This Trustees 'Need to KNow' Guide provides general guidance of the law at the date of publication. Specialist advice should also be sought.
Updated July 2020.
What constitutes a breach of trust?
A breach of trust occurs when a trustee contravenes the terms of the trust or the duties of a trustee.
Trustees are jointly and severally liable for breach of trust to their beneficiaries where the breach has given rise to a loss.
Common allegations of breach of trust include (i) distributing assets to a beneficiary not entitled to them under the trust deed; (ii) investing trust assets in a way not permitted; (iii) breach of fiduciary duty; and (iv) breach of the common law or statutory duty of care.
What are a trustee’s duties?
- to exercise reasonable care and skill
- to comply with the terms of the trust document
- to act impartially between beneficiaries
- to invest in authorised investments
- to act in the best interests of the beneficiaries
- to avoid conflicts of interest
- to act personally (with the exception of some limited permitted delegation)
- to act in good faith and with honesty and integrity
- to take control of trust property
- to inform beneficiaries of their position and provide such information concerning the trust as they are entitled to
- to keep proper records and accounts
- to not profit from the trust
What is the required standard of care?
The statutory duty of care is found at Section 1 of the Trustee Act 2000. A trustee must exercise such care and skill as is reasonable in the circumstances, having regard in particular:
- to any special knowledge or experience that he has or holds himself out as having, and
- if he acts as trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.
The common law duty of care is to take such care as an ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide. This duty is derived from Learoyd v Whiteley (1887).
What are the possible defences to a breach of trust claim?
Exemption clause: An express clause in the trust deed may exempt a trustee from loss or damage.
Statutory relief under Section 61 of the Trustee Act 1925: The court may relieve a trustee wholly or partly from personal liability for a breach of trust if the trustee is found to have acted honestly, reasonably and ought fairly to be excused for the breach and for failing to obtain court directions.
Beneficiary consent: It is a defence for a breach of trust if a beneficiary of full age and capacity and not subjected to undue influence has assented to or concurred with the breach. It is not necessary for the beneficiary to have benefited from the breach.
Limitation: The limitation period, which is the prescribed statutory time period allowed for making any claim for breach of trust, is 6 years. No such period is applicable in the instance of fraud and/or recovery proceedings. The limitation period for claims in a deceased person’s estate is 12 years.
Delay: If there is an unreasonable delay on the part of the claimant in pursuing a breach of trust claim and that delay has given rise to prejudice to the trustee’s position, then the court may use its discretion to not permit the claim to proceed.
What is the extent of the liability faced by a trustee for breach of trust?
If a trustee is found to have acted in breach of trust they are required to restore the trust fund to the position it would have been in had the breach not occurred.
How can we help?
We act for trustees, executors, personal representatives and for individuals claiming against estates, trustees or other parties. We also often advise on complex and cross-jurisdictional issues, and regularly work alongside other intermediaries based offshore. Our team is recognised for our expertise in this field by the legal directories: The Legal 500 and Chambers & Partners. If you have any questions arising from this Need to Know please do not hesitate to contact our Wills, Trusts and Inheritance Disputes Team.
Latest blogs & news
Actor Terry Jones’ children challenge his Will - but does suffering from dementia mean you can’t make a valid Will?
Several stories have recently been published about the ‘legal battle’ commenced in the High Court relating to the estate of actor Terry Jones, who was well known and loved for his role in Monty Python and who died in January 2020. His adult children from his first marriage have reportedly commenced proceedings against their father’s estate and his second wife Anna Söderström (who is thought to be the main beneficiary of the estate), claiming that the Will their father made in 2016 is invalid because he lacked capacity when he made it. As a matter of law, a Will made by someone who lacks the required mental capacity at the time they made the Will is not valid.
Death does not release an individual from their debts and liabilities, nor does it allow transactions made to loved ones to escape challenge. This is so regardless of whether the transactions were made with the intention to defraud creditors.
Alzheimer’s disease, the most common form of dementia, has been in the spotlight recently given a recent scientific breakthrough with the US approving the first new Alzheimer’s drug in 20 years. Light has also been shed on dementia and assessing testamentary capacity in the recent case of Hughes v Pritchard  EWHC 1580 Ch. In this case, Mr Hughes, who suffered from moderately severe dementia was nevertheless deemed to have capacity at the time of amending his will by his GP, a view supported by a joint medical expert later instructed in the case. Despite this, his will was overturned by the judge on the basis that he did not have the requisite capacity to make the changes to his previous will, which were much more significant than the medical professionals, and indeed Mr Hughes, had appreciated.
