Trust 16 - Liability of Strangers

Question 1

What is recipient liability?

Answer 1

• A personal claim against a recipient of misapplied trust property brought by beneficiaries
• Only liable if recipient had requisite degree of knowledge

Question 2

What are the requirements for recipient liability?

Answer 2

1. Misapplication of trust property
2. Beneficial receipt by D of misapplied TP (must be for his own benefit or in how own right)
3. D knew property was misapplied TP: if they dispose of/dissipate property before knowing, don’t incur liability but as soon as they find out, should restore property to the trust

Question 3

When would someone trace property, rather than follow?

Answer 3

If original property has been substituted and if there’s an equity’s darling

Question 4

What is accessory liability?

Answer 4

Personal claim against those who dishonestly assisted or procured the breach of trust
Must be dishonest

Question 5

What are the requirements for accessory liability?

Answer 5

1. Trust in existence at material time
2. Trustee committed breach of that trust
3. D assisted trustee in committing breach: must have made planning, commission or obfuscation of breach easier for trustee - more than minimal
4. D’s assistance was dishonest: actual state of mind and apply objective standard of ordinary decent people

Question 6

What are the remedies for accessory liability?

Answer 6

Liable for loss incurred: C must show that but for breach, loss wouldn’t have occurred
Potentially liable for profits but only if proportionate - not automatic right to profits