Presented by:VeemarlenShammer

JayaDeveena

INTRODUCTION

HOW BREACH OF TRUST OCCURS?

CONSEQUENCES OF A BREACH OF TRUST

DEFENCE OF TRUSTEES

For Breach Of Trust

Any act or omission on the part of the trustee which is inconsistent with the terms of the trust agreement or the law of trusts.

or 1) Any act which is in violation of the duties of a trustee or of

the terms of a trust. Such a breach need not be intentional or with malice, but can be due to negligence.

2) Breaking a promise or confidence.• How breach of trust occur?"violation by a trustee of a duty which equity lays upon him,

whether willful and fraudulent, or done through negligence, or arising through mere oversight and forgetfulness." 

Breach of Trust occurs when trustees do not act according to their duties.

A trustee shall in the exercise of his functions, observe the utmost good faith and act as per section 37 in TA

(a) with due diligence;(b) with care and prudence; and(c) to the best of his ability and

skill.

Subject to this Act, a trustee shall execute and administer the trust, and exercise his functions:

in accordance with the terms of the trust only in the interest of the beneficiaries or

in fulfillment of the purpose of the trust.

A trustee shall not use or deal with trust property for his own profit or for any purpose not connected with the trust.

Subject to section 38 as per Act and to the terms of the trust, a trustee shall preserve and enhance so far as is reasonable, the value of the trust property.

A trustee shall keep updated and accurate accounts and records of his trusteeship.

A trustee shall keep trust property separate from his own property and separately identifiable from any other property of which he is the trustee.

Subject to the terms of the trust, where there is more than one trustee, all the trustees shall join in performing the trust.

Subject to subsections (3) and (4), where there is more than one trustee, no functions given to the trustees shall be exercised unless all the trustees agree on its exercise.

The terms of a trust may empower the trustees to act individually or by a majority with respect to the exercise of some or all of the functions conferred on the trustees or to delegate the exercise of these functions to one or more trustees.

A trustee who dissents from a decision of the majority may require his dissent to be recorded in writing.

Where a trust has more than one beneficiary, or more than one purpose, the trustees, subject to the terms of the trust and to subsection (2), shall be impartial and shall not execute the trust for the advantage of one at the expense of another.

Subsection (1) does not prejudice the exercise of a discretion conferred upon a trustee by the terms of the trust.

In this case, the Court set out steps that should be taken by an outgoing trustee in order to comply with its duty to be proactive in pursuing the transfer of trust assets, and provided further guidance.

• Purpose of an injunction is to prevent trustees from doing something wrong.

• Restrain someone from continuing his action.• Sec 63 T.A, the court has general powers to make

any orders if it thinks fit.• Used as a remedy in circumstances where financial

compensation is inappropriate• An equitable remedy

RE: Ludlow V/S Greenhouse Facts: One of he trust properties were of historical value.

The municipality wanted to demolish that property. D.H: The court granted an injunction to restrain the

demolishing

Beneficiaries sued trustees for their personal actions to claim financial damages.

A trustee who has committed a breach of trust is accountable for his personal action and innocent trustees are not responsible as long as they have performed their jobs properly.

General principle: a trustee who commits a breach of trust which results in a loss to the trust estate is personally liable to the beneficiaries to make good the loss

Sec 50(1) T.A, ‘a trustee who commits a breach of trust shall be liable

(i) for any loss or depreciation in value of the trust property resulting from the breach and

(ii) any profit which would have been accrued to the trust had there been no breach’

• Sec 50 (3), a trustee shall be liable for a breach of trust committed by his co-trustees if

he is aware of the breach and he actively conceals the breach or fails within a

reasonable time to take proper steps to protect the trust property or to prevent the breach.

RE: Townley V/S Sherborne• D.H: A trustee who commits a breach is usually

personally liable but if its co-trustees have failed to participate in the management of the trust by merely leaving matters in the hand of the trustee who commit the breach, its co-trustees will also be blamed.

No action taken by the court to make good to the loss.

Does not hold trustees responsible for the breach of trust. Sec 52, ‘the court may relieve a trustee wholly or partly of

liability for a breach of trust, where it appears to the court that the trustee has acted honestly and reasonably and ought fairly to be excused for the breach of trust’

A trustee who is being sued for breach of trust can raise the following defences:

1. Trustee acted honestly and reasonably and ought to be fairly excused. However a professional trustee cannot rely on this defence.

2. Trustee can rely on an express exclusion notes/clauses if there is any in the trust deed.

1. Trustee proves that he acted honestly and reasonably and ought to be fairly excused. Here the court can relieve a trustee wholly or partly for breach of trust or for omitting to obtain the directions of the court in the matter in which breach arose.

Re Kay:

Facts:The testator had left an estate worth £20000 after his death. The only

apparent liability was £100. There was a request by his wife for £300. The trustees gave the wife £300 without advertising the estates. Later the estate was insolvent. The trustees were sued for breach.

Decision Held:Trustees acted fairly and honestly.

2. Trustee can rely on an express exclusion clause/exemption/ indemnity clause, if found in the trust deed. Such a clause indemnifies the trustee against any potential breach. However, as per Section 50 subsection (6), if the trustee is found liable of fraud, willful misconduct or gross negligence, then this clause is ineffective.

Such a clause is very common in private family trust.

3. Section 52 subsection (2) provides relief to the trustee if he has committed a breach of trust at the instigation, request or with the concurrence of a beneficiary, irrespective if the beneficiary is a minor of legally disable. Here the court will order the defaulting beneficiary to indemnify the trustee for the breach and the trustee can even appropriate part of the beneficiary’s interest as indemnity. However the trustee must have acted honestly

4. Section 51: a beneficiary may indemnify or relieve trustee for breach. This indemnification will not apply in the following conditions, if the beneficiary is:

i. is a minor or a legally disable person;

ii. is not fully aware of all material facts;

iii. is improperly induced by the trustee to act.

5. Section 68: Time limitation for a court action regarding a breach. This implies that there is a period of 30yrs within which a trustee can be sued for breach, relating to fraud or recovery of trust property from trustee.

6. Time limit for beneficiary to sue a trustee