Protection of trustees Flashcards
(22 cards)
What do ouster clauses do?
Can entirely remove a duty that they otherwise would have
Not all duties can be ousted.
How can trustees be protected from the outset?
- Ouster clauses
- Exemption clauses
- Trustee liability insurance
What is an exemption clause?
Limits liability for particular sorts of breach
Cannot apply to fraudulent breaches.
What does trustee liability insurance protect against?
Protect for negligence not fraudulence
What must trustees do in situations of uncertainty regarding their powers or duties?
Fulfil their duty as well as they can
This applies even if beneficiaries cannot be identified.
How can trustees be protected during administration?
- Seek court directions
- Apply to the High Court under s48 AJA 1985
- Surrender discretion to court
- Obtain beneficiary consent
What happens if trustees rely on incorrect legal advice?
They may still be liable for breach of trust
Legal advice does not absolve liability if it is incorrect.
What does surrendering discretion to the court entail?
Does not give up all duties
This is an exceptional course of action during deadlock or conflict of interest.
What protections are available to trustees after breach?
- Instigation, consent, acquiescence
- Impounding a B’s interest
- Statutory limitation
- s61 TA 1925
- Claims against 3Ps
- Full indemnity
- Civil liability and contribution Act
This can help in situations where there is uncertainty.
What happens if only some beneficiaries have consented?
It can act as a partial defence.
Can beneficiaries affirm consent after a breach?
Yes, they may subsequently affirm even if they did not consent before the breach.
What is impounding a beneficiary’s interest?
Trustees may impound the beneficiary’s interest if they instigated or requested a breach.
- They can use some of the B’s share of the fund to indemnify themselves against a claim by other Bs
- No need to show that B benefitted from the breach
What is the statutory limitation period for beneficiaries with interests vested in possession?
The statutory limitation is six years.
What equitable defense can trustees rely on after the statutory limitation expires?
Trustees can rely on the equitable defense of laches.
What must trustees demonstrate for laches to apply?
They must show that the beneficiary knew of a breach but delayed their claim unacceptably, making it unconscionable for B to asser their beneficial interest
What does Section 61 TA 1925 allow the court to do?
It allows the court to excuse a trustee who acted honestly and reasonably and ought to be excused
Who is more likely to be excused under Section 61 TA 1925?
Lay trustees who have sought advice.
What is an example of a situation where a trustee might be excused?
Believing a missing beneficiary to be dead.
Example situation for Section 61 TA 1925.
What can lead to claims against third parties?
Taking negligent advice from a lawyer or financial adviser, or from strangers.
What is full indemnity in the context of trustees?
Full indemnity is rare and occurs when one trustee is morally culpable or misappropriates trust property.
What does the Civil Liability Contribution Act allow the court to do?
It allows the court to make other trustees contribute justly and equitably.
What do unequal contributions reflect under the Civil Liability Contribution Act?
They reflect differing levels of culpability.
