A trustee who commits a breach of trust may be able to avoid personal liability through several defenses: 1) Beneficiaries consented to or participated in the breach of trust. The trustee can show the beneficiaries requested or consented to the actions that caused the breach. 2) Beneficiaries acquiesced or approved of the breach after the fact, through a formal or informal release or by their conduct over time. 3) More than 6 years have passed since the breach, which triggers the statute of limitations to pursue legal claims against the trustee personally. 4) The court uses its statutory power to relieve trustees of personal liability if they acted honestly and reasonably in committing the breach.

1. DEFENCES ADEFENCES A
TRUSTEE MAYTRUSTEE MAY
TAKETAKE

2. IntroductionIntroduction
 A trustee who has committed a BreachA trustee who has committed a Breach
of trust may be able to escape personalof trust may be able to escape personal
liability by bringing the case within a fewliability by bringing the case within a few
ground in the case ofground in the case of RE PAULING’SRE PAULING’S
SETTLEMENT TRUST (1964) Ch 303SETTLEMENT TRUST (1964) Ch 303

3. Facts of the caseFacts of the case
 The children of the Younghusband’s familyThe children of the Younghusband’s family
sued to recover from the trustee whosued to recover from the trustee who
managed their mother’s marriage settlement.managed their mother’s marriage settlement.
 The children were in many occasion facedThe children were in many occasion faced
financial difficulties. Main financial sourcesfinancial difficulties. Main financial sources
was Mrs Younghusband’s marriagewas Mrs Younghusband’s marriage
settlement 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 power
to advance the trust fund up to ½ of theto advance the trust fund up to ½ of the
presumptive share of each childrenpresumptive share of each children

4.  Several advances were made to the childrenSeveral advances were made to the children
who on some occasion received independentwho on some occasion received independent
legal 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 every
case.case.
 1954 : an advancement was made in order to1954 : an advancement was made in order to
avoid 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 be
in breach of trust.in breach of trust.
 1958 : the children brought an action against the1958 : the children brought an action against the
trustee claimingtrustee claiming £29,160 on the ground that this£29,160 on the ground that this
sum had been improperly paid out by way ofsum had been improperly paid out by way of
advancementadvancement

5.  The trustee depends relied on theThe trustee depends relied on the
consent and acquiescence of theconsent and acquiescence of the
advanced beneficiaries.advanced beneficiaries.

6. A) Beneficiaries, before the breachA) Beneficiaries, before the breach
consented to or participated in breachconsented to or participated in breach
 A beneficiary who has participated in orA beneficiary who has participated in or
consented 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 a
valid request or consent by advancedvalid request or consent by advanced
beneficiary to the advance in questionbeneficiary to the advance in question
that is a good defencethat is a good defence

7. Release or AcquiescenceRelease or Acquiescence
 After the breach, beneficiaries witherAfter the breach, beneficiaries wither
formally or informally showed theirformally or informally showed their
approval through ‘release orapproval through ‘release or
acquiescenceacquiescence
 Refers to the conduct of theRefers to the conduct of the
beneficiaries after breachbeneficiaries after breach
 A release may be formal or inferredA release may be formal or inferred
from conductfrom conduct

8. iii) Expiration of 6 yearsiii) Expiration of 6 years
 No action against trustee personallyNo action against trustee personally
after expiration of 6 years period of theafter expiration of 6 years period of the
Limitation Act 1953.Limitation Act 1953.
 Except in cases regarding fraudExcept in cases regarding fraud

9. iv) Statutory relief s63 ofiv) Statutory relief s63 of
Trustee ActTrustee Act
 Power to relieve trustee from PersonalPower to relieve trustee from Personal
LiabilityLiability
 If it appears to the court, the trustee hasIf it appears to the court, the trustee has
acted honestly and reasonably andacted honestly and reasonably and
ought to be excused for the breach ofought to be excused for the breach of
trust, the court may relieve him eithertrust, the court may relieve him either
wholly or partly from personal liability.wholly or partly from personal liability.

10.  RAJA ENA JAINAB ABIDEENRAJA ENA JAINAB ABIDEEN
(1930) SSLR 212.(1930) SSLR 212.
 Three requirements that trustee oughtThree requirements that trustee ought
to 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 conduct
of parties, trustee and beneficiary.of parties, trustee and beneficiary.

11. v) Advice of Solicitor - Trusteev) Advice of Solicitor - Trustee
 What need to be proved is that theWhat need to be proved is that the
trustee in committing breach of trusttrustee in committing breach of trust
acted on the advice of solicitor.acted on the advice of solicitor.

12. vi) Breach by a Single Trusteevi) Breach by a Single Trustee
AloneAlone
 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 trustee
who has himself the benefit of BOT orwho has himself the benefit of BOT or
between whom a relation which will justify thebetween whom a relation which will justify the
Court in treating him as solely liableCourt in treating him as solely liable

13. vii) Exemption Clause in thevii) Exemption Clause in the
Trust DocumentTrust Document
 If the trust document has specifyIf the trust document has specify
matters which could exclude trusteematters which could exclude trustee
from breach, then the trustee will not befrom breach, then the trustee will not be
liable.liable.

14. Statutory Indemnities.Statutory Indemnities.
 Section 31 – 35 & s64 of the TrusteeSection 31 – 35 & s64 of the Trustee
Act 1949.Act 1949.