Breach Of Trust And The Defences Available

• Published date: 26 January 2021
• Law Firm: Ashfords LLP
• Author: Mr Robert Horsey and Rebecca Milton

Trustees are jointly and severally liable for breach of trust to their beneficiaries where that breach has led to a loss to the trust fund.

Common allegations of breach of trust include where a trustee:

• Distributes trust assets to a beneficiary who is not entitled to them under the terms of the trust document.
• Invests the trust fund in a way not permitted by his express or statutory powers of investment.
• Breaches a fiduciary duty such as the duty not to profit from the trust.
• Breaches the common law or statutory duty of care, for example by exercising a power of investment without exercising such skill and care as is reasonable in the circumstances.

THE DEFENCES AVAILABLE

EXEMPTION CLAUSE

A trustee who has committed a breach of trust could be protected from a breach of trust claim by an exemption clause in the trust deed. However, even if there is an exemption clause, trustees still have a minimum duty to perform the trusts honestly and in good faith for the benefit of the beneficiaries. An exemption clause cannot excuse a trustee who either knows that his act or omission is contrary to the beneficiaries' interests or is recklessly indifferent to the beneficiaries' interests.

LIMITATION

If a trustee is not protected by an exemption clause, he/she could escape liability if the claim is time-barred. It has long been...