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Defences a Trustee may take

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Defences a Trustee may take

  1. 1. DEFENCES ADEFENCES ATRUSTEE MAYTRUSTEE MAYTAKETAKE
  2. 2. IntroductionIntroduction A trustee who has committed a BreachA trustee who has committed a Breachof trust may be able to escape personalof trust may be able to escape personalliability by bringing the case within a fewliability by bringing the case within a fewground in the case ofground in the case of RE PAULING’SRE PAULING’SSETTLEMENT TRUST (1964) Ch 303SETTLEMENT TRUST (1964) Ch 303
  3. 3. Facts of the caseFacts of the case The children of the Younghusband’s familyThe children of the Younghusband’s familysued to recover from the trustee whosued to recover from the trustee whomanaged their mother’s marriage settlement.managed their mother’s marriage settlement. The children were in many occasion facedThe children were in many occasion facedfinancial difficulties. Main financial sourcesfinancial difficulties. Main financial sourceswas Mrs Younghusband’s marriagewas Mrs Younghusband’s marriagesettlement where she was the tenant for life.settlement where she was the tenant for life. The trustee in this settlement has the powerThe trustee in this settlement has the powerto advance the trust fund up to ½ of theto advance the trust fund up to ½ of thepresumptive share of each childrenpresumptive share of each children
  4. 4.  Several advances were made to the childrenSeveral advances were made to the childrenwho on some occasion received independentwho on some occasion received independentlegal advice s to their right under the settlement.legal advice s to their right under the settlement. The mother’s consent was obtained in everyThe mother’s consent was obtained in everycase.case. 1954 : an advancement was made in order to1954 : an advancement was made in order toavoid estate duty on the death of the mother –avoid estate duty on the death of the mother –children were aware that advancement might bechildren were aware that advancement might bein breach of trust.in breach of trust. 1958 : the children brought an action against the1958 : the children brought an action against thetrustee claimingtrustee claiming £29,160 on the ground that this£29,160 on the ground that thissum had been improperly paid out by way ofsum had been improperly paid out by way ofadvancementadvancement
  5. 5.  The trustee depends relied on theThe trustee depends relied on theconsent and acquiescence of theconsent and acquiescence of theadvanced beneficiaries.advanced beneficiaries.
  6. 6. A) Beneficiaries, before the breachA) Beneficiaries, before the breachconsented to or participated in breachconsented to or participated in breach A beneficiary who has participated in orA beneficiary who has participated in orconsented to or participated in breachconsented to or participated in breach Wilmer LJWilmer LJ ““that if the trustee can established athat if the trustee can established avalid request or consent by advancedvalid request or consent by advancedbeneficiary to the advance in questionbeneficiary to the advance in questionthat is a good defencethat is a good defence
  7. 7. Release or AcquiescenceRelease or Acquiescence After the breach, beneficiaries witherAfter the breach, beneficiaries witherformally or informally showed theirformally or informally showed theirapproval through ‘release orapproval through ‘release oracquiescenceacquiescence Refers to the conduct of theRefers to the conduct of thebeneficiaries after breachbeneficiaries after breach A release may be formal or inferredA release may be formal or inferredfrom conductfrom conduct
  8. 8. iii) Expiration of 6 yearsiii) Expiration of 6 years No action against trustee personallyNo action against trustee personallyafter expiration of 6 years period of theafter expiration of 6 years period of theLimitation Act 1953.Limitation Act 1953. Except in cases regarding fraudExcept in cases regarding fraud
  9. 9. iv) Statutory relief s63 ofiv) Statutory relief s63 ofTrustee ActTrustee Act Power to relieve trustee from PersonalPower to relieve trustee from PersonalLiabilityLiability If it appears to the court, the trustee hasIf it appears to the court, the trustee hasacted honestly and reasonably andacted honestly and reasonably andought to be excused for the breach ofought to be excused for the breach oftrust, the court may relieve him eithertrust, the court may relieve him eitherwholly or partly from personal liability.wholly or partly from personal liability.
  10. 10.  RAJA ENA JAINAB ABIDEENRAJA ENA JAINAB ABIDEEN(1930) SSLR 212.(1930) SSLR 212. Three requirements that trustee oughtThree requirements that trustee oughtto be fairly excused.to be fairly excused. A) trustee had acted honestlyA) trustee had acted honestly Trustee had acted reasonably –Trustee had acted reasonably –depends on the ctc of the casedepends on the ctc of the case Court will take into account the conductCourt will take into account the conductof parties, trustee and beneficiary.of parties, trustee and beneficiary.
  11. 11. v) Advice of Solicitor - Trusteev) Advice of Solicitor - Trustee What need to be proved is that theWhat need to be proved is that thetrustee in committing breach of trusttrustee in committing breach of trustacted on the advice of solicitor.acted on the advice of solicitor.
  12. 12. vi) Breach by a Single Trusteevi) Breach by a Single TrusteeAloneAlone If breach is committed by one trustee, the co-If breach is committed by one trustee, the co-trustee will not be held liable.trustee will not be held liable. Dicta in Bahin v Hughes;Dicta in Bahin v Hughes; ‘‘But as far as cases had gone at present,But as far as cases had gone at present,relief has only been granted against trusteerelief has only been granted against trusteewho has himself the benefit of BOT orwho has himself the benefit of BOT orbetween whom a relation which will justify thebetween whom a relation which will justify theCourt in treating him as solely liableCourt in treating him as solely liable
  13. 13. vii) Exemption Clause in thevii) Exemption Clause in theTrust DocumentTrust Document If the trust document has specifyIf the trust document has specifymatters which could exclude trusteematters which could exclude trusteefrom breach, then the trustee will not befrom breach, then the trustee will not beliable.liable.
  14. 14. Statutory Indemnities.Statutory Indemnities. Section 31 – 35 & s64 of the TrusteeSection 31 – 35 & s64 of the TrusteeAct 1949.Act 1949.

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