LLB270 Lecture Notes - Lecture 12: Westpac, Liquigas, Unmixed
LECTURE 12 – REMEDIES FOR BREACH OF TRUST:
BREACH OF TRUST:
oOCCURS WHERE:
Trustee acts contrary to their powers/duties, OR
They act within their duties/powers but DO NOT ACT REASONABLY (speculative
investment), in GOOD FAITH (acting impartially), or in the PROPER ADMINSTRATION of
the TRUST
Common breaches:
Failing to meet the standard of care in investing money
Profiting from the trust
Failing to preserve trust property
Misappropriation of trust property
DEFENCES TO BREACH OF TRUST:
oINFORMED consent of ALL beneficiaries (must all be of age and capacity)
Requires disclosure of all facts that MIGHT affect their decision to consent
oCOURT may excuse the breach – Trustee Act Section 85
Trustee must have acted ‘honestly and reasonably’
Must be in circumstances where it is FAIR to excuse them
oTRUST INSTRUMENT may excuse breaches, but cannot:
Exclude the duty to act honestly and in good faith
Exclude negligent conduct where no reasonable trustee could have believed the
actions would be to the benefit or beneficiaries
Exclude actual fraud or dishonesty
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If removed of these duties there would be no trust
oPLAINTIFFS CONDUCT:
Unclean hands – Catinos v Magafas
Laches – delay in bringing the claim – Steeter v Western Areas Exploration (No 2)
CLAIMS AGAINST CO-TRUSTEES:
oAt common law – liability was joint and several
Each trustee is liable for the entire amount in equity
Innocent trustees could claim indemnity from trustees responsible for the breach
(fraud)
oPosition altered by STATUTE – Trustee Act Section 59(2)
Co-trustees ARE NOT LIABLE for the actions of other trustees
UNLESS, it happens through the trustees own ‘WILFUL NEGLECT OR DEFAULT’
‘wilful neglect’ – conscious of wrongdoing or reckless disregard
Dalrymple v Melville (1932):
oTrustee passively allowed others to be in a position to misappropriate funds
oPassive trustee acted honestly & had no suspicions of misconduct
oFound to be in wilful default because they failed to take the necessary
precautions to safeguard the trust property
CLAIMS AGAINST CO-BENEFICIARIES:
oIf trustee is a beneficiary, their share may be impounded to cover loss – Fletcher v Collis
For the benefit of innocent beneficiaries
oBeneficiary who CONSENTS to breach or BENEFITS from it may have their share impounded
to cover the loss – Trustee Act Section 86
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REMEDIES AGAINST TRUSTEES:
oPERSONAL LIABIILITY:
TWO REMEDIES:
Equitable COMPENSATION for loss:
oPersonally liable
oReturning trust the position it would be if not for the breach
oNo issue of remoteness or foreseeability
oCAUSATION – ‘but for’ proof
oINCLUDES increases in market value, may cover gains that would have been
made if not for the loss, may include interest (discretion of the court)
Value assessed at date of compensation, not date of loss
oBreach generating profits – trustee CAN CLAIM SET OFF
ACCOUNTING for profits:
oWhere trustee has profited, may be required to account to beneficiaries for
profits
Applies where trustee exploits a business opportunity or otherwise uses
information gained as trustee
oIrrelevant that profit could not have been obtained from the trust – Boardman
v Phipps
oAllowance can be made for the skill and work of the trustee
Beneficiaries must choose between compensation or account – ALTERNATIVE
REMEDIES
Choice made FOR EACH INDIVIDUAL BREACH
Losses can be SET OFF AGAINST PROFITS, if they apply to the SAME BREACH –
Contradictors v AG
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Document Summary
Lecture 12 remedies for breach of trust: They act within their duties/powers but do not act reasonably (speculative investment), in good faith (acting impartially), or in the proper adminstration of the trust. Failing to meet the standard of care in investing money. Defences to breach of trust: informed consent of all beneficiaries (must all be of age and capacity) Requires disclosure of all facts that might affect their decision to consent: court may excuse the breach trustee act section 85. Must be in circumstances where it is fair to excuse them: trust instrument may excuse breaches, but cannot: Exclude the duty to act honestly and in good faith. Exclude negligent conduct where no reasonable trustee could have believed the actions would be to the benefit or beneficiaries. If removed of these duties there would be no trust: plaintiffs conduct: Laches delay in bringing the claim steeter v western areas exploration (no 2)
