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...
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