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Breach Of Trust Notes

GDL Law Notes > GDL Equity and Trusts Notes

This is an extract of our Breach Of Trust document, which we sell as part of our GDL Equity and Trusts Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.

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Topic 13 - Breach of Trust (Fiduciary Duties, Investment and Breach) o Role of trustee = range of duties and responsibilities. If a trustee does not fulfil the duties may be found to have acted in breach of trust. o Breach of Fiduciary = (see previous lecture) o Breach of trust = variety of forms, some (such as absconding with trust funds) more obvious than others. o = allow a beneficiary to claim compensation for losses suffered or in some cases to recover trust funds that may have been misappropriated by the trustee. o NB - Breach of Trust - Can occur even though Beneficiary doesn't suffer any loss, as can make money on trust fund (maybe not as much as should have). o Actions o Personal against the trustee o Proprietary against the trust property Breach of trust by Trustee - Conduct to
? Browne-Wilkinson in Target Holdings Ltd v Redferns = still followed, has real problems, but still referred to often. o "Basic right of beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument". o = one of trustee primary duties is to abide by the terms of the trust i.e. do what they are told by the Settlor. But Brown-W says this only occurs when you have a trust instrument. Not absolutely certain/vital for their to be a trust instrument which will set out trustees duties/powers. Can have statute that governs what trustee can/cant do, and common law.
? [Not prescriptive - just structure to help assess whether there has been a breach, if so whether trustees liable, and if so the extent of their liability]:
? Cause of Action = breach of trust (claim against trustee, strict liability) o 1. Duty - sources:
? Trust Deed (First stop) - most common for trusts to have trust instruments. So instrument will set out instructions for what trustee is/is not able to do. Have they breach those duties, have they acted outside the powers given to them by the trust instrument. IF trust instrument authorises trustee to do something, like self-dealing - to purchase trust property, then not a breach of trust, as trustee not acting ultra vires, not acting outside the powers the trust instrument has given them
? Statute - May not always have a trust instrument. Where no trust instrument, or does exist but not clear about a particular area, or silent - then look at statute. Trustee Act 2000, but also 1925 Trustee Act. Separate instruments. Sets out statutory trustee duties

Common Law - I.e. the duty to be even-handed between Beneficiaries is a common law trustee duty. o 2. Breach
? Has there been a breach of trust - will depend on scenario. Has a trustee violated their duties as laid down by the 3 elements above. IF breach, if trustee has prima facie done something they should not have done then move onto causation: o 3. Causation (don't focus on THIS COURSE) - NO REAL CONTENT
? Not entirely clear - But lead case HoL authority is Target Holdings Ltd v Redferns
? Browne-Wilikinson = must be some 'causal connection between breach of trust and the loss sustained by the beneficiaries'. But for test of causation (used in common law). Criticism is that common law test of causation has NO place in a case on breach of trust, too simplistic. Criticism in academia
? Case = about fraudulent land deal, Target holdings mortgagee/lender, and Redferns is solicitor. Land misrepresented as worth 2m, but actually worth 0.5m. So they convince Target to lend 1.5m to get land, Redferns stipulates purchase monies not paid for completion until there is a charge laid on land in favour of Target holdings. Target pays money to Redferns, meant to hold in Escrow. Redferns in breach of trust pays money to purchaser before land secured. Subsequently, charge is secured on land. Purchaser goes insolvent so land is possessed and sold. As worth so much less than valuation, so Target only able to recover much less, and sue Redferns for difference.HELD redferns not responsible, as not payment in breach of trust that causes the loss - 'but for that payment, but for the breach, the loss would have still occurred' as loss intrinsically tied to the MR, the fraudulent valuation of that land.
? = Has to be SOME causal connection between the breach and the loss.
? CF AIB Group plc v Redler o 4. Damage - Have the beneficiaries suffered loss as a result of this:
? Quantification of loss - can be several different things:
? Loss to trust fund - if trust property not invested property and investments decreased in value
? If trustee has taken trust property
? Can cover - investment where trustee invested property, investments not lost money, but they have not done as well as other investments might have done, OR as the

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