
what is a breach of trust?
Exceeded their powers
Failed to meet their duties
Tito v Wadell (No 2)  Ch 106, 247
“One of the more unexpected curiosities of this case is that it became common ground between counsel that the term "breach of trust" had not been defined in any case or textbook known to them.” - no clearly understood academic or judicial definition.
Megarry V-C explained that a breach of trust occurs where there is a “violation of any duty which the trustee owes as trustee to the beneficiaries.” (Same para)
remember the fundamental obligation of loyalty owed by trustees to their principal
focus on fundamental obligation of loyalty that Trustees owe to their principal - act in GF, act honestly.
fiduciary duties: Bristol v Mothew
breach of FD
Boardman v Phipps  2 AC 46 - acted in good faith and honestly.. But still found to be liable. Bc of breach of FD
No absolute rule – depends on the
of the obligation
Acting ULTRA VIRES: Where trustee has positively acted so as to exceed their powers / ‘Unauthorised action’/ Strict liability
Acting INTRA VIRES: Actions which are authorised but have not been properly carried out OR Failure to act / ‘Inadequate action’/ Must prove some fault on part of trustee - negligence [have not exceede dpower, but what u r supp to do u did badly]
5 questions (virgo)
Does defendant owe an eq duty to the claimant?
"has the duty been breached" ?
"has the claimants rights been infringed by the breach?
Defences? - Trustee PF liable, sometimes it is reduced or entirely not …