Apply the principles concerning the measure of the
trustee’s liability
Trustee’s
liability
If
a trustee fails to fulfil his duties, whether by not executing an act that he
should have performed or by performing one that he should not have performed,
he is responsible for a breach of trust. Trustee responsibility for breach of
trust is based on the idea of compensating the trust estate for losses incurred
as a result of wrongfully handling trust funds and assets. The trustee shall be
liable to the trust for all damages resulting from such violation. The typical
guidelines governing the distance of harm in tort or contract proceedings do
not apply to the scope of this responsibility. The trustees are required to put
the trust estate in a similar position once a breach has occurred.
RECONSTITUTION
OF A TRUST FUND
The
plaintiff in Target Holdings Ltd v. Redferns (1996) asked for an order
to recover the trust funds.
According
to Lord Browne-Wilkinson, this remedy was not open to beneficiaries who had a
clear claim to the trust money; rather, it was only available in cases where it
was the only option to guarantee that the interests of all beneficiaries were
protected. Fair restitution was the appropriate response in this case.
As
a result, the remedy was rejected because, if it had been granted, Target
Holding would have received a sizable windfall that was justified by the case's
circumstances. As a consequence, beneficiaries won't receive more from the
courts than they merit and certainly not more than they lost.
ACCOUNTING FOR SECRET PROFITS
"Secret
gains" are profits that are received without the recipients' permission.
In
Regal (Hastings) v. Gulliver [1967], the directors of a movie theatre benefited
personally rather than professionally from a marketing opportunity. According
to Lord Russell, fiduciaries is required to account for any profits they make
by utilising their position.
In
Boardman v. Phipps [1967], despite acting in good faith and making money for
the beneficiaries, a solicitor was held accountable for earnings made while in
a fiduciary position.
SET OFF
Generally,
trustees cannot offset the loss of trust property by any gain from another
transaction.
Barrington
v. Barclays Bank (1980) It is not possible to counter two sets of illegal
investments made by a trustee, one of which results in a loss and the other of
which results in a gain.
Although
trustees owned the bulk of the company's equity in this case, they failed to
supervise it. Real estate speculation was done by the company. Although the
other lost a lot of money, one earned a modest profit. As there was no set-off,
the court determined that they were both liable for the loss.
THE
RIGHT TO ADOPTION
If the unlawful investment suffers a financial
loss, the beneficiary (if sui juris) may decide to keep it (adopt it) and urge
the trustees to make up the loss. The trustees are required to sell the
investments, reinvest the revenues in a way that is authorised, and make up the
difference if they do not approve it.
ELECTION
RIGHT
The
beneficiary has the option of asking the trustee to surrender the trust
property or to provide fair recompense.
Tang
Man Sit v. Capacious Investments Ltd. [1996]: A harmed beneficiary will usually
have conflicting and alternative remedies, such as (1) an accounting of the
defendant's profits made in violation of his fiduciary responsibility and (2)
damages for loss incurred as a result of the breach. A claimant must choose, or
opt, between them in this situation, and they must do so before the court makes
a decision.
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