#6578 - Breach Of Trust - Trusts

BREACH OF TRUST TRUSTS | PAGE 30 WHEN IS A TRUST BREACHED? * * * * A "breach of trust" is: A trustee acting, or omitting to act, in contravention of their trust duties o Ranging from fraudulent activity, to the innocent misappropriation of trust property. SS? Including (but not limited to): Failure to keep accounts as required, careless investment, investment on insufficient security, breach of fiduciary duties. SS? Important to consider how it arises, and on what basis. o According to the trust deed o According to the duties attached to the office of trustee SS? General & Other duties (see Week 4 Notes for specific duties) Acting in bad faith or for ulterior purposes A trustee acting in excess of their powers, or omitting to exercise their powers o "Trust powers" vs "mere powers" - this distinction is significant. o Not necessarily a breach if a trustee fails to exercise a 'mere power' "Trust powers" vs. "Mere powers" * Did the settlor intend the holder of the power to be under a duty to exercise it? o Yes = trust power o No = mere power * Does settlor use language that suggests exercise of power is mandatory? o Yes = trust power o No = mere power * Person with trust power is under o a duty to consider how to distribute o a duty to distribute * Trustee with a mere power has duty to consider the exercise of the power from time to time o Discretionary trust - does person have to exercise their discretion or not? TRUSTS | PAGE 31 WHO CAN SUE? * Standing to sue: o Co--trustees o Beneficiaries o Beneficiaries' successors in title Lidden v Composite Buyers Ltd (1996) 139 ALR 549 o Issue: where a trustee is unwilling to instigate proceedings on the beneficiaries behalf, can the beneficiary o Held: Yes, but only where the relief sought is in the equitable jurisdiction of the court and where the circumstances are exceptional. SS? But all beneficiaries must be joined in the action. Who can be sued? * Trustees * Co--trustees * Beneficiaries * Third party recipients of trust property * Proprietary claims What to sue for? * Removal or replacement of trustee(s) * Declaration about administration of trust or distribution of property * Directing or compelling trustee(s) to adopt a particular course of action * Recovery of trust property * Compensation o ... and so on TRUSTS | PAGE 32