Matthew & Others v Sedman & Others  UKSC 19
The Supreme Court recently handed down a judgment dealing with time limits in a “midnight deadline” case. The claim was brought by new trustees and beneficiaries of a will trust against the former professional trustees. The claim involved allegations of negligence against the former trustees, along with breach of trust and breach of contract.
Financial abuse of older and vulnerable adults is sadly becoming more prevalent
My previous blog examined whether Kenny Goss, the ex-partner of George Michael, may be entitled to a provision from the late singer’s estate, notwithstanding the fact that their relationship had broken down in 2009 (seven years prior to Mr Michael’s death). It was reported at the time that Mr Goss was seeking an award of £15,000 per month on the basis that Mr Michael had been financially maintaining Mr Goss at the time of his death. Pursuant to the Inheritance (Provision for Family and Dependants) Act 1975, Mr Goss made an application for reasonable financial provision from Mr Michael’s estate because he had not been left anything in the singer’s will.
In recent years the courts have seen a significant number of claims under the 1975 Act bought by adult children. This week it has been widely reported that the two adult daughters of Tony Shearer, a high profile banker and finance governor of a well-known public school, have failed in their attempt to bring a claim against their late father’s £2.2 million estate. Mr Shearer made no provision in his estate for his daughters leaving the majority of his wealth to his second wife.
Examining the impact of Sofer v Swiss Independent Trustees SA on practitioners in England and Wales.
This article was first published by STEP, December 2020: Katherine Pymont, 'Moments of Truth', Trust Quarterly Review (Vol18 Iss4), pp.36-41
Two recent decisions relating to forged wills have highlighted what evidence will be sufficient for a court to make a finding of forgery.
This quarterly contentious trust and probate litigation update provides a summary of a cross-section of reported decisions handed down in the courts of England and Wales in the period October 2020 - December 2020.
Beneficiaries often have questions and concerns over how the estate of a loved one is being administered but are sometimes kept in the dark by personal representatives (PRs). Under section 25(b) of the Administration of Estates Act 1925 (AEA 1925) PRs can be required by the court to provide, on oath, a full inventory of the estate and an account of what steps they have taken to administer an estate.
The High Court has recently given judgment in the case of Knipe v The British Racing Drivers’ Motor Sport Charity and Ors  EWHC 3295 (Ch), a summary judgment application concerning the construction of a will of a deceased racing driver, Mr Barrie Williams, who had sought to make several bequests to charity but the names of the organisations had not been correctly recorded.
One of the questions we are often asked is whether an individual’s will can be amended after their death if it doesn’t reflect their intentions. This is sometimes possible under a process known as rectification, although the circumstances in which rectification is available are limited. A claim for rectification was recently considered by the court at the end of 2020 in the case of Barrett v Hammond & others.
It has been alleged that the ex-partner of George Michael, Kenny Goss, may be considering issuing a claim against the singer’s estate. Goss was excluded from the singer’s Will but purportedly claims he is entitled to a monthly allowance of £15,000 as the singer provided this monthly allowance to him before their relationship broke down in 2009.
Highly publicised matters arising in relation to the administration of the late Steve Bing’s estate in the US give rise to some interesting legal issues
Before the Family Law Reform Act 1969 (“the 1969 Act”) came into force on 1 September 1970, the common law rules of construction that a child is legitimate only if the child was born or conceived in wedlock applied when dealing with trust deeds or wills. The 1969 Act is not retrospective so difficulties may still arise in relation to trust deeds or wills settled/executed prior to that time.
This blog focuses on two practical considerations that should be borne in mind when dealing with an estate where there are any suspicions that the value of the assets when realised may be insufficient to meet all debts and liabilities in full.
It is not uncommon in claims involving trusts and estates for one or more of the parties to be a child or other protected party. This is particularly true of claims under the Inheritance (Provision for Family and Dependants) Act 1975 and in cases involving trusts with minor beneficiaries. The procedures for litigation by or on behalf of a protected party are covered by Part 21 of the Civil Procedure Rules.
This article was first published by EPrivateClient on the 18th August 2020
This quarterly contentious trust and probate litigation update provides a summary of a cross-section of reported decisions handed down in the courts of England and Wales in the period April 2020 - June 2020.
Delay is a common complaint in professional negligence claims against solicitors in the context of wills and probate. For example, If a client is in poor health or advanced old age and wants to create or update their will, they might instruct a solicitor to assist with this. If the client dies before the new will can be prepared and/or executed, the beneficiaries who would have inherited, had the will been put in place before the client’s death, may look to bring a professional negligence claim against the solicitor if there has been undue delay by the solicitor in preparing the will.