Question 1

A trustee is subject to a number of duties, of both a fiduciary and non-fiduciary nature.

Accepted Answer

Trustees have a fiduciary duty to act in the best interests of the beneficiaries and manage the trust assets prudently, but also have non-fiduciary duties such as keeping accurate records and providing information to the beneficiaries.

Question 2

What is 'equitable compensation'?

Accepted Answer

Equitable compensation is a legal remedy that is awarded by a court when a breach of fiduciary duty or other equitable wrong has occurred, resulting in a loss to the claimant. This type of compensation is designed to restore the claimant to the financial position they would have been in had the breach not occurred. It is distinct from damages awarded in common law, which are typically based on the principle of putting the injured party in the position they would have been in if the contract had been properly performed.

The concept of equitable compensation is rooted in equity, the body of law that addresses concerns of fairness and justice and is often applied when common law remedies are insufficient or inappropriate. Equity operates on the maxim that "equity will not suffer a wrong to be without a remedy," ensuring that those who have been wronged receive fair and just treatment.

In cases involving equitable compensation, the court will consider various factors, including the nature of the breach, the conduct of the parties involved, and the actual loss suffered by the claimant. The aim is not to punish the wrongdoer but to compensate the victim for their actual loss.

Equitable compensation is commonly sought in cases involving:

1. Breach of trust: When a trustee fails to comply with their obligations, resulting in a loss to the trust.
2. Breach of fiduciary duty: When someone in a position of trust, such as a director or agent, breaches their duty to act in the best interests of another party, such as a company or principal.
3. Professional negligence: When a professional, such as a lawyer or financial advisor, fails to perform their duties to the required standard, causing financial harm to their client.

The remedy is discretionary, meaning that the court has significant flexibility in determining whether to award equitable compensation and, if so, the amount. The court will typically require a clear causal link between the breach and the loss suffered, and the compensation awarded will be strictly limited to the loss directly caused by the breach.

Equitable compensation is an important tool in the legal system for addressing wrongs that cannot be adequately remedied through common law damages, ensuring that justice can be served in a manner that is fair and just to all parties involved.

Question 3

What is 'restoration' of a trust?

Accepted Answer

Restoration of a trust refers to the legal process or action taken to reinstate a trust to its original status after it has been modified, terminated, or has lapsed due to certain circumstances. This process can be necessary for a variety of reasons, such as:

1. **Revival of a Revoked Trust**: If a trust was previously revoked by the settlor (the person who created the trust), restoration might involve re-establishing the trust according to the original terms or with new provisions, assuming the settlor still has the capacity and intent to do so.

2. **Correcting Administrative Errors**: Sometimes, a trust may need to be restored because of administrative errors or oversights that led to its unintended alteration or termination. Restoration would correct these errors and bring the trust back into compliance with the settlor's original intentions.

3. **Compliance with Legal Requirements**: A trust may be restored to meet certain legal requirements or to correct issues that have arisen due to changes in the law. This ensures that the trust remains valid and operates within the legal framework.

4. **Beneficiary Interests**: If the termination or modification of a trust adversely affects the beneficiaries, they may seek legal action to restore the trust to protect their interests, provided that such restoration aligns with the original intent of the settlor.

5. **Reinstating a Lapsed Trust**: In some cases, a trust may lapse due to the expiration of its term, failure to fund the trust properly, or other reasons. Restoration would involve re-establishing the trust to ensure that it continues to serve its purpose.

The process of restoring a trust typically involves legal proceedings and may require the consent of the beneficiaries, the settlor (if still living), and possibly the approval of a court. It is important to consult with a legal professional who specializes in trust and estate law to navigate the complexities of restoring a trust and to ensure that all actions taken are in accordance with the governing laws and the intentions of the parties involved.

Question 4

What happens if one trustee leaves a matter to a co-trustee without enquiring as to what has happened and a breach of trust occurs?

Accepted Answer

The answer of What happens if one trustee leaves a...

Question 5

What did Staughton LJ recognised in Nestle v National Westminster Bank plc?

Accepted Answer

The answer of What did Staughton LJ recognised in Nestle...

Question 6

An exemption clause may either exclude entirely or otherwise restrict a trustee's liability for breach of his duties in carrying out the trust.

Accepted Answer

An exemption clause can indeed exclude or restrict a trustee's liability for breach of duties in carrying out a trust. However, the enforceability of such a clause would depend on various factors, including the nature and wording of the clause, as well as any statutory or common law limitations on its applicability.

Question 7

As equitable compensation is a personal right of action against the trustee, it is only worth pursuing such a remedy if the trustee is solvent.

Accepted Answer

Equitable compensation is a form of monetary compensation awarded to a beneficiary by a court for loss suffered due to a breach of trust by a trustee. As it is a personal right of action against the trustee, it can only be pursued if the trustee is solvent and has the ability to pay the compensation. Otherwise, even if the beneficiary wins the case, they may not receive the compensation they are entitled to.

Question 8

For a trustee to be liable for breach of trust, it must be shown that the trust fund has suffered loss.

Accepted Answer

In order for a trustee to be liable for breach of trust, it is necessary to demonstrate that the trust fund has suffered a loss. If there is no loss, the breach of trust may not have caused any harm to the beneficiaries and therefore the trustee may not be liable for any damages.

Question 9

A breach of trust will have occurred when 'the trustees made decisions which they should not have made or failed to make decisions which they should have made'.

Accepted Answer

A breach of trust occurs when the trustees fail to fulfill their obligations and responsibilities, which includes making decisions that they are authorized to make and avoiding those that are outside their purview.

Question 10

When is a summary judgment given?

Accepted Answer

The answer of When is a summary judgment given?...

Quiz 12: Remedies for Breach of Trust Against Trustees