Breach of Trust:

Liability for breach of trust is compensatory, personal, joint and several (trustees are jointly liable) and may be held after retirement (Head v Gould: trustees must appoint new trustees with reasonable care)
Breach of trust may be deliberate or inadvertent

Breaching Trust:

Trustee fails to carry out duty
Trustee acts outside of his power:
Knott v Cottee: Stocks invested were foreign but the rust document only allowed investment in British stocks.
Trustee acts without reasonable care:
S1(1) Trustee Act 2000: Whenever the duty under this subsection applies to a trustee, he must exercise such care and skill as is reasonable in the circumstances, having regard in particular—
(a) to any special knowledge or experience that he has or holds himself out as having, and
(b) if he acts as trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.

Liability:
Compensation for Loss:
Re Dawson: trustee is liable to place the rust in the same position it would have been if the trust had not been committed

Bristol and West Building Society v Mothew: Mothew was acting as both lender and borrower, he failed to inform the bank of this until it became evident to him. Equitable compensation for breach resembles common law damages (fusion?).

Causation:
Target Holdings: Redferns released inflated price mortgage money without Target's authority. A trustee who as in breach of trust by dispensing trust money causing immediate loss is under an immediate duty to make restitution, there must be a causal link between the breach and loss; but-for the breach the loss would not have occurred. However, in a commercial trust a minor loss is not usually compensated.

Swindle v Harrison: Claimant wanted to run a restaurant and borrowed money from solicitors, they failed to advise her appropriately and later asked for her money back. Although the solicitors were in breach, she would have accepted the money without their advice, therefore there was no causation.

Remoteness:
The Wagon Mound: One is reliable only for a reasonably foreseeable breach

Target Holdings: Causation in equity is different to common law; one may be liable even if there is a break in the chain of causation eg. if the trustees hand the money to the stranger there is still a loss and causal connection found.

Assessment of Damages:
Target Holdings: The cause of action is pinpointed when the breach occurs, however there may be many damages subsequent to the breach and so loss is quantiﬁed at the date of judgement with the full beneﬁt of hindsight. This rule is strict and acts harshly where there has been a depreciation in the value of the asset acquired, for example, where there is a dramatic fall in the property market.

Offsetting Losses and Gains (the right to combine actions to determine losses and gains):
Dimes v Scott: One investment succeeded and another failed. If there are two unauthorised investments, the trustees are liable only for the loss. There is no right to offset the losses.

Bartlett v Barclays Bank Trust: Two developments were set up, the Guildford development made money and the old Bailey did not. However, this was one single trust and one single investment therefore they have the right to set off.

Interest:
Wallersteiner v Moir: Claimant acted in breach to the company he was suing. He was held to be liable not only for the loss but also the interest.

AIB Group Plc v Mark Redler and co: AIB bank was lending to a family to re-mortgage their home. Mark Redler and Co acted on behalf of the family and accidentally underpaid AIB in existing borrowings which meant the family defaulted on their payments. Held, the solicitors had released the money upon completion and so had gotten the required documents and bank's undertaking. This meant AIB was only entitled to the equivalent offset as a result of their underpayment and could not sue for interest.

Defences:
Limitation of Actions:
S21(3) Limitation Act 1980: ...an action by a beneficiary to recover trust property or in respect of any breach of trust... shall not be brought after the expiration of six years from the date on which the right of action accrued.

Exceptions to Limitations:

Trustee was party to fraud
S21(1)(a) Limitation Act 1980: No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy

Armitage v Nurse: an exemption clause stated that trustees would not be liable for loss or damage unless it was caused by the trustee's fraud. Fraud, in this sense, effectively means dishonesty i.e. either knowing something to have been wrong, or showing a reckless disregard as to whether it was wrong under S21(1) Limitation Act 1980, only a clause which purported to exclude liability for fraud would be considered contrary to public policy. Thus the exclusion clause in favour of the trustee was allowed.

