Equity and Trusts - Breach of Trust - Essay Example

? Equity and Trusts: Breach of Trust A breach of trust as made clear in the case of Armitage v Nurse, mayrefer to a deliberate or otherwise inadvertent in addition to consisting of the act of misappropriation or misapplication of the trust property or an investment that lies outside the power of the trustee (Takashi 2004, p.528-550). Additionally, the case also made it clear that a breach as a matter of fact can occur in disregard of whether the breach turns out to be beneficial or injurious to the beneficiaries. Furthermore, the Trustee Act 2000 provides that a trustee is responsible for ensuring that reasonable care and skill is applied in duty when managing the trust. If Leonard and Nancy demonstrate to the court that they took all the necessary precautions consistent with the actions of an ordinary prudent man when exercising the trust fund, then their breaches will be discharged as exemplified in Speight v Gaunt (Kurt, Peter, Donald and Cecily 2011, p. 202-2012). In this case scenario, it is unlikely that an ordinary person with skills like those of Leonard would have managed the trust in the way he did by proposing the selling of some shares and retain the case. Section 3 (1) of the Trustee Act 2000 provides that trustee make investment decisions which he would have himself done if he was entitled absolutely to the trust assets of the trust. We could therefore say that Leonard would have made the same decisions had he been absolutely entitled to his trust assets and thus his suggestion can be considered to be reasonable. Despite this, his decision does not satisfy the set out standards like shown in the case of Cowan v Scargill where it was ascertained that any decisions made should be wholly to the benefit of the beneficiaries and not the trustees (Sameera and Jill 2009, p. 202-210) And since this not the case in the study, then we can postulate that a breach of trust is evident. As for the case of Nancy, by the virtue of being a trustee under the trust, she will be also liable for the breaches of Leonard if it can be proved that he acted in a careless manner. From the demonstrations in case of Re Vickey, it was ascertained that a trustee can be found liable for recklessness if it is proved he did not give much regard as whether his act or omission amounted to a breach of trust. Since Nancy omitted in her duties by not raising objections to Leonard’s suggestions, we can say that he is careless and therefore he may be found to have breached his fiduciary duties. Additionally, just like it has been expressed by Abbas and Clements, the trustee is personally obliged to run the trust with part of the duty being to keenly observe what other trustees are doing and raise objections if something wrong is being done (Antony 1999). Therefore, since Nancy did nothing to ensure that Leonard was exercising the instruments of trust as required, she is thus liable to a breach of trust. Consequently, as spelt out in Bahin v Hughes, there are sufficient reasons not to allow a trustee to escape liability by placing blame on another trustee or other trustees for anything that goes wrong (Bruce, Florin 2009). Nevertheless, if it can be approved that there was an exemption clause to that regard freeing her from the liability, then she shall not be in breach. Therefore, since in this case the trust instrument contains the clause, Nancy cannot be held liable for the breach of trust and should therefore not be sued. The beneficiaries are in a position to seek proprietary claim from Orlando’s property as it falls in the awarding against a specific asset which in this case is the swimming pool. Orlando clearly still is in possession of the swimming pool and thus the beneficiary can clearly assert proprietary claim to the swimming pool. We cannot determine if Orlando had the knowledge that the money she received from her mother was from the trust, but if Orlando had the knowledge then he clearly suffers from the liability to account to trust for value of property received, and person receiving trust property which in this case is Orlando, takes it subject to trust and as result, significantly the beneficiaries can reclaim their property. As for Nancy case, being the wealthiest of the trustees and her fears that she will have to bare the whole loss, to take it easy and relax. This in my view is because from the instrument of trust, the three trustees were in a way mandated to keep an eye and watch over and where necessary correct the conduct of the other trustees. Cleary Nancy did not effectively observe this as she let Mary with the advice from Leonard to sell some of the beneficiary shares. As a result due to joint control Nancy consequently suffers from joint liability and is severally liable for the whole loss and will together with Mary and Leonard contribute to the whole loss. This can be proven in a law court and Nancy will have but to abide to pay for the whole loss together with Mary and Leonard. On the other hand in Nancy’s defense it can be argued with the help of the excuse clause (Armitage v Nurse) which allows a lawfully exemption of a trustee from a liability no matter how indolent, imprudent, lacking in diligence, or willful he may have been and proven with the help of the excuse clause to be exempted from joint liability (Bruce, Florin 2009). Again on Nancy’s advantage, although authority of the trust is jointed, each of the trustees is effectively liable to his/her own acts of misgiving as expressed by Townley v Sherborne. As a result Nancy will argue and prove that the sold shared was effected by Mary and she had nothing to with it, and thus will be exempted from bearing the whole loss. References Takashi, O 2004, Social security and trust fund management Journal of the Japanese and International Economies, 18 (4) pp. 528- 550 Sameera, M, and Jill, S 2009, protecting clients from insider attacks on trust accounts Information Security Technical Report, 14, (4) pp. 202-212 Kurt, T. D, Peter, H. K, Donald, L. F and Cecily, D. C 2011 Understanding the effects of substantive responses on trust following a transgression Organizational Behavior and Human Decision Processes, 114 ( 2) pp. 87-103 Antony, S 1999, Trust law, sustainability, and responsible action Ecological Economics, 31 (1) pp. 139-154 Bruce, I. C, Florin, D. S, V 2009 Public trust, the law, and financial investment Journal of Financial Economics, 92, (3), pp. 321-341. Read More