Students will be able;
1) To define what is a breach of trust.
2) To understand the basis of liability
3) To learn on personal liability to the
4) Nature of Liability
5) Measure of Liability
What is a Breach of Trust
Failure to comply with duties laid upon
trustee by the trust instrument and also by
May be in a positive action, eg;
- investing in an unauthorised investment
- Maladministration that cause losses to trust
Settlor-trustee is liable to the same extent as
any other trustee although trust was created
by the same person.
Nature of Liability
1) Personal Liability to beneficiaries
2) Liability Inter Se : Contribution and
3) Criminal Liability
Basis of liability
Liability is compulsory.
Compensation to the beneficiaries for
Restoration to the beneficiaries of the
property if an unauthorised profit has been
Objective is not to punish trustee but to
Unless in the case of technical breach which
the court authorised
Personal Liability to the
Compensation to beneficiaries.
Remedy sought is compensation for breach.
Target Holdings v Redferns  3 WLR 352.
- the principle on compensation for breach is the
same as damages at common law.
- a trustee who committed a breach of trust was
not liable to compensate the beneficiary for
losses which the beneficiary would have suffered
if there had been no such breach
Liability is Personal Not
A trustee is liable personally for his own breach of
- A trustee is liable for his own wrong and not for
those of his co-trustee.
- Unless if there is a breach by co-trustee, trustee
will be at fault
i) for leaving the matter in the hands of a co-trustee
ii) Standing by while breach is committed
iii) Allowed trust fund to remain in sole control of a co-
iv) Failed to take steps to obtain redress after the
trustee was aware of the breach
S35 of the Trustee Act 1949:
Implied indemnity of trustees.
(1) A trustee shall be chargeable only for money and
securities actually received by him notwithstanding
his signing any receipt for the sake of conformity,
and shall be answerable and accountable only for
his own acts, receipts, neglects, or defaults, and not
for those of any other trustee, or of any banker,
broker, or other person with whom any trust money
or securities may be deposited, nor for the
insufficiency or deficiency of any securities, nor for
any other loss, unless the same happens through
his own wilful default.
Re Lucking’s WT  1 WLR
Lucking had committed a BOT in
entrusting large sums of money to a
His fellow trustee, Block, was not liable
for Lucking’s BOT, but entitled to rely
on what Lucking had told him about
the company’s affairs.
Bahin v Hughes (1886) 31 Ch
A passive trustee was liable to the
same extent as an active one.
In this the breach was a breach by a
co-trustee but trustee left the matter in
the hand of trustee without inquire or
stand by to see that breach is
Breaches before Appointment
A trustee is not liable for breaches of
trust committed before his
A trustee should on his appointment
examine any documents and books
If he discover a breach, action should
be taken against the former trustee
Breach After Retirement
A trustee remain liable after retirement
for breaches committed by him during
his term of office.
If he died, his estate will be liable.
He will not be liable if breach is
committed after his retirement
He will be liable if he retire in order to
facilitate a breach of trust
Head v Gould (1989) 2 Ch 250
Kekewich J “… In order to make a retiring trustee
liable for a trust committed by his successor you
must show and show clearly that the very breach of
trust was in fact committed was not merely the
outcome of the retirement and appointment took
place… It will not suffice to prove that the former
trustee rendered easy or even intended a breach of
trust, if it was not in fact committed. They must
proved to have been guilty as accessories before
the fact of the impropriety actually perpetrated.
Breach of Trustee –
Where trustee in breach is also a
beneficiary, his beneficial interest bears
the loss against the other beneficiaries.
A trustee will be required to indemnify his
co-trustees to the extent of his beneficial
interest and not merely the extent that he
has personally received some benefit
from the breach.
Chillingworth v Chambers  1 Ch
Bankruptcy of a defaulting
If a liable trustee for breach of trust
becomes bankrupt, the claim (breach)
is provable in his bankruptcy
Measure of liability
Trustee liable for the restitution of the
money or thing, or value of the thing, and to
account for profit made or loss caused.
a) Payment to wrong person or
misapplication of Trust funds.
Increased rate of interest plus principal
b) Sale of authorised and purchase of
A trustee who has committed a Breach
of trust may be able to escape
personal liability by bringing the case
within a few ground in the case of RE
PAULING’S SETTLEMENT TRUST
(1964) Ch 303
Facts of the case
The children of the Younghusband’s family
sued to recover from the trustee who
managed their mother’s marriage
The children were in many occasion faced
financial difficulties. Main financial sources
was Mrs Younghusband’s marriage
settlement where she was the tenant for life.
The trustee in this settlement has the power
to advance the trust fund up to ½ of the
presumptive share of each children
Several advances were made to the children
who on some occasion received independent
legal advice s to their right under the settlement.
The mother’s consent was obtained in every
1954 : an advancement was made in order to
avoid estate duty on the death of the mother –
children were aware that advancement might be
in breach of trust.
1958 : the children brought an action against
the trustee claiming £29,160 on the ground that
this sum had been improperly paid out by way
The trustee depends relied on the
consent and acquiescence of the
i) Beneficiaries, before the breach
consented to or participated in breach
A beneficiary who has participated in
or consented to or participated in
“that if the trustee can established a
valid request or consent by advanced
beneficiary to the advance in question
that is a good defence
ii) Release or Acquiescence
After the breach, beneficiaries wither
formally or informally showed their
approval through ‘release or
Refers to the conduct of the
beneficiaries after breach
A release may be formal or inferred
iii) Expiration of 6 years
No action against trustee personally
after expiration of 6 years period of the
Limitation Act 1953.
Except in cases regarding fraud
iv) Statutory relief s63 of
Power to relieve trustee from Personal
If it appears to the court, the trustee
has acted honestly and reasonably
and ought to be excused for the
breach of trust, the court may relieve
him either wholly or partly from
RAJA ENA JAINAB ABIDEEN (1930)
Three requirements that trustee ought
to be fairly excused.
A) trustee had acted honestly
Trustee had acted reasonably –
depends on the ctc of the case
Court will take into account the conduct
of parties, trustee and beneficiary.
v) Advice of Solicitor - Trustee
What need to be proved is that the
trustee in committing breach of trust
acted on the advice of solicitor.
vi) Breach by a Single Trustee
If breach is committed by one trustee, the
co-trustee will not be held liable.
Dicta in Bahin v Hughes;
‘But as far as cases had gone at present,
relief has only been granted against trustee
who has himself the benefit of BOT or
between whom a relation which will justify
the Court in treating him as solely liable
vii) Exemption Clause in the
If the trust document has specify
matters which could exclude trustee
from breach, then the trustee will not