Williams v Central Bank of Nigeria: Williams claimed he was being scammed by Nigerian Security and bought a claim years later, however, it was held that S21(1)(a) can only be invoked by a beneficiary against a trustee.
Trustee retained the trust property
S21(1)(b) Limitation Act 1980: No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action to recover from the trustee trust property in the possession of the trustee

James v Williams: the plaintiff's mother died intestate and the family home was to be held on statutory trusts for the plaintiff and her brother whom died. He left the property to his sister. On her death the property was left to the defendant who argued that the plaintiff's claim was time-barred under the Limitation Act 1980. The court held that the deceased brother held the property on constructive trust. Consequently, the plaintiff's claim was not time-barred.

Martin v Myers: If the trustee retains the trust property there must be a trust. In this case a constructive trust was not found ass the husband and wife were not married therefore the wife could not hold property on trust in her will.
Concealment
S32(1)(b) Limitation Act 1980: if any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant, the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

Thorne v Heard: Heard did not know about Thorne's mortgage during their purchase of a property and so was not liable to pay for the money owed by Thorne
Actions to account
S23 Limitation Act 1980: An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account.

Laches (unreasonable delay pursuing a right or claim in a way that prejudices the opposing party):
Lindsay Petroleum v Hurd: Defendant tricked purchasers into buying land, he claimed that the claimant took too long to raise their claim. Laches applies where it is practically unjust to give a remedy where the plaintiff has effectively waived their rights or by their conduct and neglect, the plaintiff has put the defendant in what would be a difficult position if the remedy were now to be granted.

Nelson v Rye: The claimant, a solo musician appointed the defendant to be his manager collecting the fees and royalties due to him and paying his expenses. When the relationship came to an end the plaintiff claimed an account, and the question was whether the account should be limited to the six years before the issue of the writ or whether it should extend over the whole period of the relationship. Held, unless the defendant was a trustee the claim for an account was barred after six years. The fact that the defendant was a fiduciary did not make him liable to pay equitable compensation. His liability to account arose from his receipt of money in circumstances which made him an accounting party. It did not arise from any breach of duty.

Consent:
Re Pauling's Settlement Trusts: A family was in need for financial support. The Bank breached trust by paying out an advancement. However, because the claimant had consented this could be bought as a defence to the beneficiary's claim despite the breach. Conest must be given freely and informed from a beneficiary of age and mental capacity.

Condonation of Breach:
Walker v Symonds: One cannot sue for a breach of trust if they have condoned or acquiesced (joined in with) to. The trustee will have a defence if the beneficiary actively assisted in carrying out the breach of trust, or requested, consented to, or concurred in, the breach.

Relief:
Contribution:
S2(1) Civil Liability Act 1978: in any proceedings for contribution the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.

Indemnity:
Re Smith: A co-trustee acted fraudulently. Contribution can be claimed from the claimant from the defendant on behalf of their co-trustee.

Chillingworth v Chambers: Co-trustee benefited from breach and so contribution could be claimed.

Head v Gould: A trustee has committed a breach of trust relying on the professional advice of a fellow solicitor trustee. Held, being a professional is not enough to impose liability or indemnity therefore the trustee cannot claim for indemnity.

S62(1) Trustee Act 1925: Where a trustee commits a breach of trust at the request or with the consent in writing of a beneficiary the court may impound all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee.

S61 Trustee Act 1925: If it appears to the court that a trustee is or may be personally liable for any breach of trust but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust then the court may relieve him either wholly or partly from personal liability.

Re Evans: Beneficiary was missing and so the trustee claimed a missing beneficiary policy, when the beneficiary re-appeared she claimed a breach of trust. Held, the insurance policy had been a reasonable and proper means of dealing with the administrative issue and so the defendant was not liable.

Perrins v Bellamy: Trustees thought they had the power of sale by mistake. As they did not act dishonestly it was held that they ought to be excused for the breach of trust.

Lloyds TSB v Markandan & Uddin: Markadan & Uddin were a firm of solicitors which had parted with money lent to them without receiving the required documents. They were liable for the mortgagee's loss as they had failed to carry out reasonable checks upon the vendor's solicitors and so fell short of their standard of care.

	Created by cadhla_corrigan over 10 years ago

LLB Trusts and Equity (9. Breach of Trusts and Fiduciary Duty) Note on Breach of Trust and Fiduciary Duties, created by cadhla_corrigan on 05/05/2014.