What are trustees’ duties? And what constitutes a breach of trust? Laura Abbott of Wright Hassall explains breach of trustee duties and the possible defences to a breach of trust claim.

What are a trustees’ duties?

The general duties of trustees are:

• to comply with the trust instrument
• to take control of the trust assets
• to act in the best interests of the beneficiaries and impartially as between them
• to avoid being in a position where their own personal interests’ conflict and not to profit from the trust
• to keep the beneficiaries informed and keep proper records and accounts for the trust

Duty of care

Trustees owe a duty of care to the beneficiaries to act honestly and in good faith and with integrity, and to exercise as much care in dealing with the trust’s affairs as a prudent man of business would use in dealing with his own private affairs, or for whom he felt morally obliged to provide (Learoyd v Whiteley (1887)).  This is their duty under common law.

In addition, the Trustee Act 2000 imposes a statutory duty of care and skill on trustees to exercise such care and skill as is reasonable in the circumstances, having regard in particular—

(a) to any special knowledge or experience that he has or holds himself out as having, and

(b) 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.

What constitutes a breach of trust?

A trustee who contravenes the terms of the trust or fails to carry out their duties will be in breach of trust. A beneficiary with an interest in the trust may seek to bring a claim for breach of trust.

Breaches will range from minor, more technical breaches, to failures to act in accordance with their duties, to fraud. Examples of breach of trust could include:

• mismanagement of the trust assets
• a transfer of assets to a beneficiary who should not have received them
• self-dealing by a trustee

In considering whether a trustee is in breach of trust the court will apply an objective test; what would a reasonably prudent trustee have done in these circumstances (Wight v Olswang (No 2) [2000])?

If a trustee is found to have acted in breach of trust, they are required to compensate the trust fund from their own personal resources for the loss caused. Injunctions can also be sought to prevent the breach continuing. Beneficiaries may also seek the removal of the trustee.

Where trustees are in doubt as to what to do, they can apply to the court for directions or guidance.

What are the defences to a breach of trust claim?

The usual defences of limitation and laches are available to a trustee seeking to defend a breach of trust claim. 

So far as limitation is concerned, the starting point is six years from the breach (which is not necessarily the date of the loss arising) (section 21(3) Limitation Act 1980). If a beneficiary’s interest has not yet vested, then the six-year period will run from the point the interest vests. There is no limitation period for fraud or to recover trust property the trustee has taken for himself. Fraud for these purposes includes dishonesty and a reckless disregard for the interests of the beneficiaries. Laches applies if the beneficiary has unreasonably delayed in pursuing the claim.

It is also a defence if the beneficiaries consented to the breach if they were of full age and capacity and were acting free of undue influence and gave informed consent. It is not necessary for them to have benefitted from the breach.

There could be an exemption clause in the trust instrument.

Finally, section 61 of the Trustee Act 1925 allows the court to excuse a breach if it is the court’s view that the trustee has ‘acted honestly and reasonably and ought fairly be excused’ for the breach. This statutory relief is at the court’s discretion. 

Discretionary trusts

Where trustees have absolute discretion as long as they act within their powers (in other words they exercise their discretion bona fide) the court will not interfere with the exercise of that discretion, even if the court would have exercised the discretion differently (Gisborne v Gisborne (1877)). 

About the author

Laura Abbott is an Associate in the contentious probate team at Wright Hassall and is a member of the Society of Trust and Estate Practitioners (STEP).

See also

Everything you need to know about will trusts

What is a deathbed gift and is it legal?

How to write a will

Find out more

Trustee Act 2000 (Legislation)

Limitation Act 1980 (Legislation)

Trustee Act 1925 (Legislation)

Image: Getty Images

Publication date: 26 April 2021

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.