Breach of Trust free essay sample

A breach of trust will arise when a party to a trust does not respect the term of the trust or the trust act. This is governed by section 52 of the trust act There can be 2 circumstances where there is breach of trust; 1. The trustee has not perform his duty 2. The trustee has done things which is not entitle to you 10. 2 Consequences for breach of trust Beneficiary will suffer from the breach of trust resulted from the trustee. The beneficiary can take action against the trustee for breach of trust. Proprietary claim In this case the beneficiary will acquire a right against an item of specific property in ircumstances in which the trustee does not have sufficient fund to make good any loss suffered by the beneficiary. A proprietary claim will enable the beneficiary to seize a specific property of the trustee. Tracing apply in the case of proprietary claim 10. 4 Personal liability Standard of care The liability of a trustee for breach of duty is strict. There is no need to establish through or even carelessness on the trustee part. The duty of the trustee is to conduct the business of the trust with the same care as the ordinary of a trust that would extend toward its own cost. Case law of Re-Speight 1883 10. 5 Measure of liability or damages The trustee must account for profit made or replace loses made to the trust. This was mentioned in the case of Re Dawson. A trustee who commits a breach shall be liable for any loss or depreciation in value of the trust property resulting from the breach. This is governed by section 50 of the trust Act. If trustee commit a breach of trust it shall jointly and severally liable. That is if there is a breach of trust committed it is a breach committed by all trustees. Jointly and severally mean that the beneficiary may recover the loss either in equal share from all the trustees or the loss from any one of them. A trustee will be held responsible in the following circumstances when breach arises: 1. Breach with full misconduct 2. Breach with gross negligence Proprietary liability – Trustee has to return the original property Refers to the recovery of the trust property, it follows the concept of tracing (is an attempt by the beneficiary) to establish a property claim to specify a piece of property by tracing a beneficiary existing. 10. 6 There are two types of tracing 10. . 1. Common law tracing Refers to identify specific item or property in the land of the trustee in which the beneficiary has retained proprietary rights. The beneficiary will seek a common law tracing claim to require the return of that specific item of property. It will be applicable if the property is in the hand of the trustee. 10. 6. 2 Equitable tracing – truste e has to compensate This will apply when the beneficiary property has passed in the hands of the trustee but has been substituted for another item or property in which the beneficiary has never previously hand any proprietary rights. He will be required to pursue an equitable tracing plate to assert, title of substitute property as being presentative of the beneficiaries original property. Case study; Foskett v/s Mckeown The tracing process is the same in law. However the nature of revenity is different. There is more likely to have a proprietary depending upon the payment acerting beneficial title to the property. The case of Ajey v/s Jackson The tracing plain in equity gives rise to proprietary revenue which depends on the continued existence of the trust property in the hand of the defendant unless it is a vonafra purchaser for value without notice. He must restore the trust property to its rightful owner if he still has it. Nature of tracing Tracing is neither a claim nor revenue. It is merely the process by which a claimant demonstrate what has happen to his property, identify its proceed and the person who has handle or receive all these of them and justify its claim that the proceeds can properly be rewarded as representing his property. 10. 7 Relief from liability It is where the trustee will not be held liable for breach of trust. The trust act provide for 2 types of relief. . Relief by beneficiary Beneficiary may relief a trustee or liability to him for a breach of trust. A beneficiary may indemnify a trustee against liability for breach of trust. However there are certain formalities attached with the relief by the beneficiary. The beneficiary should not be a minor or a person under mental disability. It does not have full knowledge of all material fact. The beneficiary is properly induced by the trustee to act. The court may relieve a liability of trust where it appear o the court that the trustee has acted reasonably and honestly and that the trustee all fairly to be excused. 10. 8 Mixing of trust money and trustee money It is where a trustee mixes trust money with his own fund The basic rule is that the beneficiary is entitled to the first charge on the fund or any property purchase with it. There may be mixing of money from different sources 10. 9 Mixing of money from different sources In this situation there is no reason to give any claimant priority over any other since all are innocent; therefore the rule is that they take paripassu. If they mix fine consist of Rs 500 from trust A and Rs 1000 from trust B and the whole of A is used to purchase share, trust A will have a charge of Share for Rs 500 and trust B for Rs 1000. 10. 10 Loss of the Right The right to trace equity will be loss if one of the following happens. The property passes to a bon a fillet If the property ceases to be identifiable It would be inequitable to trace. This may apply to the case of innocent volunteers.